Infinity Ward

What happened to the Infinity Ward lawsuit?

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UPDATE: it seems the lawsuit is going ahead with a trial date of potentially late this year/early next year.  I spoke to Develop about it here.

We all know the story by now: back in 2009 Jason West and Vince Zampella, then the heads of Infinity Ward (the Activision-owned developer behind the Call of Duty: Modern Warfare series) resigned in acrimonious circumstances and promptly sued Activision for substantial amounts of monies. Cue a massive brawl developing over the next months, including: dozens of Infinity Ward developers also suing Activision for unpaid bonuses; Activision countersuing West and Zampella; and finally, Activision suing EA for up to $400m for its part in allegedly wooing West and Zampella away. This whole shooting match was scheduled for trial to start on May 23rd, 2011 (i.e. 3 days ago). What’s happened?

Answer: it’s still very much alive but it hasn’t gone to trial yet and everyone still arguing about it, apparently. According to the LA Superior Court website, the case is still rumbling away, with the parties still debating a number of preliminary issues. All of which suggests that a trial is still some distance away.

None of this is particularly surprising, mind you – the timeframe in large litigation often slips as unforeseen developments crop up. In this case, the addition of a massive claim by Activision against EA in particular was always going to have an impact on the progress of the litigation. Still, no doubt we’ll hear about a renewed trial date in due course.

So what?

As I’ve written about before (see here), this is no ordinary lawsuit in the games industry. It involves one of the largest franchise in the modern games industry – Modern Warfare – some big personalities, huge amounts of money and – above all – as far as I know, it will be the first time that Activision and EA have squared off against each other in major litigation.

And they’re all fighting for pretty high stakes. West and Zampella are hoping for big pay-offs from Activision as well as creative control of the Modern Warfare series, while Activision wants to retain control of its most valuable IP and now win up to $400m from EA. As I said in a previous post, in 2010 EA suffered net losses of $677m and had net total assets were worth $2.729 billion, so having potentially to pay $400m to Activision would be a real headache (assuming of course that Activision wins, which is completely uncertain atm).

As always in litigation of this kind, we have to watch and wait to see what happens next. Many people predicted this case would have settled by now, but it shows no signs of doing so just yet…

Activision joins EA to Infinity Ward lawsuit

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Activision has obtained court permission to join EA to its lawsuit against former Infinity Ward executives Jason West and Vince Zampella, according to Joystiq.  

You can read more about the recent steps in this increasingly bitter lawsuit here.  What this latest development  means is that, barring any other unforeseen developments, the trial will go ahead on May 23rd, with Activision squaring off against West, Zampella and now EA.  And it looks increasingly like sparks will really fly – especially with some interesting recent revelations about EA allegedly interfering in Modern Warfare 2’s map packs


For EA, those sparks are bad enough from a PR perspective, but what’s worse are the financial implications of losing.  Activision is claiming at least $400 million in damages from EA.  SPECULATION ALERT: IF Activision is successful (and that will depend entirely on the court’s decision in due course) and IF it wins that level of damages, it would cause a serious headache for EA – a company which in 2010 suffered net losses of $677m and whose net total assets were worth $2.729 billion. That would be a BIG dent in its bottom line.

Still, as I said that’s just speculation at the moment – EA could just as easily win.  All this is going to come down to what happens at trial, so roll on May 23rd…

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More on the Infinity Ward lawsuit: EA to join the party?

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UPDATE: apparently, West and Zampella have filed a response to Activision’s application to enlarge its lawsuit against them, basically complaining that Activision is trying to bankrupt them in the litigation.  Ouch.  Ofc, hopefully they have more substantive grounds for opposing Activision, but since irritatingly no one has published the court documents, I can’t check :/

So, there have been further developments in the most (in)famous recent lawsuit in the games industry: Activision v Jason West and Vince Zampella, which I’ve written about previously here and here


The key development is that Activision is seeking both to join EA to the litigation and to claim damages of some $400m from it as well.  Ouch.  More generally, further evidence is building up that this case is the first big film lawsuit type case (big studio v creatives and other big studio) in the games industry so far…

The story so far
  • Activision bought up 100% of Infinity Ward in the early Noughties for $5m. Infinity Ward generated a lot of revenue and critical acclaim for Activision through the Call of Duty series of first person shooter (FPS) games.
  • Activision approached studio heads West and Zampella after the release of Call of Duty 4: Modern Warfare to develop what became Modern Warfare 2, and offered to extend their employment contracts.  West and Zampella reluctantly agreed.
  • However, Activision now argues that – essentially – West and Zampella then engaged in a pattern of improper behaviour on a range of fronts, including demanding more money, withholding bonuses from their Infinity Ward colleagues, and then misappropriating Activision confidential information.
  • Earlier this year there was a confrontation between Activision, West and Zampella – which led shortly to West and Zampella leaving on acrimonious terms and Activision commencing this lawsuit.  It has just got nastier since then.
  • West and Zampella then formed Respawn Entertainment, backed by EA.
The new developments

Activision starts off the latest court document stating that, following disclosure of documentation in the lawsuit, new information has come to light which they claim shows that EA was actively involved in poaching West and Zampella.  You can find some of the colour at Joystiq, but essentially Activision says that EA worked at the very highest levels in order to persuade West and Zampella to join EA in order to boost its (allegedly) flagging efforts in the FPS genre.  In fact, Activision goes so far as to label this as a “destabilize, disrupt and attempt to destroy Infinity Ward” and as “corporate espionage”.
Activision also takes the time to go into some detail on EA’s recent history.  None of it is complementary, to say the least.  Activision even goes so far as to refer to “the fall of EA and the rise of Activision” and to discuss EA’s “precipitous decline in stature with investors, and most importantly, in the eys of games players who demand innovation and excitement”.
Activision also makes further allegations against West and Zampella, calling them “small minded-executives almost obsessed by jealousy of other developers” and claiming that they deliberately worked to damage other studios’ work (apparently this refers to Treyarch, another CoD developer).  Further, Activision claims that West and Zampella appropriated up to a third of the Infinity Ward bonus pool for themselves and refused to allow Activision to pay out bonuses to other IW staff.  Lastly, Activision claims that West and Zampella have been engaged in poaching IW staff and that they have retained confidential Activision information.
Activision now seeks to claim (among other things):
  • Damages against West and Zampella as well as recovery of all previous sums paid to them 
  • An injunction stop West, Zampella and EA from soliciting further Activision employees and from using Activision confidential information
  • From EA, damages/compensation for: 
    • The profits Activision would have made but for EA’s interference (I think this is the $400m bit)
    • Activision’s costs in rebuilding IW following the departure of West and Zampella
    • The loss caused by delay to Activision’s new games being developed by IW (presumably this is Modern Warfare 3)
IMPORTANT CAVEAT: Activision is not actually claiming all of this in the litigation yet – effectively it needs the court’s permission to do so.  As a result, there is a court hearing scheduled for January to hear these matters further.  Therefore, at the moment at least, EA is not technically a defendant to this lawsuit.
THOUGHTS
Activision and EA aren’t friends any more
Wow.  Activision is not pulling any punches with this lawsuit.  Not only are they suing EA for $400m, but they make some really quite aggressive comments about EA as well.  Until now, while Activision and EA haven’t exactly always been friendly to each other, my impression was that they had been relatively civil to each other recently.  Well that’s disappeared and I think the genie is out of the bottle for well and good on that front, too.
So, no settlement then?
Widespread industry speculation when the original lawsuit started was ‘ah, it’ll just settle’.  My experience as a litigator is never to make bets about whether a legal fight will settle or not – you just don’t know all the variables.  It might still settle.  But the fact that Activision has just massively expanded this case by seeking to add in the no. 2 games giant in the world suggests that settlement is not on their mind…not yet anyway. 
$400m is a lot of money

Well, it IS a lot of money – and that’s just the quantified bit of Activision’s claim, they’re actually after more than that.  IF successful in due course, that would put a decent dent in EA’s finances.  Who knows what impact that could have?
This is just like Hollywood
Two creative types help to build a huge blockbuster hit for their studio and then allegedly conspire with a talent agency to jump ship to a rival studio, only to find out their original studio partner is not a happy bunny and sues everyone.  Sounds like Hollywood?  Well, now it has come to the games industry…and I suspect we will see more of in the future.
This will just get nastier
There is a court hearing in January 2011.  Trial is set for May 2011.  We have a volatile mix of companies and individuals involved.   They are already throwing about incendiary allegations about each other, which Activision says it can prove with documents.
From what I can see (though court documents alone are only part of the story), it seems to me that Activision do seem to have some legitimate grievances, IF it is correct that EA sought actively to poach West and Zampella while all of them were aware of their contractual obligations to Activision.  On the other hand, we have yet to see West and Zampella’s response, who will no doubt continue to argue that Activision made their life impossible.
Ultimately of course, all of the hyperbole will have to draw to a close and the court will have to decide the relatively simple issues of law in this litigation: what do the employment agreements and related documents say, did West and Zampella breach their obligations therein and did EA encourage or assist those breaches?
Here’s looking forward to 2011… 

UPDATE: Eurogamer asked my views on whether Activision could attempt to block Respawn’s next game.  Short answer: I said yes.  More here: http://www.eurogamer.net/articles/2010-12-23-will-activision-block-respawns-ea-game ! 


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[Image credit: Gamerant/Activision]

More on the Activision/Infinity Ward lawsuit

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More interesting details have emerged in the two lawsuits being brought against Activision over the Modern Warfare IP.  To recap, the first lawsuit is by former Infinity Ward heads Vince Zampella and Jason West over the circumstances in which they were sacked from the Activision-owned developer of the Modern Warfare series of games, and which features a claim for over US $36m damages (you can read more from me on that lawsuit here).  The second lawsuit is by a number of present and former Infinity Ward employees for payment of over US $500m of bonuses which they claim Activision has failed to pay them.


So, what’s happened now?  Over to Kotaku, the key highlights being:

  • There is a Court hearing set down for August 5th to hear an application to consolidate the two lawsuits into one set of proceedings.  This makes sense in evidential terms, given the similar facts and circumstances underpinning both lawsuits.  However, in legal terms the lawsuits seem different: West and Zampella are claiming under different contracts to the IW employees.  If the legal difference between the cases is found to be quite distinct, then this may be a reason to refuse the consolidation.
  • A trial date of May 23 2011 has been set down for the West/Zampella lawsuit.  Depending on how the consolidation hearing proceeds, this could be expanded to cover the employees’ lawsuit or potentially could be pushed back in order to accomodate both lawsuits (if for example the employees’ lawsuit won’t be ready for trial by then).  
  • The employees have made some sort of amendment to their court documents which now pleads more colourful claims against Activision imposing a “police state” on them (from a strictly legal perspective, I’m not sure what any of that really adds to the claim so I won’t go into the detail).

While the latter developments have caught the press’ attention, ultimately it’s the court application and the court timetable updates which are the real news.  Of course, it’s worth taking them with a pinch of salt though: the odds are fairly good that this case will settle before it reaches trial.  I say that because the rule of thumb is that 9 out of 10 cases settle before they reach trial anyway, but this has got to be a special candidate for settlement given the high profile allegations being made and the sheer nuisance value.  Still, I’ve been proven wrong before when it comes to assessing the appetites of litigants to “have their day in court” as one client put it to me recently.  Watch this space…

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Former Activision employees join Infinity Ward exec lawsuit

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38 former and current employees of Infinity Ward, the US developer behind the Call of Duty: Modern Warfare series, have sued Activision Blizzard claiming that they are owed between $75 million and $125 million in unpaid royalties and potentially more in compensatory damages, reports the LA Times.

This lawsuit follows on from the lawsuit by former Infinity Ward heads Vince Zampella and Jason West against Activision for “substantial royalty payments” relating to Call of Duty: Modern Warfare 2, which they commenced following the termination of their employment by Activision on the grounds of “breach of contract and insubordination”.  My early thoughts are on that are here.  Activision subsequently filed a defence and counterclaim which set out a very different account of events and raised some real legal issues for West and Zampella.  You can read more on that here.  Subsequently, a number of Infinity Ward employees left that company and some joined a new startup formed by West and Zampella, called Respawn Entertainment. 

According to the LA Times, of the 38 employees involved in the lawsuit 21 are former employees of Infinity Ward and 17 still work there.  Another lengthy quote from the LA Times as to what the lawsuit is about:

“The lawsuit says that Activision owes Infinity Ward employees a bonus pool of at least $118 million, of which $82 million is supposed to go to employees other than West and Zampella.

It alleges that the publisher has withheld royalty payments in order to keep them from leaving as their former bosses did, putting at risk the potentially hugely lucrative release of Call of Duty: Modern Warfare 3 planned for late 2011.

‘Activision engaged in this inappropriate course of conduct in an attempt to force employees of Infinity Ward to continue to work at a job that many of them did not want just so Activision could force them to complete the development, production and delivery of Modern Warfare 3,’ the suit says.”



Activision responded to the LA Times that it “believes the action is without merit…Activision retains the discretion to determine the amount and the schedule of bonus payments for [Modern Warfare 2] and has acted consistent with its rights and the law at all times. We look forward to getting judicial confirmation that our position is right.

Thoughts

Clearly, there is an ongoing power struggle between West/Zampella and Activision for the future of Infinity Ward.  In the West/Zampella lawsuit this covers contractual, IP and creative control of the Modern Warfare series, but outside of that there is clearly a battle going on for the Infinity Ward employees themselves. 

What is really interesting about this lawsuit is the report that 17 of the current Infinity Ward employees have joined the lawsuit.  It is not very often at all that an employee sues his employer while still in its employment and the consequences in terms of the employment relationship are seldom good. 

The other interesting point is where this goes in the future.  According to the LA Times, the plaintiffs have requested that their lawsuit be consolidated with the West/Zampella lawsuit.  If this was approved by the court, it would mean all of those employees lining up with West and Zampella against Activision in one claim, the financially value of which would increase substantially quite apart from the political value of having so much of Infinity Ward involved in the lawsuit.  In the meantime, Activision will be considering now what next steps to take in this legal battle – will they try to cut it short, or let it run all the way?

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More thoughts on the Activision/Infinity Ward exec lawsuit

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NOTE: just to make clear – these are just the personal views of Gamer/Law. Also, we do not have any relationship with anyone involved in the litigation! Thanks.

Rather belatedly, here are my thoughts on the latest developments in the Activision/Infinity Ward executives lawsuit.

Background: A couple of weeks ago, I blogged about former Infinity Ward executives Jason West and Vince Zampella launching a lawsuit against their former employer Activision for “substantial royalty payments” relating to Call of Duty: Modern Warfare 2. The lawsuit followed Activision’s sacking of the duo on the grounds of “breach of contract and insubordination”. My early thoughts here.

Now, West and Zampella’s complaint (the US legal document which sets up their lawsuit) has been released and sets out further detail about their allegations.  I’ve taken a look at it and here are my thoughts…

The initial section complaint is pretty colourful in its drafting: it is filled with pretty barbed anecdotes about how terrible Activision (and Bobby Kotick) is, made even more colourful with bold italic sections – which is the legal equivalent of yelling while jumping up and down on your desk.  Example: paragraph 1 of the complaint –

“Modern Warfare 2 – a video game that has already been responsible for over $1 billion in sales and was recently hailed by Activision itself as the largest launch of any entertainment product ever“.

The remainder of the complaint is drafted in rather more sedate legalese (with a few exceptions) and goes on to summarise the facts underpinning the lawsuit. Here’s a summary of the summary:

  • Activision bought up 100% of Infinity Ward in the early Noughties for $5m. Infinity Ward generated a lot of revenue and critical acclaim for Activision through the Call of Duty series.
  • Activision approached studio heads West and Zampella after the release of Call of Duty 4: Modern Warfare to develop a sequel to the game, and offered to extend their employment contracts.
  • West and Zampella were initially reluctant, and were concerned over Activision’s involvement in Infinity Ward. Activision apparently had “forced Infinity Ward’s employees to continue producing the games at break neck pace under aggressive schedules.” West and Zampella were concerned about creative burnout and that they were being asked to develop sequels instead of new IP.
  • However, “ultimately, Activision offered West and Zampella sufficient additional consideration to induce them to continue as co-heads of Infinity Ward and to work on Modern Warfare 2. The parties reached a March 31, 2008 Memorandum of Understanding that would keep Infinity Ward a part of Activision.”

Now, pause there. We have not yet had the chance to review the MoU yet but, from what we know, the idea that the MoU would somehow “keep Infinity Ward a part of Activision” possibly suggests a misunderstanding of the legal position. Activision already owned Infinity Ward, having acquired a 100% of the legal entity’s shares. All the MoU could do is keep West and Zampella on board.  Does that mean West and Zampella have confused themselves with Infinity Ward?  Of course, I could be entirely wrong, if for example Infinity Ward control would somehow revert to West and Zampella unless the MoU was entered into – but there doesn’t appear to be any factual grounds for that argument at present.

The complaint goes on to summarise the purpose of the MoU:

  • “First, the MoU gives West and Zampella creative authority over the development of any games under the Modern Warfare brand (or any Call of Duty game set in the post-Vietnam era, the near future or the distant future) including complete control over the Infintiy Ward studio”
  • “Second, the MoU gives West and Zampella the right to oeprate Infinity Ward independently and to choose to develop new intellectual property after they completed Modern Warfare 2”
  • “Third…Activision agreed to pay Plaintiffs and the Infinity Ward studio additional compesnation, including a pool of Restricted Stock Units, stock options, a royalty for any Call of Duty game, a technology royalty, and a royalty for Modern Warfare 2 and future titles”.

So, the MoU is signed, Infinity Ward charges ahead, Modern Warfare 2 is released with great acclaim and financial success.  However, West and Zampella then say that Activision decided to “launch a pre-textual investigation into West and Zampella to create a basis to fire the two co-heads of Infinity Ward before the Modern Warfare 2 royalty payment would be paid in the ordinary course, on March 11, 2010“.

The complaint goes into some detail about the baselessness of the investigation, with outside legal counsel apparently interrogating West and Zampella for six hours in a “windowless conference room” while refusing “to tell either West or Zampella what specific acts or omissions Activision believes they had committed or what was prompting the investigation“. West and Zampella were told only that Activision was “investigating potential “breaches of contract” and “violations” of Activision policies, and threatened that anything less than their full cooperation with the inquisition would constitute “insubordination”, which itself would justify their termination“.

The factual section of the complaint finishes with Activision’s subsequent termination of West’s and Zampella’s employment, refusal to pay any royalties to them and its establishment of a new “dedicated business unit” to manage and control the Call of Duty franchise going forward.

The complaint concludes by stating West and Zampella’s key legal claims are for:

  • Damages for breach of contract, breached of an implied duty of good faith and wrongful termination, estimated value over $36m
  • A declaration by the court essentially vindicating West’s and Zampella’s position and, in particular, agreeing that they have creative control over the Call of Duty series
  • A preliminary and permanent injunction against [Activision]…from violating Plaintiffs’ rights with respect to the development, release and exploitation of any Modern Warfare game or Call of Duty game set in the post-Vietnam era, near future or distant future” (more on that below)

(Pause there to give myself a sad self-congratulatory pat on the back for having predicted West and Zampella would seek an injunction!)

Legal thoughts:

As I said earlier, the complaint is rather colourfully drafted in places – I would guess with a view to public consumption.  It is quite detailed factually, but comparatively lighter at this stage on the detail of the legal arguments. For example, it refers to an Employment Agreement and the MoU but does not cite any clauses from them in support of West and Zampella’s argument (though this is no doubt due to commercial sensitivity). It refers to claims for breach of contract, wrongful termination and the request for a preliminary and permanent injunction against Activision but does not set out much detail on the bases for these claims.

So, why isn’t this the complete picture? Three reasons:

(i) commercial sensitivity: West and Zampella don’t want to disclose publicly too much about their arrangements with Activision;

(ii) strategy/the nature of the allegations: West’s and Zampella’s argument is that the whole investigation into them was a sham and there’s only so much they can say about that, especially if they were kept in the dark by Activision at the time; and

(iii) the nature of the document: the complaint is only the first piece of the legal jigsaw, the next piece being Activision’s reply and then (probably) a rejoinder from West and Zampella.

For these reasons, it’s far too early to take a view as to where the merits of the lawsuit lie. On the one hand, if (and it’s a very big if) West and Zampella’s argument the investigation was trumped up are proved in court to be correct, then it will be interesting to see how Activision justifies its actions. On the other hand, once we have heard Activision’s side of the story and reviewed the terms of the MoU, it may be clear that West and Zampella are in the wrong. Welcome to the Russian Roulette that is commercial litigation!

What happens next?

As I said (were you not reading me, fool?) Activision will need to prepare its reply (probably this will be made available in the internets in the next week or so), followed probably by a rejoinder from West and Zampella. This early stage of setting out the parties’ cases in the court documents can go back and forth for a while.


The most interesting thing about the lawsuit currently is what West and Zampella will do about their claim for a preliminary injunction against Activision – which essentially means that they want a Court order banning Activision from taking any further steps with the Call of Duty or Modern Warfare franchises until the question of who has ultimate creative control over them is decided at trial (which is probably months away).  Will they say the matter is urgent and try to push their injunction application into court as soon as possible?  In fact, with Activision’s plans to release further DLC for Modern Warfare 2, it’s possible that this hearing is already on the stocks (though we’ve not heard anything to confirm that yet).


The reason they might want to push it into court as soon as possible is obvious: if they can control Activision’s use of Call of Duty then it gives them great bargaining power.  On the other hand, it’s a high risk strategy: injunctions aren’t just a legal walk in the park, there are specific tests that they would need to convince a judge that it should be granted.  Moreover, the hearing would also be an early opportunity for the parties to state their legal cases in court and for the judge to give an early indication as to who he/she thinks has the better case, which could be an important legal and psychological factor in the lawsuit.  Hopefully more info on this aspect of the lawsuit will be made public in the near future…


Leaving that to one side, more generally the litigation will go on to see mutual disclosure of relevant documents, witness evidence and quite possibly expert evidence – all of which are likely to be dissected in public and could quite possibly yield further details of the commercial arrangements in place between Activision and Infinity Ward. There will eventually be a round of court hearings on procedural matters (I see the front page of the complaint has a Case Management Conference – which is generally a procedural hearing – listed for 21 June 2010).

Going forward, unless either side can show urgency, it will probably be several months before the matter gets to trial – assuming of course that it doesn’t settle before then. So far, the signs of settlement don’t look promising, with Activision commenting the lawsuit is meritless and West/Zampella making some pretty barbed comments about Bobby Kotick in the complaint, but lawsuits seldom settle before they are properly bedded in, so there’s plenty of time for negotiations to get underway if the parties were that way minded.



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Former Infinity Ward Execs Sue Activision

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NOTE: this post seems to have received a deal of media interest, so just to make clear: these are just the personal views of Gamer/Law.  Also, we do not have any relationship with anyone involved in the litigation!  Thanks.

Original post:

Former Infinity Ward executives Jason West and Vince Zampella have launched a lawsuit against former employer Activision for “substantial royalty payments” relating to Call of Duty: Modern Warfare 2.

The lawsuit follows a great deal of controversy and rumours over the last few days, which saw Westand Zampella fired from their jobs at Infinity Ward, the games studio which developed the billion dollar grossing Modern Warfare 2.  West and Zampella co-founded in 2001 and sold it to Activision in 2003.  At the time they were fired, Activision made a SEC filing in which it indicated that an investigation was being conducted into their “breaches of contract and insubordination”.  They say they were weeks away from being paid royalty payments over MW2.
In a nutshell, West’s and Zampella’s argument appears to be that these allegations of “breaches of contract and insubordination” were unsubstantiated and put forward to justify Activision firing them before their royalty payments became payable.  Their press release said:
“Activision has refused to honor the terms of its agreements and is intentionally flouting the fundamental public policy of this State (California) that employers must pay their employees what they have rightfully earned,” said their attorney Robert Schwartz.  “Instead of thanking, lauding, or just plain paying Jason and Vince for giving Activision the most successful entertainment product ever offered to the public, last month Activision hired lawyers to conduct a pretextual ‘investigation’ into unstated and unsubstantiated charges of ‘insubordination’ and ‘breach of fiduciary duty,’ which then became the grounds for their termination on Monday, March 1st.”

“We were shocked by Activision’s decision to terminate our contract,” said West.  “We poured our heart and soul into that company, building not only a world class development studio, but assembling a team we’ve been proud to work with for nearly a decade.  We think the work we’ve done speaks for itself.”
Zampella added, “After all we have given to Activision, we shouldn’t have to sue to get paid.”

Modern Warfare 2 is arguably one of the most successful games in history and together with Call of Duty, has generated more than $3 billion in sales for Activision.  In addition, Activision seized control of the Infinity Ward studio, to which Activision had previously granted creative control over all Modern Warfare-branded games.  The suit was filed to vindicate the rights of West and Zampella to be paid the compensation they have earned, as well as the contractual rights Activision granted to West and Zampella to control Modern Warfare-branded games. 

The suit includes claims for breach of contract, breach of the implied covenant of good faith and fair dealing, wrong termination in violation of public policy, and declaratory relief.”
Legal thoughts
The issues
From what we know so far, it seems the legal crux of this litigation will be whether West and Zampella were really in breach of contract to the extent that Activision was entitled to fire them in the manner it did.  West and Zampella, who are bringing the lawsuit, will need in effect to prove that Activision’s claims regarding their “breaches of contract and insubordination” are wrong or, even if they are right, were not sufficiently serious to warrant them being fired (more on that below).  Several sensitive issues would have to be aired in court if this got to trial:
  • The West and Zampella employment arrangements with Activision, including their remuneration structure
  • Details regarding the commercial and personal relationships between West, Zampella, Infinity Ward and Activision
  • Infinity Ward’s and Activision’s business and management structures/practices
  • Details regarding the development of Modern Warfare 2 and its royalty arrangements
  • The alleged “breaches of contract and insubordination” – and Activision is going to need to explain exactly what it means by “insubordination” (which, as far as I am aware, has no specific legal meaning in either UK or US law)
In addition to the legal arguments, all of this will have to be backed up by disclosure of Infinity Ward/Activision documents and witness statements from West, Zampella, Infinity Ward and Activision personnel.  You can see that this is not going to be pretty.
A third way?
The wording of the last paragraph in the press release is interesting, because it refers to “breach of the implied covenant of good faith and fair daling, wrong termination in violation of public policy”.
In my view, this suggests it is possible (but no more than that at this stage), that West and Zampella may have an alternative legal argument, i.e. that even if Activision is right regarding their “breaches of contract and insubordination” it was still legally unfair for Activision to fire them just before their royalty payments were due to be paid.  If that argument has legal force under Californian law, and is accepted by the Californian court, then in principle West and Zampella could seek to claim their royalty payments even though Activision may have been right to fire them.
What does this mean for Modern Warfare?
The press release also states the lawsuit was commenced to “vindicate…the contractual rights Activision granted to West and Zampella to control Modern Warfare-branded games.”
This is potentially explosive: West and Zampella are arguing they have contractual creative control over the Modern Warfare brand.  The details will have to come out in the litigation, but it will be interesting to see how aggressively West and Zampella pursue this claim: if they have a good legal basis for their argument, you could even see them (though it would be difficult) seeking an injunction against Activision until this lawsuit is resolved.  Bear in mind though that it would be a difficult argument to run.
What does this mean for Activision?

The short-term prognosis at this very early stage looks challenging.  Activision faces a high-profile, high-value lawsuit from hostile plaintiffs which is likely to stay in the spotlight for some time.  Worse, unless it can get rid of the lawsuit quickly, Activision faces lingering doubt as to whether West and Zampella retain creative control over Modern Warfare.  And, worst of all, this will mean the industry watching very carefully what it does next and how it relates with developers in the future.

On the other hand, it’s quite possible that Activision could score a convincing and early legal victory (and in that regard, Activision has recently released a statement commenting on the lawsuit as “meritless” and stating that the duo did not “honor their obligations” to the publisher).

What next?

In the meantime, this lawsuit isn’t likely to go anywhere anytime soon.  We can expect to receive a rival press release from Activision in the near future, following which the next stage will be the parties preparing their detailed legal cases (which will also probably be made public).
UPDATE: Activision has commented on the lawsuit and West/Zampella have released their legal complaint.  We’ll write a follow-up analysis once we’ve had a chance to look over it.
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Activision and Infinity Ward fall out, Mr Lawsuit beckons?

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2nd UPDATE 03/03/10 at 14:02

More info here and here.  The current position seems to be:

  • Activision has confirmed that Zampello and West have left Infinity Ward.  MCV reports that chief technology officer Steve Ackrich will replace the now departed West and Zampella as head of Infinity Ward on an interim basis.
  • Sledgehammer Games, a new Activision internal studio, are being brought into the CoD picture, apparently to “extend the franchise into the action-adventure genre”.  Not clear what that really means.
  • Activision says that Infinity Ward will remain a key part of CoD, but again it’s not clear how
  • No word yet as to any legal action by Activision against the former Infinity Ward execs or vice versa

UPDATE 02/03/10 at 15:30

According to BingeGamer (via VG247):

  • Activision has not yet paid Infinity Ward any royalties for Modern Warfare 2, and
  • Infinity Ward’s contract with Activision ends in October 2010, but the rights to the Call of Duty IP are split between them
  • Infinity Ward may have been in discussions with a possible future publisher (not Activision)

It’s worth stressing that all of this derives from BingeGamer’s sources and remains to be verified.  Moreover, Activision has yet to make any statement setting out its side of the story.

BUT, if those three points above are true, then it could mean that Infinity Ward has a royalties claim against Activision and there is the possibility of either a big deal or a big lawsuit over the ownership of the highly lucrative Call of Duty franchise.  Then, on top of that, there are the allegations regarding Activision and Infinity Ward’s management (see below).

Curiouser and curiouser…

ORIGINAL STORY:

Rumours are rife that something big is happening between Activision and the current management of Infinity Ward, developers of Call of Duty: Modern Warfare 2.  From what we can piece together from the games blogosphere:
 

  • G4 reported (which came to us via VG247) that, in an Activision SEC filing, Activision stated it was carrying out “a human resources investigation into ‘breaches of contract and insubordination by two senior employees at Infinity Ward.‘”.  It continued: “This matter is expected to involve the departure of key personnel and litigation,” read the filing…At present, the Company does not expect this matter to have a material impact on the Company.”
  • At around the same time, G4 saidInfinity Ward studio heads Vince Zampella and Jason West reportedly met with Activision this morning and have not been seen by Infinity Ward staff members since“.
  • Later that same day, “a bunch of bouncer typesshowed up at Infinity Ward’s offices
  • A screen shot then surfaced from Infinity Ward CTO Jason West’s Facebook page at Kotaku with the status update “Jason West is drinking. Also, unemployed.”
  • Similarly, G4 said that West had updated his Linkedin profile to appears to reflect a change in employment

Unresolved questions:

  • What are the “breaches of contract and insubordination“?  Will/when will litigation be started and against whom? 
  • Will it be against Zampella and West?  Why did they leave?
  • Why is all this happening now?
  • Most importantly, what impact will this have on Activision’s share price and plans for future Call of Duty titles?

Watch this space…


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