WILMINGTON, Del.--(BUSINESS WIRE)--Susman Godfrey L.L.P. announced today that it has filed a patent infringement lawsuit against Zynga, Inc. in U.S. District Court, District of Delaware. The Complaint, filed on behalf of upstart competitor Agincourt Gaming, LLC, claims that Zynga violated two of Agincourt’s patents. Agincourt seeks unspecified monetary damages and a permanent injunction that could shut down Zynga’s multi-billion-dollar business.
Agincourt, a recent entrant into the social gaming space, owns foundational patents that claim priority back to 1996 and cover the processes for credits-based online gaming and a prize redemption system based on the outcome of game play. The company, which owns and operates an online game called Pantheon, is uniquely positioned to profit from the enormous market potential for the sale of virtual goods. “Agincourt’s patents cover the most lucrative aspects of online social gaming – including those comprising the bulk of Zynga’s revenues – as they contain the crucial ‘link’ that allows for global, interactive prize redemption over the Internet,” said Bill Carmody, a senior partner at Susman Godfrey, Agincourt’s lead counsel.
The market for the sale of virtual objects in online game play is remarkably robust and expanding rapidly: consumers are expected to shell out $653 million this year on goods purchased in social network games, up from $510 million in 2010. And there is no question that Zynga is at the head of the class. Since its launch just four years ago, Zynga has soared to the top of the social gaming empire to become the largest online game developer in the world. The company, which pulled in revenues of $597.5 million in 2010 and is reportedly valued at $20 billion, filed in July for a pending $1 billion IPO that has the Silicon Valley – and Wall Street – abuzz. Zynga is responsible for four of the top five games on Facebook, which draw more than 270 million active monthly users.
So why might Zynga hit a wall? According to the lawsuit, Zynga violates Agincourt’s patents in numerous games including FarmVille, its most successful, as well as FishVille, PetVille, YoVille, Zynga Poker, Empires & Allies, Mafia Wars, Treasure Isle, FrontierVille, CityVille, CafeWorld and Vampire Wars. The lawsuit also alleges that Zynga has a history of copying rather than innovating its own games.
Concerns that Zynga has infringed on others’ intellectual property are not new. A recent article on the IPWatchdog blog notes, “You will likely also be underwhelmed by [Zynga’s] IP portfolio, particularly their patent portfolio, and the admissions that there are many large competitors in the industry, as well as many patents that cover the very core of social gaming…. Zynga will also inevitably be the target of patent infringement litigations moving forward.”
In fact, Zynga’s recent Registration Statement warned that “during our earlier history our practices relating to intellectual property…may not have been as robust as they are now, and there may be unasserted claims arising from this period that we are not able to anticipate.” Given Zynga’s recent amendment to its Registration Statement – in which it acknowledged that its top three games accounted for nearly two-thirds of its revenue in Q1 2011 – Carmody, the Susman Godfrey partner, believes that Agincourt’s claim to Zynga’s most profitable games “is exactly the kind of serious problem about which the company was forced to warn its investors.”
ABOUT SUSMAN GODFREY
Susman Godfrey L.L.P. is a national law firm with offices in New York, Houston, Dallas, Seattle, and Los Angeles. It is America’s first trial-only law firm to handle complex commercial cases and distinguishes itself in 15 major trial practice areas, including its internationally recognized Intellectual Property practice. For 2011, Susman Godfrey was named one of “The World’s Leading Patent Litigators,” by Intellectual Asset Management Magazine. Susman Godfrey has recovered in excess of a billion dollars on behalf of clients for infringement or misappropriation of their intellectual property.