Publisher Pays for Panning Patent

In Atari's latest SEC filing, which recently showed the company in dire straits, a $300,000 settlement was revealed for a patent infringement case launched agaisnt many major publishers, including Atari. American Video Graphics L.P. owns the rights to the "method and apparatus for spherical panning" (US Pat. No. 4,734,690), essentially the means for displaying moving 3D perspectives on a 2D screen. The patent was bought by AVG in the late 90s from tech measurements firm Tektronix, Inc. In 2004, AVG filed suit against just about every company operating in the U.S. that has made games using such techniques (and which has enough money to be worth including). This includes Atari, Activision, Electronic Arts, Take-Two Interactive, THQ, Ubisoft, Vivendi Universal Games, Sega, Square Enix, Tecmo, LucasArts, and Namco Hometek (now Namco Bandai). A similar suit was also filed against Sony, Nintendo, and Microsoft for making use of the technology in its gaming consoles. Understandably, when the lawsuit was launched in late 2004, it caused a great deal of consternation within the games industry, both among publishers and developers. Patent litigation in terms of game programming techniques has hugely destructive potential within the industry, as nearly all games make use of similar fundamental techniques that may share specific methods but are not unique to any particular publisher. AVG is clearly seeking large monetary settlements out of the matter, rather than actually attempting to curtail the use of its technology in games. A lawsuit targeting so many major publishers all at the same time would only have been launched if AVG's claims were unlikely to be stricken down. Atari is the first publisher to have confirmed any specific action taken to end its involvement in the lawsuit.

On October 19, 2005, we and AVG executed a Patent License and Settlement Agreement pursuant to which we will pay $0.3 million in full settlement of the lawsuit, which has been accrued as of December 31, 2005, and will receive an irrevocable nonexclusive, worldwide license to use, publish, sell, etc. products conceived by the AVG patents.

Immediately after the paragraphs detailing the AVG suit, the SEC filing goes on to describe another patent suit, this one filed against Atari, Epic Games, Valve Corporation, Sierra Entertainment, Sony Corporation of Japan, Sony Corporation of America, and Sony Online Entertainment. iEntertainment Network, Inc. claims that those companies infringed on its patent describing the method for "minimizing the effects of time latency in multiplayer electronic games played on interconnected computers" (US Pat. No. 6,042,477). The companies targeted, of course, are all large entities with multiplayer network games. In this case, all the parties involved shared a combined settlement of $175,000, with each company paying an equal $25,000 portion. Each company in question was, as with Atari in the first lawsuit, granted a nonexclusive license to use the technique in its future games. For Atari, this settlement didn't come at the ideal time; $325,000 being paid out at a time when the company plans to sell off its studios just to stay afloat certainly doesn't help. It remains to be seen how the other companies involved will react (or have reacted). Overall, lawsuits such as these--in which vast sums can be coaxed out of game companies for using techniques that have been common for decades--do paint a rather worrying picture.