Houston Business and Commercial Law Attorney Blog

Activision and Electronic Arts settle 'Call of Duty' dispute

2012-05-18T19:16:40Z

When businesses face litigation disputes, the best option might be to settle the case. While litigation can reward a company with desired results, going to trial may also be risky for the company. In many situations, companies confront the following issue: How much money and time are we willing to invest or risk in this business dispute? Fortunately, many Texas companies find that with strong legal representation, an amicable and appropriate settlement can be reached with opposing parities.

In recent news, Activision Blizzard Inc. and Electronic Arts Inc. have settled their litigation over the "Call of Duty" video game franchise.

]]> Both of these companies are massive video game giants. The controversy between the companies started in 2010 when Electronic agreed to fund a new studio led by the co-creators of "Call of Duty," whom Activision had fired earlier that year.

Ultimately, Activision added Electronic as a defendant in the lawsuit against the co-creators. It accused the company of a plot to wipe out the studio previously led by the co-creators, which made many Call of Duty games. Fortunately, the two companies have agreed to move forward in a settlement.

Nevertheless, sources say that the trial against the co-creators may be the most closely watched in the history of the video game business.

If your business has invested time in a dispute that is draining energy and finances, it may be time to consider other options. On the other hand, settlements are not always the better road for a business dispute. For this reason, it is important that companies take the time to meet with legal specialists and explore the various resolution options.

Source: The Republic, "Activision, EA settle litigation as larger 'Call of Duty' trial nears," Alex Pham and Ben Fritz, May 16, 2012

CIFG permitted to pursue contract dispute against Goldman Sachs

2012-05-08T22:43:59Z

Texas residents that have been following business news may know that CIFG Assurance North America filed suit against Goldman Sachs Group in August. It claimed the investment bank knowingly sold unstable mortgage bonds to get the risk off its shoulders.

More recently, a Supreme Court judge dismissed some claims against Goldman, including fraudulent inducement. Even so, the court did not eliminate claims for breach of contract.

]]> CIFG claimed in the initial lawsuit that Goldman fraudulently induced it to provide insurance on the portfolio of over 6,000 residential mortgage loans. CIFG claims that Goldman did so by misrepresenting the quality.

Eventually, the judge granted Goldman's motion to dismiss on that claim. The ruling had to do with the issue of due diligence: If CIFG had conducted a proper investigation prior to writing the insurance, it would have discovered the misrepresentations.

Despite the decision, the judge let three breach of contract claims remain based on CIFG's statistical evidence, which showed breaches in the underlying loans.

Generally speaking, a contract is a bargained-for exchange. When businesses develop a contract and one party does not fulfill the obligations of the agreement, a breach occurs. In this particular suit, the court feels as though there is a legitimate question as to whether Goldman breached the contract. For this reason, the case was not tossed.

Ultimately, CIFG's suit seeks reimbursement for claims and also buy-backs of nonperforming loans.

There can be so many different facets to a business deal. If one party does not uphold a specific part of the bargain, this can lead to a heated contract dispute.

Source: Reuters, "Goldman loses bid to dismiss CIFG breach of contract claims," Karen Freifeld, May 3, 2012

Administrative procedure is important in business litigation

2012-05-02T21:52:21Z

As many Texas companies know, when businesses engage in litigation, they will use legal tactics to attack every part of an opponent's case. For example, a business might attack the administrative details surrounding the actual filing of the suit. These fine points often include jurisdictional or venue-related matters.

In recent news, a federal judge has ruled that Electronic Arts may pursue claims that its combat game "Battlefield 3" does not infringe on a military helicopter maker's trademarks. This case touches base with some procedural mechanics that are important in a business dispute.

]]> Bell Helicopter Textron, the designer and manufacturer of the AH-1Z, UH-1Y and V-22, had formerly sued Electronic Arts in 2008 over "Battlefield: Bad Company 2 - Vietnam." Subsequent to this settled lawsuit, Bell granted Electronic licensing rights to prior games in the "Battlefield" series. Recently, however, Bell notified Electronic that the agreement did not concern "Battlefield 3." "Battlefield 3" depicts modern-day armed conflict. The game portrays the use of U.S. military accessories, weapons and vehicles.

For this reason, Electronic sued for declaratory relief. According to the dispute, the license was pointless because the use of helicopters was expressive and supported by the First Amendment.

However, Bell counter-sued with trademark and trade-dress claims. It also asked the court to stay, transfer or dismiss Electronic's case for venue-related reasons. Venue is a matter that concerns the court in which a claim is pursued.

Nevertheless, the judge has indicated that Bell admitted that it "has no ownership interest in the intellectual property at issue." Also, Bell was incorrect that Electronic's case had forum problems. Specifically, the judge felt that Bell's own arguments were quite contradictory-especially in relation to its own selection of a court.

This case serves as an example of how important it is to be aware of every portion of a case. Beyond main legal theories, business litigation also concerns very important procedural matters.

Source: Courthouse News Service, "Video game weapons dispute can charge on," Jonny Bonner, May 2, 2012

Design firm files a breach of contract suit against J.C. Penney

2012-04-25T21:24:06Z

As Texas residents know, business disputes come in all shapes and sizes. In a recent case, a lawsuit between two companies comes in the form of a square.

Hudson + Broad Inc., a visual design firm, has filed a suit against J.C. Penney Co. alleging breach of contract and misappropriation of trade secrets. According to the suit, J.C. Penney backed out of an agreement for the design company to produce lighted square frames on display at the entrances of J.C. Penney's stores.

]]> The company alleges that the design of the large square Plexiglas LED light displays is proprietary. Furthermore, the suit claims that J.C. Penney agreed to buy 1,800 of them to be installed at department stores across the country after they were shown during the store's rollout of its new "Fair and Square" marketing plan. The frames were designed to change colors to allow for a unique color scheme every month.

However, the visual design company says that instead, the department store informed the firm on April 3 that it was contracting production of the LED displays to another outside company.

While there are no further details regarding the companies' specific agreement, the department store stands to lose a lot if the design firm is successful in this suit. In this case, the business seeks $20 million in compensatory damages and $20 million in punitive damages.

Sometimes, business agreements naturally fall through. However, if an arrangement breaks due to the fault or breach of an involved party, this may lead to contract liability.

Source: Dallas Business Journal, "Visual marketing firm sues J.C. Penney for $40M," Lance Murray, April 25, 2012

Motorola cannot place a ban on Microsoft's products

2012-04-18T21:10:12Z

Many Texas residents understand that disputes arise frequently in business. Furthermore, sometimes business litigation is the only way to resolve these conflicts. This will probably be the case for two major software companies. In connection with a recent contract dispute, a federal judge has ruled that Motorola Mobility will not have the authority to ban Microsoft's Windows products or Xbox gaming systems from the German market.

Motorola Mobility owns patents related to industry standards for Wi-Fi and video compression. As a result, the company petitioned a German court to ban Microsoft products that conformed to those standards. However, Microsoft asked a U.S. District judge to prevent Motorola Mobility from taking any further steps in the German case until a trial is held on an ongoing contract dispute between the two companies. This is because pursuant to a contract, Motorola promised to make its patents available to Microsoft on fair and reasonable terms.

]]> A conflict started when Motorola Mobility asked for royalties of 2.25 percent of the price of items incorporating the patented industry standard. Therefore, Microsoft has filed the breach-of-contract lawsuit. It has argued that Motorola Mobility failed to abide by its obligation to be fair and reasonable.

In the end, the U.S. judge ruled that Motorola Mobility is prohibited from taking any steps to seek a ban of Windows or Xbox until a ruling is made on the contract matter.

There are so many complexities involved in business law. This is definitely true in intricate contract disputes. For this reason, these two companies have hopefully retained adequate legal representation in addressing the various issues of this business conflict.

Source: The Boston Globe, "Motorola can't seek Windows, Xbox ban," Susan Decker, April 13, 2012

An appellate court reinstates Viacom's lawsuit against YouTube

2012-04-10T21:50:54Z

As many Texas residents know, legal proceedings involving major businesses can be very complex. This is the case for an ongoing lawsuit between YouTube and Viacom, which has lasted around five years. This type of business litigation involves very technical aspects of copyright law.

In recent news, a federal appeals court has revived Viacom's copyright proceeding against YouTube. In this process, the federal court indicated that a jury could potentially conclude that YouTube may have known it was infringing rights when it permitted the sharing of television programs on its site. This finding has sent an issue of the case back to the district court.

]]> In this proceeding, Viacom argued that YouTube committed "rampant copyright infringement." Initially, a lower court had ruled that YouTube was protected from copyright infringement claims by the safe harbor provision of the Digital Millennium Copyright Act. This provision protects a company from legal responsibility if it does not have actual knowledge of the alleged copyright infringement.

However, at the appeals level, Viacom showed that YouTube employees had conducted website surveys estimating that approximately 80 percent of all YouTube videos contained copyright material. Also, Viacom demonstrated that financial advisors from the YouTube side had previously estimated that only one-tenth of the material was authorized.

Ultimately, the evidence suggests that YouTube may have knowingly delayed taking down copyrighted material. As a result, the intermediate court found that a doctrine known as "willful blindness" could potentially be applicable in the case.

Under the Digital Millennium Copyright Act, this doctrine would be relevant if the company's executives made a "deliberate effort to avoid guilty knowledge." For this reason, the appeals court has sent the case back to the lower court for a determination of whether the legal concept applies.

Viacom is not the only company that has sued YouTube over copyright matters. Nevertheless, this pending suit with Viacom is worth one billion dollars. As a result, there is no doubt that YouTube has retained a strong business litigation team that is well versed in copyright law.

Source: Mercury News, "Viacom's $1B YouTube lawsuit revived by appeals court," Larry Neumeister, April 6, 2012

Envestnet finishes its acquisition of Prima Capital Holding

2012-04-06T21:30:24Z

As many Texas residents know, business acquisitions help companies grow and prosper. The collaboration of two big businesses can create a comprehensive corporation, which brings in a range of different clients. Furthermore, the attainment of one company by another can also assist with the development of innovative ideas. However, the process can be quite difficult.

The process involves developing the criteria of an acquisition, creating a proposal, drafting a purchase agreement and identifying funding options. Ultimately, companies aim for an efficient and reliable transition of ownership.

]]> In recent news, Envestnet, Inc., a major source of technology-enabled wealth management solutions for investment advisors, has announced the conclusion to its acquisition of Prima Capital Holding, Inc. Prima is a company that provides investment manager due diligence, asset allocation modeling, research applications and portfolios to the wealth management and retirement services.

The acquisition will help enhance and expand Envestnet's customer base to include Prima's variety of clients in the banking and broker-dealer industries.

Prima feels that the acquisition process will give the company additional sources of modernization.

Ultimately, the acquisition is part of an overarching plan to increase Envestnet's growth. Last year, Envestnet acquired FundQuest, Inc., the turnkey asset management program supplier. Furthermore, Envestnet is currently involved in the acquisition of Tamarac, Inc., which is a source of portfolio management technology.

The Chairman and Chief Executive Officer of Envestnet made a statement about the process: "We are pleased to expand Envestnet's core technology and investment solutions with Prima's institutional-quality investment manager research and due diligence."

Source: MarketWatch, "Envestnet completes acquisition of Prima Capital," April 5, 2012

Contract dispute arises between Tribune and DirecTV

2012-03-29T21:32:27Z

As many Texas residents know, lawsuits arise frequently in business. Sometimes, even companies that have shared a lengthy and successful business relationship can get involved in a heated dispute. Furthermore, if the participants cannot reach an agreement, this may lead to litigation or a broken deal. In recent news, two television companies are involved in a financial contract dispute. If the two businesses do not reach a resolution, this will inevitably affect cable consumers across the country.

According to reports, DirecTV subscribers could lose access to Tribune Broadcasting's television stations because the companies have not reached an agreement on carrier fees. Sources say that Tribune wants a deal similar to that which DirecTV has with other broadcasters. Furthermore, Tribune claims that it has never been paid for the rebroadcast of its television stations.

]]> If the contract falls through, DirecTV subscribers would lose Tribune's local stations and WGN America. The cable change would begin on the last day of this month. Fortunately, DirecTV subscribers would continue to have some options even if DirecTV were to lose the programming.

The president of Tribune Broadcasting claims, "Despite our best efforts, DirecTV is refusing to offer a fair deal and we remain far apart in negotiations."

Hopefully, Tribune and DirecTV will arrive at some type of agreement. Presumably, the companies are working with legal assistance in the hopes of reaching some sort of monetary deal that is acceptable to both parties. Nevertheless, from the looks of it, the companies are not headed toward a resolution, and TV watchers around America will be upset.

Source: Reuters, "Tribune to pull the plug on DirecTV over carrier fees," March 26, 2012

GlaxoSmithKline and Johnson & Johnson try a new investment model

2012-03-22T21:56:55Z

In recent news GlaxoSmithKline and Johnson & Johnson are forming a $200 million fund with Index Ventures to invest in newer biotechnology companies. Sources say that hopefully, the project will lure venture capitalists back into the industry. According to reports, Glaxo and Johnson & Johnson will each contribute $50 million to the fund. Index Ventures will contribute $100 million and have authority over investment decisions.

It's not new news for Texas residents that early-stage companies have been stressed for financing; venture capital firms are gravitating toward less risky industries. However, the new fund will invest in blossoming single-asset companies in Europe, the United States and Israel. The companies believe that this model will generate usual venture capital returns.

]]> To qualify for funding, a biotech company must agree to focus on one molecule. Furthermore, it must add at least one entrepreneur associated with Index Ventures to its executive team. If the entrepreneur were to determine that the project was not worth engaging in, the development would end with the specific company, and the executive would move on to another funded business.

Sources say that this model reduces the time it takes to reach a return. Furthermore, the system is ideal for scientists who need money to bring their inventions closer to the market, without the risk of losing an idea inside a large organization.

Last year, initial venture capital investments in new biotechnology businesses fell. In fact, a study shows that in the past few years, around 40 percent of 150 firms have decreased their investment. Furthermore, the market for initial public offerings has also been slow. There were 29 biotechnology IPOs last year, which is down from 36 five years ago.

A spokesperson explains and backs the process to the new biotechnology companies: "We are giving you cash, and an Index drug developer who is going to live with you in the company until death or fireworks. If the plug is pulled, the founder still gets the molecule, the company, and at least it got financed that much."

Ultimately, the hope is that with success, the project will encourage venture capitalists to get involved in the industry.

Source: Bloomberg, "Glaxo joins J&J in $200 million fund with Index Ventures," Kristen Hallam, March 21, 2012

FCC cites many Class A stations that ignored federal regulations

2012-03-14T20:39:59Z

Many Texas residents understand that it is extremely important to comply with any government regulations. If an organization or company does not follow the laws, it is subject to fines and a loss of operational privileges. In recent news, notifications from the Federal Communications Commission have gone out to licensees, requiring two Class A stations to pay a fine and others to defend why they should not be moved to LPTV status. Class A status is superior to LPTV status.

According to sources, one station, L4 Media Group, has 13 stations that have been cited. One regulation violation involved keeping stations off air on frequent occasions to preserve its financial resources. Furthermore, instead of its own local studios, it has been using libraries and non-profits as venues for public files. In addition, it lacks documented information on its children's programming.

]]> KPAL Television, Inc. is another company that has failed to comply with most of the ongoing Class A eligibility requirements. Specifically, the station lacked a central studio and left the air for lengthy periods of time.

Nevertheless, Omni Broadcasting Company was one licensee that responded without delay to the FCC's initial investigation of its stations. For this reason, its two stations were only given fines.

According to the FCC, a station will receive only a fine if it is cooperative and in compliance with orders. However, if multiple violations have piled up, the station risks losing its Class A status. Therefore, this is a lesson that it is always important to comply with federal regulations.

Source: Radio & Television Report, "FCC continues to pursue Class A warfare," Dave Seyler, Mar. 12, 2012

Insurance companies unite to form an expansive business duo

2012-03-08T22:42:03Z

Many Texas residents know that a merger is generally when a firm assumes all the assets and liabilities of another company. In some circumstances, the acquiring business retains its identity, while the acquired firm ceases to exist. However, there are many different types of merging strategies, and a company can acquire another business in various formations.

In recent news, another merger has occurred, this time between two prominent insurance companies. In this particular case, the merger will not extinguish the identity of the acquired company. In this process, both companies will continue to exist; however, one will be a subsidiary of the other.

]]> According to reports, Alleghany Corporation and Transatlantic Holdings, Inc. have recently announced that their merger is finalized. Sources explain that the collaboration will create an enormous insurance and reinsurance franchise. In this type of merger, Transatlantic will serve as an operating subsidiary of Alleghany.

Under the merger agreement, Transatlantic stockholders may receive shares of Alleghany common stock for each share of common stock. On the other hand, a holder has the option of receiving cash with a value equal to $61.14.

Sources report that the Alleghany Board would add former Transatlantic directors. The current Transatlantic President and CEO will continue with the company.

Mergers can be extremely intricate. Companies considering major business transactions should take the time to explore the available merging and acquiring options. Hopefully, everything will work out for the uniting insurance companies. Nevertheless, Alleghany and Transatlantic will join, thus improving the span of their distribution.

Source: NASDAQ, "Alleghany, Transatlantic Holdings announces completion of merger," Mar. 6, 2012

Houston printing companies unite to form Seebridge Media

2012-03-02T22:14:03Z

It seems like more and more companies are unifying these days to form larger and more efficient entities. In recent merger news, Ideal Printers and PrintMailers will combine to form Seebridge Media. The new company will operate out of PrintMailer's 112,000 square foot Houston facility.

Ideal and PrintMailers ranked on the top 10 list of the biggest Houston-area printing companies in 2011. Once the Houston-based businesses combine, they will have more than 150 employees, and provide various media production services such as printing, creative design, logistics, direct mail, warehousing and social media. Sources explain that the new business will employ workers on two separate shifts. This will increase job turnaround time.

]]> The independent owners of PrintMailers and Ideal will run Seebridge Media as co-owners. According to the one of the owners, as more companies turn to digital media options, the marriage of the two companies creates a "one-stop shop" for all marketing services.

The creation of Seebridge seems to be a beneficial business choice for the two printing companies. However, mergers are complex business transactions that require intricate detail and attention. The process involves developing a proposal, drafting a purchase agreement and identifying funding options. Furthermore, many types of mergers exist. For example, there are reverse mergers, public to private mergers, private to private merges, small business mergers and publicly traded mergers.

If your company is in the process of unifying with another business, it is important that you have adequate legal knowledge and support. This will ensure that the new combined entity is efficiently created.

Source: Houston Business Journal, "Ideal Printers, PrintMailers merge to form new company," Molly Ryan, Mar. 1, 2012

Independent Publishers Group refuses renewed contract with Amazon

2012-02-24T22:52:44Z

In recent news, Amazon removed thousands of titles from its Kindle store because a Chicago distributor would not agree to new terms. Independent Publishers Group (IPG) claims the new electronic book agreement favored Amazon too much. When IPG's contract with Amazon came up for renewal, it rejected the new and revised version because the proposed terms, according to the president of IPG, "increasingly reduce already narrow margins." Amazon comprises only 5 percent of IPG's business. This has led to a heated dispute.

The digital publishing industry is still evolving. In the beginning, e-books were pretty straightforward. Now, the Kindle Store offers more than one million books. In the new age of digital titles, retailers can sell books for a relatively low price. That's exactly what Amazon did.

]]> Traditionally, publishers set guidelines for the price of books in a very arbitrary way. However, once bookstores purchased books from wholesalers, they could set their own. When Amazon priced e-books so low, the industry's lead publishers were upset.

As a result, Apple, which was also competing with Amazon, initiated the agency model. This allowed publishers to set prices, and give a percentage of the profits to retailers.

The recent contract dispute between IPG and Amazon is just part of the e-book saga. Recently, Barnes & Noble announced that it is refusing to sell books published by Amazon because of its efforts to sign exclusive deals.

As one can see, contract disputes can get messy. Hopefully, IPG and Amazon will work out a deal that will keep e-readers happy.

Source: Time Business, "Amazon pulls 5,000 books from kindle store," Jill Priluck, Feb. 24, 2012

FCC declines proposed broadband plan

2012-02-16T22:41:01Z

As Texas residents know, technological advances are booming at an exponential rate. However, what happens when an advanced and innovative system conflicts or interferes with another technological structure? This is where regulation agencies step in. In recent news, the Federal Communications and Commission (FCC) has declined the proposed creation of a wireless broadband network that would provide voice and internet service using airwaves, which were once set aside for satellite-telephone transmissions. According to a recent article, the proposed network interferes with current GPS technology.

The FCC's ruling is a product of an opinion, which was released by the National Telecommunications and Information Administration. The company has stated that currently, there is no way to alleviate the potential interference with GPS technologies.

]]> The news crushes the hopes and plans of LightSquared, a Virginia-based company. LightSquared feels that the evaluative testing, which was used to determine the ruling, was flawed.

The company argues that the network would have created jobs. Also, the setup would have backed President Obama's plan to expand wireless Internet access around the country. On the other hand, the network has been opposed by organizations and industries that rely on GPS systems, including the military, aviation, construction and agriculture.

The ruling was a difficult decision for the FCC because the interference was not the fault of LightSquared. Basic GPS receivers pick up signals from outside of the spectrum designated for such devices. LightSquared wants to use the satellite-telephone part of airwaves; however this is next to the GPS band on the electromagnetic spectrum. GPS devices will interfere with those transmissions. Furthermore, the FCC cannot fault GPS users. That would mean changing a massive and widespread industry.

Much of the opposition to the network has come from the Pentagon and military industries. They rely heavily on GPS systems. Nevertheless, LightSquared noted that it "remains committed to finding a resolution with the federal government and the GPS industry to resolve all remaining concerns."

Source: New York Times, "F.C.C. bars the use of airwaves for a broadband plan," Edward Wyatt, Feb. 14, 2012

SandRidge Energy acquires Dynamic Offshore Resources

2012-02-09T16:47:31Z

In recent news, a Houston company will be partnering with another energy source business. According to reports, SandRidge Energy has agreed to acquire Dynamic Offshore Resources in a $1.28 billion purchase agreement. In this deal, SandRidge will get Dynamic's Gulf of Mexico oil fields. Dynamic is a Houston-based company, which was founded in early 2008.

SandRidge, which is based in Oklahoma, has historically focused on drilling onshore basins. However, higher production costs have made offshore properties a bargain. A source explains that as larger companies want to come onshore and compete, service costs are increasing. Furthermore, fewer companies are interested in the Gulf of Mexico because of the Deepwater Horizon disaster. This has made offshore properties a good deal. The deal is the biggest for Gulf of Mexico fields since the Deepwater Horizon rig blew up. This disaster killed 11 and was one of the worst marine oil spills in history.

]]> The contract terms indicate that SandRidge will pay $680 million and approximately 74 million shares of SandRidge stock. The stock value was $8.02 at the time of the deal. In the acquisition process, SandRidge will keep Dynamic's 130 employees and run all of its Gulf of Mexico operations from Houston.

These two companies seem to have the technicalities of the acquisition resolved. Nevertheless, acquisitions and mergers can be a complex process. Companies must develop the criteria of an acquisition, structure a proposal, draft a purchasing agreement and identify sources of funding. For this reason, it is important that companies involved in these types of dealings work closely with knowledgeable attorneys to guarantee a sufficient transition.

Source: Wall Street Journal, "SandRidge Energy to buy Dynamic Offshore," Ryan Dezember, Feb. 1, 2012