ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Monday, October 29, 2012

Profile Tech Falls Out with Facebook and Sues for Breach

Chris Claydon, the Managing Director of a New Zealand based company, Profile Technology, Ltd. (Profile Tech.), has brought suit against the social networking giant, Facebook, alleging breach of contract, interference with business relationships, defamation, and unlawful, unfair and fraudulent business practices.  Claydon’s Complaint alleges that Profile Tech. and Facebook entered into an agreement in 2008 allowing Profile Tech. to acquire Facebook data by automated “crawling,” for the purpose of creating a service called Profile Engine.  Profile Engine became the world’s first search engine dedicated to Facebook.  However, according to the Complaint, without notice, Facebook cut off the access Profile Tech. needed to continue its venture shorty after October 13, and began a “malicious” defamation campaign, thereby damaging Profile Tech.’s business and reputation.

Facebook Founder, Mark Zuckerberg
Claydon claims the agreement was partially written (via emails) and partially implied through the parties’ conduct, As consideration, Facebook gained a search engine more powerful than any of its own tools.  According to the Complaint, after months of disruption, Facebook denied the existence of an agreement maintaining that Profile Tech.’s data was obtained without authorization and that Profile Tech. sold the information to background services without Facebook’s or its users’ permission.   When Profile Tech confronted Facebook, the latter allegedly wrote a letter to Profile Tech. demanding that it “go out of business” and threatening that if it did not do so, “Facebook would escalate its efforts” to punish Profile Tech.  When Profile Tech. refused these demands, Claydon contends Facebook did, in fact, punish Profile Tech. by informing Facebook users that Profile Tech was “unsafe” and “spammy,” and disabled both Profile Tech.’s and Claydon’s Facebook page, which were used to communicate with customers, and indeed, with Facebook itself.    

Claydon further alleges that Facebook interfered with access to its other applications, independent of Profile Engine (IQ Test, Survey, Polling, etc…)  Facebook’s actions were allegedly purposeful and malicious and as such, require punitive damages in addition to compensation for lost profits and defamation.  In addition, Claydon requested an injunction to prevent Facebook from any further defamation it is allegedly employing against Profile Tech.

Claydon states that Facebook breached the implied duties found in every contract:  to deal fairly and in good faith, and refrain from doing anything that would have an ill effect on, or injure the rights of the other party’s receiving the fruits of the contract. 

[Christina Phillips & JT]

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