Interplay Fires Back At Bethesda Over Fallout MMO Licensing

Original Fallout IP owner and current licensee Interplay has filed a counterclaim accusing current Fallout owner Bethesda for breach of contract, claiming that Interplay's own Fallout MMO has a playable demo -- indicating production status -- and that Bethesda tried to grant Fallout MMO rights to sister company ZeniMax Online. Interplay, which sold the rights of the venerable PC-derived Fallout series to Bethesda in 2007 for $5.75 million, alleged in an October 16 court filing that Bethesda breached the Fallout series asset purchase agreement -- the same allegation that Bethesda put to Interplay. "As a result of Bethesda's breach of the [asset purchase agreement], Interplay has suffered, is suffering, and will continue to suffer substantial damages and irreparable harm in an amount within the jurisdictional limits of this Court," said Interplay's filing, which was obtained by Gamasutra. Bethesda filed a complaint in the U.S. District Court of Maryland on September 9 requesting a preliminary and permanent injunction against Interplay's manufacture, sale, and distribution of Fallout Trilogy, which includes the classic PC games Fallout, Fallout 2 and Fallout Tactics. Interplay retained the rights to sell the catalog titles as part of its deal with Bethesda. But Bethesda accused Interplay of violating the deal, claiming that while Interplay was permitted to sell pre-existing Fallout games, it was required to submit to Bethesda all relevant packaging, advertising, and promotional material prior to bringing the catalog titles to market. Bethesda alleged that Interplay did not do so, causing confusion in the market, a claim that Interplay denied in its answer to the complaint. Fallout MMO Licensing Dispute Along with the asset purchase agreement, the two companies signed a trademark licensing agreement. After Interplay sold off the Fallout series, it licensed back from Bethesda the rights to develop an MMO based on the franchise. The terms of the agreement stipulated that Interplay gather at least $30 million in funding and that full-scale development begin on a Fallout MMO within the 24 months after the deal was signed, or else license-owner Bethesda could take over full control of the MMO license. Interplay's counterclaim alleges that Bethesda is trying to grant the rights to develop a Fallout MMO to "another party." Detailing further, Interplay alleged, "On information and belief, Bethesda's ultimate goal is to recapture through gamesmanship the Fallout MMOG rights and award them to its sister company, ZeniMax Online Studios, formation of which was announced in August 2007, just four short months after the APA [licensing agreement] was signed." Interplay is suing for damages, legal fees and is asking a court to declare that Interplay still holds the particular Fallout rights originally detailed in the agreements. Alternatively, Interplay said if Bethesda terminates its asset purchase agreement, the court should rescind the agreement and return the parties to the "status quo prior to that agreement's execution" -- when Interplay still owned Fallout. In that case, Bethesda might owe Interplay as much as $15 million or more from royalties to Fallout 3 and its expansions. Interplay's Opposition To Motion For Preliminary Injunction In a separate court filing from October 26 in opposition to Bethesda's motion for a preliminary injunction, Interplay reiterated its claims that it did not violate either of the agreements, that Interplay did not infringe on the Fallout trademark, that Bethesda "cannot show imminent irreparable harm" from Interplay's actions, and that the asset purchase agreement "contains no termination provision." That filing also said that Interplay originally sought "a much higher price" for the Fallout franchise. But Interplay agreed to the $5.75 million because it believed that it would be able to "exceed [that amount] by millions of dollars," as its older Fallout games could ride the popularity of October 2008's blockbuster Fallout 3, developed by Bethesda. As for the Fallout MMO -- confirmed to be Project V13 -- Interplay said that it has created over 600 pages of "extensive" design documents that include characters, weapons, concept art and other elements. (Interestingly, Bethesda refused to approve use of the Fallout name for use with Project V13, and there's now legal controversy around Interplay's allusive workaround. Interplay commented on the current name choice for the MMO, "Even if V13 is evocative of 'Vault 13,' the starting location of the original Fallout game developed by Interplay, Bethesda presents no evidence that it has used this or a substantially similar mark in commerce.") Interplay also said it, along with MMO studio Masthead, created a Fallout MMO game demo "that included a playable portion of the 3D environment" as well as network code partly based on previous Masthead game Earthrise. Interplay claimed this qualifies as "full production," thus meeting the licensing agreement's requirements. The filing also said that Bethesda did not allow Interplay to announce its MMO as Fallout MMO due to trademark concerns. "The harm to Interplay's business from an improperly granted preliminary injunction decidedly outweighs the risk to Bethesda of maintaining the status quo during litigation," the filing read, noting that Interplay makes much of its current revenues from selling older versions of Fallout. Gamasutra will continue to follow the ongoing litigation in the case. Thus far, both sides are laying out their arguments, and no rulings have been made.