Apple v Amazon over the ‘App Store’

Last week news broke that Apple is taking legal action against Amazon over the latter’s forthcoming opening of its “Appstore for Android“.  Apple argued it constituted trade mark infringement of its well known iOS “App Store“.

I spoke with Pocketgamer.biz about what all this means – here’s the article reproduced below:

“Apple’s move to block Amazon’s use of the ‘Appstore’ name on the day before it launched was an aggressive move, even in the context of the ongoing battle between Apple and Microsoft over the App Store moniker.

On a legal basis, however, Apple isn’t looking for a quick win over its newfound rival.  The attempt to protect the ‘App Store’ name is the kind of tussle that has the potential to roll on for some time to come.
That’s the view of Olswang LLP lawyer Jas Purewal who told PocketGamer.biz he thinks the case could become a complex legal battle.

Take the stand

“This lawsuit is really about the application of trade mark law to the fast changing world of mobile purchases,” Purewall, who is also the writer behind games law blog Gamer/Law, says.

“Briefly, a trade mark is a sign – like a logo or brand name – which a business uses so that its customers can recognise its goods and services and distinguish them from the goods and services of a competitor.

“Trademarks can generate significant brand value and, therefore, protecting them is important. In this case, Apple is suing Amazon on the basis that Amazon’s Appstore will ‘confuse and mislead customers’ – for example, that customers may buy an app from the Amazon App Store thinking that it is in fact created, sponsored or approved by Apple.

“In effect, Apple wants to stop Amazon from benefiting from the value which Apple says it has built up in that phrase via its iOS App Store.”
Problem precedent

Apple’s case against Amazon, however, is complicated by its ongoing efforts to register its App Store trademark with the USPTO.

“There are potential difficulties for Apple in pursuing this case,” explains Purewal.

“Firstly, Apple does not itself yet have a fully registered trade mark over ‘App Store’ – in fact, Apple’s trade mark application is reportedly being contested by Microsoft on the basis that it is too generic to be protectable – which has the potential to turn this into a three-way battle between Microsoft, Apple and Amazon.

“This is by no means fatal to Apple’s case against Amazon, but it may complicate it. Secondly, Amazon will no doubt argue that there is no likelihood of confusion between the Amazon Appstore and the Apple App Store because they will presumably run on completely different devices.

“Further details of the lawsuit are not clear at the moment, but it is possible that Apple may seek a temporary ban on Amazon rolling out its Appstore until a full trial of the lawsuit – though Amazon would no doubt contest this.

“If the case does reach trial in due course, the court will then need to decide upon the relative merits of Apple’s and Amazon’s cases and rule whether or not Amazon may proceed with its Appstore plans.”

You can read more about trade marks and games here: demystifying trademarks and games.



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LG vs Sony: court battle over PS3 seizures due tomorrow

UPDATE: Sony was able to lift apparently all restrictions against it and LG was ordered to pay it substantial damages.  More here.

Sony and LG are set to go to court in Holland tomorrow over a court order apparently obtained last week by LG for the seizure of reportedly tens of thousands of PlayStation 3s.  This appears to be a separate strand to the patents battle ongoing between Sony and LG over the PlayStation 3 among other devices.

Florian Mueller over at Foss Patents has all the details.  Here’s my view of the highlights:

  • It seems that, at around the same time that LG secured a temporary ban on the importation of PS3s into Holland, it also obtained a seizure order over PS3s stores in a Sony warehouse in Holland.  As I said, media reports suggest tens of thousands of PS3s may have been seized.
  • Sony was not given advance notice of the seizure (apparently because the judge ruled Sony the opportunity to move its PlayStations out of that warehouse ahead of confiscation).  However, Sony was given permission to appeal against the seizure – which is now set for a court hearing in The Hague tomorrow (10th March).
  • Sony will of course be wanting to have that seizure order overturned, whereas LG will want to extend it – much like the position regarding the temporary importation ban (no news on that, by the way).
  • The court documents filed in support of this seizure order set out interesting details about LG’s explanation why this litigation started up in the first place. 
  • Basically, it seems that LG and Sony were in discussions late last year about giving each other licences over technology underlying a whole range of products.  LG wanted to give Sony only a licence over Bluray technology (and leave the other products for another licence(s), but Sony wanted a licence to cover everything. 
  • LG says that, when these discussions failed, Sony then launched legal action in the US and LG responded with its own legal action in Europe and the US.

So, what’s the current state of play?

(1) Sony and LG will go to court tomorrow over the seizure order – watch this space for more.  In the meantime, bear in mind that the seizure order does not mean conclusively that LG was right and Sony was wrong.  It simply means that the judge felt that LG’s case is sufficiently convincing to warrant the seizure ahead of a full court hearing – but the judge won’t have been able to come to a full decision yet.
(2) The temporary ban on importing the PS3 into Holland is still in place but I suspect is soon to run out – which will mean another court hearing soon.
(3) What impact will the seizure of the PS3s have on PS3 stocks in Europe?  Will it change analysts’ assessments that stocks won’t run low anytime soon?
(4) If in due course a judge finds that LG was wrong to have obtained the importation ban or the PS3 seizures, it would in principle be liable to pay potentially substantial compensation to Sony.
(4) We’ve yet to hear Sony’s side of the story…

Again, go to Foss Patents for all the details.  I’ll write another update when I hear more.


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Analysis: the LG vs Sony PS3 lawsuit

The big news in the console world last week was LG obtaining a temporary ban on the importation of PlayStation 3s into Europe. I spoke with BBC Radio 4 about this issue (you can listen here at 42 mins if you’re keen!) and wrote a feature on Gamesindustry.biz, now reproduced below:


SUMMARY

This case is a ‘first’ for the games industry in several respects: the first time a patent has been used to obtain a console importation ban; the first time a console has been blocked from entering Europe; and the first time a (modern) outside electronics manufacturer has sued over a console. I’m going to discuss why this lawsuit came about, what practical consequences this might have for Sony (though talk of a ‘loophole’ is misguided – more on that later) and what might happen next. Lastly, at the end I set out some key points from this case for all businesses in the games industry.

THE STORY SO FAR

The rivalry between Sony and LG – both of whom are of course Asian giants in electronic consumer products – has been going on for some time. But it really came to the fore when, in December 2010, Sony took legal action to block the importation of LG mobile phones in the US. LG has since responded with legal action in both the US and Europe, alleging that Sony has infringed a number of LG patents over Blu-ray DVD technology, including the Blu-ray tech in the PS3 – which is what has led directly to this battle.


WHAT’S A PATENT?

A patent is a form of intellectual property right – it is essentially a temporary monopoly over the exploitation of a new invention. The legal rationale is that if you have created something useful for society, you are rewarded by the exclusive right to profit from that invention for a limited period of time – provided that afterwards anyone can use that invention freely.

Broadly speaking, in Europe patents are awarded over hardware/physical inventions, not over software. They are therefore mainly of interest to hardware manufacturers, such as console or peripherals manufacturers in the games industry.

Technology companies like Sony and LG tend to amass large portfolios of patents for two key reasons: (1) patents are valuable in their own right; and (2) they can be a useful shield in any patent case brought against you.

That last point needs a little explanation. Let’s say Company A and Company B are both in the electronics industry and both own several patents. Company A sues Company B for patent infringement. Because Company B also owns a patent portfolio, it may be able to use that portfolio to bring its own patent infringement claim against Company A. Hence why owning a patent portfolio can be a shield in patent cases – in fact, having your own portfolio might even stop your rival from suing you in the first place, for fear of an immediate counterclaim.

However, this logic doesn’t work all the time – clearly in this case there has been enough at stake for Sony and LG to go to litigation despite the inevitable counterclaims on either side.

THE PLAYSTATION 3 BAN

As I said, once Sony had started the ball rolling, LG commenced legal action in the US and Europe over Blu-ray tech in Sony products – in particular the PS3. So far, we haven’t seen any substantial reported action on the US front.

However, LG was able to score a big win in Europe by going to the Dutch legal authorities and obtaining this temporary ban (for those who are interested, LG used an EU law on customs action against goods suspected of infringing intellectual property rights).

Why Holland? Reports indicate that PS3s are brought over in container ships from the manufacturing base in Asia to the European distribution base in Holland, from which onwards distribution to the different European national markets is organised. So, by obtaining the temporary ban in Holland, LG has disrupted Sony’s European distribution network.

As to the practical impact of the ban on Sony, opinions on this differ. Some reports suggest that, since most retailers have 2-3 weeks supply of PS3s already, the impact would be muted. On the other hand, the longer this drags on, the greater the potential for it to become a real problem.

In the meantime, it’s not completely plain-sailing for LG for two reasons:

(1) The ban is only temporary – typically ‘up to ten days’ under the normal rules in these cases. LG will need to go back to the Dutch legal authorities if it wants to extend the ban, while Sony will of course be seeking to end the ban.

(2) If a judge later finds that LG was wrong to seek the ban in the first place (ie its patent infringement claim is wrong), then it will in principle be liable to Sony for financial damages to compensate Sony for the harm caused by the ban – quite apart from the PR blow that LG would suffer.

On the other hand, if a judge ultimately rules in LG’s favour, then in principle Sony would be liable to pay LG effectively to compensate it for Sony’s patent infringement.

IS THERE A LOOPHOLE FOR SONY?

Some press reports suggested that there is a loophole for Sony, ie the temporary ban applies only to Holland and therefore Sony could simply get the PS3s into Europe through other ports. This is technically correct legally because the current ban only applies to Holland, but I suspect a ‘loophole’ is unlikely in reality:

(1) It is much easier said than done for Sony to change its entire European distribution network. It takes weeks for container ships to reach Europe, then they have to be sent to the right kind of port, which also has to have on-shore distribution facilities. All of that is currently set up in Holland and it can’t be easily replicated elsewhere. I suspect it would be difficult to fly substantial amounts of PS3s into Europe on any economic scale.

(2) In any event, even if Sony was able to make alternative temporary distribution arrangements, that would be treating the symptom (the Dutch ban) not the cause (the dispute with LG). LG could potentially just go to each European port and seek a similar ban (albeit we don’t know if they would have the same success). One last point: the Daily Mail reported yesterday that the PS3 importation ban has been extended to the UK, but that has not been corroborated so far as I’m aware by HMRC, Sony or LG.

SO WHAT’S NEXT?

It’s impossible to predict the twists and turns a lawsuit can go through, but some things are clear:

  • The case may or may not settle at any time of course, if the parties are able to resolve their differences. If it doesn’t, Sony and LG will need to go back before the Dutch legal authorities regarding the current ban there in the next few days.
  • If LG wants to pursue its patent infringement case in Europe further, it will likely need to do so in each European country – there isn’t a simple pan-European patent framework for it to rely upon.
  • The legal action in the US is ongoing and could catch up with Europe at any time – which could cause headaches for both LG and Sony.
  • If the lawsuit does drag on, and if stocks of PS3s are affected, then it could quickly affect everyone in the PS3 supply chain – from Sony to its developers to the consumer.



KEY TIPS FROM THE CASE:

  • Hardware manufacturers should pay attention to this case and consider how well their intellectual property rights, particularly their patents, are protected.
  • Don’t just look at your home market(s) – issues in other European countries can quickly affect you too.
  • Don’t assume that your legal issues will occur just within the games industry itself.
  • Everyone should be aware that these kinds of bans/freezing orders aren’t restricted to patent infringement – they can in principle be obtained where there has been other IP infringement or possibly even if there is just a contract dispute.

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Gold farmer turns WoW gold into real gold, loses it, sues

An Australian woman is suing her insurer over the theft of 74 bars of real gold bullion worth $74,549, which she bought using profits made from gold farming in World of Warcraft.

Adelaide Now reports that Kristina Fincham was a (clearly successful) gold farmer in WoW who sold in-game gold to players in return for substantial profits.  She then decided to convert the profits from the WoW gold into real-world gold bullion.  [EDIT: as Daniel points out in the comments below, gold prices are doing well at the moment, which is a good reason to buy gold atm]

The bullion was allegedly stolen from her home in March 2008.  She is now suing her insurer, AAMI, for failing to reimburse her for that theft.  AAMI’s response appears to be that the theft was staged by Fincham and therefore it has no obligation to pay her.  They said “Ms Fincham was not covered for any loss caused by, or arising from, fraud or fraudulent means used by her or anyone acting on her behalf”.  Trial is set for May 2011.

THOUGHTS:

So this Australian woman farmed WoW gold, turned it into real gold and then allegedly faked its theft?  Good grief.

I’m afraid this case sets no new legal precedents, since the fact she was a WoW gold farmer does not appear to be an issue.  The real issue is what happened to the gold bullion.  Still, the whole case seems so mad, I had to blog about it!

Of course, this would be a lot a more interesting if she had tried to insure the gold that she farmed from WoW, but I suspect we’re some distance from that kind of thing yet…

(NB Adelaide Now reports that this case could be the first case to recount in-game WoW events in a trial.  That’s not right – it’s happened many times before, such as in the WoW Glider case.)

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Image Credit: Activision-Blizzard/Wired

No Doubt vs Activision Band Hero lawsuit to fight on

A US appeal court has given No Doubt permission to continue their lawsuit against Activision over Band Hero.  The rock band argue that Activision has misused their likenesses and music within Band Hero in a breach of a contract that Activision entered into with them.

This lawsuit has been going since around November 2009 (see previous posts about the No Doubt/Activision lawsuit here and here), so here’s a quick summary of the story so far.
NO DOUBT SAYS…

(1) They contracted with Activision for their avatars to appear in Band Hero and sing a maximum of three No Doubt songs only. 
(2) They agreed to be photographed and have motion-capture video taken of them (to make game avatars for each of them) and to assist with marketing the game (e.g. press interviews).  In return, they received an undisclosed payment.
(3) BUT, the band argue, without their permission Activision designed the game so that players can: (i) have No Doubt avatars play over sixty songs from other bands; and (ii) have No Doubt avatard sing other bands’ songs in other bands’/singers’ voices, whether male or female (they give the example of Gwen Stefani singing the ‘Stones song “Honky Tonk Woman” in a man’s voice). This, they argued previously, has “transformed No Doubt band members into a virtual karaoke circus act”.  
(4) Essentially, No Doubt were pretty angry that Activision allegedly told them their likenesses and songs would be used only for a limited purpose, but actually then used them in a much more expansive way than No Doubt would ever have agreed to.  Or so they say.
ACTIVISION SAYS…
(1) It did have the contractual rights to allow players to use No Doubt avatars to sing non-No Doubt songs.
(2) In any event, it was “publicly known” that players can unlock in-game characters in Band Hero and then use them to play potentially any song within the game.
(3) Activision also counterclaimed against No Doubt for allegedly failing to provide marketing assistance as it was contractually obliged to do.
CURRENT STATE OF PLAY
Originally, Activision advanced a pretty straightforward contract-based argument: they said they had the rights to do what they did and therefore No Doubt can have no complaint.  But, more recently, it seems that Activision ran a more sophisticated constitutional law argument, relying on the US First Amendment – which among other things protects freedom of expression.
It was essentially this issue which went before the courts just now.  Activision argued that its use of No Doubt’s likenesses in Band Hero is protected by the First Amendment and therefore No Doubt had no case.  No Doubt of course rejected that argument, arguing that Activision could not now claim wide ranging constitutional protections when as a matter of contract it had already agreed with No Doubt only to use the No Doubt likenesses and music under limited condititions. 
At first instance, the trial court rejected Activision’s argument.  Activision then appealed the case to the Californian Court of Appeal.  Now that Court of Appeal has again rejected Activision’s argument and effectively allowed No Doubt to continue the lawsuit against Activision.
THE COURT’S REASONING
The court found against Activision for two main reasons (full ruling HERE):
(1) Activision’s freedom of expression/First Amendment argument failed
In order for Activision to claim a freedom of expression protection, it first had to prove that the ‘expression’ in question deserves to be legally protected.  In this case, the ‘expression’ that Activision wanted to protect is its use of the No Doubt band’s likenesses and music in Band Hero
But think about that for a second.  It’s not enough for Activision to just copy No Doubt’s likenesses and music wholesale, stick it in Band Hero and then claim First Amendment protection.  If that was the case, then anyone could stick anyone else in a game (or a film etc) and then avoid being sued by relying on the First Amendment.  To get around this problem, US case law has established that you have to do something expressive with the work in order to obtain First Amendment protection.  There has to have been a “transformative use” of what you want to protect.  Put simply, you can’t just copy someone else, you have to actually do something new if you want First Amendment protection.
Example: Alan takes a photo of Bob and sells it to someone else = arguably not protected by the First Amendment.  Alan takes a photo of Bob and turns it into a mural painting featuring Bob  = potentially protected by the First Amendment.  Why?  Because turning the photo into the painting is the ‘transformative use’.
[American readers: I think that works, but tell me if I’m wrong!]
So, the court applied that logic to Band Hero.  Was the appearance of No Doubt and everything a player can do with them once they unlocked a ‘transformative use’ of the work?  Answer: NO.  The Court said:
We conclude that the creative elements of the Band Hero videogame do not transform the images of No Doubt’s band members into anything more than literal, fungible reproductions of their likenesses. Therefore, we reject Activision’s contention that No Doubt’s right of publicity claim is barred by the First Amendment.”
In other words, taking a celebrity from the real world and putting them in avatar form within your game isn’t enough to give you First Amendment protection, because you haven’t done enough to their likenesses to have made something new which deserves First Amendment protection.
(2) The contractual argument
One of the three judges, Justice Epstein, also found against Activision but using different reasoning.  He essentially agreed with No Doubt’s argument that Activision had agreed in the contract to a limited use of No Doubt’s likenesses and music so it could now turn around and argue wide-ranging contractual protection.
WHAT NEXT?
No Doubt has been given permission to continue its lawsuit and we’ll have to see what it decides to do next.  If it continues, it certainly will have had a substantial boost thanks to the Court of Appeal.  By contrast, Activision has suffered a real setback: its consitutitional law argument failed and, maybe more damagingly, the court did not seem particularly impressed with Activision’s conduct or its views of the contract.
WHY THIS CASE IS IMPORTANT
A number of games companies have profited from associating themselves with celebrities, or even including celebrities within the games themselves.  But now the games industry is facing a backlash: EA is facing claims from throngs of sports stars from (American) football to basketball.  Activision is facing claims over its music games – not just No Doubt over Band Hero, but also from Axl Rose over Guitar Hero.  And in the background there are a whole host of other celebrity vs games companies disputes on the boil.    Late last year, for example, a Cypress Hill singer sued Rockstar Games over Grand Theft Auto.
You can argue back and forth how genuine these claims by rich celebrities against rich games companies really are.  But what the No Doubt/Activision lawsuit is showing us so far is this:
  • Games companies can’t just take someone else’s image or intellectual property and do what they want with them.
  • In fact, games companies can’t even just take a real person’s likeness and turn it into a game avatar without permission.
  • As always, a properly drafted licence agreement is key: you need to obtain rights for what you want to do with someone else’s likeness or intellectual property and you need to be absolutely clear what you can and cannot do with them.
  • So far, there is nothing to discourage more cases like this in the future – watch this space…
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Image credit: Wikimedia/Activision

Activision joins EA to Infinity Ward lawsuit

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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Hacker jailbreaks PS3, pwned by Sony

Last week news emerged that a group of hackers, led by one George Hotz, have jailbroken the PS3 – in other words, they had successfully circumvented the security measures put in place by Sony to prevent users from running whatever programs they like on the PS3.  
This has caused shockwaves to say the least, particularly given Sony’s previous claims regarding the impregnability of the PS3.  You can read more about what happened regarding the hack itself via the BBC or have a look at Rob Fahey’s editorial about it on Gamesindustry.biz.
Ofc, I’m interested in the legal aspects of this incident.  As, it seems, are the handful of my readers who emailed me to ask what might happen to George Hotz as a result of his hacking escapades.  And the answer is….Sony are suing him.
As Gamesindustry.biz reports:
“[Sony] alleges the defendants “circumvented effective technological protection measures” for the PlayStation 3 and other copyrighted works, and “trafficked in circumvention technology, products, services, methods, codes, software tools, devices, including but not limited to the Elliptic Curve Digital Signature Algorithm Keys, encryption and/or decryption keys, dePKG firmware decrypter program, Signing Tools, 3.55 Firmware Jailbreak, and/or any other technologies that enable unauthorized access to and/or copying of PS3 Systems and other copyrighted works.
Sony alleges the defendants have violated the Digital Millenium Copyright Act, the Computer Fraud and Abuse Act, the Copyright Act and related state and common laws covered by the California Comprehensive Computer Data Access and Fraud Act, according to legal filings published by Hotz.  “
Thoughts
A DCMA action was pretty much inevitable once word of this got out.  For non-US readers: the DMCA makes it illegal for you to try to circumvent technological protection measures which a software company puts in place to protect its software (the equivalent in the UK is in the Copyright, Designs and Patents Act 1988 – you can read more about that here in the context of modchips).  One example is The Warden, the anti-bot program used in World of Warcraft (and recently in the court’s spotlight as part of the WoW Glider case).  Another is the technical measures put in place by Sony in the PS3 which Hotz has now broken.  Difficult for me to see how Hotz will be able to avoid a successful DMCA claim, personally.

UPDATE: Jono793 points out that there could be complications in Sony’s DMCA argument given that it was only a flaw in Sony’s security which allowed Hotz to jailbreak the PS3 in the first place.  I imagine this would mean an enquiry into the arcane detail of the DMCA in order to determine whether that is a problem for Sony.  However, it seems to me that if the court allowed a loophole for circumvention devices which do not work properly, it would be opening the floodgates to that argument in every DMCA case going forward – perhaps unlikely therefore.

Then there are some other claims being advanced by Sony.  The copyright claim is another no-brainer and goes hand-in-hand with the DMCA claim.  I imagine the copyright argument goes something like this: the PS3 console software is a copyright work, which you are only allowed to use in accordance with a EULA.  If you jailbreak that software, you are outside the scope of the EULA and therefore likely committing copyright infringement.  Which is a Bad Thing – not least because, in the USA, it can lead to huge damages awards against the infringer.

UPDATE: As Artfunkel notes in the comments below, the copyright claim might not be that straightforward to run.  After all, a jailbroken PS3 runs the same software – the same games – as a vanilla PS3.  Sony could ofc argue that a jailbroken PS3 is a breach of the EULA and therefore automatically copyright infringement – but that argument didn’t get very far in the WoW Glider appeal recently.  If this case fights, there could be some complex legal argument here.
Lastly, there is what looks like a claim over the act of hacking itself.  Again, no surprises there: generally it is illegal to hack software belonging to someone else, regardless of what you do with the fruit of that hacking – whether it  be private use or public dissemination.  Sony is of course using a Californian statute; for those who are interested, the principal UK equivalent is the Computer Misuse Act 1993, which you can read more about here.
So, all in all, no great surprises here – Sony really had no choice but to take these actions.  In practical terms, it seems they are applying for a restraining order and injunction against Hotz, which if successful would at least stop him distributing the hack.  Good luck to them.
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More on the Infinity Ward lawsuit: EA to join the party?

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]

Interplay’s gamble: the Fallout lawsuit continues

We now have confirmation that the lawsuit between Interplay and Bethesda over the Fallout IP has not been quietly settled (thanks to The Vault).  In fact, it seems to be hotting up.
The story so far…
Longtime readers will know this already from my previous posts (see here and here), but here goes:
Interplay sold the post-nuclear dystopian games series Fallout to Bethesda in 2007, as part of which they agreed that Interplay would retain certain licence rights, including the right to develop a Fallout MMO.  In 2009 Bethesda commenced this lawsuit, claiming that Interplay had breached that agreement, infringed Bethesdra’s trademark rights in the Fallout series and that, as a result, Interplay has forfeited all remaining rights in the Fallout IP.  Interplay denied Bethesda’s claims and counterclaimed that it still has rights in the Fallout IP, including the right to create a Fallout MMO (then known, rather mysteriously, as “Project V13”).
At the end of 2009, Bethesda unsuccessfully applied to court for a preliminary injunction effectively prohibiting Interplay from doing anything with the Fallout IP until the resolution of the lawsuit.  A month later, Bethesda launched an appeal against the court’s refusal to grant that preliminary injunction, which it later dropped.
Then it got a bit mysterious: at around the same time, a beta sign-up page for Fallout Online appeared, which appeared to suggest that Bethesda and Interplay were cooperating notwithstanding the litigation (the bottom of the sign-up page reads:
 
Fallout® is a registered trademark of Bethesda Softworks LLC, a ZeniMax Media company, in the U.S. and/or other countries, and is used by Interplay under license from Bethesda Softworks LLC. All Rights Reserved.”

Which suggests ofc that perhaps Bethesda and Interplay are cooperating over Fallout Online after all…which made me wonder if maybe there had been a handshake and the lawsuit had quietly been settled?

What has happened now?
In fact, the lawsuit continues – and how!  The Vault, a Fallout wiki, has received a further batch of court documents which both confirm that the lawsuit is ongoing and highlight some of the recent developments.  Now, I don’t yet have access to those court documents,  so I can’t establish myself exactly what is going on and how it relates to Fallout Online.  However, we do know that:

(1) Bethesda is continuing to argue that it owns all the IP rights in the Fallout series.

(2) Bethesda is now also arguing it gave Interplay rights over only the Fallout trademark and nothing else.  In other words, Bethesda argues that Interplay has no rights over any other Fallout IP, including for example artwork artwork (e.g. weapon art) or game concepts (e.g. the (in)famous “PIP Boy”), all of which Bethesda says it purchased from Interplay in 2007.

The practical effect of that argument (if successful) is that it would make it extremely difficult for Interplay to use much of the previous Fallout games in Fallout Online at all, which would be both a creative and commercial headache for Interplay.  Example off the top of my head: Interplay couldn’t, for example, just import Megaton (either nuked or not nuked, natch) into Fallout Online, at least as it is shown in Fallout 3 anyway. 

(3) Bethesda is also apparently taking other steps to make life difficult for Interplay, including demanding that Interplay provides it with access to its internal Fallout Online design document wiki as part of the litigation (which Interplay is refusing on the basis that it contains trade secrets).

So what?

Drawing all the above together, I think this is what has happened:

  • The reference to Bethesda on the Fallout Online beta sign-up site does not mean that there has been any deal between Bethesda and Interplay.  We know this now because the litigation is ongoing: Interplay and Bethesda cooperating over Fallout Online would only make sense if they had settled the lawsuit.
  • IF that’s right, then Interplay has taken advantage of Bethesda’s setbacks in the litigation by forging ahead with Fallout Online as a solo project.
  • And, IF that’s also right, then Interplay is running a serious gamble that it will win the lawsuit and therefore be able to release Fallout Online itself…
  • …BECAUSE, if Bethesda wins the lawsuit it would in principle have the ability either to shut Fallout Online down or to demand that it be transferred to Bethesda’s ownership.
  • It would also mean that Bethesda has uncontested control over the Fallout IP in the future.
  • Ouch.

I can see the commercial benefits of what Interplay is trying to do (if in fact I’m right on the above): get the game as far developed as possible, both as a bargaining chip with Bethesda in any negotiations and because, if Interplay wins, it already has a game ready to go.  On top of that, the Interplay Fallout MMO is now probably regarded by fans, gamers and the games industry as the Fallout MMO regardless of this lawsuit – so Interplay has won the PR contest there.  So it seems like a smart move in those respects…if it wasn’t for the legal risk that it could all be taken away from them.

That said, it’s worth remembering that ultimately all of this remains to be tested in the litigation, so the ownership and the future of the Fallout IP is still undecided.  
It also means I’ve stopped making any predictions about what or may not happen in this case – I’ll write another update when there’s another turn in this roller coaster…
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[Image source: Wikipedia]

WoW Glider: what actually happened in the courtroom

Last week I wrote an analysis of the Blizzard/WoW Glider case, which got a decent amount of press on the mainstream games sites and led to an awesome debate/flame war/hilarity in the comments to my original post – see here.
One (anonymous) poster wrote up a tongue-in-cheek script for what might have happened in the courtroom, which I liked so much I decided to post it properly below. Enjoy – and if you’re the writer of this piece of genius, let me know for credit….
Blizz: …So in conclusion, please order Michael “Mike” Donnelly to shut down Glider, and also buy us all Yachts. Cuz really, that’s what we were gonna do with it anyway. Either that, or nerf rogues.
Judge: I hate rogues too! B*ggers always gank me when I’m afk taking a leak…
Blizz: Well, we DID nerf stealth by making it MUCH easier to detect. Obviously there were complaints, but PR’s got it covered with the usual run-around.
Judge: Oh sh*ts, I know SOMEONE who’s gonna win a lawsuit if they’d keep a certain class from ever stealthing aga-
Mike: Uh, your honor?
Judge: shut up, Mikey Mike. I’m talking business here. So anyway, this one time I was THIS CLOSE to getting that peacebloom, when I hear that WOOOO, ya know? And then I-
Mike: Your honor, the case?
Judge: FINE, but you BETTER make it a good one, I’m one global away from swinging my Gravel of Justice in favor of Blizz here.
Mike: Thank you, your Honor. Well, ladies and gentlemen of this “supposed” jury, Blizz would like you to believe they made my Glider program illegal. And they make a good case. Hell, I even felt pity myself! But ladies and gentlemen of this “supposed” jury, I have one final piece of evidence for you to consider…
Blizz: (Wait, isn’t this a South Park skit?)
Judge: When did that chartboard get here? Warden, did you catch that?
Warden: No, but there’s a guy in Diremaul who hasn’t logged off in 3 days straight…
Blizz: SEE?! They’re RUINING us!1!
Judge: Really? I mean, it’s just Diremaul. Honestly, have you guys actually tried to run your own instances? They really suck sometimes.
Blizz: Uh… well, we ARE in the process of streamlining the PVE content in order to re-optimize the percentage of numbers such that they increase with better lateral passing.
Judge: …oh.
Phoenix Wright: OBJECTION!
Judge: wat
Phoenix: The excuse offered by Blizz doesn’t make even the most remote logical sense! It’s just words they strung together from what little they remember during the last manager’s meeting in Vegas! Furthermore, “lateral passing” isn’t even an economics term! It’s from football!
Judge: He’s gotcha there, Blizz.
Blizz: Oh yea? Well guess what Phoenix? You just lost.
Phoenix: ?
Blizzard: THE GAME! lol
Judge: lol
Phoenix: !!!
Mike: /sigh
Blizz: Hey! That’s OUR property there!
Mike: You know what, I give up. I had this wookie I was gonna show and everything, but seriously this is just too stupid. (morons, every one of them)
Judge: You heard the man, he sai- wait.
Blizz: ?
Mike: ?
Judge: … did he say he had a wookie to show us?
Mike: (Oh, God…)
God: I LOVE WOOKIES
Mike: /facepalm
Blizz: STOP IT! God, make him stop! He’s stealing our stuffs!
God: MAN WAS ORIGINALLY SUPPOSED TO BE WOOKIES
Judge: Really? What happened?
God: TEQUILA
Judge: Fair point.
Mike: For the love of… you, please just get me out of here. I can’t take this any more.
God: I CANNOT DO THAT HERE
Mike: I know I’m gonna regret this, but… why not, God?
God: I AM OVERBURDENED
Blizz: lol! He’s doing the D2 Barb lines!
Judge: lol! His voice is perfect for it too! Do the A1Q1 quest completion line!
God: THE ROGUES ARE SAFE FOR THE MOMENT
Judge: lol
Blizz: lol
Warden: lol
Phoenix: lol
Mike: Fuck it. I’ll see you all in appeals. /camp
God: ACTUALLY YOU’LL SEE ME IN 1 DAY 17 HOURS 1 MINUTE 0 SECONDS
Judge: Is that… is that when he’s going to die?
God: NO THAT’S WHEN I RENEW MY WOW SUBSCRIPTION
Blizz: Now THERE’S a marketing pitch! “WoW: the only game fit for God!”
God: MY SON PLAYS BEJEWLED
Blizz: we’ll talk to Popcap, make it an addon.
God: AND THE LORD SAW IT AND SAID THAT IT WAS GOOD
…And that’s how a massive lawsuit between a company and some dude brought about the addition of Bejewled into WoW.”
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