Lawyers in Canada: Davis LLP - Legal Advisors Since 1892

Scratch DJ Game Itching for Damages and Injunctive Relief

It has been reported that Scratch DJ Game ("Scratch"), a joint venture between Genius Products ("Genius") and Numark Industries, has filed a lawsuit against publisher Activision, former partner and game developer California 7 Studios ("7 Studios") and its CEO Lewis Peterson, claiming that Activision has "engaged in intentional interference with contract, breach of contract, conversion and misappropriation of trade secrets obtained from Genius to purchase 7 Studios, which is under contract to develop the much anticipated new Hip Hop video game, Scratch: The Ultimate DJ." Scratch has also alleged that Activision and 7 Studios have deliberately hindered the release of Scratch: The Ultimate DJ in order to allow the future release of Activision's own prospective game, DJ Hero, to grab the spotlight.

Scratch has explained that while Activision had offered Genius to acquire Scratch: The Ultimate DJ, this offer was refused. It is at that point that Activision began to look to purchase Genius' product developer, 7 Studios, despite a non-disclosure and confidentiality agreement with Genius. Scratch has also alleged that Activision and California 7 studios conspired to impede the release Scratch: The Ultimate DJ.

It is reported that Trevor Drinkwater, President and CEO of Genius, has stated that "We believe that Activision and 7 Studios have improperly used confidential information obtained from Genius and 7 Studios to interfere with our efforts to complete the game. In short, we believe that Activision is attempting to sabotage the release of our much anticipated game and prevent it from getting to market prior to the release of DJ Hero."

Apparently, Scratch is not only seeking damages, but also an order to have the game returned to it immediately, as well as other injunctive relief.

Meanwhile, in response to these allegations, Activision has reportedly issued a statement, denying that there is any truth to these allegations and claiming that the Los Angeles Superior Court "found that there was no evidence of any wrongdoing by Activision and refused to grant any restraining order against Activision." Activision has also claimed that Scratch has made these allegations "to place blame for the game's delay, as well as to divert attention from the cash flow, liquidity and revenue challenges Genius detailed in its March 30, 2009, SEC filing." Finally, Activision also claimed that it acquired 7 Studios to increase its development capabilities, which did not interfere with 7 Studios efforts to complete the game, as it provided much needed financing to the developer.

However, it has been reported that Genius and Numark have claimed that they were the ones to prevail in Court, rather than Activision. The transcript from the Los Angeles Superior Court hearing has been made public by the companies and although the judge began by stating that there was no evidence against Activision and no reason to restrain it from doing anything, the judge went on to say that 7 Studios "has a duty to return the work product, source code, and software of the plaintiff [Genius]." The judge then stated that Activision had to turn over the source code and should it want it back, that it could argue its case during a hearing set for May 6. The judge also ordered a wall-off between 7 Studios and Activision, preventing the two companies from sharing any trade secrets that 7 Studios may have learned from Genius.

The next step in the case is a May 6 hearing, regarding the damages that Genius is seeking.

Coverage at GameDaily.com, Gamasutra.com, GameDaily.com and Gamespot.

File Share Beware - IP ID'd

Submitted by Amanda Alfieri, Articled Student

Topware Interactive obtained judgments from a London Court against four individuals for file-sharing . The Court granted interim damages in the amount of £750 per person and the final amount can be up to £2000 per person. The difficulty in successfully suing file sharers is discovering their identity. Internet Service Providers (ISP) give a number to each of their users when they are on-line. This number is referred to as an IP address and the ISP's have been reluctant to divulge the IP addresses of their customers in order for computer experts to be able to identify which IP addresses match file-sharers with illegally obtained copyright material on their computers. However, a UK High Court has ordered the identification of hundreds of users whose computers have been used for illegal game sharing. It will permit Davenport Lyons, the lawyers for Topware Interactive to send lawyer’s letters to all those users. The recipients of the letter must provide a satisfactory response or they shall risk being sued.

Read more at This Is Money.

Silicon Knights Digs for Epic Contract Information

Silicon Knights and Epic Games have been embroiled in a lawsuit over the Unreal Engine 3 for some time now. According to recent reports, Silicon Knights has filed subpoenas on several Unreal Engine 3 licensees in order to see the terms of their confidential licensing contracts with Epic. Silicon Knights presumably hopes that the contracts will provide useful evidence in the dispute. Epic, on the other hand, would no doubt prefer not to have the details of its various licences made public -- it could rock the boat with its current licensees, and could make negotiations with future licensees more difficult.

If the contracts are disclosed, it's conceivable that they could be part of a sealed court file so that they do not become part of the public record -- that way they could be used in the Silicon Knights litigation, but not be revealed to the gaming industry at large.

Coverage at GameDaily.com.

UBISOFT LOSES CONFIDENTIAL INFORMATION

Ubisoft is justifiably annoyed that a file containing confidential information and images about upcoming games has made its way onto the Internet. An inquisitive web surfer pulled the file from Ubisoft's FTP site and posted it on the web; the information is disseminating rapidly.

Confidential information or trade secrets can be among a company's most valuable assets, and it is important to protect them carefully (including by using legal documents such as confidentiality agreements and non-disclosure agreements, as well as by implementing effective technological and physical security procedures and practices). This is particularly true in the digital and high-tech context, where hackers and techies delight in ferreting out and distributing information that companies would rather keep confidential.

Coverage at http://shorl.com/defrusemileni (GameSpot)

TABLE OF VIDEO GAME CASE LAW

We're pleased to report that our blog now contains a table of video game law cases.  It's a work in progress (we have a bunch more cases to add) but we're so excited that we just can't wait to share.  So here's the link  http://www.davis.ca/community/blogs/video_games/files/blogtable.htm

Keep checking back for updates.  There's also a link on the homepage of the blog. 

YAHOO! WINS INJUNCTION AGAINST MFORMA

In an earlier posting we reported that Yahoo! sued four former employees who (according to Yahoo!) took various trade secrets regarding Yahoo!'s technology for sending content to mobile phones. Yahoo! has now been awarded a temporary injunction against the employees. The case (and likely the settlement discussions) will continue"?

Coverage at http://www.shorl.com/fodygrifragegi

YAHOO! SUES MFORMA OVER TRADE SECRETS

Several former employees left Yahoo! to join mobile game publisher and distributor Mforma. The problem, according to Yahoo!, is that the former employees took with them various trade secrets regarding Yahoo!'s technology for sending content to mobile phones. Yahoo! filed a lawsuit against Mforma in Santa Clara County, seeking damages and an injunction to prevent Mforma from using the information.

Microsoft filed a similar lawsuit against Google last year regarding a senior executive who left Microsoft to join Google. The parties eventually settled that lawsuit

Coverage here  http://www.shorl.com/fyvepikykepra (gamesindustry.biz)

Microsoft and Google coverage here  http://www.shorl.com/fuhigenebrydra (eweek.com)

DEVELOPER SUES EA OVER MADDEN 2006

A game developer has sued EA, claiming EA incorporated some of his ideas into Madden 2006. The developer met with EA in 2003 and disclosed an idea for a football game where the gamer develops a football player from high school to pro ball. The developer claims EA stole this idea and included it in Madden 2006 without his permission. EA denies this. 

Developers who pitch ideas to publishers often try to protect their ideas by asking publishers to sign confidentiality agreements. However, many publishers refuse to sign those agreements (and in fact require developers to sign agreements waiving all future claims regarding the ideas) because publishers hear hundreds of game ideas each year and want to avoid lawsuits like this one.
Coverage at  http://www.shorl.com/dofudevuviha

Don't Mess With Texactivision

Looks like the giant woke up. As previously reported, Spark Unlimited launched a lawsuit against Activision, alleging that Activisionfailed to pay promised royalties for the first title developed under that deal (the console edition of Call of Duty Finest Hour), and took Spark's proposals for a sequel and gave them to its own developers.. Now, Activision has filed a counter-suit against Spark, allegingfraud, breach of contract, trade secret misappropriation, trademark infringement, false designation of origin, and false advertising. In a lengthy statement of claim, Activision refutes virtually everything alleged by Spark, and paints an interesting alternative perspective of Spark's claims. Activision also argues that Spark's refusal to return Activision development kits, mixed with the fact that Spark is generating new content for Atari, may result in Atari unwittingly violating Activision's intellectual property. Ultimately, Activision has requested that damages be calculated through a full trial, which indicates a potentially lengthy (and potentially difficult for Spark to finance) legal battle between the two companies.

Coverage at http://shorl.com/fetanihirete

Previous Coverage at http://www.davis.ca/community/blogs/video_games/archive/2005/08/30/283.aspx

FULL-PACKAGE LAWSUIT AGAINST MICROSOFT

There are reports that Glud and Marstrand, a Scandinavian packaging company, has sued Microsoft for breaching non-disclosure agreements and misappropriating confidential information.

G&M claims it developed technology for metal DVD/CD containers that are designed to open and lay flat like a book. G&M and Microsoft entered into discussions about video game packaging; after getting its NDA signed, G&M says that it provided confidential information concerning the packaging to Microsoft.

Microsoft eventually issued a request for proposal for a metal case for Halo 2, and then rejected G&M's proposal and went with different firm (Viva). G&M now claims that Microsoft passed on confidential information to Viva, that the Halo 2 case made by Viva for Microsoft uses G&M's proprietary technology, and that Viva has filed patent applications based on that technology.

Protecting confidential information while exploring business opportunities is always tricky, as it is difficult to generate business relationships without giving the other party a look at your technology. If your technology has not yet been patented (either because you haven't gotten that far, or because it may not be patentable), using techniques such as non-disclosure agreements is crucial. However, you have to be willing to act decisively, as G&M appears to have done, if you suspect that your NDA has been breached and that an unauthorized party is using your technology.  Time will tell whether there is merit to G&M's claims.

Coverage at http://shorl.com/bitranefraprimy

THINKING OF JUMPING SHIP? WATCH OUT!!!

Microsoft just won a temporary injunction preventing a former Microsoft executive (named Kai-Fu Lee) from working for Google on certain products and services. Mr. Lee was previously the 'face of Microsoft"? in China, and Microsoft objected to him playing the same role for Google.

In awarding the injunction, the court ruled that 'Mr. Lee had misled Microsoft about his intention to return to Microsoft following his sabbatical and he continued to have access to Microsoft's proprietary information after he decided to leave Microsoft to join one of its competitors without informing Microsoft."?

However, the court stopped short of prohibiting Mr. Lee from working for Google altogether, provided that Mr. Lee does not use or disclose any of Microsoft's confidential information for Google. The result might have been different if Mr. Lee's contract contained a non-competition agreement (or perhaps a differently worded non-competition agreement).

Executive employment contracts often contain provisions dealing with confidentiality, non-competition and non-solicitation. The enforceability of these provisions varies from jurisdiction to jurisdiction.

Coverage at  http://www.shorl.com/hofynobribrito