Taboola, Inc. v. Ezoic Inc.
| Decision Date | 04 February 2019 |
| Docket Number | 17 Civ. 9909 |
| Parties | TABOOLA, INC., Plaintiff, v. EZOIC INC. and DWAYNE LAFLEUR, Defendants. |
| Court | U.S. District Court — Southern District of New York |
APPEARANCES:
Attorney for Plaintiff
SHER TREMONTE LLP
90 Broad Street, 23rd Floor
New York, NY 10004
By: Mark Elliot Cuccaro
LATHAM & WATKINS LLP
885 Third Avenue
New York, NY 10022
By: Benjamin Naftalis
Virginia Foster Tent
LATHAM & WATKINS LLP
12670 High Bluff Drive
San Diego, CA 92130
By: Jake Ryan
Sweet, D.J.
Defendants Ezoic Inc. ("Ezoic") and Dwayne Lafleur ("Lafleur") (collectively, the "Defendants") have moved pursuant to Federal Rules of Civil Procedure 12(b)(2) and 12(b)(6) to dismiss the Amended Complaint ("AC") of plaintiff Taboola, Inc. ("Taboola") claiming breach of contract and tortious interference with Plaintiff's business relationships. Upon the conclusions set forth below, the motion is denied.
On December 19, 2017, Plaintiff filed its Complaint. ECF No. 1. On May 7, 2018, Plaintiff filed its AC alleging that Ezoic tortiously interfered with four contracts Plaintiff entered into with internet website providers and that Ezoic and Lafleur breached a separate contract that Ezoic and Lafleur signed with Taboola. ECF No. 26, ¶¶ 99-114. Defendants filed their motion to dismiss the AC on June 8, 2018. ECF No. 27.
The instant motion was heard and marked fully submitted on July 18, 2018.
The AC sets forth the following facts, which are assumed true for the purpose of this motion to dismiss. See Koch v. Christie's Int'l PLC, 699 F.3d 141, 145 (2d Cir. 2012).
Plaintiff is one of the world's leading targeted digital advertising technology companies. AC ¶ 12. Its content recommendation technology (the "Content Recommendation Technology") (referred to in Plaintiff's agreements as the "Widget") reaches more than one billion Internet users and offers more than 360 billion recommendations each month. Id. As part of its business, Plaintiff enters into agreements with Internet publishers, such as CBS, NBC, USA Today, and The Weather Channel, to be the exclusive provider of content recommendations that help monetize the websites and digital properties that these publishers own and/or operate. Id. ¶ 13.
Plaintiff provides code for its proprietary Content Recommendation Technology, which publishers place on their website and digital properties. Id. ¶ 14. The Content Recommendation Technology then appears on the publisher's websites, typically below the header (e.g., "Content You May Like," "Recommended for You," or "Around the Web") andrecommends sponsored articles and advertisements ("Content") (referred to in the agreements as the "Taboola Sponsored Content") to each visitor of the websites, based upon the visitor's particular interests (collectively, the "Recommendations"). Id. Content may be provided by a sponsoring advertiser, third-party publisher, or by the publisher itself for the promotion of its own editorial content. Id.
When a visitor clicks on a Recommendation, the visitor is directed away from the publisher's website to the website of a third party that paid for the distribution of the recommended Content. Id. ¶ 15. This sponsoring third party pays Plaintiff a contractually-specified sum, called a "Cost Per Click," each time a visitor clicks on its Content link. Id. Plaintiff then pays the publisher a percentage of Plaintiff's revenues from each click pursuant to a contractually-specified formula. Id.
Julio Garcia Network ("JGN"), Swing by Swing Golf, Inc. ("SwingxSwing"), Precision Creations, LLC ("Precision Creations"), and TechSoft IT Solutions ("TechSoft") (collectively, the "Publishers") are among the publishers with whom Plaintiff does business pursuant to written contracts. Id. ¶ 16. Plaintiff's contracts with each of the Publishers (the "Publisher Agreements") require the Publishers to displayPlaintiff's Content Recommendation Technology on the Publishers' websites throughout the contractual term. Id. ¶ 17. The terms of the Publisher Agreements are substantially identical to the terms of the Defendants' contract with Plaintiff. Id. ¶ 18. They are also substantially identical to the "Publisher Terms and Conditions" that have been publicly listed on Taboola's website throughout all timeframes at issue in this action.1 Id.
Ezoic provides an Internet advertisement testing platform for its customers. Id. ¶ 19. Ezoic's customers download Ezoic's web browser extension, which allows them to test different combinations of advertisement placement locations and sizes for their websites. Id. Ezoic then recommends ways that its customers can optimize ad revenue and user experience. Id.
Ezoic has over 30,000 sites registered to its platform with over half a billion visitors per day. Id. ¶ 20. Ezoic has multiple offices in California and in the United Kingdom. Id. Ezoic provides services through its Internet advertisement testing platform to numerous customers based in New York from which it derives substantial revenue. Id. Ezoic's customers are located worldwide and Ezoic derives substantial revenue frominterstate and international commerce. Id. Ezoic's form Affiliate Agreement contract, publicly available on its website, is expressly governed by the laws of the state of New York. Id. ¶ 21.
Plaintiff alleges that, beginning no later than March 2017, Ezoic has advised, encouraged, and instructed at least four of Plaintiff's Publishers to breach their contracts with Plaintiff by removing Plaintiff's Content Recommendation Technology from their websites, and has done so with full knowledge that removing Plaintiff's Content Recommendation Technology would constitute a breach of the Publishers' contractual obligations. Id. ¶ 22.
JGN entered into a publisher agreement with Taboola dated June 7, 2016 (the "JGN Agreement"). Id. ¶ 23. SwingxSwing entered into a publisher agreement with Taboola dated April 23, 2014 (the "SwingxSwing Agreement."). Id. ¶ 37. Precision Creations entered into a publisher agreement with Taboola dated January 1, 2015 (the "Precision Creations Agreement."). Id. ¶ 55. TechSoft entered into a publisher agreement with Taboola dated June 1, 2010 (the "TechSoft Agreement."). Id. ¶ 67.
The key material terms of these Publisher Agreements are as follows: (1) the Publishers will display Taboola's Content Recommendation Technology on their respective websites throughout the contractual term; and (2) Taboola and the Publishers will share the revenues that Taboola receives from third party websites to which viewers are redirected after clicking on a Recommendation on the Publishers' websites, pursuant to a specified contractual formula. Id. ¶ 24, 38, 56, 68. Throughout the term of the Publisher Agreements, each of the Publishers is required to display Taboola's Content Recommendation Technology on their websites. Id. ¶¶ 24, 39, 57, 69. In addition, throughout the term of their respective agreements, JGN, SwingxSwing, and TechSoft are all prohibited from using content recommendation technologies belonging to Taboola's competitors on its websites. Id. ¶¶ 26, 40, 70. The JGN and SwingxSwing Agreements specifically name Outbrain as a competitor of Taboola. Id. ¶¶ 26, 40.
The JGN Agreement will not expire until June 2018 at the earliest, as the original term of the contract was for one year beginning on June 7, 2016. Id. ¶ 27. On June 7, 2017, theJGN Agreement was renewed for an additional one-year term, lasting through June 7, 2018. Id. JGN is one of Plaintiff's publishers that uses Ezoic's services. Id. ¶ 28.
Plaintiff alleges that JGN discussed the material terms of the JGN Agreement with Ezoic, including the requirement that JGN display Taboola's Content Recommendation Technology on its websites throughout the contractual term. Id. ¶ 29. In late April 2017, Plaintiff noticed that the code for its Content Recommendation Technology was no longer appearing on JGN's websites. Id. ¶ 30. In its place, content recommendations from Outbrain, one of Plaintiff's main competitors, appeared on JGN's website instead. Id. When Plaintiff asked JGN why it was no longer displaying Plaintiff's Content Recommendation Technology, JGN responded that it was using Ezoic's services, and that Ezoic had deliberately configured its ad tester platform to prevent Plaintiff's Content Recommendation Technology from displaying. Id. ¶ 31. Ezoic had suggested to JGN that it run ads from Outbrain instead of Plaintiff, which JGN agreed to do. Id. On May 15, 2017, JGN forwarded Plaintiff an email that it had received from Ezoic, which read in relevant part:
Taboola is no longer allowed to run alongside Ezoic products. We've noticed Taboola has been randomly injecting ads which our system is not able to track aspart of the tests; causing a bad user experience. Since they interfere with Ezoic, Taboola will not show when Ezoic is turned On. If you would like to consider running native ads on Ezoic versions, we could run Outbrain ads for you in their place. Would you be open to this? Id. ¶ 32.
Plaintiff alleges that Ezoic had actual knowledge of the JGN Agreement, including specific knowledge of the requirement that JGN display Taboola's Content Recommendation Technology on its website throughout the contractual term. Id. ¶ 33. Plaintiff further alleges that Ezoic directly and intentionally caused JGN to breach the JGN Agreement by preventing Taboola's Content Recommendation Technology from displaying on JGN's websites, that JGN would not have breached the JGN Agreement but for Ezoic's tortious interference, and that Ezoic directly and intentionally caused a further breach of the JGN Agreement by successfully persuading JGN to run content recommendations from Outbrain instead of Plaintiff. Id. ¶ 34-35. According to Plaintiff, to date, JGN's websites are displaying content recommendations from Plaintiff's competitors instead of Plaintiff, in...
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