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Activision Adds EA to Suit Against ‘Modern Warfare’ Creators

Call of Duty Black Ops
Source: Activision
Call of Duty Black Ops

The war of words between Activision-Blizzard and Electronic Arts has moved to a new plateau. Activision has added the rival publisher to its $400 countersuit against the creators of the “Call of Duty” franchise.

A Los Angeles Superior Court judge approved the amendment to the suit Thursday, acknowledging Activision’s allegations that EA wooed Jason West and Vince Zampella, the heads of the wholly-owned Infinity Ward subsidiary, while they were still under contract with Activision.

Activision first petitioned the court to add EA in December.

The amended suit alleges that EA engaged in unfair competitive practices, conspiring as early as July 2009 “to destabilize, disrupt and to attempt to destroy Infinity Ward”. Among the accusations from Activision are that EA circulated a list of “prospects” from the developer’s employee roster that included West as early as July 2009.

West and Zampella were abruptly fired by Activision in February of 2010. A week later, they filed suitagainst the publisher for wrongful termination and breach of contract – seeking $36 million in royalties and creative control over the “Modern Warfare” franchise. (Activision counter sued the pair soon after.)

By mid-April, West and Zampella had announced the formation of their new studio – Respawn Entertainment – which would work exclusively with EA. Dozens of Infinity Ward employees soon left Activision and joined the pair at Respawn. The company has not yet announced details on the game it’s currently working on.

For investors, the addition of EA to the suit against West and Zampella lies less in the potential judgment, say analysts, and more in potential delays to what has become perhaps its most anticipated title.

“I think the outcome could be that games coming out of Respawn could be pushed back,” says Colin Sebastian of Lazard Capital Markets. “They want to make it difficult for EA and Respawn to be successful. … For EA, the risk for investors is getting any Respawn games out into the market. Any uncertainly around that might cause investors to not give EA credit for having that game in their portfolio.”

Activision’s amended complaint includes what it says are emails from EA CEO John Riccitiello and COO John Schappert as well as Creative Artists Agency agent (and co-creator of the Microsoft Xbox) Seamus Blackley. The emails, it says, show a precise, deliberate attempt to lure the developers and disrupt operations at Infinity Ward.

“JR [presumed to indicate Riccitiello] cooks a mean BBQ,” wrote Blackley. “I think we could accomplish some interesting chaos.”

As negotiations with EA continued, Activision alleges, West and Zampella became more and more insubordinate – knowing that another offer was waiting for them.

“EA’s months of unlawful interference with West and Zampella’s employment contracts created a situation where West and Zampella had no ‘downside’ to breaching those contracts and causing their terminations, since they knew there was an even more lucrative deal waiting for them from Electronic Arts,” the company says in its complaint.

The hurdle Activision may face in the suit is showing what damages it suffered by the departure of West and Zampella. The 2010 installment of the “Call of Duty” series – subtitled “Black Ops” – was made by another development team and has significantly outperformed “Modern Warfare 2”. “Black Ops” hit $1 billion in sales one month quicker than its predecessor and has not shown any slowdown at retail.

Activision has also hinted that it plans to release more downloadable content for “Black Ops,” which will further boost margins on the title.

“I don’t think Activision needs the money,” says Sebastian. “They’re clearly raking in the profits on ‘Call of Duty’ and they have the next version coming out in November of this year, so it’s probably going to be difficult for them to prove empirically how they’ve been damaged.”

Questions? Comments? TechCheck@cnbc.com
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