Lawyers in Canada: Davis LLP - Legal Advisors Since 1892

Microsoft Ordered To Pay $1.5B In Patent-infringement Damages To Alcatel-Lucent

The award was made by a federal jury in San Diego who arrived at the figure, says Microsoft, by multiplying Windows sales and average PC sales prices worldwide since May 2003

Lucent, which was acquired by Alcatel in 2005, had filed patent claims against Gateway and Dell in 2002 and 2003. Microsoft then sued Lucent over the claims and was itself countersued by Lucent. To date, two of Lucent's claims have been dismissed and six trials were set to deal with the remaining patent claims. The judgment in this case is in respect of patents involving the conversion of audio into digital MP3 files on PCs.

Microsoft, which maintains it properly licensed the MP3 technology, has announced that it plans to appeal.

Meanwhile, the remaining patent suits continue with the next one (dealing with speech coding) to be heard by the same San Diego court in March and April. Also at issue is video coding on the Xbox and the Windows interface.

Coverage at: http://shorl.com/reryperoposu (theithacajournal.com)

PATENTS AND GAMES

Gamasutra has an interesting article about the US patent regime and how it does more harm than good, especially in high-tech industries such as video gaming. Note that some of the criticisms raised in the article are not fully applicable to other jurisdictions -- for example, Canada has a more restrictive approach to software patents and business ...

WoW LAWSUIT OVER BOT SOFTWARE

A flurry of legal activity has erupted over a piece of software called WoWglider. The software (see here) will play your World of Warcraft character for you while you do other things. WoWglider's FAQ states bluntly that using the software is a violation of WoW's terms of use, and that your WoW account may be closed if you are caught using it. However, the FAQ also points out the various steps taken to make WoWglider difficult to detect.

When the creator of WoWglider, Michael Donnelly, received notice that Blizzard and Vivendi considered WoWglider to be a copyright infringement and a violation of the Digital Millennium Copyright Act, he decided to strike first and commenced a lawsuit seeking a declaration that WoWglider does not infringe any rights.

Blizzard and Vivendi have now filed a countersuit claiming various infringements, including violation of WoW's terms of use, copyright and trade-mark infringement, violation of the DMCA (by circumventing copyright protection), unfair competition, and tortious interference with contractual relations. The countersuit alleges that by creating and distributing WoWglider, Donnelly's company is encouraging and enabling WoW subscribers to breach their contracts with Blizzard.

Coverage at: http://tinyurl.com/25h3kp (Gamasutra)

and at: http://tinyurl.com/2m2hys (Game Politics)

WoWglider's Complaint here; Blizzard and Vivendi countersuit here.

CANADIAN THOUGHTS ON MOD CHIPS

Dr. Michael Geist, one of Canada’s pre-eminent technology law scholars, has an interesting entry on his blog about mod chips. One of his readers recently received a cease and desist letter from a large Canadian IP firm on behalf of the ESA concerning the use and sale of mod chips. As well as citing various statutes that prohibit software pirating, the letter also claims that using and selling mod chips to circumvent security on game consoles is an offence and constitutes direct or indirect IP infringement by “inducing and procuring” infringement in Canada.

Dr. Geist has two thoughts about the demand letter. First, the ESA is trying to apply US law in Canada – there is no Canadian doctrine of “inducing” copyright infringement. Second, the letter contradicts the ESA’s position that Canadian copyright law needs reform. On one hand, the ESA says that Canadian law does not adequately address mod chips and therefore needs to be amended; on the other hand, the ESA is relying on existing Canadian laws to prohibit the use and sale of mod chips (in other words, existing Canadian laws are adequate).

Coverage at: http://preview.tinyurl.com/yrfbf3 (Michael Geist)

Former Take-Two CEO Admits His Sins Of Backdating

Ryan Brant, the founder and former CEO of Take-Two who resigned in October of last year has pleaded guilty to felony criminal charges for his role in backdating stock options and has settled with the SEC and the NY Country District Attorney’s office. Ryan Brant will be sentenced to five years probation and must pay $7.3 million in fines. Mr. Brant made $5.3 million on the backdating ordeal. As part of the settlement, Mr. Brant will be banned from acting as an officer and director of public companies.

It is interesting that Mr. Brant escapes prison despite committing fraud in the millions.

Take-Two’s current executives have all been cleared by the investigations

Coverage:
http://shorl.com/vasyjalenydu (Red Herring)
http://shorl.com/juvasobyfrisi (MSN)

Take-Two Completes Option Backdating Investigation

Take-Two Interactive Software Inc. (NASDAQ: TTWO) has completed its backdating investigation and has found no misconduct by its current top executives. Take-Two investigation revealed certain “improprieties” in the process of granting the options and that the incorrect dates were for financial accounting purposes! It will be interesting to see if the SEC will be as kind in their conclusions of the backdating of the options. It seems like Take-Two will blame its former CEO Ryan Brant as the culprit.

Take-Two must now restate its financial statements between April 1997 and August 2003. We have yet to see if this means that the executives must repay their bonuses for said years. My guess is that they won’t have to.

Take-Two’s problems do not end there. NASDAQ has filed another delisting warning due to Take-Two’s failure to file its financials statements. This is not the first warning that Take-Two has received from NASDAQ which delay has been blamed on the investigation. If Take-Two does not file its financials within the next month, there is a significant risk that it will be delisted from NASDAQ.

Coverage:
http://shorl.com/kypradosorulo (Gamasutra)
http://shorl.com/brujytefrapuma (GamePro)

Take-Two: http://www.take2games.com/

Not So Majestic!

Majesco Entertainment Co. (NASDAQ: CM), the US publisher of such games as Jaws Unleashed, Soldier of Fortune, BloodRayne was issued a going concern warning by its auditors last month.

Such a warning means that Majesco that the auditors have significant doubt about the company's ability to exists as a going concern and to generate enough resources to stay operational.

This basically means that Majesco must either significantly reorganize its business and/or obtain financing in order to secure the future operations of the business.

Majesco has reduced its development costs and operating expenses but only time will tell if it enough.

Coverage: http://shorl.com/fredufrufokati (Game Industry)

Majesco: www.majescogames.com

Activision Faces Possible Nasdaq Delisting

Activision, having failed to file its earnings in a timely manner for the quarter ended December 31, 2006, has received its second warning by the Nasdaq. The company, which also failed to file its earnings on time for the previous financial quarter, has been granted a continued listing on the Nasdaq on the basis that it will file both delayed reports by May 9, 2007. If it fails to do so, its stock may be delisted. Both delays are attributed to internal investigations into stock-option grant practices

A preliminary report issued by Activision claims the company sold $822.8 million worth of games during the latest financial quarter.

Coverage at: http://shorl.com/vabrehaniposa (Gamasutra)

BLAME CANADA

The International Intellectual Property Alliance, a coalition of US movie, music and software providers (which, most relevantly for our purposes, includes the ESA), has issued a report urging the US government to add Canada to the list of countries that don't properly protect intellectual property (the Axis of IP Evil, as it were). The IIPA complains that Canada's failure to update its copyright legislation to address issues such as technological protection measures, bootleg in-theatre filming of first-run movies, etc.

Canada is currently on the low-priority watch list. If it is moved to the high-priority list, as the IIPA wants, Canada could face trade challenges at the World Trade Organization, plus possible sanctions.

Canada's copyright legislation is indeed a little behind the times. The copyright reform process has been underway for a number of years, but keeps getting derailed by elections and minority governments who (perhaps understandably) have other priorities.

Coverage here: http://tinyurl.com/28lryd (Globe & Mail)
And here: http://tinyurl.com/2s7ssb (Game Politics)

New Japanese Anti-piracy Legislation

Japanese customs and copyright law is being amended to start banning the exportation of pirated software as of July 1, 2007. The current laws bans importation, but not exportation, of pirated software.

This is actually not very unusual. For example, the Canadian Copyright Act doesn’t specifically prohibit exportation of pirated software, although it does prohibit the distribution of pirated works “to such an extent as to prejudicially affect the owner of the copyright” in those works.

Coverage of Japanese law here: http://tinyurl.com/ywr8bp (Yomirui)

JACK THOMPSON IS IN HOT WATER - SURPRISED?

Apparently the blessing from Pope Benedict XVI wasn’t enough to help officials see things Jack Thompson’s way. The controversial attorney is facing a disciplinary hearing in Florida at least in part in connection with his conduct as the representative for the Alabama police officers and a police dispatcher, murdered in 2003 by an 18 year old video gamer, against several video game industry defendants in Strickland v. Sony (2005), and for his questionable interactions with Philadelphia’s Blank Rome (acting for Take-Two) and Florida Judge, James Moore. The hearing is set to be heard on an as-yet undisclosed date, by a referee appointed by the Florida Supreme Court.

He is going to need a lot more than the prayers of the Pope to get out of this one…

Coverage at: http://tinyurl.com/yosckj (Game Politics) and http://tinyurl.com/39n46r (Game Informer)