Call Of Duty: Finest Hour - The Contract

[EDITOR'S NOTE: The following article reprints the entire development contract for Spark's November 2004-released console game Call Of Duty: Finest Hour, which debuted for PlayStation 2, Xbox, and Gamecube following Infinity Ward's first Call Of Duty for PC. We have asked three leading game attorneys - Tom Buscaglia, Chris Bennett, and Dave Spratley - to comment on the entire document, which even includes milestone payment specifics, and was released to the public as part of a legal battle between Spark and Activision.]

Tom Buscaglia: Los Angeles Superior Court judge Tricia Ann Bigelow recently unsealed the exhibits filed in a pending law suit that included a three-game development agreement between Activision and the then newly formed Spark studio.

Contracts such as these are rarely made public because they inevitably contain confidentiality provisions that prohibit the publication of or even talking about their terms. But once the contract was filed as an exhibit in the lawsuit, and then unsealed by the court, the contract became public information.

This was a just too good an opportunity to miss. So, when the editors of Gamasutra asked me to review and comment on the agreement, I jumped at it. I have done my best to summarize each section of the contract and to include comments where appropriate. I hope you find it both illuminating and educational.

Chris Bennett & Dave Spratley: Here’s a quick summary of the dispute. In August 2005, Spark sued Activision for breach of contract, fraud and misrepresentation. Spark claimed that:

1. Activision threatened to stop funding the games unless Spark agreed to accept fewer royalties and other less-favorable terms.
2. Activision charged Spark millions in assistance costs that Spark did not approve.
3. Activision did not negotiate in good faith regarding sequels.
4. Activision did not provide meaningful bridge funding.
5. Activision hired away some of Spark’s employees.

In October 2005, Activision counter-sued for fraud, breach of contract, misappropriation of trade secrets, trade-mark infringement, false designation of origin, and false advertising. Activision claimed that:

1. Spark misrepresented that it had the necessary talent, knowledge, skill and experience to develop the games.
2. Activision paid Spark’s legal fees to defend against Electronic Arts’ accusation that Spark stole trade secrets and confidential information from EA.
3. Spark repeatedly failed to meet its milestones, even when Activision provided substantial support.
4. Spark’s proposal for a sequel was half-hearted and deficient.
5. Spark failed to return development kits and computers containing source code to Activision.
6. Spark breached its confidentiality obligations when it filed the lawsuit.

Tom: This section identifies the parties (A. and B.) and the basic objective of the agreement and that it relates to a three-game deal (C.). There is also a reference to a preexisting Letter of Intent (LOI) entered into on July 22, 2002 (D.). I suspect that much of the interim time was probably expended on negotiating the details of this final agreement.

Products and Exclusivity - This is where the three AAA (1.1) titles to be developed by Spark under the contract are described. The second (1.2) game will either be a sequel (probably based on the success of the first one) or a new game based on either original IP or licensed content. The same for the third game covered under the agreement (1.3).

The three games are collectively referred to as “the Products” (1.4) and the general scope of work it set out (1.5) and the term “Sequel” is defined (1.6). Activision was to have an exclusive relationship with Spark through the completion of the second game in the series. After the delivery of the second title Spark could devote a part of their resources to other projects (1.7). The description of the first title, referred to under the working title of “Tour of Duty” is also set out (1.8).

Platforms and Formats - The target platforms are simple - PS2, Xbox and Gamecube (2.1).

Chris & Dave: The last few words of section 2.1 also require Spark to develop for the PS3, 360 and Wii (even though those consoles weren’t on the market in 2002)!