Lawyers in Canada: Davis LLP - Legal Advisors Since 1892

West and Zampella Sue Activision

Jason West and Vince Zampella, co-founders of Infinity Ward, have allegedly filed a lawsuit against Acitivision Publishing Inc. claiming breach of contract, breach of the implied covenant of good faith and fair dealing, wrongful termination in violation of public policy and declaratory relief.

West and Zampella reportedly served as president/game director and CEO of Infinity Ward following its acquisition by Activision in November 2003. Their employment was allegedly terminated by Activision weeks before they were to be paid substantial royalty payments as part of their existing contracts for Modern Warfare 2. This reportedly follows claims of Activision having investigated charges of insubordination, breach of fiduciary duty and breach of contract by two senior employees at Infinity Ward, which allegedly became grounds for West and Zampella's termination on March 1, 2010. Activision is said to be moving ahead with the Call of Duty franchise, despite this turn of events.

Coverage here, here, here and here

Help Save the IT Work Permit Category

HRSDC intends to eliminate the Information Technology Workers category any day. Provide your support for saving the IT category - Information Technology Workers

The IT Category - Advantages to Avoiding LMO Applications

The standard work permit process for temporary foreign workers is a two-step process:

• The first step involves the prospective employer applying to Service Canada for a Labour Market Opinion ("LMO").
• The second step involves the prospective employee applying for the work permit.

For a few occupations, HRSDC has issued a national LMO to recognize that critical labour shortages in these occupations are experienced throughout Canada. As a result, employers are not required to apply for individual LMOs. One such national confirmation is for Information Technology Workers who fall within one of seven prescribed occupations, including Embedded Systems Software Designers, Software Developers - Services and Software Products Developers.

It is advantageous to prospective employers to not have to apply for an LMO. Reasons include:

1. Employers do not have to show comprehensive efforts recruiting qualified Canadians. This is important in light of the recent developments which make LMO applications increasingly uncertain. Service Canada adopted an arguably overly restrictive approach in January 2009 that continues to the present time. Service Canada is overemphasizing hiring Canadians and underemphasizing other important factors like job creation/retention and skills and knowledge transfer which can result from the hiring of a particular foreign worker.

2. Employers do not have to wait for the LMO application to be processed. The processing time is dynamic and gaming companies can not rely on processing times remaining at the current 2-4 weeks.

3. With the elimination of LMO "extensions" in April 2009, an employer is required to make in essence a new LMO application when wanting to support a work permit extension, including demonstrating that new recruitment efforts were conducted. The company will be required to lay off the foreign worker if it can not secure a new LMO, as may happen due to reasons cited in item 1 above. There are situations where Service Canada can be convinced to waive the recruitment requirement, but this is very much case-by-case and can not be assumed.

Proposal to Eliminate the IT Category

HRSDC has announced that it intends to eliminate the IT category, likely during the first few months of 2010. Particular industry organizations have also apparently been notified. Justification provided by HRSDC for eliminating the IT category is questionable.

The IT category should continue in order to facilitate the recruitment of highly talented and skilled temporary foreign workers. Elimination of the IT category will adversely impact various industries affected in Canada in terms of maintaining their strong position in the global market. If required to apply for individual LMOs, based on current trends, companies will be prevented from hiring talented and skilled foreign workers, and as a result will be forced to either carry out projects with compromised staffing or even forego certain projects due to multinational management deciding to develop projects abroad.

If you support the IT category, let us know and we will pass along said support to the various immigration authorities, federally and provincially.

Empire Interactive Shuts Down

It has been reported that Empire Interactive, a U.K. based publisher of nearly two decades, is shutting down its operations. The closure has been announced to the employees located in its London offices while all other employees are currently being liquidated.

Approximately two weeks ago, KPMG, an administrator, was asked to find a purchaser for the enterprise. Although two potential buyers expressed interest, no deal was reached.

Coverage at GameDaily.com.

Tough times in the games industry

Utah video game developer Sensory Sweep probably won't win an ??oeemployer of the year” award this year, at least not if its former employees have any say in the matter. Nearly 200 of the former employees have sued the developer for more than $2 million in unpaid wages, claiming they've been owed the money for more than 100 days.

The Department of Labor has gotten involved too, apparently investigating the studio since 2008, and recently requesting an injunction recently to prevent the developer from shipping certain games until employees are paid. The developer is in talks with the Department of Labor to try and solve the disputes.

Sensory Sweep is not the only games company hit hard by tough financial times. Electronic Arts recently announced that it would be closing its downtown Vancouver Black Box Studio and eight other studios, laying off hundreds of employees and relocating others.

It's difficult to show up at a games industry event these days and not bump into someone who's been affected by the lay-offs. For some, it's been a great opportunity, but for many others it's been a real challenge.

Coverage on Sensory Sweep here (Gamasutra)

Coverage on EA here (Vancouver Sun)

Tecmo’s legal woes

Submitted by Tania Da Silva, Articled Student

On June 17, 2008, it was reported that two of Tecmo’s employees, Team Ninja developers Hiroaki Ozawa and Tatsuki Tsunoda, were filing a class action lawsuit with the Tokyo District Court, on behalf of themselves and 300 other employees, against the company for 8.3 million Yen in unpaid overtime (approx. $77,000). Tecmo allegedly placed workers in a “flexible hours” work scheme, thus underpaying them for overtime hours for the past four years. Tecmo is denying rumors that up to 300 of its employees are involved and have reportedly stated that only two employees are seeking legal action. They are also denying rumors of mass resignations occurring as a result of the suit. Reports indicate that, according to Tecmo, employees affected by unpaid overtime have been notified that they will be compensated and that the company will resolve the issue.

The news of this class action follows the resignation of Tomonobu Itagaki, head of Team Ninja. Mr. Itagaki has also filed suit against Tecmo. Rumors indicate that he is seeking approximately 1.4 million dollars in damages for unpaid completion bonuses for the development of Dead or Alive 4 for Xbox 360. It has also been reported that a court order was granted to Tecmo prohibiting Mr. Itagaki from directly or indirectly making statements about the company, its products, practices or employees.

Read more about the story here.

SCEA Settles Overtime Lawsuit

Sony Computer Entertainment America has settled an employee class-action lawsuit in California by agreeing to pay $8.5 million to current and past employees who claimed they were entitled to (but never paid) overtime by Sony.

Employment legislation in many jurisdictions requires employers to pay employees overtime after a certain number of hours unless the employees fall into exempted groups. These groups are typically highly-skilled individuals in a particular industry such as software development. The Sony employees claimed they California exemption did not apply to them.

Employee overtime lawsuits are becoming a regular occurrence in the video game industry. Electronic Arts, Activision and Gamestop have all been hit with them. In 2005, EA settled one lawsuit by agreeing to pay employees $15.6 million.

The Sony case citation is Andrew Wilson v. Sony Computer Entertainment America Inc

Coverage at GameDaily

TECMO'S ITAGAKI SUED FOR SEXUAL HARASSMENT

According to recent reports, Tecmo's Tomonobu Itagaki, creator of theDead or Aliveseries, has been accused of sexually harassing a former Tecmo employee. According to the former employee who is suing Tecmo for 10 million Japanese Yen (approximately $96,000CAD), Itagaki made repeated advances towards her over a period of at least 3 years.  Itagaki, who is married with children, has not denied that there was kissing involved although when questioned,he stated thatthat 'anything they did was with her consent."? Although Itagaki does not appear to have a new job description, according to some sources, in title at least, Tecmo demoted Itagaki from Executive Officer to Managing Executive Officer in response to the harassment allegations. According to Tecmo, 'there was a difference of opinions, and it will be cleared up in the trial."?  The plaintiff it would seem, is going to get her day in court.

Coverage at 

http://www.shorl.com/harykorejestu (biz.gamedaily)

http://www.shorl.com/bybutregrosyfa (gamerevolution)

http://www.shorl.com/damegobujyfry (gamesarefun)

HUMAN RIGHTS TRIBUNAL RULES AGAINST EA

The British Columbia Human Rights Tribunal has awarded almost $150,000 to a former EA employee who claims she was unjustly fired after a suffering a breakdown. The worker's health deteriorated as her workload increased, and when she informed EA that she would be taking indefinite stress leave on her doctor's recommendation, she was dismissed (with an offer of a lump-sum severance payment). Although the Tribunal noted that it was not a case where the employee was 'worked to death"?, it stated that EA did not attempt to accommodate the employee's need for leave.

The monetary award includes amounts for injury to the worker's dignity, feelings and self-respect; health care costs; legal expenses; out-of-pocket expenses; lost value of stock options; and severance.

It is not known whether EA will appeal the Tribunal's decision.

Coverage at http://shorl.com/godyhipavubro (Vancouver Sun)

BC Human Rights Tribunal Decision at http://shorl.com/febreprogrydadru

GAMESTOP SUED OVER TIME

Six managers have filed a class action suit for unpaid overtime, under the Fair Labor Standards Act (FLSA). They seek to have managers denied overtime since 2003 because they were classified under the FLSA as 'executive, administrative, or professional capacity" to opt into the class action and obtain redress (including overtime, interest, damages and lawyers' fees).  They claim to have been forced to work 50 to 60 hours a week without proper compensation.

GameStop has asked that the lawsuit be dismissed because of a similar 2004 case pending against Electronics Boutique.
coverage at http://shorl.com/basahalesara

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. 

VIDEO GAMING AS AN ADDICTION

Smith& Jones Addiction Consultants is opening Europe's first detox clinic for video game addicts in Amsterdam.

It is reported that about a dozen clinics already exist in the United States and Canada, and even one in China, as problem gaming gains recognition as an ailment requiring treatment.  According to the article referenced below, Keith Bakker, director of Smith& Jones Addiction Consultants, has stated that although video games may look innocent, they can be as addictive as gambling or drugs.

Others, like Richard Wood, a professor of International Gaming Research Unit at Nottingham Trent University, are reported to be sceptical about viewing heavy gamers as addicts.

The medical debate on whether heavy gaming can be deemed an addiction will necessarily have an impact on the legal field. Already violence in video games is being used to explain, if not justify, the violent actions of players. Will video gaming addiction stand as a defense, or as a mitigating factor, in criminal law? What about employment law? In many jurisdictions some addictions are recognized as a handicap protected by human rights and employment standards legislation. Will an employer have to accommodate and offer treatment of an employee's video gaming addiction?

coverage at  http://shorl.com/fugipralihyve

INJUNCTION ISSUED AGAINST FORMER UBISOFT BOSS

Martin Tremblay, formerly the head of Ubisoft in Quebec, now the President Worldwide Studios of Vivendi Games, has been provisionally enjoined by Mongeon J.C.S. of Quebec's Superior Court from, directly or indirectly, competing with Ubisoft and ordered to immediately cease working, directly or indirectly, within Canada, the United States and Mexico, for himself or any third party, in any business which manufactures or commercializes video products that may compete with products sold, manufactured or developed by Ubisoft. The provisional injunction was issued based on Martin's contract with Ubisoft, which contained a non-competition covenant.

Unless it is renewed, or an interlocutory injunction or safeguard order is issued, the provisional injunction will only remain in force until 5:00 PM on Tuesday May 9, 2006. 

The irony of it is that Tremblay was the principal supporter behind Ubisoft's recent clashes with EA over the use of non-competition clauses.  

coverage at http://shorl.com/dururededrehy

EA SETTLES OVERTIME SUIT

Electronic Arts recently announced that it had settled a lawsuit with former employees for $14.9 million. The former employees claimed they were required to work significant overtime without receiving overtime pay. 

Under some jurisdictions' laws, employees in high-tech jobs are not entitled to overtime pay. However, the EA employees in this case argued that they were not exempted by the law, and therefore they were owed millions in overtime pay. 

Coverage here  http://www.shorl.com/fysimidydigre (news.com)

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)

REFLECTIONS FOUNDER SETTLES WITH ATARI

Martin Edmondson, the founder of Reflections Interactive (a UK development studio owned by Atari) has dropped his unfair dismissal claim against Atari. Mr. Edmondson resigned in December 2004, and documents show that he brought a lawsuit against Atari in March 2005 alleging constructive dismissal due to Reflection's breach of his employment contract. However, Mr. Edmondson dropped the claim in August 2005 after settling with Atari for shares and a cash payment.

Coverage at http://shorl.com/bubahisehila (GamesIndustry.Biz)

XFIRE/YAHOO! SETTLEMENT NEAR?

We reported earlier this year ( here and here ) about a patent lawsuit between Yahoo! and Xfire concerning instant messaging technology. Xfire had a summary judgment motion scheduled for December 9, in which Xfire was going to argue that its technology does not infringe Yahoo!'s patents and therefore that Yahoo! does not have a cause of action. However, Xfire has recently requested that that hearing be postponed. Apparently the parties have agreed on key settlement terms, and hope to negotiate a final settlement themselves.

Reaching a mutually-agreeable settlement is often the main impetus behind lawsuits; the fact remains that parties are often not willing to come to the table until a court action is underway.

Coverage at http://shorl.com/dameduprefryju

Infinium In Trouble

Ifinium Labs, which trades on the over-the-counter market, is in the midst of one of its biggest challenges to date. Infinium's Chairman Timothy Roberts, who resigned from the posts of chief executive and acting chief financial officer in August, has been informed by the SEC that he is under investigation. Infinium believes the SEC notice is connected to charges filed by the SEC in July against three men for the alleged fraudulent promotion of several companies, including Infinium Labs. Infinium has further stated that certain aspects of six quarters' worth of its financial reports (regarding payroll and payroll taxes) contain errors, as they failed to disclose interest and penalties which could effectively double the amounts actually disclosed.

Infinium Labs has been working toward the release of the Phantom Game Service video game console.  It is unclear when the Phantom Game Service will launch.

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

ANOTHER CLASS ACTION AGAINST EA

Sounds like somebody smells an opportunity last week we reported that EA settled an employee lawsuit in California for $15.6 million.  Gamepolitics.com is reporting that another employee class-action lawsuit has been filed against EA, this time in Florida. There is also one other outstanding employee lawsuit that (to our knowledge) has not been settled. 

Flordia complaint is here http://www.shorl.com/jafripehylaho

 

EA SETTLES EMPLOYEE OVERTIME LAWSUIT

In July 2004, a group of Electronic Arts employees sued EA for overtime wages. Under California law, some employees in high-tech jobs are not entitled to overtime pay. The EA employees in this case argued that they were not exempted by the law, and therefore they were owed millions in overtime pay.

EA has now agreed to settle the lawsuit by paying the former employees $15.6 million to cover their overtime claims and legal fees. The settlement will become effective if it is approved by the court. 
Coverage here  http://www.shorl.com/dehisajulafe

TRUMPET OF DOOM FOR Id?

Earlier this year Adrian Carmack, one of the founders of id Software (but no relation to co-founder John Carmack), left the company, and it was presumed that he had retired voluntarily.  That seems not to be the case. Carmack has sued his former co-owners, claiming that they forced him out in order to gain his 41 percent of id's shares for a relatively small amount ($11 million). That doesn't seem small, you say? Well, it is small compared to what the shares will be worth if id is ever purchased by a third party. Apparently this manoeuvre was prompted by various recent offers by Activision (reportedly of $105 million to buy id outright, and $90 million to purchase the rights to Doom, Quake and Castle Wolfenstein). Carmack claims that his co-owners deliberately rejected these offers so that they could force him out and acquire his shares on the cheap, and then presumably reap a windfall in the event of a third-party purchase.

Carmack is also seekingto have the contract that requires him to sell his shares back to id for $11 million if he leaves declared void (i.e., so he can retain his 41 percent shareholding).

It is a good idea to have a strong shareholders agreement place when establishing a small company, for two important reasons to specify permitted exit strategies in case things fall apart, and to restrict the shareholders' abilities to sell their shares to outside interests. However, the Carmack lawsuit shows that even a shareholder's agreement won't always save the day.

Coverage at http://shorl.com/durabrebredrefre

and at http://shorl.com/hugehodifrimy

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

 

Sparks Fly At Activision

In April 2003, Spark Unlimited announced that it and Activision Inc. had entered into an exclusive publishing deal pursuant to which Activision would publish three console games developed by Spark. Now, Spark has filed a $10,000,000 suit against Activision, alleging that the publishing giant has failed 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.

This is not the first time Spark has been involved in a legal dispute. In April 2003, Reuters reported that Electronic Arts had settled a lawsuit against the 23 former employees who formed Spark, part of which allegedly included a confession by those employees that they improperly took internal EA documents and game code with them to Spark.

On March 4, Atari announced that it had entered into an exclusive agreement for worldwide publishing rights to all future titles developed by Spark Unlimited; between that and the lawsuit, it seems unlikely that future Spark titles will sport the Activision logo any time soon.

Current coverage at http://shorl.com/gufrogryprikege

Historical coverage at http://shorl.com/dogiluhykobry and http://shorl.com/hebrinofidroho

Another Xbox Modder Sentenced

Hitesh Patel, a 31-year-old employee of Washington DC-based game retailer Pandora's Cube, has been sentenced to 8 months for selling 'Super Xboxes,"? which are Xboxes modified with larger hard drives which play imported and pirated games. Because Patel sold many units with pirated games pre-installed, it is difficult to assess the extent to which his prosecution is due to modding, versus the distribution of pirated games.

See article at http://www.shorl.com/fekobribrybyru

GAMES KEEP TALKING

The Screen Actors Guild and the American Federation of Television and Radio Artists have agreed to a deal with video game publishers, ending the threat of a strike by video game voice actors. The new 3 and a half year deal includes a 36% pay raise for voice actors and improved benefits, but the issue of residual payments was dropped to facilitate the deal. The deal has yet to be ratified by the unions.

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

Previous coverage here

SLIPPERY SLOPE FOR VOICE ACTORS?

As previously discussed , the Screen Actors Guild is in discussions with video game makers about the proper remuneration for voice actors in video games. The talks have stalled again, and on June 6, 2005 the SAG will announce whether there will be a strike.

The sticking point is whether voice actors should share profits in successful games. This simple-seeming question actually opens a large can of worms "? who should be able to share in video game profits? The video game makers claim that allowing voice actors to share in profits would cause other parties in the production chain (e.g., programmers and animators) to demand the same. And with the costs of making video games constantly rising, game producers are reluctant to make any concessions that will cut into their profits.

On the flip side, the movie and television industries routinely use profit-sharing schemes so that various participants receive bonuses if their product sells well. The video game companies say that their industry is different, but that claim is questionable given the monstrous successes of recent video games and the increasing number of links between video games and movies.

In any event, keep an eye on this stand-off it will potentially define how video game contracts work in the foreseeable future.

Coverage at  http://shorl.com/gubastidrytradi

NO LOST VOICES -- YET

A recent post mentioned that the actors who provide voices in video games may soon be on strike, and that the old contract expired last Friday, April 15.  Gamerswill be relieved to know there has been a short reprieve the parties (the Screen Actors Guild and the American Federation of Television and Radio Artists, plus various large game publishers) entered a new agreement today that extends the contract deadline to May 13 (a Friday "? apparently the parties aren't superstitious).

Coverage at http://shorl.com/gytopogomyma

VOICES IN THE WILDERNESS?

As if labour problems in the hockey world weren't enough!  US video game voice actors, who are represented by two different unions (the Screen Actors Guild and the American Federation of Television and Radio Artists), may be ready to strike. The current contract between the two unions and the major video game publishers expires on Friday, and if negotiators can't get a new agreement in place a strike could be imminent.

Apparently a key issue is that of residuals "? the current contract does not allow voice actors to share in the profits of a successful game, but instead sets out a fixed payment scale. Given the blockbuster potential of video games (Halo2, anyone?), the unions are obviously interested in tying some remuneration to game profits. This contract negotiation could mark a new industry mindset, where more parties start to jostle for pieces of the newly-lucrative video game pie.

More and more well-known actors are contributing their voices to video games "? GTA San Andreas includes the voices of Samuel L. Jackson, James Woods and Peter Fonda; EA's Godfather game includes the voices of original cast members Marlon Brando, James Caan and Robert Duvall. And, as mentioned in a recent post , Sean Connery is lending his Scottish brogue to an upcoming James Bond game.

Coverage at http://shorl.com/bobyjahedohe

EA ROUND TWO

An employee of Electronic Arts has filed a class-action lawsuit for overtime.  The lawsuit follows an earlier lawsuit launched against EA by another employee.  To be successful, the employees will have to show that California's exemption on overtime for some software workers does not apply to them.  One of the employees is trying to do so by arguing that EA engineers rarely use their own judgment and do not perform work that is original or creative.Coverage at http://shorl.com/hukybogikade http://shorl.com/berifejybrigro

EA EMPLOYEES FACING SUDDEN DEATH OVERTIME?

A California law firm is attempting to certify a class action on behalf of Electronic Arts employees who claim that EA owes them unpaid overtime pay. The dispute revolves around whether EA improperly classified the employees as being exempt from overtime under California law. If it continues, this lawsuit may focus attention on the widespread industry practice of expecting extraordinarily long hours from game developers without necessarily providing extra compensation or benefits.

Coverage at http://shorl.com/javastikohiha

CHINESE GAME DEVELOPERS GET DAY IN COURT

The Beijing Haidian District People's Court has heard its first lawsuit brought by game developers against their employers. Two game developers who worked on a game but were not listed as developers in the published version have sued their former employer for copyright infringement. The case has not yet been decided.

Coverage at http://shorl.com/gukybrujidregro