Tuesday, August 7, 2012

Electronic Arts (NASDAQ:EA) Sues Zynga (NASDAQ:ZNGA), Claims Imitation of Gaming Features

Electronic Arts Inc.(NASDAQ:EA) has sued Zynga Inc(NASDAQ:ZNGA) last week alleging that the latter’s ‘The Ville’ game has copied many an element from EA’s ‘Social Sims’ game. Games industry does not really face lawsuits like these, for good reasons. Imitating other manufacturers’ games happens in the industry and every other player does it. According to Prof. James Grimmelmann, the games industry has developed a lamentable culture of copy cattery.

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Grimmelmann feels that a lawsuit that redefines the industry’s practices in imitating game designs can lead to a counterproductive conclusion. Even if EA wins the lawsuit, which is highly doubtful, the consequential legal example can give rise to even more powerful tools to potential plaintiffs, who can charge against EA for copying their games. This is because every person in the industry lives in a glass house and the major participants here would not choose to throw stones.

EA needs to overcome some complicated aspects of the patent law in order to win this lawsuit. EA would need to have a stronger standpoint rather than just the claim that Zynga has imitated its fundamental concept of the game and its in-house game window design resembles that of EA’s. Everyone is aware of what the copyright law states. It says that everyone can copy the basic design. Apparently, Zynga has been careful while changing several details in its execution of the concept of the game in keeping with game practices.

How Should Investors Trade ZNGA After Today’s News

Without a doubt, Zynga cannot afford to lose this lawsuit as it has established its business on imitation of other games. Any adverse ruling to that practice can prove to be detrimental for Zynga. However, EA is planning on destabilizing the current industry practices about game copying. Any consequential litigation can result in eroding EA’s profits. On the contrary if EA succeeds in redefining the legal standards of imitations in game industry, it would make things tougher for future copyright owners.

Shares of ZNGA rose 3.74% to $3.05 and shares of EA added 5% to $12.83.

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