2012 Video Game Industry Litigation Review

By: Tanner Robinson and

Max Metzler

As far as significant gaming law developments are concerned, 2011 was a tough

act to follow. Last year saw a new paradigm emerge with the Hart test being applied to

lawsuits involving celebrities’ publicity rights in video games1, and the Supreme Court,

in Brown, validating a new art form.2 There seems to be an important trend that, while

not new to 2012, certainly continued in a big way: the video game industry is becoming

more mainstream. As video games continue to cross demographic lines and become

more ubiquitous, the producing companies start to look more and more like the

companies of other industries. Because of the industries’ growth, 2012 saw many of last

year's contentious lawsuits settle as a result of risk-focused business decisions.

As the scope of a business expands, the variety of its contracts tends to expand as

well. Video game companies faced everything from old-fashioned employment disputes,

to licensing deals with A-list celebrities gone awry.

While numbers continued to fall and the market continued to expand, companies

were plagued by intellectual property (IP) litigation from competitors and non-practicing

entities (NPE) alike. The well-known threat of intellectual property infringement claims

not only affected the largest players, but even the smallest mobile app start-ups were

1 See Hart v. Elec. Arts, Inc., 808 F. Supp. 2d 757 (D.N.J. 2011).

2 See Brown v. Entm't Merchants Ass'n, 131 S. Ct. 2729, 2731 (2011).

subject to troll-like claims. Plaintiffs discovered new IP mediums to litigate over; some

even taking pages out of old IP portfolios in order to find new defendants.

Almost every company is hurting from the slow growth in the economy, and the

shift to the less profitable world of mobile gaming. This trend could explain why some

companies are beginning to litigate against competitors in more ways, and on a greater

scale, than we have ever seen before. And the evolution of the industry to one more

populated with businesspeople and investors could explain why more of these suits are

settling out of court.

I. Patent Infringement

In 2012, the video game industry seemed to avoid the mass patent troll attacks

that characterized 2011, but NPEs are still pressuring some major players. Also, several

cases between practicing entities threatened some of the very foundations of the industry.

Indie developers and start-ups usually avoid the major patent traps, but giants like

Nintendo and Microsoft are consistently dragged into the courtroom over their console

technologies; sometimes at the mercy of smaller technology companies. As we’ve seen,

wise counsel must clear new technologies early or risk ending up in court years down the

line.

Microsoft Corp. v. Motorola, Inc.

2012 gave us a collection of suits that threatened the Xbox, iPhone and every

gadget in between. Back in 2010, after Google acquired Motorola, they flexed some

muscle and sued Microsoft and Apple over their H.264 video compression and wireless

patents.3 After making initial headway with the ITC, the FTC began an anti-trust

investigation of Google’s conduct, and Federal district judges denied Google’s

injunctions against the Xbox and other products.4 Now, the Xbox’s fate seems somewhat

secure as, recently, Google dropped the video-encoding patents from the investigation.5

This comes on the heels of the settlement resulting from the FTC’s antitrust investigation

that ruled Google must cease seeking injunctions against competitors using standard-

essential patents (such as the H.264 patent) and, instead, continue third-party

negotiation.6 There are several patent related district court cases still going on, however,

and experts say that although negotiations have been spurred on, a conclusion is not close

at-hand.7

Worlds, Inc. v. Activision Blizzard, Inc. et al

On March 30th, 2012, Worlds Inc., a non-practicing entity, was at it again, suing

3 Steven Musil, ITC Judge Recommends Banning Xbox Imports, CNET NEWS (May. 22, 2012), http://news.cnet.com/8301-1023_3-57439737-93/itc-judge-recommends-banning-xbox-imports/. 4 Karen Gulo, Motorola Mobility Loses Appeal in Microsoft Xbox Lawsuit, BLOOMBERG (Sept. 28, 2012), http://www.bloomberg.com/news/2012-09-28/motorola-mobility-loses-appeal-in-microsoft-xbox-lawsuit.html. 5 Steven Musil, Google withdraws ITC patent claims against Microsoft, CNET NEWS (Jan. 7, 2013) http://news.cnet.com/8301-1023_3-57562922-93/google-withdraws-itc-patent-claims-against-microsoft/. 6 The Federal Trade Commission Closes Its Antitrust Review, GOOGLE BLOG (Jan. 03, 2013), http://googleblog.blogspot.com/2013/01/the-federal-trade-commission-closes-its.html. 7 Susan Decker, Google Patent Offers Probably Won’t End Microsoft Suit, BLOOMBERG (Jan. 7, 2013), http://www.bloomberg.com/news/2013-01-07/google-patent-offers-probably-won-t-end-microsoft-apple-suits.html.

World of Warcraft and Call of Duty masterminds Activision Blizzard.8 The patents

allegedly infringed are U.S. patents nos. 8,082,501, 7,493,558, 7,945,856 and 7,181,690;

titled "System and Method for Enabling Users to Interact in a Virtual Space." 9 These

patents arguably give Worlds a monopoly on the technology at the core of most

MMO's.10 The patent claim construction hearing, also called a Markman hearing, is set

for June 27, 2013.11 If this hearing construes the patent as broad as its title suggests,

hundreds of other games and their creators could be liable. It is probable that this lawsuit

will settle with a licensing deal, however, and Worlds could continue to sue other MMOs

that use similar technology.

Tomita Technologies USA, LLC et al v. Nintendo Co., Ltd.

2012 gave us our first in-depth look at an augmented reality patent infringement

case when Seijiro Tomita, the founder of Tomita Technologies and holder of a glasses-

8 John Gaudiosi, Worlds Inc. Explains Why Its Suing Acitivision Blizzard Over World of Warcraft and Call of Duty, FORBES (Apr. 13, 2012), http://www.forbes.com/sites/johngaudiosi/2012/04/13/worlds-inc-explains-why-its-suing-activision-blizzard-over-world-of-warcraft-and-call-of-duty/. 9 Steve Peterson, Patent Suit Against Activision Proceeds, GAMEINDUSTRY (Sept. 17, 2012), http://www.gamesindustry.biz/articles/2012-09-17-patent-suit-against-activision-proceeds. 10 Markman Hearing Date Set in Wolds Inc. vs. Activision Blizzard, Inc., Blizzard Entertainment, Inc. and Activision Publishing, Inc. Patent Infringement Lawsuit, MARKETWIRE (Sept. 10, 2012), http://www.marketwire.com/press-release/markman-hearing-date-set-worlds-inc-vs-activision-blizzard-inc-blizzard-entertainment-otcbb-wddd-1699189.htm. 11 Worlds Inc. vs. Activision Blizzard Markman Hearing Date Set in Patent Suit, YAHOO FINANCE (Sept. 10, 2012), http://finance.yahoo.com/news/worlds-inc-vs-activision-blizzard-122824136.html.

free 3D patent, sued Nintendo.12 The Nintendo 3DS’ 3D imaging and augmented reality

capabilities seems to be similar enough to patent no. 7,417,664, titled “Stereoscopic

Image Picking Up and Display System Based Upon Optical Axes Cross-Point

Information”, for the Federal District Court of the Southern District of New York to deny

Nintendo summary judgment.13 Nintendo seems to be hit at least twice a year with patent

infringement cases, especially centered on the Wii and its peripherals; this will, however,

be the first time its 3D applications have been targeted.14

Uniloc v. Everyone

At least one patent troll plagued the game industry this year, as Uniloc USA filed

no less than 50 lawsuits in the Eastern District of Texas in 2012 alone.15 Among the

defendants were every kind of tech company, including several game developers:

Mojang, Minecraft creator; Halfbrick, the makers of Fruit Ninja; Gameloft, mobile game

mogul; Madfinger, maker of mobile FPS like Shadowgun; and even Square Enix and

12 Owen Good, Retired Sony Engineer says 3Ds Copied His Patent, KOTAKU (Jul. 11, 2011), http://kotaku.com/5819199/retired-sony-engineer-says-3ds-copied-his-patent. 13 Brian Wassom, Tomita v. Nintendo: The First Augmented Reality Patent Infringement Case, WASSOM.COM (Jul. 12, 2012), http://www.wassom.com/tomita-v-nintendo-the-first-augmented-reality-patent-infringement-case.html. 14 Nintendo Faces Suit Over 3Ds, PATENT ARCADE (Jul. 5, 2011), http://www.patentarcade.com/2011/07/nintendo-faces-suit-over-3ds.html. 15 Uniloc – Lawsuit History, RFC EXPRESS, https://www.rfcexpress.com/search.asp?page=6&partyName=uniloc&caseTypes='P',%20 'C',%20'T'.

Electronic Arts.16 Uniloc owns US patent no. 6,857,067, titled “System and method for

preventing unauthorized access to electronic data”, and asserts that mobile games, like

Minecraft - Pocket Edition, use their patented process for server authorization (which

includes “a portable licensing medium configured to communicate with the electronic

device and to store license data”).17 As of Dec 27th, 2012, Uniloc has also filed suit

against Take-Two Interactive and 2K Games over U.S. Patent No. 5,490,216, “System

for Software Registration”, mentioning Borderlands as a culprit.18 The litigation is still

ongoing, but Minecraft creator, Markus "Notch" Persson, has vowed he “will throw piles

of money at making sure they don't get a cent.”19 If Notch keeps his word (admittedly this

is a quote from Twitter, of all places) then we could possibly see a patent infringement

ruling, a key to future patent defense.

Wildcat Intellectual Property Holdings LLC v. Wizards of the Coast LLC

A different patent troll has filed an infringement case against a game over 10

years old, this time in the Northern District of Texas.20 Wildcat Intellectual Property

16 Owen Good, Some Patent Troll is Suing Minecraft and an Ensemble Cast of Big Names, KOTAKU (Jul. 21, 2012), http://kotaku.com/5927978/some-patent-troll-is-suing-minecraft-and-an-ensemble-cast-of-big-names. 17 Emily Gera, Minecraft Developer Sued Over Android Patent Infringment, POLYGON (Jul. 23, 2012), http://www.polygon.com/gaming/2012/7/23/3177205/minecraft-developer-sued-over-android-patent-infringement. 18 Complaint at 14, Uniloc, USA v. Take-Two Interactive Software, No. 6:2012cv01013 (E.D. Tex filed Dec. 27th, 2012). 19 Adam Rosenberg, Mojang Facing Patent Infringment Lawsuit for ‘Mindcraft’, G4TV (Jul. 23, 2012), http://www.g4tv.com/thefeed/blog/post/726206/mojang-facing-patent-infringement-lawsuit-for-mindcraft/. 20 Complaint, Wildcat Intellectual Property Holdings vs Wizards of the Coast, LLC, No. 3:12-cv-04412-K (N.D. Tex Filed Nov. 1st, 2012).

Holdings of Dallas sued Wizards of the Coast, LLC on November 1st, 2012 for Magic the

Gathering: Online, which they claim infringes on U.S. Patent no. 6,200,216, “Electronic

trading cards”.21 Interestingly enough, this is a suit that Wildcat brought back in 2011,

then against numerous defendants who have all but one been dismissed without

prejudice.22 Wildcat is asking the judge for an injunction to immediately take down the

site, which is a cash cow for Wizards of the Coast.23 The details of the settlement from

the last case have not been released, but it seems Wildcat did not get dealt the hand they

actually wanted.

Walker Digital and Lodsys v. Everyone

Last year, GBL’s 2011 Year in Review reported on pending patent litigation in

hopes of educating the conference on the trends in patent law.24 Somewhat expectedly,

most of the suits are still being fought and few actual court opinions have been handed

down. However, we have learned that Non-Practicing Entities, such as Walker Digital,

LLC and Lodsys, LLC, are vicious and a constant threat to video game developers, large

and small. Walker Digital’s infamous 2011 deluge of 15 patent infringement cases

21 David Lee, Patent Fight Over Trading Cards, COURTHOUSE NEWS SERVICE (Nov. 2, 2012), http://www.courthousenews.com/2012/11/02/51931.htm. 22 Complaint at 18, Wildcat Intellectual Property Holdings, LLC v. 4Kids Entertainment, Inc. et al, No. 2:11CV00305 (E.D. Tex July 1, 2011). 23 Owen Good, Texas Patent Firm Asks Judge to Shut Down Magic the Gathering Online, KOTAKU (Nov. 3, 2012), http://kotaku.com/5957317/texas-patent-firm-asks-judge-to-shut-down-magic-the-gathering-online. 24 Kent Jordan & Robert Wilkinson, Comment, A Review of 2011 Video Game Litigation and Selected Cases. 15 SMU SCI. & TECH. L. REV. 271 (2012).

against over 100 defendants included almost every major player in the video game

industry25, while Lodsys’ near 40 suits attacked iOS developers. 26 This type of behavior

by patent trolls has apparently prompted some indie developers to move to Europe.27 This

is a shift to be watching as video game copyright law is constantly changing in the EU.28

But more often, developers simply pay up to avoid the costs of the long, drawn-out

litigation that we have seen here.29

Impulse Tech. v. Microsoft/ ThinkOptics Inc. v. Nintendo of America

However, patent litigation not involving NPEs was more focused and seemed to

resolve more quickly. Some closure was had in 2012 from litigation when console

25 Walker Digital Sues the Internet (almost), PATENT ARCADE (June 23, 2011), http://www.patentarcade.com/2011/06/walker-digital-sues-internet-almost.html. 26 Erik S. Syverson, Lodsys Sues Angry Birds Game Manufacturer for Patent Infringement (Aug. 1, 2011), http://www.syversonlaw.com/blog/2011/08/lodsys-sues-angry-birds-game-manufacturer-for-patent-infringement.shtml. 27 Lodsys Claims Momentum in Patent Fight as Some Indie Devs Leave US, ARS TECHNICA (October. 9, 2012), http://arstechnica.com/apple/2012/10/lodsys-claims-momentum-in-patent-fight-as-some-indie-devs-leave-us/. 28  See  German  group  sues  Valve,  GAMESPOT (Feb 1, 2013),    

http://www.gamespot.com/news/german-­‐group-­‐sues-­‐valve-­‐

6403307?utm_medium=referral&utm_source=pulsenews;  See  also  Secondhand  Sale  of  Software  

Protected,  rules  European  court , GAMESPOT (July 3, 2012),

http://www.gamespot.com/news/secondhand-­‐sale-­‐of-­‐software-­‐protected-­‐rules-­‐european-­‐court-­‐

6385463  

29 Licensing Momentum, LODSYS BLOG (October. 8, 2012), http://www.lodsys.com/1/post/2012/10/-licensing-momentum.html.

makers, Microsoft and Nintendo, and even their developers and retailers, were sued over

motion-tracking peripherals such as the Wii Remote and the newly introduced Xbox

Kinect.30 The suit, brought by Impulse Technology in the Northern District of Ohio, was

voluntarily dismissed after the Court’s Markman hearing constructed the claim in favor

of the defendant.31 A plaintiff victory was had, however, when another company,

ThinkOptics, Inc., sued Nintendo because of the Wii remote in 2011.32 One must wonder

why it took these companies 5 years to attack the Wii, but in the end, motion-controlled

virtual bowling lives on. Nintendo settled with ThinkOptics and is now licensing their

patent in order to continue to sell Wiis.33

II. Copyright and Trademark Infringement

Copyright and trademark law in the video game industry has always been

interesting and often entertaining; this year was no exception. It seems that as the

industry grows, the subject matter being litigated grows wider and more diverse as virtual

30 Complaint at 4-5, Impulse Tech. v. Microsoft, No. 1:11-cv-00586 (Del. filed July 1, 2011); See also New Case: Microsoft Sued Over Kinect and Motion Tracking Patent, PATENT ARCADE (July 22, 2011), http://www.patentarcade.com/2011/07/new-case-microsoft-sued-over-kinect-and.html. 31 Impulse Tech. V. Microsoft, 2012 WL 4794635 (Slip Copy). 32 Wavit Remote Maker Sues Nintendo Over Wii Remote, GAME POLITICS (Sept. 8, 2011), http://gamepolitics.com/2011/09/08/wavit-remote-maker-sues-nintendo-over-wii-remote. 33 Recent News, THINKOPTICS BLOG (Nov.-Dec., 2012), http://thinkoptics.com/recent-news/.

tattoos, video game plot lines, depicted helicopters, and more are accused of

infringement.

Tetris Holding, LLC v. Xio Interactive, Inc

The most important development in video game copyright law in 2012 was

perhaps the victory Tetris had against Xio, makers of a Tetris clone for the iPhone. In

response to the Tertris’ complaint, Xio admitted that they were copying but claimed “the

only similarities between the games are elements not protected by copyright law.”1 While

code and graphical elements of a game are copyrightable, the rules and mechanics are

not. As the Court stated, the “doctrine is simple to state—copyright will not protect an

idea, only its expression—but difficult to apply.”2 The Court proffered what might come

to be known as the “the Squint Test” when it declared “[i]f one has to squint to find

distinctions only at a granular level, then the works are likely to be substantially

similar.”3 In applying the Squint Test, the Court found “the overall look and feel of the

two games is identical” and thus Xio had almost per se copied the “visual expression” of

Tetris, infringing its copyright.4 With copying in the industry being as commonplace as it

is, this opinion will surely cause companies to rethink their strategies of avoiding suit.

Ubisoft Entertainment, S.A. et al v. John L. Beiswenger

In April, many industry professionals and gamers alike were troubled to hear that

the popular Assassin’s Creed series may have lifted its entire premise from the pages of a

self-published novel called “Link”, written by John L. Beiswenger in 2003.34 The novel,

which predated the first game by five years, included familiar touchstones such as a

machine that allowed characters to re-live their ancestors’ memories and analogous

spiritual and Biblical overtones.35 Beiswenger sued Ubisoft, the makers of Assassin’s

Creed, for copyright infringement but dropped the suit without prejudice only a month

later.36 This prompted Ubisoft to immediately counter-sue for a declaratory judgment to

end the dispute.37 The ruling of this case would have interested other developers that

would possibly “borrow” a few ideas from a favorite sci-fi novel, but the case settled

fairly quickly in August, this time with prejudice.38

34 Matthew Hawkins, Author Suing Ubisoft Based on Claims that ‘Assassin’s Creed’ was

His Idea, http://www.nbcnews.com/technology/ingame/author-suing-ubisoft-based-

claims-assassins-creed-was-his-idea-722586

35 Kyle Orland, Sci-fi Author Sues Ubisoft Over Assassin’s Creed Copyright

Infringement, (Apr. 18, 2012, 6:08 PM), http://arstechnica.com/gaming/2012/04/sci-fi-

author-sues-ubisoft-over-assassins-creed-copyright-infringement/

36 Ross Dannenberg, Case Update: Beiswenger v. Ubisoft (Assassin’s Creed), (June 26

2012 7:00 AM), http://www.patentarcade.com/2012/04/new-case-beiswenger-v-ubisoft-

assassins.html

37 Patent Arcade Staff, Ubisoft Sues Beiswenger for Declaration of Rights, (Aug. 21,

2012, 12:00 PM), http://www.patentarcade.com/2012/06/ubisoft-sues-beiswenger-for-

declaration.html

38 Id.

Electronic Arts Inc. v. Zynga Inc.

Copying between competing developers in the social game sphere has gone from

a game’s basic concepts to blatant copy-pasting of code, but how much is too much is

still a legal grey area. In June, Zynga revealed one of its most ambitious projects yet, The

Ville, only to be hit with a lawsuit a month later from EA for infringing on Sims Social.39

Zynga, geared up for what could be the biggest infringement lawsuit yet between the

companies, counter-sued in three parts.40 The most important claim asserted that EA

originally stole Sims Social from their own CityVille, a game they released a year and a

half before. 41 However, Professor Eric Goldman is of the belief that this is a lawsuit that

“EA [cannot] afford to win.” 42 The legal precedent in copyright law allows copying of

39 Owen Thomas, The Game that Got Zynga Sued by EA is Headed for the Dumpster,

BUS. INSIDER SAI, Oct. 23, 2012, http://www.businessinsider.com/zynga-is-sunsetting-

the-ville-2012-10

40 Alex Pham, Zynga Calls EA Lawsuit ‘Baseless’ Countersues, L.A. TIMES, Sep. 14,

2012,http://articles.latimes.com/2012/sep/14/entertainment/la-et-ct-zynga-calls-ea-

lawsuit-absurd-20120914

41 Emily Price, Zynga Fights Back, Says EX Copied Games, (Sep. 14, 2012),

http://mashable.com/2012/09/14/ea-zynga-lawsuit/

42 Eric Goldman, EA’s Copyright Infringement Lawsuit Against Zynga is Dangerious –

For EA, FORBES, Aug. 6, 2012,

the basic game concept and even the general appearance of the game.43 EA needs to push

the boundaries of what is considered infringement, if EA does not want to start

completely from scratch on its next social game, it will be much easier for copyright

owners to win on these types of claims.44 Further complicating the suit, Zynga is sun

setting the Ville.45 What this means for the pending litigation remains to be seen, but we

can only guess that a settlement is just around the corner.

Electronic Arts, Inc. v. Textron, inc.

In what seems to be déjà vu, Textron, the maker of Bell helicopters, again

claimed trademark infringement against EA games in January over the helicopters

depicted in the Battlefield series. 46 Back in 2006, the same suit settled with a licensing

agreement, but surprisingly the negotiations for licensing the Bell trademark for

http://www.forbes.com/sites/ericgoldman/2012/08/06/eas-copyright-infringement-

lawsuit-against-zynga-is-dangerous-for-ea/

43 Id.

44 Id.

45 Owen Thomas, The Game that Got Zynga Sued by EA is Headed for the Dumpster,

BUS. INSIDER SAI, Oct. 23, 2012, http://www.businessinsider.com/zynga-is-sunsetting-

the-ville-2012-10

46 Alison Frankel, The Battle Over Brand-Name Helicopters in ‘Battlefield’, (July 26,

2012),

http://newsandinsight.thomsonreuters.com/Legal/News/ViewNews.aspx?id=53123

Battlefield 3 seems to have gone awry.47 EA’s Motion to Dismiss claimed First

Amendment protections like those given to video games in the Supreme Court’s Brown v.

Entertainment Merchants Ass’n decision but was disappointed to see it denied in July. 48

This litigation is ongoing and could provide a first look at how courts will handle the

Brown decision. However, chances are that EA will steer clear of that minefield and end

up settling with new licensing terms.

Tattoo Cases

Infringing tattoos seems to be one of the next trends of copyright law as two

tattoo suits have cropped just in the last few months. There is little precedent in this area,

but legal scholars suggest that tattoos meet the definition of a work of art fixed in a

47 Brian Scanlon, EA’s Video Game “Battlefield 3” Turning into “Battlefield

Trademark” as Video Games Manufacturer Sues to Adjudicate Non-Infringement of

Military Helicopters, (Jan. 25, 2012, 11:02 PM),

http://www.lexisnexis.com/community/copyright-

trademarklaw/blogs/copyrightandtrademarklawblog/archive/2012/01/25/ea-s-video-

game-quot-battlefield-3-quot-turning-into-quot-battlefield-trademark-sues-to-adjudicate-

non-infringement-of-helicopters.aspx

48 EA Motion to Dismiss Counter-Claims in Battlefield Helicopter Lawsuit Denied, (July

31, 2012), http://www.gamepolitics.com/2012/07/31/ea-motion-dismiss-counter-claims-

battlefield-helicopter-lawsuit-denied; Brown v. Entm’t Merchs. Ass’n, 131 S. Ct. 2729

(2011).

tangible medium, subject to copyright protection, even if that medium is someone else’s

body.

a. Chris Escobedo v. THQ, inc.

When THQ recreated UFC fighters for UFC: Undisputed 3, probably the last

thing they thought of was licensing the copyrighted tattoos on each fighter from each of

their respective tattooists. But perhaps it should have because Chris Escobedo, a tattoo

artist whose work was recreated on fighter Carlos Condit in the game, sued THQ.49 This

may sound similar to Mike Tyson's infamous face tattoo, created by artist Victor

Whitmill, who sued Warner Brothers over their recreation of his design in The Hangover

II.50 The suit predictably settled, giving little precedent to stand on, but legal experts

believe that tattoos are copyrightable.51

b. Stephen Allen v. Electronic Arts

49 Eriq Gardner, Tattoo Artist Sues Over Copycat in ‘UFC Undisputed’ Video Game,

THE HOLLYWOOD REPORTER, Nov. 22, 2012,

http://www.hollywoodreporter.com/thr-esq/ufc-undisputed-video-game-at-393653

50 Dan Seitz, UFC Fiqgther’s Tatoo Artist Sues THQ for Copyright Infringement, (Nov.

27, 2012, 10:28 PM), http://www.gametrailers.com/side-mission/40377/carlos-condits-

tattoo-artist-sues-thq-for-copyright-infringement

51 Id.

Just days ago, Stephen Allen sued EA because Ricky William, a former NFL

runningback, and his tattoos appeared on the cover of NFL Street, a game from 2004.52

Allen, a tattoo artist from Louisiana, carved on Williams, so the tattoos are technically

his, not Ricky’s. It remains to be seen if this lawsuit will spark more claims from tattoo

artists from all over the country whose works are prominently displayed in sports games.

At any rate, general counsel for developers need to start to recommend licensing deals

with tattoo artists or significant changes to tattoos recreation in-game.

EMI April Music, Inc. v. 4MM Games,

Musical video games created an exciting collision of two of the edgiest sectors of

the entertainment industry, however, this intersection could bring about trouble when it

comes to copyright infringement. EMI filed a suit against 4MM Games, the maker of the

Def Jam Rapstar music video game, an alleged copyright infringement.53 The complaint

claimed that the developer used certain songs in which EMI had an interest without

obtaining the proper permissions.54 EMI only owned portions of some of the songs it

52 Luke Plunkett, EA is Being Sued Over A … Tattoo from 2004, (Jan. 9, 2013, 10:00

PM), http://kotaku.com/5974683/ea-is-being-sued-over-atattoo-from-2004

53 EMI April Music, Inc. v. 4MM Games, LLC, No. 12 CV 2080 (S.D.N.Y.) (Filed March

12, 2012).

54 Eriq Gardner, EMI Sues Over Def Jam Rapstar Video Game, THE HOLLYWOOD

REPORTER, March 29, 2012, http://www.hollywoodreporter.com/thr-esq/emi-def-jam-

rapstar-video-game-lawsuit-305434

claimed infringement upon, including the game's use of Kanye West's Stronger, which

samples the EMI-owned Better, Faster, Stronger by Daft Punk.55 EMI claimed statutory

damages of $150,000.00 per violation, as well as net profits of the game, and also asked

for an injunction.56

Games like Rock Band and Guitar Hero have left a well-blazed trail in the world

of music licensing for video games, but some commentators believe that because rap

songs generally have a more complicated ownership portfolio, with their often multiple

contributors and sampled tracks, the legal legwork that is needed is much more

complex.57 Obviously, EMI's claim was that the necessary work was not done, which

resulted in infringement. The industry needs to watch this case, and consider the added

costs of this part of the market before attempting to expand music-based video games

there.

SocialApps LLC v. Zynga Inc

Throughout 2011, patent trolls and a recently public Zynga were ever-present in

the courtroom. On both sides of cease and desist letters, Zynga is still in the midst of

numerous lawsuits. One such suit involved SocialApps, LLC, creator of a game called

myFarm on the Facebook API, where players send their friends gifts of farm animals and

plants to raise and grow on their virtual farms. Zynga began negotiations to buy or

license myFarm from SocialApps but after they shared their source code in accordance

55 Id.

56 Id.

57 Id.

with due diligence, Zynga created Farmville.58 The suit quickly followed, and as of 2012

SocialApps overcame Zynga’s Motion to Dismiss claims of breach of implied contract,

confidence, and implied covenant.59 The damages demanded were $100,000 of punitive

damages, a permanent injunction and, Zynga's FarmVille profits (estimated at over

$500,000).60 If most of the complaint is true, SocialApps has a strong case. Zynga may

have a hard time not getting slapped with willful copyright infringement unless they

settle, which usually happens in copyright litigation.

The Learning Company v. Zynga Inc.

Case in point, one of Zynga’s lawsuits was settled December 18, 2012. In May

2011, Zynga was also accused of infringing on the trademark of a game that introduced

many children to PC gaming, the Oregon Trail.61 Their Frontierville expansion called

58 Zynga Wins, Loses in Latest Round of SocialApps Lawsuit, (Feb. 17, 2012),

http://www.gamepolitics.com/2012/02/17/zynga-wins-loses-latest-round-socialapps-

lawsuit

59 Joe Osborne, FarmVille Could Owe a lot (of cash) to myFarm for its Success in

Lawsuit, (Feb. 17, 2012, 12:30 PM), http://blog.games.com/2012/02/17/farmville-

myfarm-zynga-socialapps-lawsuit/

60 Nathan Brown, How Zynga cloned its way to success, (Jan. 25, 2012, 4:47 PM),

http://www.edge-online.com/features/how-zynga-cloned-its-way-success/

61 Compl. at 15, The Learning Co. v. Zynga Inc., No. : 1:11-cv-10894 (D. Mass. Filed

May 18, 2011).

Oregon Trail was the last straw for The Learning Company, which sued them for

trademark infringement.62 This suit recently settled on December 18, 2012, just in time

for Christmas.63 However, the details of the settlement have yet to be divulged. During

the suit, Zynga voluntarily removed Oregon Trail from any products, and the Court

ordered this to remain the status quo throughout the litigation, so it is likely that Zynga

will not use this bit of history in any future game development.64

Augusta National, Inc. v. CustomPlay Games Ltd. / Atari Interactive, Inc. v. Wan

GBL reported on two other cases from 2011 that were rare among the ubiquitous

pack of social game infringement suits; a trade dress case about a virtual rendition of a

golf course and a copyright infringement case that involved knock-off Ataris.65, 66 First,

62 Id.

63 Voluntary Dismissal With Prejudice, The Learning Co. v. Zynga Inc., No. : 1:11-cv-

10894-MLW (D. Mass. Filed Dec. 18, 2012).

64 Order, The Learning Co. v. Zynga Inc., No. : 1:11-cv-10894-MLW (D. Mass. Filed

June 15, 2011).

65 Claim at 2, Augusta National, Inc. v. CustomPlay Games Ltd., No. 1:11-cv-00119

(S.D. Ga. Filed Aug. 5, 2011).

66 Compl. at 6, Atari Interactive, Inc. v. Wan, 2:11-cv-05224 (C.D. Cal. Filed June 22,

2011); see also Frank Cifaldi, Bootleg Consoles Attract Lawsuit From Atari, (July 6,

2011),

Augusta National Inc. sued CustomPlay Games after a cease and desist letter did not

yield removal of their golf course’s map and notable locations in their game, CPG Golf.

67 However, that same year, CustomPlay Games folded and a settlement was drawn up

with the other defendants.68 Sadly, no legal merits have been authored of this trade dress

claim in the 11th circuit, but it is known that other defendants resolved to settle with

Augusta in some fashion. Secondly, in the Atari case, defendants John Wan and Tommi,

Inc. ended litigation in 2012 and resulted in the licensing of copyrights and trademarks

from Atari.69 The evidence suggested that the defendants were clearly in the wrong in this

suit and were wise to settle as soon as possible.

III. Right of Publicity

Unlike 2011, which saw massive changes in the right of publicity landscape with

the landmark Hart case and its "transformative test," 2012 was fairly quiet in comparison.

No Doubt v. Activision

http://www.gamasutra.com/view/news/35697/Bootleg_Consoles_Attract_Lawsuit_From_

Atari.php

67 Claim at 2, Augusta Nat’l, Inc. v. CustomPlay Games Ltd., No. 1:11-cv-00119 (S.D.

Ga. Filed Aug. 5, 2011).

68 Notice of Settlement and Status, Augusta National, Inc. v. CustomPlay Games Ltd.,

No. 1:11-cv-00119 (S.D. Ga. Filed Sept. 27, 2011).

69 Stipulation of Dismissal with Prejudice at 8, Atari Interactive, Inc. v. Wan, No. 2:11-

cv-05224 (C.D. Cal. Filed Jan. 6, 2012).

No Doubt’s long-running dispute with Activision came to an end this year, settling on

undisclosed terms.70 The suit was over No Doubt's licensing of their images and selected

songs to Activision for the game Band Hero.71 No Doubt claimed that Activision

improperly used their likenesses and exceeded the terms of the licensing agreement by

allowing players to “unlock” the band’s virtual avatars to play any song in the game

(including songs the band says they would never perform), allowing players to make the

lead singer, Gwen Stefani, sing in a male voice, and by allowing players to make the

band members perform individually by splitting them up.72

A California appeals court had already ruled that there could be no First Amendment

protections for Activision under the Hart "transformative" test because the band

members' avatars could not be edited or transformed in the game.73 Because the case was

settled, any further legal impact the case would have had is, of course, unknown.74

IV. Contract Disputes

Silicon Knights, Inc. v. Epic Games Inc.,

70 Billy Kidd, No Doubt Settle ‘Band Hero’ Video Game Lawsuit, Rolling Stone Music

(Oct. 4, 2012, 9:40 AM), http://www.rollingstone.com/music/news/no-doubt-settle-band-

hero-video-game-lawsuit-20121004.

71 No Doubt v. Activision Publ'g, Inc., 122 Cal. Rptr. 3d 397, 402-03 (Cal. Ct. App.

2011), review denied (June 8, 2011).

72 Id.

73 Id. at 410-11.

74 Kidd, supra note 69.

2012 saw the apparent conclusion of the five-year-long lawsuit between Silicon

Knights, Inc. and Unreal Engine, the creator of Epic Games.75 This litigation was

actually started by Silicon Knights, but Epic Games ended up with a large judgment in its

favor based on several different claims.76

Silicon Knights, a licensee of the Unreal Engine 3, sued maker Epic in 2007 for

fraudulent misrepresentation, claiming that the UE3 engine contained so many flaws that

it was unusable for its game, Too Human.77 Silicon Knights went on to claim that it was

forced to create a proprietary engine of its own for the game in order to meet its planned

timelines.78 But Silicon Knights, which originally claimed upwards of $63 million in

damages, now must pay Epic Games nearly $10 million.79

75 Adam Rosenberg, Silicon Knights Ordered to Destroy Code, G4TV (Nov. 9, 2012),

http://www.g4tv.com/thefeed/blog/post/729401/silicon-knights-ordered-to-destroy-

games-code-in-epic-lawsuit/.

76 Wesley Yin-Poole, Silicon Knights Ordered to Recall and Destroy, Eurogamer.net

(Nov. 9, 2012), (http://www.eurogamer.net/articles/2012-11-09-silicon-knights-has-a-

month-to-recall-and-destroy-all-unsold-copies-of-too-human-x-men-destiny-more.

77 Complaint at 1, Silicon Knights, Inc. v. Epic Games, Inc., No. 5:07-CV-275

(W.D.N.C. filed July 8, 2007); See Order on Motion for Miscellaneous Relief, Silicon

Knights, Inc., No. 5:07-CV-275-D (W.D.N.C. Dec. 22, 2011).

78 Id.

79 Order on Motion for Miscellaneous Relief at 2, Silicon Knights, Inc., No. 5:07-CV-

275-D.

In response to Silicon Knights's claims, Epic counterclaimed under theories of

breach of contract (The UE3 Licensing Agreement), copyright infringement, and trade

secret misappropriation, claiming that Silicon Knight's new engine, SKE, used portions

of UE3's code and thus violated Epic's copyrights, trade secrets, and the licensing

agreement.80

Once the time came to compare the SKE code to the UE3's, clear evidence of

copying came to light.81 The court was aided in its decisions by a showing at trial that

Silicon Knights not only copied Epic's functional code but also some of its non-

functioning programmer comments, which even contained the typographical errors left

intact by Silicon Knights.82

On May 30, 2012, the jury returned a verdict for Epic Games in the amount of

$2.65 million for its breach of contract counterclaim and $1.8 million for its copyright

infringement and trade secret misappropriation counterclaims.83 The court entered a

judgment reflecting this verdict the same day.84 Per federal and local court rules and state

and federal laws, the court also awarded Epic costs ($277,852.13), attorney's fees for the

copyright infringement and trade secret counterclaims (but not for BOC counterclaim)

80 Order on Post-Trial Motions at 1, Silicon Knights, Inc., No. 5:07-CV-275-D

(W.D.N.C. Nov. 7, 2012).

81 Id. at 18.

82 Id.

83 Id.

84 Id.

($2,091,722.83), prejudgment interest ($2,302,147.96), and all but denied expert witness

fees ($650). (In total, a pittance of $680 was awarded out of over $1,000,000.00

claimed).85 Silicon Knight was also required to wipe all Unreal code from its engine and

to recall and destroy any existing copies of games in which Unreal Engine code could be

found, including Too Human, The Box/Ritualist, The Sandman, X-Men:Destiny, and Siren

in the Maelstrom.86

This case shows that even "borrowing" portions of code or ideas from copyrighted

software can be a very expensive proposition.

Gate Five, LLC v. Beyoncé Knowles-Carter

In 2011, Gate Five filed suit against singer Beyoncé for allegedly breaching a

contract related to the in-development game Superstar: Beyoncé.87 The conflict arose

when Beyoncé terminated the contract she had negotiated to license her image and songs

for Gate Five's game, Superstar: Beyoncé—a move that cost Gate Five $6.7 million in

previous investment and 70 jobs.88 Beyoncè claims that she merely exercised a financing

contingency in the contract, which required Gate Five to raise a certain amount of capital

for the game by a deadline; if Gate Five did not raise the capital in time, Beyoncè could

85 Id at 47.

86 Order on Post-Trial Motions at 40-41, Silicon Knights, Inc., No. 5:07-CV-275-D.

87 Dan Rogers, Part 2: The Five Most Influential Video Game Lawsuits of 2012,

Gamasutra (Dec. 12, 20012, 7:50 PM),http://www.gamasutra.com/blogs/DanRogers/201

21231/184221/Part_2_The_Five_Most_Influential_Video_Game_Lawsuits_of_2012.php.

88 Id.

back out of the deal.89 Gate Five did not, in fact, meet the deadline but countered with an

estoppel argument, saying essentially that Beyoncè waived her right to financing

contingency based on representations she and her representatives made, namely that the

financing arrangements, though late, were acceptable to them.90

It now seems that this case may proceed to trial, as Beyoncé's motion for

summary judgment was denied by the New York court hearing the case, and the denial

has been confirmed by the appellate division.91 Gate Five is seeking to recover the lost

investment and lost profits (which it estimates at $100 million) and to enjoin Beyoncé

from working on any competing video game.92 As one commentator noted, this case

could be significant in showing the disconnects that can occur between the talent and

89 Eriq Gardner, Judge: Beyonce Video Game Lawsuit Can Move Forward, The

Hollywood Reporter (Dec. 8, 2011, 1:44 PM), http://www.hollywoodreporter.com/thr-

esq/beyonce-video-game-lawsuit-gate-five-271442.

90 Gate Five, LLC v Knowles-Carter, 953 N.Y.S. 193, 193-94 (N.Y. App. Div. 2012).

91 Ron Dicker, Beyoncé Lawsuit: $100 Million Claim Against Singer Over Dance Video

Game Gets Go-Ahead, HUFFINGTONPOST.COM (Updated: 11/20/2012 3:36 PM),

http://www.huffingtonpost.com/2012/11/19/beyoncé-lawsuit-100-milli_n_2158954.html;

See id.

92 Complaint, Gate Five, LLC v. Beyoncé Knowles-Carter, No. 0651094-2011 (N.Y. Sup.

filed May 9, 2011).

video game industries and could indicate that an especially high level of communication

is needed for joint ventures, such as the game at the center of this case.93

Zynga v. KIXEYE

A war of words that began with a KIXEYE recruiting video lobbing thinly-veiled

criticisms at Zynga has culminated in an equally-vitriolic lawsuit between the two. The

legal dispute centers on Dan Patmore, a former programmer on Zynga's popular CityVille

free-to-play who was hired by KIXEYE.94 In Zynga’s complaint, which claims breach

of contract and misappropriation of trade secrets, the social games giant accuses Patmore

of violating his employment agreement and engaging in "wholesale theft" of Zynga

documents and secrets.95 Zynga originally just sued Patmore; but, it has since amended

its complaint, naming KIXEYE as a co-defendant.96

This lawsuit is still in the early stages, but could be the bellwether of things to

come. The demand for talent in the industry, especially for social-games programming

93 Dan Lee Rogers, Countdown: The 5 Most Influential Video Game Lawsuits of 2012:

Number 4 Gate Five LLC v. Beyoncé Knowles-Carter, Law Office of Dan Lee Rogers

(Dec. 31, 2012), http://dlr-law.com/3/post/2012/12/countdown-the-5-most-influential-

video-game-lawsuits-of-2012-2-of-5.html.

94 Kim-Mai Cutler, The Legal Tussle Between Zynga and the Cityville GMA, Techcruch

(Oct. 16, 2012), http://techcrunch.com/2012/10/16/kixeye-harbin-suit-zynga.

95 Id.

96 Id.

talent, is well-publicized.97 If the known-to-be-litigious Zynga continues to lose talent to

competitors, lawsuits such as this one could become the story of the next year.

Bethesda v. Interplay

Bethesda and Interplay settled their long-running dispute at the turn of the New

Year.98 Bethesda had sued Interplay for breach of contract and trademark infringement

stemming from Interplay's use of Bethesda's Fallout brand.99 Interplay—which created

the Fallout series and sold it to Bethesda in 2007— retained the rights to sell preexisting

Fallout games and also licensed back the series so that it could develop a Fallout

MMORPG.100 Bethesda claimed that Interplay had failed to seek its approval on

marketing materials for the preexisting titles and that Interplay entered into licensing

agreements for those titles with distribution channels, such as Steam; both actions could

97 Dean Takahashi, Kixeye Steal General Manager from Zynga, Venturebeat (Aug. 23,

2012, 6:00 AM), http://venturebeat.com/2012/08/23/kixeye-steals-a-general-manager-

from-zynga/.

98Mike Rose, Bethesda, Interplay Reach Settlement in Fallout Dispute, Gamasutra (Jan.

3, 2012), http://www.gamasutra.com/view/news/39441/Report_Bethesda_Interplay_

reach_settlement_in_Fallout_dispute.php#.UO2W5m_hrhe.

99 Kris Graft, Bethesda Sues Interplay Over Use of Fallout License, Gamasutra (Sept.

11, 2009), http://www.gamasutra.com/php-bin/news_index.php?story=25226#.UO2XlG_

hrhd.

100 Id.

have been in violation of the licensing agreement between Bethesda and Interplay.101 In

a somewhat unusual development, settlement details are expected to be (at least partially)

announced later this year.102

Antonick v. Electronic Arts, Inc.

EA is locked in a legal battle with Robin Antonick, a longtime employee and creator

of the software that allowed the football teams in EA's Madden series to use eleven-man

teams rather than five; this feature of course plays a huge part in Madden's realism, and

thus arguably its popularity. 103 Antonick ultimately signed a few employment contracts,

including one in 1986 that guaranteed him royalties “on not only the versions of the

Madden game developed by him but also any derivative works and any works ‘derived’

from derivative works.”104 Antonick claims this contract was modified over subsequent

years, though never voided or expired.105 The case centers on whether the more recent

Madden games are derivative works of the ones Antonik worked on and whether EA

deceived Antonick in any way about this aspect of them.106

101 Id.

102 Id.

103 Complaint for Breach of Contract and Fraud at 1, 4-5, Antonick v. Electronic Arts,

Inc., No. 3:11-cv-01543 (N.D. Cal. filed March 30, 2011).

104 Id. at 1.

105 Id. at 8, 19.

106 Id. at 1, 19-20.

The case also mentions several other EA sports titles which may contain vestiges of

Antonick's engine.107 Antonick alleges that EA told him that the new games were based

on new code, which did not include any of his work; he further claims that he remained

unaware until 2009—a fact that is critically important to the case because of statute of

limitations considerations.108 In fact, EA did file a motion to dismiss on statute of

limitations grounds, but the court found that the statute of limitations did not begin to run

until Antonick's discovery in 2009.109 In theory, this should be a relatively simple case,

comparing Antonick's code to that of the EA games alleged to be using it,. However,the

financial consequences for EA could be dire, as the Madden series of games has made

about $4 billion for EA, and Antonick could have a claim to royalties from his contract

based on that figure.110 2012 saw the case tangled in continuance motions and delayed

hearings. Currently, EA's motion for Summary Judgment will be heard in late January.111

West v. Activision Publishing, Inc.

107 Id. at 23.

108 Id. at 1-2, 21-22.

109 Order Denying Motion to Dimiss at 1, 9-10, Antonick v. Electronic Arts, Inc., No.

3:11-cv-01543 (N.D. Cal. Filed March 30, 2011).

110 Id.

111 Order and Stipulation at 2, Antonick v. Electronic Arts, Inc., No. 3:11-cv-01543 (N.D.

Cal. Filed March 30, 2011), available at: http://docs.justia.com/cases/federal/district-

courts/california/candce/3:2011cv01543/238889/259/.

This highly contentious case settled—somewhat surprising—on the eve of trial

this year.112 The terms are undisclosed, but EA (opposite Activision in the suit) described

the settlement as "a vindication of Vince [Zampella] and Jason [West], and the right of

creative artists to collect the rewards due for their hard work."113 This description would

seem to imply the settlement, at least in EA's opinion, was more favorable to West and

Zampella.114

In 2002, Activision acquired Infinity Ward Studios, which was founded by West

and Zampella and had been responsible for the popular Modern Warfare and Call of Duty

titles.115 The two signed employment agreements that let them retain creative control

over Infinity Ward and that laid out compensation terms, including royalty payments for

Modern Warfare 2.116 However, Activision terminated West and Zampella for

insubordination on March 1, 2010, which was just weeks before the royalty payments for

112 Michael McWhertor, Settlement Reached in Call of Duty’s Billion Dollar West v.

Activision Lawsuit, Polygon (May 31, 2012, 4:26 PM), http://www.polygon.com/gaming

/2012/5/31/3049988/activision-call-of-duty-trial-placeholder.

113 Id.

114 Id.

115 Complaint for Breach of Contract, Breach of the Implied Covenant of Good Faith and

Fair Dealing, Wrongful Termination in Violation of Public Policy, and Declaratory Relief

at 5-6, West v. Activision Publ’g, Inc., No. SC107041 (Cal. Super. Ct. L.A. Cnty. Mar.

3, 2010).

116 Id. at 5, 7-8.

Modern Warfare 2 were set to begin.117 West and Zampella sued, alleging that the

termination was pre-textual and meant to help Activision avoid making those royalty

payments.118 Activision countersued West and Zampella and later added EA based on

interference grounds.119 This was precisely the type of high-stakes, very personal case

that many assumed would go through to trial; but ultimately, a settlement was able to be

reached.

Financial Review of 2012

As more gamers moved to mobile and social gaming, retail sales continued to slip

in 2012 as they have been since 2008.120 Console gamers are now outnumbered

117 Id. at 8, 10.

118 Id. at 9-10.

119 Ben Gilbert, Activision Blasts West and Zampella in Countersuit, JOYSTIQ (Apr. 9,

2010), http://www.joystiq.com/2010/04/09/activision-blasts-west-and-zampella-in-

countersuit; Edvard Petterson, Electronic Arts Must Defend $400 Million Activision Suit,

Judge Says, BLOOMBERG (Dec. 21, 2011, 11:01 PM),

http://www.bloomberg.com/news/2011-12-21/electronic-arts-asks-judge-to-dismiss-400-

million-activision-claims.html.

120 Lance Whitney, Xbox 360 Shines Bright in Otherwise Dismal Damge Market, CNET

(Nov. 9, 2012, 8:57 AM), http://news.cnet.com/8301-10805_3-57547692-75/xbox-360-

shines-bright-in-otherwise-dismal-game-market/.

considerable but spend an average of 35 percent more than the mobile gamer.121 The

decline leveled off in the fourth quarter as Halo 4, Assassin’s Creed III, and Call of Duty:

Black Ops 2 were released for the holiday season.122 These games actually sold better

than games in the top five last year.123 The problem was the titles outside of the top five

did not show quite as well.124 Overall, 2012 was the continuance of a trend that includes

a wider, more diverse market but perhaps a less profitable one.

Unfortunately, a bleak 2012 saw a few game companies fold, most notably THQ

and 38 Studios.125 The 38 Studios collapse actually became quite a mainstream story,

due in part to the fact that the company was owned by sports legend Kurt Schilling. Also

tied up in this bankruptcy was the issue of state support for video game development.

Schilling,who played perhaps his most storied seasons for the Boston Red Sox, was lured

121 Mike Snider, NPD: Video Game Sales Slide Continues, Game Hunters (Sept. 6,

2012, 8:25 PM), http://content.usatoday.com/communities/gamehunters/post/2012/09/

npd-video-game-sales-slide-continues/1.

122 Juan Rodriguez, Black Ops 2, Halo 4 and Assassin’s Creed 3 Top Game Charts for

November, GAMENGUIDE (Dec. 7, 2012, 2:15 PM), http://www.gamenguide.com/

articles/4431/20121207/black-ops-2-halo-4-assassins-creed-3-sales-charts-november.htm.

123 Id.

124 Id.

125 Core Licht, Videogame Maker THQ Files for Bankruptcy, Atlanta Bankruptcy News

(Dec. 12, 2012, 3:12 PM), http://atlantabankruptcynews.com/2012/12/videogame-maker-

thq-files-for-bankruptcy-sells-its-studios.html.

out of Massachusetts to Rhode Island by millions of dollars in preferential loans issued

by the Rhode Island government.126 38 Studios defaulted on the very first payment of

these loans, and subsequently, laid off all of its workforce, some 400 employees.127 It

was said that 38 Studios would have needed to sell two million copies of its game,

Kingdoms of Amalur: Reckoning, in order to stay solvent; but ultimately, it only shipped

between 1.3 and 1.4 million.128 When paired with the chilling of the MMO market—

which negatively affected investment prospects of 38 Studios’ main in-development title,

Copernicus— this lackluster performance doomed 38 Studios, which ultimately filed for

chapter 7 bankruptcy. 129 Precisely what affect this debacle will have on government

involvement in video game funding remains to be seen, but it certainly stands as an

example of how things can go very wrong.130

126 Connor Sheridan, 38 Studios Spent $133 million Before Bankruptcy, GAMESPOT

(July 26, 2012), http://www.gamespot.com/news/38-studios-spent-133-million-before-

bankruptcy-6388664.

127 Id.

128 Andrew Goldfarb, 38 Studios Executives Testify in Bankruptcy Hearing, IGN (July

13, 2012), http://www.ign.com/articles/2012/07/13/38-studios-executives-testify-in-

bankruptcy-hearing.

129 Id.

130 Jason Hidalgo, Fallen Kingdom, Engadget (Sept. 7, 2012),

http://www.engadget.com/2012/09/07/38-studios-collapse-and-risk-of-public-private-

THQ, which had been in financial trouble for most of the year, filed for

bankruptcy protection on Dec. 19, 2012.131 Originally set to be quickly sold in its

entirety to investor Clearlake Capital for around $60 million, Bankruptcy Judge Mary

Walrath declared earlier this year that she was "not convinced that we are under the gun"

to have a quick sale, and ultimately postponed the sale.132 Now, THQ's various studios

and titles will be bid upon separately on January 22, 2013, and will be sold separately if

the net bids of the individual assets generate more than the $60 million that Clearlake bid

for the whole package.133 Perhaps the most interesting aspect of this case will be seeing

where beloved THQ franchises, such as Saints Row, Red Faction, and Darksiders, will

end up as well as whether any investor will pick up and carry on any of THQ's in-

development projects, which include South Park: The Stick of Truth, Company of Heroes

2, and Metro: Last Light.134

partnerships/ (for viewing an in-depth discussion of state-sponsored programs for tech

and video game development).

131 Licht, supra note 124.

132 Michael Bathon, THQ Denied Approval of Bankruptcy Sale Process and Loan,

Bloomberg (Jan. 4, 2013, 11:01 PM), http://www.bloomberg.com/news/2013-01-05/thq-

denied-approval-of-bankruptcy-sale-process-and-loan-1-.html.

133 Alexander Sliwinski, THQ Will Seel Whole Unless Exceeded by Individual Asset

Bids, Joystick (Jan. 8, 2012, 8:30 AM), http://www.joystiq.com/2013/01/08/thq-auction-

details/.

134 See Bathon, supra note 131.

 

1 Def. Motion at 2, Tetris Holding, LLC v. Xio Interactive, LLC. No. 09-6115 (D. New

Jersey)

2 Tetris Holding, LLC v. Xio Interactive, LLC, 863 F.Supp.2d 394, 400. (D. New Jersey

2012)

3 Id. at 410.

4 Id. at 410.