game spat expands beyond false advertising to TM and (c)

Skillz Platform Inc. v. Papaya Gaming, Ltd., 2025 WL 438387,24cv1646(DLC) (S.D.N.Y. Feb. 7, 2025)

Previousdiscussion. Skillz sued its competitor Papaya, alleging false advertisingunder federal and state law. Papaya counterclaimed for the same causes ofaction and added trademark and copyright infringement as well as defamation andcivil conspiracy claims. Here, the court partially granted Skillz’s motion todismiss the counterclaims, and severed Papaya’s trademark and copyrightcounterclaims.

Papaya alleged: its multiplayer games allow users to depositmoney and earn real cash prizes, along with in-game currency. “In a game, userstypically compete with between five and twenty opponents for the highest score.Using an algorithm, Papaya arranges games by matching users of similar skill,as measured by each player’s performance in prior games.” Skillz operates acompeting mobile gaming platform that hosts games created by third-partydevelopers. “Skillz’s games involve only head-to-head gameplay, as opposed togames involving more than two players.”

Skillz allegedly markets its games as being uniquely fairand trustworthy with a badge indicating it is “Committed to Fair Play” and aclaim that it will “[m]atch [users] with real players of equal skill” in itsgames. Skillz promotes its promise to “NEVER EVER employ bots” and “guaranteethat every match you engage in is a true reflection of your skill level.” A2024 “letter to our community” stated that the company was “committed torooting out and eradicating cheaters, bad players, and bots,” and that itsgames would include “No unfair bots, not ever.” The letter said that Skillzused a “proprietary technology to ensure fair matching,” so that users could be“sure the competition is real, and so are your chances of winning.”

However, Papaya alleged, Skillz used and allowed the use ofbots in its games, and it has unevenly matched players. Skillz “clarified thatit uses bots only in certain non-cash games and in games where two humanplayers compete asynchronously. In addition to permitting the use of bots onits platform, former Skillz employees say that the company sometimesmanipulates the outcomes of games by unevenly matching players.”

Papaya alleged harms because some players’ experience withSkillz’s games  allegedly leads them tobelieve that all mobile gaming is rigged and stop using other games, likePapaya’s. Players also allegedly confuse the two platforms and attribute theunfairness of Skillz’s games to Papaya. “And if not for Skillz’s claims aboutthe fairness of its games, some players may have played Papaya’s games insteadof Skillz’s.” [This last theory seems like the only one where proximate causelogic favors Papaya.]

Papaya also alleged that Skillz claims that they canwithdraw cash that they win on its platform “at any time.” “But some playershave complained online and in reviews of Skillz’s platform that they wereunable to withdraw money from their accounts when they attempted to do so. Insome cases, players were unable to access their winnings because their accountshad been banned from the platform.”

Papaya alleged that Skillz smeared competitors “first, bycreating an organization that accuses Skillz’s competitors of using bots in itsgames, and, second, by planting and disseminating an article that stated Papayahad admitted to using bots in its games.” This allegedly tarnished Papaya’sreputation and that of the mobile gaming industry generally.

The alleged “false front” website “Fair Play for MobileGames” allegedly “encouraged and facilitated visitors’ filing of complaintsabout mobile gaming companies, other than Skillz and including Papaya, withstate attorneys general.” It had a homepage banner “showing a counter thatpurported to display an increasing number of complaints filed with state lawenforcement about Papaya and two other companies. That counter did not displayan accurate number of complaints; in fact, each time a visitor arrived at thewebsite, it would display the same number. The number would appear to increaseevery few seconds.” It also displayed a pie chart purporting to show therelative number of complaints relating to various games offered by Papaya andother companies, stating: “Bingo Cash and Solitaire Cash by Papaya Games havereceived the highest complaints so far followed by Solitaire Cash from AviaGames.” The figures allegedly didn’t reflect in real time any actual databaseof complaints being continuously updated, and there were similar problems witha map purporting to show the number of complaints submitted from each state. 

screenshot from alleged astroturf website

Papaya also alleged that Skillz had engaged in copyright andtrademark infringement by copying specific games.

Lanham Act and GBL § 349: The court found that Papaya statedcounterclaims as to claims arising from Skillz’s statements about its ownproducts, but not to the extent that Papaya alleged violations based onSkillz’s claims about its competitors. That is, false advertising wassufficiently pled as to statements that games on Skillz’s platforms did not usebots, matched players evenly, and allowed users to withdraw funds at any time. Thecomplaint plausibly alleged that these were material claims, “evidenced in partby customer reviews implying that Skillz’s users participated in its gamesbecause they thought they would be fairly matched against a human.”

Applying Rule 8, Papaya adequately alleged that Skillz usedbots or unevenly matched players. It cited “Skillz documentation that refers tothe use of bots” and “language used internally at Skillz, which, construed inthe light most favorable to Papaya, could suggest that Skillz was manipulatingthe outcomes of games by unevenly matching players.” Skillz argued that botusage in a narrow set of circumstances, such as in training games, wasimmaterial to consumers. But that was a factual question, and it wasn’t clearhow limited the bot use allegedly was.

Withdraw cash at any time: Skillz argued that this wasn’tfalse in context, including Skillz’s website having an article called “why doesit take 4-6 weeks to get my withdrawal.” While, “under certain circumstances,the presence of a disclaimer or similar clarifying language may defeat a claimof deception,” on a motion to dismiss the court would only consider adisclaimer located near the challenged language and “so clear that noreasonable addressee could believe the plaintiffs’ allegations of being misled.”Here, Skillz allegedly made the challenged claims in video advertisements andon another page of its website, not on the same page.

Statements about competitors: Papaya failed to sufficientlyallege falsity. The allegations “are essentially that the website’s graphicscaused consumers to be confused.” For example, the complaint counter allegedly “createda false sense of specificity and legitimacy,” but that didn’t mean that it wasunambiguous or that it necessarily implied a constantly updated connection to alive database. Likewise, the claims that other companies are “scams” or“fraudulent” “do not necessarily and ambiguously imply a false message, becausethose words are not susceptible to a single clear, widely agreed-upondefinition.”

Papaya failed to “plead sufficient facts to support afinding that consumers were confused or misled,” as is necessary to challenge“a statement that is not literally false.” The conclusory allegation that “areasonable consumer ... would have been deceived” was insufficient. Papayaargued that the 4FairPlay website involved Skillz’s hiding its involvement to“give the impression” that 4FairPlay was unbiased, the “design” of the websitesuggesting its impartiality, and the website’s omission of Skillz as an optionfor the subject of complaints. “But these accusations do not identify ‘anydescription of fact,’ or statement about a product or service.” (Really? Thequestion in a misleadingness case is what message consumers received, notwhether it was said in words; and omissions generally do count! This is atleast in tension with other cases finding that fake reviews/claims ofindependence were plausibly deceptive, something the FTC surely thinks.)

Papaya also failed to plead defamation. To show falsity, adefamation complaint “must plead facts that, if proven, would establish thatthe defendant’s statements were not substantially true.” “A statement issubstantially true if the statement would not have a different effect on themind of the reader from that which the pleaded truth would have produced.” Andthe counterclaim didn’t plead that the complaint counter, pie graph, and mapwere not substantially true. There was, for example, no allegation thatmultiple consumers had not complained about Papaya, or that thecomplaints about Papaya were not increasing over time.

Even if the counter gave the false impression of beingconnected to a live database, “the thrust of its presentation” was to urgeviewers to “join a growing list of complainants.” Other statements about“fraudulent games” and “scams” were mere opinions. “Various other allegedaspects of the website, such as the solicitation of complaints against Papayabut not against Skillz, likewise are not factual statements.”

Papaya also alleged that Skillz defamed it by creating andsharing an article whose headline stated that Papaya “Admits Bot Use.” This wasprotected by New York’s fair and true report privilege. A statement is “a fairand true report if it is substantially accurate, that is if, despite minorinaccuracies, it does not produce a different effect on a reader than would areport containing the precise truth.” The complaint indicated that the articlewas about this litigation: a judicial proceeding. And the challenged headlinewas “substantially true” inasmuch as, at a conference, Papaya’s counsel statedthat “at the pleading stage, we have not denied the use of bots” and thatPapaya’s games “as currently constituted do not use bots.” Papaya’s briefstated: “Papaya does not represent that its games never include computerizedopponents” and “Papaya has not denied or refuted that it deployed bots.”

Even if the Bonus.com headline mayhave been more accurate in saying that Papaya “has not denied or refuted thatit deployed bots,” defamation does law does not require maximal accuracy, andPapaya does not plausibly allege that such a characterization would have adifferent effect on readers than that of what the headline actually said.Particularly in a headline -- an especially “condensed report of events,” --New York law does not require the level of precision that Papaya’s argumentsimply.

Trademark: Papaya plausibly alleged confusion with its logomarks, but not with its word marks. Skillz argued that the word marks -- “BINGOCASH,” “21 CASH,” and “SOLITAIRE CASH” -- lacked secondary meaning. It wasenough at this stage to allege “longstanding, continuous use of the names andlogos, which represent popular games that have been downloaded many times,” asto the logo marks, but not as to the word marks.  

[For the copyright claims, there doesn’t seem to be a lotthere that isn’t scenes a faire for a game, but it might be important to lookat other games in the market.]

Game 1 logos quick research suggests that "daub" is a standard term for a bingo function logos for game 2 logos for game 3

The marks were descriptive, thus requiring secondary meaningto protect.  The logo marks’registrations on the Principal Register plus the other allegations were enoughat this stage. But Papaya’s supplemental trademark registration for the wordmarks “disclaims use of any particular font style, size, or color in connectionwith the words.” The counterclaim didn’t explain how the word marks arepresented to consumers or other facts “to support a claim that the word marks,by themselves, have become identifiers of the source of the games.”

Papaya plausibly alleged confusion of the logos.

There is clearly substantialsimilarity between the marks, as the logos use many of the same words, colors,and symbols and position these components similarly with respect to each other.The parties’ products are in close competition and are offered in essentiallythe same market. And a factfinder could find that the similarities of thelogos, and Skillz’s likely knowledge of them as a close competitor, imply adegree of bad faith.

Skillz also counterclaimed that Skillz infringed copyrightedelements of Papaya’s game BINGO CASH. “The parties appear to agree thatelements common to bingo-style games are not protectible, but they disagreeabout whether substantial similarity between other elements exists in the twogames.” Various elements supported a plausible claim:

Those elements include a similarlycolored and shaped “Bingo” button, similarly named and described bonus options(“Wild Daub”, “Daub any number”), similar shapes and colors used for certainbingo squares, and similarly colored and shaped icons similarly arranged abovethe bingo board. A motion to dismiss is not the appropriate vehicle todetermine whether these elements are inherent parts of the unprotectibleconcept of bingo, or that they “necessarily result” from choosing to create abingo game.

But severance was appropriate because copyright andtrademark were very different claims, with new counterclaim defendants, anddiscovery here on false advertising had been ongoing.