Skillz won at least $420 million in a case against mobile gaming rival Papaya, after a jury found in its favor in allegations that Papaya used bots to defraud human players in its human-only multiplayer games.
Skillz’s lawsuit had similar allegations to the Skillz case against Avia Games, where Skillz won a civil lawsuit earlier. In that previous case, Skillz won a $42 million judgment against Avia Games, which was found to have copied Skillz’s IP for skill-based games against other human players. Ultimately, Skillz settled that lawsuit for $80 million.
The actual allegation in front of the jury this time was a federal false advertising claim. The jury ruled on that matter.
In a statement, Skillz said, “Skillz is pleased with the jury’s verdict and the actual damages award of $420 million in our litigation against Papaya Gaming. Skillz proved at trial that Papaya used bots in its games, which is the issue at the core of Skillz’s claims around false advertising, deceptive trade practices and transparency in the skill-based gaming industry. Papaya conducted a multi-year campaign of fraud and false advertising that materially damaged Skillz and the skill-based gaming industry.”
And in a statement from Papaya, the company said, “While Papaya respects the jury’s decision, we are disappointed with the outcome. We look forward to court review of the verdict. Papaya will continue to lead with integrity and transparency while remaining focused on our mission to deliver joy through exciting skilled-based fair competition.”
The jury ruled in favor of Skillz on all its claims. Actual damages will be $420 million, as well as advisory suggestions of profits disgorgement of $719 million and cost-saving disgorgement of $652 million. The judge, Denise Cote, can take the advisory parts and decide to increase (or decrease) the total award based on that, but it depends on the different damage theories the judge decides to accept. The judge will return a number on disgorgement and then the plaintiff can choose damages or disgorgement, but not both.
The ruling was made by a jury in the U.S. District Court in the Southern District of New York. In the case against Avia, Skillz also alleged that Avia copied its intellectual property. In the Papaya case, Skillz only charged that Papaya deceived players by using bots.
Andrew Paradise, CEO of Skillz, said in an interview with GamesBeat that the the jury considered three different damage theories. The judge will determine which one to accept. It could take a few weeks for the judge to decide that.
In court, Skillz testified it estimated the damage was $4.5 billion in amounts stolen from tournaments.
“On behalf of the shareholders, I’m so relieved,” Paradise said. “The narrative told was that this is an incompetent business and I’m incompetent.”
He noted Skillz raised almost $2 billion in capital in an IPO and other money raised, but the stock fell to as low as $40 million in value.
“It’s pretty vindicating,” Paradise said.
During the past week of the trial, Paradise learned that the “cover up” was at the highest levels of the company, where players accused the company of bot fraud.
“It was the company running the bots,” Paradise said. “I think it is truly greed at a level of evil.”
Paradise said his first wind of something wrong was that Papaya was outbidding Skillz on all its advertising campaigns, even though it was a brand new company in the industry that Skillz had pioneered.
“We studied their products,” Paradise said. “We paid a third-party market research company to run blind company testing. That’s when we learned they were running bots.”
While Papaya is based in Israel, Skillz found many of its customers were in the U.S. That’s why it sued in New York.
“It’s been a five year path to get here,” Paradise said, regarding the first lawsuit that started with Avia. He added, “I’ve never sued another company in my life” until the bot-related lawsuits.
Skillz has also sued Voodoo.