'Call of Duty' legal spat pits creatives against studios


Games vs. movies in 3D TV tech push

Call it the shot heard 'round the gaming industry.

The legal battle between Activision and the developers of "Call of Duty: Modern Warfare" is shining a spotlight on the complex relationship between game creators and the studios who get rich off their ideas.

Wanda Meloni, founder and senior analyst at M2 Research, says the case -- which pits the Santa Monica-based Activision against fired developers Jason West and Vince Zampella -- represents a major shift in what it has long considered business as usual between studios and contracted developers.

"There is a growing sense that designers can take a more independent role in their own destiny," Meloni says. "With the power of online distribution, developers feel that they have more control."

Citing "insubordination" and "breach of contract," Activision on March 1 fired West and Zampella, two lead developers of the lucrative "Modern Warfare" franchise at Activision's subcontractor Infinity Ward.

The video game manufacturer, one of the largest in the world with franchises including "Guitar Hero" and "Warcraft," and licensing ties to Lucasfilm and Marvel, alleged West and Zampella were holding meetings with rival studios to establish their own production shingle elsewhere.

On March 4, West and Zampella filed suit against Activision claiming the firm failed to pay "substantial royalty payments" to Infinity Ward.

Activision countersued the developers a week later, alleging the pair set out to steal "Modern Warfare" away for their own benefit by trying to separate that subfranchise from the "Call of Duty" catalog.

"Activision made promises to Jason, Vince and Infinity Ward," says Robert Schwartz of O'Melveny & Myers, who represents West and Zampella in both actions. "Activision said, 'Make "Modern Warfare 2" for us, and we'll give you complete creative control over the franchise in the future.' But following the success of that game, Activision wanted that control back. So they invented a reason to fire my clients."

Activision's lawyers declined comment on the suit but its PR firm defends the firing.

"The decision to terminate West and Zampella was not made lightly," its spokesperson says. "It also was not made to deprive them of their bonuses, which will be divided among remaining employees when Activision prevails. The decision was made ... to protect Activision's assets, and safeguard (shareholder) interests."

The litigation doesn't end there. A third lawsuit was filed April 27 by 38 former Infinity Ward employees claiming Activision failed to pay $75 million-$125 million in royalties and forced the staffers to remain under the Activision umbrella for the upcoming "Call of Duty 3."

Rifts among gaming creatives pop up from time to time, but the prominence of the "Call of Duty" franchise caught in the crossfire has increased the attention on this case.

Bruce Isaacs of Wyman Isaacs Blumenthal & Lynne represents the 38 co-plaintiffs and says their case will be co-litigated with the West and Zampella claim.

"My clients are entitled to $75 million-$125 million in unpaid bonus and royalty payments," Isaacs says. "Activision held my clients' money hostage in a power play to force them to work on 'Modern Warfare 3' and my clients refused to be held hostage."

In the wake of the legal wrangling, Schwartz says West and Zampella have established Respawn Entertainment to continue developing games in Los Angeles. They've started hiring employees, but have yet to announce any details or titles for new projects.

Jeffrey W. Rose, an attorney who specializes in new-media intellectual property, says the games world should prepare for similar litigation because the economics now justify it.

"These cases have been very few and far between," Rose says. "Now there is enough money at stake in the larger projects that no one is willing to walk away without a fight."

At the same time, the relationship between publishers and developers is actually improving. Many publishers agree to pay negotiated kill fees without argument if they terminate a relationship early, and also pay royalties when they are owed.

"The financial side of the equation makes litigation more viable, while on the other hand the growing sense of accountability and professionalism in the relationship between most publishers and developers mitigates against it," Rose says.

However the case ends, the industry may be better for it, says analyst Chris Zimmerman. "A heated competition between juggernauts, should lead to heightened competition," he says."