June 19, 2012 4:32pm PT by Eriq Gardner
Paramount Hit With $10 Million Video Game Lawsuit
Paramount Pictures is being sued for $10 million for allegedly breaching an agreement to co-finance and co-produce video games based on the studio's films.
The lawsuit, filed in California federal court, comes from Swedish company ProCloud, which claims it made a $1 million licensing fee and was expecting to receive royalties before Paramount shut down its digital entertainment division and walked away from the deal.
According to the complaint, Paramount approached ProCloud in 2010 to create video and social web games based on several motion pictures. The two sides are said to have entered into a written agreement in September of that year.
ProCloud says that under the original deal, it paid $500,000 and was thus given the exclusive right to develop and publish video games based on five films. Paramount purportedly had the right to exercise a co-financing option to share the costs of further development of games. An amendment to the agreement is said to have been executed in September, adding two additional properties, amending the identity of other films under the agreement and making ProCloud pay an additional $500,000.
Paramount then allegedly exercised its co-finance option, which according to the plaintiff meant that the studio had the obligation to contribute 50 percent of the development costs of projects budgeted in total at $8.75 million. Paramount was to be compensated and required to act as publisher.
But a few days after signing the Sept. 27 amendment, ProCloud says it learned that the head of Paramount Digital Entertainment was terminated and that the division would be brought under its Worldwide Marketing Partnerships and Licensing division.
Four weeks later, the division is said to have been shut down.
According to the lawsuit, "Since that time, it has been virtually impossible to communicate with anyone at Paramount with any knowledge of its obligations under the agreement or with substantial knowledge of the ongoing co-produced game projects, which are (and always have been) of a time-sensitive nature. The abrupt structural change within Paramount left it incapable of performing its obligations under the agreement."
Paramount allegedly has indicated its intent not to go ahead with the deal but is said to have continued work "to develop the very same game projects" in the agreement without ProCloud's involvement.
The complaint doesn't indicate which movies were being developed into games. Paramount's website currently features a Star Trek game. Reportedly, the studio has featured games based on War of the Worlds and Rango.
ProCloud is suing for breach of written contract, breach of fair dealing and unjust enrichment. The plaintiff is represented by Adam Brezine at Bryan Cave.
Paramount declined comment.