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>Bethesda Sues Interplay Over Fallout IP Purchase

>The purchase of intellectual property is always a complicated transaction, which can easily blow up on the participants if not handled carefully. Bethesda Softworks found how easily things can go wrong last month when it sued Interplay over the purchase of the Fallout IP. Bethesda?ÇÖs suit accuses Interplay of breach of contract and trademark infringement for not abiding by various provisions in the purchase and license agreements detailing Bethesda?ÇÖs purchase of the Fallout IP from Interplay in April, 2007.

Under these purchase and license agreements, Bethesda bought the exclusive rights to the Fallout game and associated trademarks for $5.75 million. Interplay then licensed back several types of limited rights from Bethesda. One provision in the agreements said that Interplay would have the right to develop a Fallout MMORPG if it could raise $30 million in funding by the end of March 2009. Bethesda claims such fund-raising did not occur, but that a few days after Bethesda informed Interplay that the right to develop a Fallout MMORPG had expired, Interplay went ahead and entered into an agreement with a third-party developer for the MMORPG project anyway.

Bethesda also accuses Interplay of releasing and repackaging older Fallout games without Bethesda?ÇÖs permission, as required under the agreements. Specifically, the new packaging for the older Fallout games was supposed to be approved by Bethesda. And lastly, Bethesda accuses Interplay of entering into deals for the older Fallout games with pen-and-paper game developers and online game distributors, such as GameTap, without Bethesda?ÇÖs consent, which is also a violation of the agreements.

Interplay responded to Bethesda’s suit by countersuing Bethesda for breach of contract. Interplay states that it retained the rights under the 2007 agreements to grant a third party developer a license to make a Fallout-based pen-and-paper role-playing game. Interplay claims that while Bethesda could have objected to this licensing deal immediately, but it waited months before sending the developer a cease and desist notice. Now, the developer is suing Interplay for granting a license that Bethesda claims Interplay did not have the right to grant. Interplay?ÇÖs countersuit also states that Bethesda sent GameTap an improper letter informing it that Interplay did not have the rights to license out the older Fallout games.

Gavin George is an associate in the Intellectual Property Practice Group of Haynes and Boone. His practice covers all areas of intellectual property law, with an emphasis on technology transactions and data privacy in the information age. His practice includes technology agreement drafting and negotiation, intellectual property analysis and due diligence, and consulting on evolving data protection and social media issues.

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November 2009