So the Duke Nukem lawsuit is over, then

Just a quick post here: as you all probably know by now, Gearbox has taken over development of the loooong-awaited next Duke Nukem game, Duke Nukem Forever.  There’s a Wired interview with Randy Pitchford of Gearbox here.
Reading this interview made me want to write this very short post for two reasons:
(1) I’m excited at the prospect of a new Duke Nukem game; and
(2) The interview makes it clear that the 2009 lawsuit between publisher Take-Two and previous developer Apogee (over Apogee’s failure to release the game in time…or at all) has been settled.  Quote from Wired:

” “I didn’t want the dream to die,” Pitchford says. So he bought the rights to Duke for an undisclosed amount, then proposed to the publisher that the lawsuits be dropped and Gearbox be allowed to finish the game.”
Which means Gearbox isn’t going to be slapped with a big lawsuit before it can get Duke Nukem Forever out into the stores.  So that’s alright then.
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Take Two loses battle over

What happens if you go to  You don’t get a website dedicated to the Bioshock series of games, that’s what.  And now you still won’t in the future…
…because Take-Two Interactive, publisher of the Bioshock series, has lost an attempt to obtain from a professional domain name purchaser known as Name Administration Inc.
Name Administration (aka NA Media), a Cayman Islands company, acquired in December 2004, a few months after rumours of Bioshock 1 began to circulate in October 2004.  Earlier this year, Take-Two instructed lawyers to seek to have the website transferred to it and away from Name Administration.  This led to arbitration proceedings before the World Intellectual Property Organisation (WIPO) in May 2010 (the WIPO being for present purposes a body which adjudicates on disputes over ownership of websites).  The Panel’s judgment has just been released – read on for a summary…
The legal bit
In a nutshell, in order to have transferred to it, Take-Two had to demonstrate that:
(i) that the Bioshock website registered by Name Administration is identical or confusingly similar to a trademark or a service in which Take-Two has rights; and
(ii) that Name Administration has no rights or legitimate interests in respect of the Bioshock website; and
(iii) that the Bioshock website has been registered and is being used in bad faith.
Take-Two’s arguments
  • As you would expect, Take-Two’s principal argument was that “the only reason for [Name Administration’s] use of the Domain Name is to trade off the value and goodwill of [Take-Two’s] Bioshock trademark by diverting users to third-party commercial websites for profit.”  The trademarks in question had been registered by Take-Two in 2005, some time after Bioshock 1 was announced. 
  • Take-Two also argued that Name Administration had been found to have cyber-squatted a number of other websites in the past.  For example, Take-Two said that Name Administration had also acquired the website! (Although in fairness, that site was given to Take-Two on request).
Name Administation’s arguments
  • Name Administation pointed out that it had acquired the website substantially prior to Take-Two acquiring any Bioshock trademarks (which weakened Take-Two’s argument that the cyber-squatting of the website infringed their trademarks, if those trademarks in fact had been acquired after the cyber-squatting began).
  • Name Administration also argued that the name ‘Bioshock’ was not exclusive to Take-Two or to a gaming context, as it is also meaningful and used in a pharmaceutical and scientific research context (in fact, itself shows pharmaceutical adverts).  In that regard, the WIPO panel noted for example that “the company Johnson & Johnson…had expressed interest in [] in view of its trademark application for BIOSHOCK in connection with hand and skin cleanser [but this was] ultimately abandoned by the company in 2007“.  (You can only imagine what might have happened if Johnson & Johnson, maker of Johnson’s Baby Shampoo, had released a ‘Bioshock skin cleanser…)
  • Finally, Name Administation argued that it “could not be aware of the blog chatter in October 2004 and of the announcement in late 2004 which are alleged by [Take-Two] to be the basis for the timing of the domain name registration. [Name Administration[ specifies that [Take-Two’s] announcement, in the form of an interview with the game designer who stated that he was developing a successor to a game published by “Irrational Gaming” which he intended to call “Bioshock”, was not associated with [Take-Two] until 2005“.  In other words, there was no link between Bioshock 1 and Name Administration acquiring
The Panel’s findings 
The Panel found that the Bioshock website was “identical” to Take-Two’s Bioshock trademarks.  This satisfied test (i) above.  (I must admit I don’t quite follow the Panel’s very terse logic here, given their findings on bad faith summarised below, but never mind).
But Take-Two fell down on test (iii), i.e. proving that “that the Bioshock website has been registered and is being used in bad faith.”  The Panel held that (a) the fact that the website had come before the trademarks, (b) there was no association of Take-Two with Bioshock until 2005 and (c) in any event was associated with fields other than video games, meant that “[Take-Two] has failed to prove that [] was registered and used in bad faith“.
In conclusion, the Panel declined to award ownership of to Take-Two, meaning presumably it has to make do with instead.  A quick look at other Bioshock websites yields a mixed bag: is clearly being cyber-squatted, whereas is being used by Irrational Games so that’s ok.
  • This case illustrates a simple lesson: when you are designing a game or other product, register all the related websites as soon as possible and keep them renewed.  It’s very surprising that Take-Two didn’t do that, but I suppose stranger things have happened.
  • You should seek legal advice on how to protect your IP (particularly trademarks) as soon as possibleIn this case, Take-Two apparently did not apply to register the Bioshock trademarks until quite some time after the game began to be discussed/designed, which helped to cost them in this case.
  • Just because a website has the same name as your game, it doesn’t mean it should or will automatically belong to you.  In this case, Take-Two lost in part because had scientific as well as gaming uses.

Thanks to Out-Law for the original spot.

Image credit: Take-Two/Fanpop

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Take-Two sues former executives in stock backdating lawsuit

Take-Two, the US-based games publisher, can proceed with a lawsuit against some of its former key executives regarding alleged illegally backdated stock options, following a Manhattan federal judgment yesterday.

Reuters reports that former Chief Executives Ryan Brant and Kelly Sumner and former Chief Financial Officers Larry Muller and James David will now have to defend claims alleging securities fraud based on option grants awarded after July 12, 2001.


Back in 2006, Take-Two announced that the US Securities and Exchange Commission was going to investigate certain of its stock option grants since 1997.  In a nutshell, a stock option grant is an offer to a person (typically to a company executive or senior employee) to buy company shares at a specified price.  The investigation formed part of a wider enquiry in the US as well as the UK regarding the legality of backdated stock options at hundreds of companies.  This led to the discovery of fraud and illegal back-dating of stock options by (now former) Take-Two executives. 

Backdated stock-options for dummies:

To explain: it is possible to take a stock option and back-date it, generally to a time when the company shares were worth less, thus instantly making the stock option more valuable if the company’s shares have performed well at the point at which the option is exercised. 

Basic example: a stock option is granted to an executive in 2007 when the shares are worth $10 but is backdated to 2003 when the shares were worth $2.  If the shares are worth say $20 now in 2010, the executive will make a lot more money by having the option back-dated to 2007 (then the profit is $20-$2 = $18 per share), compared to the profit to be made if the true 2007 price was used (then profit would be $10 – $2 = $8 per share). 

The perceived dangers with backdated stock-options are that they can artificially inflate company earnings and share price, as well as being seen poorly by shareholders and potentially the market.  That said, backdating share options is generally not illegal per se, provided the legal formalities (in particular, disclosure to the regulator and approval by the company) are complied with. 

What happened next:

The SEC discovered that Take-Two had not complied with the proper formalities, had filed false information to the SEC, and that the former executives – in particular the former CEO Rob Brant – had acted fraudulently in concealing the backdating of the stock options.

In 2007, Rob Brant pleaded guilty to a SEC criminal prosecution regarding the backdating and agreed to settle a civil lawsuit over the same issues.  Other former Take-Two executives also pleaded guilty in parallel criminal prosecutions.

In April 2009 (according to Reuters) Take-Two paid $3m to the SEC to settle its part in the backdated stock options scandal.

The current lawsuit:

It now transpires that Take-Two shareholders have pressed ahead with separate civil claims for compensation against the former executives, and further that Take-Two has now taken over these claims itself.  So, instead of the Take-Two shareholders claiming compensation from the former executives, the company itself is now pressing the claim.

Although the Reuters article doesn’t state so specifically, the fact that the judge ruled that some of the claims can proceed whereas others cannot suggests that the former executives may have gone to court to have some of the claims against them thrown out for being out of time (all legal claims have a ‘limitation period’ of time during which they must be commenced or otherwise will be forfeited, e.g. breach of contract claims generally have a six year limitation period).  In the event, the judge did rule that some of the claims could proceed whereas others were indeed out of time.

Reuters was not able to obtain a comment from Take-Two but no doubt one will be forthcoming sometime soon.  Hopefully, at that point Take-Two will be able to clarify exactly what claims it is bringing against the former executives and what is the value of these claims.

Going forward, it will now fall to Take-Two to press ahead with its legal claims against the former executives, so we’ll be sure to hear more about this in the future.  We’ll write a follow-up post once further information (and hopefully the Court documents) become available.

[Image credit: Take Two Interactive]

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