Valve Sues Activision In Royalty Battle, Activision Threatens Countersuit

Developer Valve Corporation has filed suit against publisher Activision Blizzard, claiming the latter company recently underpaid royalties to Valve by nearly half a million dollars -- after Activision threatened it would countersue if the Bellevue, Washington-based studio attempted to secure those funds. The dispute dates back to a 2002 copyright infringement claim by the Half-Life series creator against then-publisher Sierra Entertainment, whose assets and contractual obligations now belong to Activision, which resulted in the 2005 termination of the publishing agreement between the two companies. At the time of the 2005 settlement, Sierra had agreed to stop generating cyber cafe licenses to players of Valve games, including Counter-Strike. In addition, the publisher ceased manufacturing and distributing physical retail versions of Valve games, including Half-Life, Half-Life 2, Counter-Strike, Counter-Strike: Condition Zero, and Counter-Strike: Source. As detailed in a report filed by Valve this week and revealed by GamePolitics, Valve and Sierra agreed in 2005 that an audit arbitrator would determine the amount of royalties owed Valve, and that the two companies would abide by that arbitrator's final decision. As it turns out, that judgment was not made until this month. On April 6, the arbitrator declared Activision (formerly Sierra) to owe Valve a total sum, including interest, of $2,391,932. On April 7, referring to a claim first made March 3, Activision declared Valve to have been previously overpaid $424,136 in royalties, and said it would subtract that amount from its ordered payment. Thus, Activision cut a check for $1,967,796 -- the court-ordered amount minus the alleged overpayment. But Valve says Activision never raised its overpayment allegation with the arbitrator, and the two companies already had a longstanding agreement to recognize the arbitrator's judgment. Furthermore, Activision has already threatened to sue Valve to recover that $424,136 if Valve seeks to confirm the $2,391,932 order. As it turns out, Valve is doing just that. The company is seeking confirmation by a Washington court of the April 6 judgment, and is requesting compensation from Activision for its additional resultant legal fees -- not to mention "such other and further relief as the Court deems just and equitable." Gamasutra has contacted Activision for comment as to whether it indeed plans on countersuing, and as to the nature of the alleged overpayment.