Lawsuit – Gamer/Law

Noriega v Activision: can a dictactor control his online image?

News has broken that Manuel Noriega, the former military dictator of Panama, is suing Activision on the claim that his name and likeness is used as a supporting character in the latest game in the multi-billion dollar Call of Duty game series, Call of Duty: Black Ops 2.

In a nutshell: the game is set in the 1980s and includes Noriega as a supporting character involved in murder, betrayal and intrigue (the normal day job for any dictator, then). It’s clear that Activision have strived for a realistic depiction of Noriega (as they have done for other historical characters by the way including John F. Kennedy, Richard Nixon and even Fidel Casto), but General Noriega wasn’t happy with that and has sued Activision, claiming essentially that they should have asked his permission and have profited from using his image and name without permission. In essence, I suspect he wants to be paid a large sum of money from Activision. Continue reading Noriega v Activision: can a dictactor control his online image?

Tetris wins the first legal victory against clones

The Tetris Company has won a court case against the developer of an iOS Tetris clone – this is a really significant legal development in fighting clones, so I’m quite excited about it. The case is here and is reported on extensively by the 1709 copyright law blog (via Rosie Burbidge – thanks!), which I recommend you read, so I’ll just summarise the facts briefly here and add a few observations. Continue reading

Timegate beats Southpeak in Section 8 lawsuit

Timegame Studios, developer of the Section 8 first person shooter, has just won an interesting lawsuit against publisher SouthPeak Interactive (via Houston Press and Courthouse News). The case is a useful reminder of both the strength and weaknesses of arbitration, as well giving us some useful practical tips for drafting good publishing agreements (skip to the end of the post for that). I’ve written a summary of the case below. Continue reading Timegate beats Southpeak in Section 8 lawsuit

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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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]

Former Activision employees join Infinity Ward exec lawsuit

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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Games lawsuits and what you can do about them

This is a post for games developers and publishers about lawsuits and what you can do when you face one.

Lawsuits are a fact of life in all businesses, the games business included. Lawsuits can come out of virtually anywhere: a disgruntled consumer, a rival looking to get ahead, a business partner who thinks you’ve breached your contract with them, the list goes on. If you are very lucky, you might avoid having to have anything to do with a lawsuit, but it’s more likely than not that at some point you will have to get involved. If so, then you might find useful the following summary about what to do and what to think about. It’s primarily aimed at what to do if you are faced with a lawsuit, but it applies just as well if you are thinking of bringing a lawsuit against someone else.

So, what do you do?

(1) Get legal advice early

There’s no way around it: the only sure way to know if you are facing a strong or weak lawsuit is to talk to a lawyer about it (preferably a disputes specialist).

Yes, that involves some money, but experience shows that a little legal advice early on could save you a lot of money later on. Besides which, some lawsuits can be a serious threat to a business and so they should be treated as such.

Of course, maybe the lawsuit is obviously without merit or has a small monetary value, meaning that throwing a lot of money at the lawsuit may not be worth it financially. If so, then perhaps it can be handled by a lawyer on a reduced-rate or possibly even pro bono basis (if yours is a sufficiently worthy case) or, failing that, perhaps it could be dealt with by someone on the business side who has some legal experience (though that’s not ideal, given how high-stakes and complicated litigation can be).

(2) Legal issues to discuss

Your lawyer will be able to advise you on:

(i) the legal strength of the lawsuit against you and what it could mean for your game/product/business.

(ii) the jurisdiciton for the lawsuit (i.e. in which country will the lawsuit take place and under what country’s laws – this is pretty important, given today’s globalised games industry and playerbase).

(ii) the prospects of success and your best/worst case scenario in terms of the possible outcomes.

(iv) how best to respond to the other side and what to say.

(3) Working out your strategy

Your lawyers will be able to work with you to figure out whether you should fight the lawsuit, stonewall it or settle it. Some key issues to discuss with them when formulating your strategy:

What is the cost/benefit analysis? In other words, what is going to cost the most – fighting, ignoring or settling the lawsuit?
Is there some commercial solution you can propose that will defuse the row? Would an early face to face meeting help?
If you’re going to fight, have you got any counterclaim against the claimant? Could that give you any financial upside to the lawsuit?
Is there any ‘floodgates’ risk if you lose/settle the lawsuit (i.e. could more people come after you over the same issue?)
What is the commercial risk if you lose the lawsuit? (e.g. impact on trading partners or consumers)
What are the PR risks? Would it be a problem if/when the lawsuit became public and, if so, do you need to have a parallel PR strategy in place?
What resources would you need to devote to the lawsuit? In particular, would management need heavily to be involved?
If you are considering a quick settlement, when would be the best time to make the offer and what will you offer?
How are you going to keep control of your legal costs expenditure? (more on that below)

(4) The litigation process

Litigation goes through broadly three stages:

(i) initial phase/setting out the legal case;

(ii) second phase/evidence gathering, including document review, witness evidence and possibly the use of experts; and

(iii) third stage/preparing for and going to trial.

If and when it comes to the legal fight, your lawyers will be able to advise you what legal weapons are available to you. For example, if the lawsuit against you clearly has no merits at all, then you may try to have the case thrown out of court (known as ‘strike out’). Or, if the lawsuit clearly has some muscle, then you might want to take steps to try to settle the claim early.

More generally, a lawsuit can go through many twists and turns during the litigation process (hence why litigation is often compared to a rollercoaster). Experienced litigators will tell you about unlikely cases that were ultimately won and of sure-fire lawsuits that somehow never made the grade. All of this means that litigation can be RISKY, so you can never take the result absolutely for granted (for this reason, many cases settle using ADR – more on that below). On the other hand, a judgment from a court is the best way of settling a dispute, particularly if it is a real threat to your business.

(5) Alternative dispute resolution (“ADR”)

ADR is the title given to different methods of settling disputes without having to go court. The classic example is mediation, where both sides sit down in a room with an independent mediator to try to settle their differences. Another example is expert determination, where both sides put their cases to an independent expert who decides which one has the better case (this can work well in intellectual property disputes). ADR is popular for good reasons: it is cheaper than full litigation, can be kept confidential and has a good success rate at settling disputes.

So, if you do end with a lawsuit on your hands, it’s worth thinking carefully about trying to settle the dispute using ADR, rather than going to court.

(6) Costs

Control of legal costs is key for any business involved in litigation, because litigation tends to be expensive. In fact, in drawn out litigation you can even see the legal costs exceed the money being argued over!

Points to think about:

Discuss costs early with your lawyers and establish who will be working on the case, what they will be doing and how much they propose to charge.
You may want to ask the lawyers to prepare a costs estimate (often this comes together with the lawyers’ initial legal advice on your legal strengths and weaknesses)
If the dispute looks likely to fight, you may be able to enter into some form of costs arrangement with your lawyers. For example, some jurisdiction permit ‘no win, no fee’ deals in which you pay no costs if you lose the lawsuit (but the lawyers can claim an uplift on their fees if you win). In the US, contingent fee arrangements are widespread (where lawyers are paid through a share in the moneys recovered in the litigation).
Insurance: your insurance policies may cover your legal costs in a dispute, usually on the basis that you notify the insurer as soon as possible once you are notified of a dispute.

(7) Summary

Take threatened and actual lawsuits seriously: they can have a real impact on your business
Speak to your lawyers: a little legal advice early on could save you a lot of money later on
Work out your legal strategy with your lawyers and stick to it. You may want to fight the lawsuit, stonewall it or settle it.
Keep a close track on your legal costs.

Any questions? Need a hand?

Drop us a line here if you have a disputes problem, or would like to talk over any of the above.