"As a result of Pong, a player can gain a deep intuitive understanding of the simplest Newtonian physics." xxx - Carl Sagan
By March of 1973, Pong was deemed a bona fide phenomenon for Atari. They had sold 8000 - 10000 machines, and would eventually sell upwards of 35,000. The day Pong was released is marked by the coin-op industry as the first nail in the coffin of pinball. xxxi
“Atari was always scrambling for cash, and we thought to spend money on attorneys was not a smart thing to do.” - Nolan Bushnell
However, it wasn’t just the copycats Atari had to worry about, it was other legal problems as well. Magnavox and Ralph Baer did not take kindly to the success of Atari’s Pong, especially since they had created a very similar game more than a year earlier. They took Atari to court, suing them over Pong. They used the sign-in-sheet for the 1972 Magnavox demo that Bushnell attended as proof that he saw the Magnavox video games before he came up with his own idea. However, Bushnell maintained that while he might have seen the Magnavox product, his was far superior:
“They did an excellent job of creating a game using analog circuitry, but it just wasn't fun.” xxxv - Nolan Bushnell
Skillfully, Nolan Bushnell turned this legal problem into an advantage for Atari. Atari settled with Magnavox, and the case never went to court. They paid a licensing fee close to $500,000 and became the sole licensor of Pong from Magnavox.
“It was a strategic thing. Magnavox was desperate to settle with me. They had seen lab books and I had been in business for two years before the Odyssey game was supposed to hit the streets. We settled basically for an amount of money that was less than I was spending on attorney’s fees at the time. $500,000 paid over five years. Less than 1/10th of 1%. It was a usage royalty.”xxxvi - Nolan Bushnell
"As far as we were concerned, that was the end of our problems with Atari" xxxvii - Ralph Baer
Magnavox then agreed to go after all of Atari’s competitors as part of the deal, which basically freed Atari to create new and different games while the competition was stuck in court.
“In our agreement we required that they go after all our competitors. Literally, I felt that if we could keep everyone else distracted and paying money, that could only help our business. I was not worried about Magnavox being a competitor. It was a strategic business move. Any time you can damage your competitors, walk away from it with token royalty and have everyone else sweating bullets because they knew that had copied my stuff. It was a good thing for Atari.” - Nolan Bushnell
The final analysis of these early lawsuits shows that it really did not matter who invented “the video game”, but it did matter who made it successful.
“I didn't invent the video game -- I commercialized it.” xxxviii - Nolan Bushnell