Legal issues with Valve & Vivendi Postpone HL2!

[Milkman 1]

Quote[/b] ]Valve vs. Vivendi Universal dogfight heats up in US District Court

By Curt Feldman, GameSpot

09/20/04 06:14 AM

URL: http://www.gamespot.com/news/2004/09/20/news_6107712.html

Last week, news of Valve finally shipping the Half-Life 2 release candidate to publisher Vivendi Universal Games (VUG) grabbed headlines. However, behind the scenes, the two companies have been involved in a much less upbeat kind of transaction--an ongoing legal battle that has garnered little attention from gamers.

On August 14, 2002, Valve served its then-publisher Sierra On-Line (now Sierra Entertainment, a Vivendi Universal Games brand) with a lawsuit in US District Court of Washington, Western Division, alleging copyright infringement--the result of Sierra placing Valve games in Internet cafes in the US and abroad. "Sierra has in the past and continues to reproduce, use, distribute, and/or license one or more of the Valve Games with regard to 'cyber cafes,'" the complaint read. "Sierra's activities are outside the scope of Sierra's limited license...and therefore constitute copyright infringement in violation of the Copyright Act of 1976."

And so it began.

Since that filing, more than a dozen lawyers have left their stamp on the over 200 documents and exhibits (the most recent filed just last week) that have crossed the desk of the honorable Thomas S. Zilly, the judge mediating the dispute.

Presiding over the claims, counterclaims, motions, answers, declarations, applications, amended complaints, and other minutia of the case, Zilly is in the middle of the legal equivalent of a barroom brawl. In court filings, attorneys for Sierra/VUG allege that Gabe Newell, founder and managing director of Valve, conveyed "misleading half-truth" to them, and that various ensuing conversations between Newell and Sierra/VUG executives were colored with "misrepresentations and concealment." Valve's marketing director Doug Lombardi is also described as having made "false representations" to Sierra/VUG execs.

"Valve sued Vivendi for copyright infringement back in 2002 over their unauthorized distribution of our products to cyber cafes," Lombardi told GameSpot last Friday. "We later had to add breach of contract claims for, among other things, refusing to pay us royalties owed and delaying Condition Zero out of the holiday season."

That lawsuit became more complex when Sierra fought back with a counterclaim. "Almost a year and a half into the lawsuit," Lombardi continued, "Vivendi responded by making a number of claims in an attempt to invalidate our agreement and be awarded the ownership of the Half-Life intellectual property. We expect to prevail in this lawsuit."

Though the density of the legal documents makes for arduous reading, they yield many fascinating nuggets of information. For example, the first Half-Life, which went on to win numerous awards and reap huge profits for both developer and publisher, was delivered to Sierra after an almost laughably meager $800,000 advance--the initial payment was a mere $30,000 when Newell and Sierra On-line reps signed their first software publishing agreement on April 27, 1997.

Currently, the case stands here: After Valve's initial lawsuit alleging that Sierra illegally distributed Half-Life to game cafes, and Sierra/VUG's counterclaim that accuses Valve of circumventing Sierra's retail plans by distributing Valve games via Steam, the two sides have both submitted motions for summary judgment on lesser points.

"Our court date [a jury trial to address the complaint and counterclaim] isn't until March 2005," Lombardi said. "The October 8 motions relate to two legal issues. We expect those issues to be decided in our favor."

For readers not familiar with the case (that is, just about everyone), the overall timeline is referenced in documents filed by VUG attorneys on Wednesday, September 15, 2004. In those documents--a second motion "to compel production of [Half-Life 2] source code"--Sierra/VUG attorneys stated their case in filings as follows:

"In 1997, Valve and Sierra entered into two agreements whereby Valve undertook to develop certain computer games and Sierra undertook to manufacture, market, and distribute the games. Among other benefits, these 1997 agreements granted Sierra intellectual property rights in the games.

"Beginning in 1999, following the success of its first game, Valve began to threaten Sierra that it would halt or slow development of the remaining games it was obligated to develop unless Sierra relinquished certain rights under the 1997 agreements. Sierra eventually capitulated to these demands and, relying on misrepresentations by Valve, entered into a new software publishing agreement (SPA) with Valve in 2001.

"Among other concessions, Sierra agreed to relinquish intellectual property rights and to allow Valve certain rights to the online distribution of games. Valve did not disclose during the negotiations over the 2001 SPA that it was in the process of developing a new technology called Steam that would allow consumers who would normally purchase games from Sierra/VUG at retail to purchase those products online directly from Valve.

"It was not until March 2002, nearly a year after the 2001 SPA was signed, that Valve announced the new Steam technology in a Game Developers' Conference in San Jose. Production of the source code in native, electronic, compliable format will allow Sierra/VUG to analyze the timing of Valve's development of Steam and the relevant Valve games.

"The timing of Valve's development of the source code for Valve games, the Valve source engine and Steam are critical to the development of several of Sierra/VUG's counterclaims, including: Sierra/VUG's promissory fraud claim based on Valve's false promises that it would continuously develop games to completion; Sierra/VUG's fraud claim and claim for breach of the covenant of good faith and fair dealing based on Valve's concealment of Steam and its strategically delayed development of the Valve games to coincide with the commercial release of Steam; Sierra/VUG's unilateral mistake claim based on its mistaken belief regarding the status of development of the Valve games upon signing the 2001 SPA; Sierra/VUG's breach of contract claim based on Valve's failure to use diligent efforts to continuously develop the Valve games to completion; and Sierra/VUG's claim for declaratory relief regarding its right to reversion of the Half-Life intellectual property based on Valve's failure to continuously develop the Valve games."

Perhaps not so coincidentally, Valve announced that it had delivered a Half-Life 2 release candidate to VUG the day after this motion was filed with the court. Whether that release candidate qualifies as the "source code" VUG attorneys sought is unclear, although Lombardi indicated to GameSpot the source code at issue and the release candidate are not the same.

One especially significant subplot contained in Sierra's 54-page counterclaim to Valve's initial copyright infringement lawsuit revolves around the lengths Newell and others at Valve, according to Sierra/VUG filings, went to to downplay the capabilities of Steam, the Valve-developed digital distribution system now being tapped as a distribution mechanism for Half-Life 2.

"During the parties' negotiations...Counterclaim Defendants [Valve] repeatedly and falsely assured Sierra and VUG that retail sales would remain "the key to [their] strategy." In September 2000, for example, Newell told Hubert Joly, then VUG's CEO, that "online is a way to nurture the retail business" and that he "could not understand how one can make money online today."

"Sierra and VUG would later learn that these statements were flatly false...Incredibly, Counterclaim Defendant Newell also stated that he "could not understand how one can make money online today," plainly with the intention to falsely imply that Valve had no present or future strategy to engage in widespread online distribution of the games. This misleading half-truth was Newell's deliberate concealment of the extent to which Valve intended through the parties' negotiations to appropriate the substantial value of the distribution rights to Valve, rather than to Sierra and VUG."

In court filings, Sierra/VUG says that the current distribution of Half-Life 2 via Steam exceeds the scope of the current software publishing agreement between the two parties. It is apparently seeking the court's assistance in compelling Valve not to use Steam as an avenue of distribution.

On Friday, when asked if Valve was still intent on making Half-Life 2 available to gamers via Steam, regardless of what was determined on October 8, Lombardi replied, "Yes."

Interestingly, and in spite of the ongoing legal dispute, Sierra/VUG still wants to work with Valve in the future and is asking the court via filings to force Valve to work with it on whatever is next in the development pipeline. It asks the court, in filings, "for a declaration that Sierra and VUG have the right to a fourth engine license pursuant to the terms of...the 2001 Agreement."

According to Lombardi, "We're going to meet the obligations of our current agreement."

So what does the future hold for the two parties? They are now in a dash to present to the court all relevant materials to support their cross-motions for summary judgment regarding "cyber-cafe rights and available damages" (according to Sierra/VUG filings).

Additionally, the following milestones remain upcoming for the two parties, according to the deputy clerk to Judge Zilly:

* All motions related to discovery must be filed by October 22, 2004

* Disclosure of expert testimony [by] November 5, 2004

* Discovery completed by November 18, 2004

* All dispositive motions must be filed by...November 18, 2004

* Settlement conference no later than January 20, 2005

* Mediation held no later than February 19, 2005

* All motions in limine must be filed by February 21, 2005

* Agreed pretrial order due March 9, 2005

* Pretrial conference to be held at 4:00 pm on March 11, 2005

* Trial briefs, proposed voir dire questions, jury instructions, and findings of fact and conclusions of law...March 16, 2005

* Trial date: March 21, 2005

With the next hearing date set by the court of October 8, 2004 (to hear the cross-motions of summary judgment), you can be sure the parties will have little time to check out the run-and-gun fun of Half-Life 2, but that doesn't mean they don't have their legal weapons drawn, fingers on the triggers.

A VUG spokesperson declined to offer any comment for this article, saying the company was "not able to comment on pending litigation."

GameSpot will keep readers posted on further developments.

Great and I bought a 9800 pro for this game...

[jotte 0]

Quote[/b] ]Great and I bought a 9800 pro for this game...

And the lesson from that Sgt Milkman is? Yes thats right, never sell the skinn befor you've shot the bear. ;)

[blackdog~ 0]

I wonder if GameStop even has my purchase/preorder of HL2 still on record, which I bought about 2 years ago :P

[Billabong81 0]

I wonder if GameStop even has my purchase/preorder of HL2 still on record, which I bought about 2 years ago :P

LOL, good luck .

So when will the game be released now? Sorry if it was in that huge reading, I didn't have the patience to read the whole thing .

[korax 4]

Nobody said this would postpone HL2, and it probably wont. Valve wants to get the game out, and they also want to destribute it on 'Steam' to get more money out of it. Vivendi games doesnt want this because it means less profit for the greedy guys... Chances are the game will be released on schedule (laughs) and then afterwards the companies will have a battle over money.

Also, the HL2 RC was sent to vivendi a few days ago, so the real release isnt that far off.

[Skul 0]

Probably. I hope so.

This game seems like it will never be released.

The thing is, nobody knows the official release date. AFAIK, no date has been set, yet. It's already been delayed for almost exactly a year (like the original... will this be a pattern for the Half-Life series?). It's about time they got the game to the shelves.

I can't wait any more! Come on, VALVe! Release the game before I explode!    

[Gareth Gates must die]

[Apollo 0]

Half life was revolutionary when it came out on the technical and graphical level ,and provided an excelent platform for modding.

I fail to see though how Half life 2 could be as revolutionary now as it once was on the technical level ,and almost every FPS game now offers a solid modding platform.

I doubt that Half life 2 will have more play room than certain games have (like Ofp or WW2online) ,more online playyers possibilety's (server and computer limmitations) ,or superior graphics. (again limitations)

[denoir 0]

I can't exactly say that my heart is breaking that a developer screwed the publisher. Publishers and venture capitalists are vultures. Their business is just a legal version of racketeering. Cash-strapped software developers contact them out of desperation and end up losing a good portion of their company and their intellectual rights to their work.

[Balschoiw 0]

...and often publishers tend to influence the developers to alter the game the way they want to have it. Means, altering it that way that it will fit the needs of a broader public wich doesn´t necessarily mean that the product quality get´s better...

[MSpencer 0]

It's VALVE! Was anyone REALLY surprised at this? HL2 betas are literally dropping out of 2nd floor windows into the huddled masses around the VALVe building.

[Monkey Lib Front 10]

Vivendi Head office

Valve: Hi

Vivendi:Hello

Valve:about the online distribution rights for HL2.

Vivendi:Yes?

Valve:can we have them please?

Vivendi: hmmm yea okay, but you aint actually going to use it right?

Valve: ermm nah we just wan't them fo no reason whatsover.

This all happened when Steam was a pipe dream and nobody thought of anything like this(about 2 years ago).

Quote[/b] ]more online playyers possibilety's (server and computer limmitations) ,or superior graphics. (again limitations)

Erm what are you talking about? i'm pretty sure the entire community of NS players is larger than the OFP MP community, if that's what you mean.

[Skul 0]

Nobody said Half-Life 2 was going to be revolutionary with modding. Games aren't just about modding, modding, modding. Half-Life 2 is going to be revolutionary in areas such as physics, graphics, AI and a host of other things.

The thing I like most about Half-Life is it balances realism and arcadey action. Also, there are places where you have to use your head, unlike some other FPS games where it's firepower just about all the way through.

I still play Half-Life and hell, even Doom today. Not only because they're great, but... well, no that's it. They're great!

[Gareth Gates must die]

[Apollo 0]

Quote[/b] ]Erm what are you talking about? i'm pretty sure the entire community of NS players is larger than the OFP MP community, if that's what you mean.

NS?

What i ment is compared to the time that Half-life 1 came out there was virtually no competition for it ,FPS was still kinda in it's kid shoes and few new FPS came out by year ,well deffinatly compared to the flood of FPS games we have today.And Half-Life 1 could by strategic timing and good programming make a giant leap in the FPS genre ,wich is now due to the market flooded with FPS game's based on various very refined game engine's (made by producers with now more experience ,like Unreal crew just 1 example) pretty dificult.

[Hit_Sqd_Maximus 0]

They won't delay the release. These two companies will not break there bottom line for a dispute. Their third quarter earning estimates are based on this games release and they are taking a beating from wall street because its not out. Niether one can afford to delay the game like that.

[Blake 0]

Quote[/b] ]Half life was revolutionary when it came out on the technical and graphical level

Well it was good but so were Rainbow Six and Thief: The Dark Project. I didn't find HL so revolutionary after all.

[GoOB 0]

Well it was good but so were Rainbow Six and Thief: The Dark Project. I didn't find HL so revolutionary after all.

The only thing I found to be "revolutionary" about HL2 was the storyline, in my opinion it is yet to be surpassed in a pure FPS game.

[Llauma 0]

Quote[/b] ]Half life was revolutionary when it came out on the technical and graphical level

Well it was good but so were Rainbow Six and Thief: The Dark Project. I didn't find HL so revolutionary after all.

I agree.. It sure was a great game but it was basicly just a mix of alot of cool features others had already developed. HL2 seems to be something similar.. All cool features available added into a single game. It's nothing revolutionary, it's only about having money to make it a reality.

[Blake 0]

What I find especially frustrating with the all the present and upcoming shooters is that they all come only with the standard TDM/DM etc game modes, there's isn't even a shred of rumor about co-op game mode being included. That's what could have made HL great in my eyes. Sven coop mod was no real substitute for a co-op story-driven campaign...

That brings me back to the old days of Doom and Doom 2 when the world trembled at the sound of our rocketsch...rant rant.

[Monkey Lib Front 10]

What I find especially frustrating with the all the present and upcoming shooters is that they all come only with the standard TDM/DM etc game modes, there's isn't even a shred of rumor about co-op game mode being included. That's what could have made HL great in my eyes. Sven coop mod was no real substitute for a co-op story-driven campaign...

That brings me back to the old days of Doom and Doom 2 when the world trembled at the sound of our rocketsch...rant rant.

sven coop team is very close to valve in the development of the mod for HL2, development of a coop Mode would take up alot of time and would alter the netcode alot, sometimes they just don't have enough time.

[FSPilot 0]

What I find especially frustrating with the all the present and upcoming shooters is that they all come only with the standard TDM/DM etc game modes, there's isn't even a shred of rumor about co-op game mode being included. That's what could have made HL great in my eyes. Sven coop mod was no real substitute for a co-op story-driven campaign...

That brings me back to the old days of Doom and Doom 2 when the world trembled at the sound of our rocketsch...rant rant.

thats what I hate about OFP multiplayer. I'm not a fan of DM or TDM, or CTF or any of that stuff. coop is the only game for me

[Skul 0]

Aah, yes, Doom. I'll always remember playing co-op on that. Nothing like going through a whole Episode with a buddy by your side.

[Gareth Gates must die]

[The Frenchman 0]

As long as its released before "the evil xbox behemoth" I'll be happy.

Do the Gordon dance!

[Skul 0]

LOL!

Go, Gordon, Go!

[Gareth Gates must die]

[USSRsniper 0]

who cares about HalLife 2 we can play OFP

[Milkman 1]

I have been discussing this issue with some lawyers over the past day, and this is what I have come up with:

This lawsuit is a counter-suit to an issue over two years old, and is just a diversionary tactic to give valve lawyers a headache. If Vivendi wanted to postpone release, they would have made a motion to halt distribution of the game buy now.

Oh yeah, and I didn't just buy a 9800 pro 256mb for HL2 either, I now play flashpoint at high terrain detail, 1600 viewdistance and twice the resolution I use to on my old Ti4200, and with twice the Framerate.