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The lawsuit follows a great deal of controversy and rumours over the last few days,
which saw West and Zampella fired from their jobs at Infinity Ward, the
games studio which developed the billion dollar grossing Modern Warfare
2. West and Zampella co-founded in 2001 and sold it to Activision in
2003. At the time they were fired, Activision made a SEC filing in
which it indicated that an investigation was being conducted into their
"breaches of contract and insubordination". They say they were weeks
away from being paid royalty payments over MW2.
In a nutshell, West's and Zampella's argument appears to be that these
allegations of "breaches of contract and insubordination" were
unsubstantiated and put forward to justify Activision firing them
before their royalty payments became payable. Their press release said:
"Activision has refused to honor the terms of its agreements and is
intentionally flouting the fundamental public policy of this State
(California) that employers must pay their employees what they have
rightfully earned," said their attorney Robert Schwartz. "Instead of
thanking, lauding, or just plain paying Jason and Vince for giving
Activision the most successful entertainment product ever offered to
the public, last month Activision hired lawyers to conduct a pretextual
'investigation' into unstated and unsubstantiated charges of
'insubordination' and 'breach of fiduciary duty,' which then became the
grounds for their termination on Monday, March 1st."
"We were shocked by Activision's decision to terminate our contract,"
said West. "We poured our heart and soul into that company, building
not only a world class development studio, but assembling a team we've
been proud to work with for nearly a decade. We think the work we've
done speaks for itself."
Zampella added, "After all we have given to Activision, we shouldn't have to sue to get paid."
Modern Warfare 2 is arguably one of the most successful games in
history and together with Call of Duty, has generated more than $3
billion in sales for Activision. In addition, Activision seized
control of the Infinity Ward studio, to which Activision had previously
granted creative control over all Modern Warfare-branded games. The
suit was filed to vindicate the rights of West and Zampella to be paid
the compensation they have earned, as well as the contractual rights
Activision granted to West and Zampella to control Modern
Warfare-branded games.
The suit includes claims for breach of contract, breach of the implied
covenant of good faith and fair dealing, wrong termination in violation
of public policy, and declaratory relief."
Legal thoughts
The issues
From what we know so far, it seems the legal crux of this litigation
will be whether West and Zampella were really in breach of contract to
the extent that Activision was entitled to fire them in the manner it
did. West and Zampella, who are bringing the lawsuit, will need in
effect to prove that Activision's claims regarding their "breaches of
contract and insubordination" are wrong or, even if they are right,
were not sufficiently serious to warrant them being fired (more on that
below). Several sensitive issues will have to be aired in court:
- The West and Zampella employment arrangements with Activision, including their remuneration structure
- Details regarding the commercial and personal relationships between West, Zampella, Infinity Ward and Activision
- Infinity Ward's and Activision's business and management structures/practices
- Details regarding the development of Modern Warfare 2 and its royalty arrangements
- The alleged "breaches of contract and insubordination" - and
Activision is going to need to explain exactly what it means by
"insubordination" (which, as far as I am aware, has no specific legal
meaning in either UK or US law)
In addition to the legal
arguments, all of this will have to be backed up by disclosure of
Infinity Ward/Activision documents and witness statements from West,
Zampella, Infinity Ward and Activision personnel. You can see that
this is not going to be pretty.
A third way?
The wording of the last paragraph in the press release is interesting,
because it refers to "breach of the implied covenant of good faith and
fair daling, wrong termination in violation of public policy".
In my view, this suggests it is possible (but no more than that at this
stage), that West and Zampella may have an alternative legal argument,
i.e. that even if Activision is right regarding their "breaches of
contract and insubordination" it was still legally unfair for
Activision to fire them just before their royalty payments were due to
be paid. If that argument has legal force under Californian law, and
is accepted by the Californian court, then in principle West and
Zampella could seek to claim their royalty payments even though
Activision may have been right to fire them.
What does this mean for Modern Warfare?
The press release also states the lawsuit was commenced to
"vindicate...the contractual rights Activision granted to West and
Zampella to control Modern Warfare-branded games."
This is potentially explosive: West and Zampella are arguing they have
contractual creative control over the Modern Warfare brand. The
details will have to come out in the litigation, but it could see West and Zampella demanding a veto over Modern Warfare 2 DLC as well as any
other Modern Warfare games. It will be interesting to see how
aggressively Ward and Zampella pursue this claim.
What does this mean for Activision?
The short-term prognosis at this very early stage does looks challenging.
Activision faces a high-profile, high-value lawsuit from hostile
plaintiffs which is likely to stay in the spotlight for some time.
Worse, unless it can get rid of the lawsuit quickly, Activision faces
lingering legal doubt as to whether West and Zampella retain creative
control over Modern Warfare. And, worst of all, this will mean the
industry watching very carefully what it does next and how it relates
with developers in the future.
On the other hand, it's quite possible that Activision could score a convincing and early legal victory. We'll have to see.
What next?
In the meantime, this lawsuit isn't likely to go anywhere anytime
soon. We can expect to receive a rival press release from Activision
in the near future, following which the next stage will be the parties
preparing their detailed legal cases (which will also probably be made
public). As always, watch this space...
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Obligatory legal stuff:
© Jas Purewal 2010. Gamer/Law and this post are intended only as a
means of bringing news of games and technology law and practice to its
readers; it is not intended to provide legal advice and is no substitute for it.
If you'd like to contact us concerning the contents of this blog or any
other games or technology law-related topic, you can email here or tweet GamerLaw. Thanks.
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"Tag-team bitching on a truly GRAND SCALE! See Ward and Zampella take on the might of Kotick and Walther! At stake is a truly ASTRONOMICAL stack of cash! See who can wield the BIGGEST LAWYERS! Etc, etc, ad nauseam."
What a complete shambles. As usual, there is no way to see the wood for the trees - who knows what is really going on? And, on my own personal favorite rant (plug coming shortly) - this will do absolutely nothing to encourage investors to jump in to support games development. Add in the grizzly shambles at Cheyenne Mountain and we'll be lucky to see any sensible investment this side of Judgement Day. For more on this rant, come and listen to me at GDC - Friday, 9am!
Dear Lord, please let it be massive medievel battles. But lets leave the neon ninjas back in the 90s please :).
But since Infinity Ward was already acquired by Activision (from what I understand), they *already* have received their payout - the acquisition payment by Activision for their shares.
Maybe they still have some shares and Infinity Ward will decide to issue dividends. But since Infinity Ward's earnings were likely just a standard payment for development by Activision - and since Activision owns Infinity Ward - I can't see how any of the MW2 profits will move down the hose all the way to the individual Infinity Ward developers.
These guys will probably get squat. And it's their own fault for not standing up for their rights as individual creators - and, in the process, every other individual creators' rights in the game industry.
This is why you are a damn fool if you don't work as a free agent, get your own agent (representation), and get a sophisticated contract. It's also proof that game designers are fools for not realizing that they have no power over their destiny by acting as employees of game studios, rather than by acting as individual creators who negotiate sophisticated contracts for their creative contribution.
Far more productive to reinvent the way the game industry deals with its core talent. That means standing up for your rights as core creators.