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California Reduces State Income Tax Penalty for Section 409A Violations

California recently enacted legislation that reduces the state’s income tax penalty for violations of Section 409A of the federal Internal Revenue Code of 1986, as amended (“Section 409A”), from 20 percent to 5 percent.  The reduction is effective for taxable years beginning on or after January 1, 2013, but does not affect the state’s interest penalty tax or federal penalties related to Section 409A violations.  The new law can be found here.

>Microsoft, Datel Battle over the Accessory Market

>The design patent infringement battle between Microsoft Corp. and Datel Design and Development Ltd. over Xbox 360 accessories in the U.S. might be coming to an end, at least for now. The two companies appear to have reached a settlement agreement this week resolving various infringement proceedings relating to Datel’s Xbox 360 compatible game controllers. But another part of the conflict between the Xbox creator and the accessory manufacturer is just heating up in federal district court in California. The California action involves antitrust claims brought by Datel against Microsoft and highlights some of the strategies Microsoft is using to gain an advantage over competitors in the Xbox accessory market, as well as some of the obstacles it faces in doing so. Datel filed the complaint in response to a Microsoft software update for the Xbox 360 that rendered Datel’s memory cards incompatible and useless with respect to the system,… Continue Reading

>NFL Retirees Suing EA Over Madden

>Electronic Arts, Inc. is again feeling the pressure regarding its sports-based video games, this time thanks to a class action centered around its “Madden NFL” video game franchise. The complaint was filed in the District Court for the Northern District of California on Thursday, July 29, 2010, by former Cincinnati Bengal and Tampa Bay Buccaneer Michael “Tony” Davis, on behalf of himself and about 6,000 former NFL players. It claims that EA is intentionally pilfering the players’ publicity rights under California law, through the unauthorized use of the players’ likenesses to recreate over 140 NFL teams of the past. Specifically, the complaint states that older versions of Madden NFL included player profiles for each “player” on a “vintage” team featured in the game, such profiles including descriptions of the players’ positions, number of years of NFL experience, physical characteristics, and relative skill level in different facets of the game. These… Continue Reading

>Storm8 and the Hazards of Gathering Personal Information from Gamers

>If not done properly, gathering personal data from gamers can bring game developers into the legal crosshairs. For instance, an iPhone game player recently sued game developer Storm8 for allegedly collecting phone numbers without permission from players who downloaded Storm8’s games from the iTunes app store. The complaint alleges the game software automatically collects and transmits the iPhone telephone number of each player back to Storm8, in violation of the Computer Fraud and Abuse Act and California state laws. Back in August, reports surfaced that Storm8’s games transmitted players’ wireless numbers back to the company’s servers. Storm8 responded that previous versions of the game software had a bug – that has since been fixed. The lawsuit’s objective appears to be an injunction barring Storm8 from collecting phone numbers in the future. However, even if Storm8 engaged in some unauthorized data gathering, the player still may not have a legally recognizable… Continue Reading

>Update on California "Violent" Games Law

>As we reported here back in February, the United States Court of Appeals for the Ninth Circuit confirmed a district judge’s 2007 ruling that a California law that restricts sales of “violent” video games to minors is unconstitutional. The Ninth Circuit found the law unconstitutional because it was not narrowly tailored, because treating violence as obscenity is not permissible by the Constitution and because the state had not demonstrated that violent video games cause psychological or neurological damage. After the law was defeated at the Ninth Circuit, Governor Schwarzenegger announced the filing of a petition for certiorari, asking the U.S. Supreme Court to save the law, arguing that the same justifications for precluding sales of pornography to minors should be applied to violent video games. “By prohibiting the sale of violent video games to children under the age of 18 and requiring these games to be clearly labeled, this law… Continue Reading

>Rights of Publicity: Its in the game

>The law surrounding an athlete’s right of publicity is fluctuating faster than Brett Favre’s retirement plans, and game companies ought to be paying attention. This week, Sam Keller, a former college quarterback, filed a class action in the U.S. District Court for the Northern District of California against Electronic Arts and the NCAA for using college athletes’ images and attributes in EA’s line of NCAA video game titles. The right of publicity is the right of a person to control commercial use of his or her name, image, likeness, or some other identifying aspect of identity. According to the lawsuit, there are close similarities between real-life college athletes and the virtual athletes in EA’s games. “Electronic Arts matches the player’s skin tone, hair color and often even a player’s hair style…” The complaint also alledges that EA’s virtual athletes are depicted with unique accessories, such as wristbands, glasses, visors and… Continue Reading

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