Activision Ordered to Hand Over Source Code

According to Gamespot.com, A Judge has ordered Activision to hand over the source code for the DJ game, Scratch: The Ultimate DJ. This case has gotten interesting fairly quickly. Let’s recap.

Activision was sued on April 14 by Genius Productions and Numark Industries for “intentional interference with contract, breach of contract…and misappropriation of trade secrets” after Activision purchased Scratch developer 7 Studios. 7 Studios is under contract to develop Scratch: The Ultimate DJ, for Genius and Numark.

Gamespot.com reported on April 16, 2009, the following: “Genius and Numark’s [April 14] filing claimed that Activision contacted them via the cash-strapped 7 Studios expressing interest in buying Scratch: The Ultimate DJ. However, after announcing its own DJ Hero game and seeing a demo of Stratch, Activision allegedly broke off negotiations and promptly bought 7 Studios. The suit then contends that 7 Studios slowed work on the game and refused to turn over software and a Numark turntable-inspired controller when Genius terminated its contract.

In addition to “substantial damages” and a return of its assets, Genius and Numark sought a restraining order against Activision’s release of DJ Hero so Scratch could retain its “‘first to market’ status.”

Then, Activision released statement announcing that a Los Angeles judge had rejected the request for a restraining order, citing a lack of evidence:

“Activision Publishing strongly denies the allegations made by Genius Products and Numark Industries and believes that the claims are disingenuous and lack any merit. Yesterday, the L.A. Superior Court found that there was no evidence of any wrongdoing by Activision and refused to grant any restraining order against Activision.

“These allegations are nothing more than an attempt by Genius to place blame for the game’s delay, as well as to divert attention from the cash flow, liquidity, and revenue challenges Genius detailed in its March 30, 2009, SEC filing. By their own admission in October 2008, the game had fallen behind in production, which was well before Activision had any involvement with Genius, Numark or California 7 Studios regarding the game.”

So, that’s the background.

On April 20, 2009, gamespot.com reported that “Genius and Numark are claiming that it was they, not Activision, who prevailed in court last week. Through an external publicity agency, the companies made public the transcript of the April 15 hearing, which was presided over by Judge James C. Chalfant.”

The hearing began with the judge saying that, “There isn’t any evidence against Activision. …There is no reason to restrain Activision from doing anything.” However, the judge quickly added that “There is evidence that…7 Studios has a duty to return the work product, source code, and software of the plaintiff [Genius].”

“It is actually very straightforward. They hired you. They have terminated the deal. Their agreement requires return of materials,” said the judge. “No matter how you slice this banana, they are entitled to the work product back. I don’t know why your client would want to continue working on a project for which they have been terminated.”

Chalfant then ordered Activision to make its 7 Studios subsidiary turn over the Scratch source code by today, April 20, in preparations for a subsequent hearing next month. “You [Activision] turn over the source code, and then if you want it back, you can argue on May 6th as to why you should get it back. I can’t under any circumstance think why you would be entitled to keep the source code.”

Next step is the May 6 hearing on damages. We’ll keep you posted.

ClearOne Maintains Its Award

I reported on this jury verdict back in November here. According to websitegear.com, it appears that the Judge has entered a Final Order awarding $9.6 million, not much less than the jury’s award.

It appears the Judge was pretty convinced of BiAmp’s wrongful actions:

As to defendant Biamp, the court ruled that the finding of willful and malicious trade secret misappropriation by Biamp was supported because “Biamp deliberately ignored numerous warning signs suggesting that the AEC technology offered by WideBand was not WideBand’s to sell. Given all the facts presented to Biamp at the time, it could not have held a good faith belief that its use of the WideBand code was valid,” and that Biamp earned over $1.5 million “by purchasing the WideBand technology at half the price offered by ClearOne and then selling the technology at the same price it charged when dealing with ClearOne.” The court also wrote that “having reviewed the testimony of Biamp’s witnesses…the court finds that the jury (who has the sole responsibility to assess witness credibility) reasonably found by clear and convincing evidence that Biamp’s behavior was willful and malicious.” For these and other reasons, the court concluded that “an award of exemplary damages against Biamp is appropriate to punish Biamp for ignoring its due diligence duties in order to profit at the expense of a competitor and to send a message deterring other companies from engaging in similar conduct.”

Luna Innovations Eclipsed By $36 Million Award

Law.com is reporting that a California jury hit Luna Innovations for $36 million in damages for breaking an agreement Luna had with hansen Medical to develop a robotic catheter and misused trade secrets to land a contract with Hansen’s competitor, Intuitive Surgical, Inc.

Key sentence: “The jury found that Luna breached its contract with Hansen in five ways, including breaking a nondisclosure agreement and failing to offer Hansen the first opportunity to negotiate an exclusive license to the technology they were developing together.”

It’s worth noting that Hansen had the opportunity to win this one because there was a nondisclosure agreement signed before any information of Hansen’s was disclosed to Luna. It is critical for small businesses looking to partner up that they execute nondisclosure agreements to protect their trade secrets.

Post-Employment Restrictive Covenants

Great article over at PharmExec.com about Post-Employment Restrictive Covenants in the pharmaceutical and biotech industries–but, a lot of the information is generally applicable to all industries. It’s the first part of a four part series that I will keep you updated on. Check it out here.

Are School Tests Public Records?

Interesting case out of Ohio–The Columbus Dispatch is reporting that there is a fight over whether or not previously administered tests should be considered public records, and thus accessible to enterprising students who want to make a public records request to see the information prior to taking a test. The school district has taken the position that the tests are “trade secrets” and on that basis cannot be construed as public records. It seems that the Courts are agreeing with them.

For what it’s worth, I can’t imagine how the tests can be construed as “trade secrets” without changing the whole trade secrets system. Hundreds of students have seen the tests, none of whom were under any degree of confidentiality–by definition, the tests can no longer be considered “secret” after individuals under no confidentiality obligations have seen them.

The attorney for the school district said: “If this test is found to be a public record and we have to disseminate it, its utility is now zero,” he said. “Every student would have an economic incentive to try to get copies of the test beforehand.” Specious argument at best. So what if students get the tests–I had some teachers give me their previous tests as study materials and as an indication of what to expect on a future test. Just because a student gets a test and reviews the information, doesn’t mean that he will memorize the information, and it doesn’t mean that the information will appear on a future test.

Seems to me that this is a bunch of teachers who don’t feel like making a new test every year and instead want to rely on older versions–if the tests are public records, they won’t be able to do that. It hardly makes sense to turn the trade secrets statutes on their head in order to save teachers from more work though.