Valve And Vivendi Battle In Court (PC)

While everybody waits for Half-Life 2, others awaits a verdict.

By Rainier Van Autrijve | Sept. 21, 2004

While everybody is eagerly awaiting Vivendi Universal Games and Valve' s Half-Life 2, it seems the two companies are fighting a nasty legal battle behind the scenes. While Valve submitted a HL2 RC to Vivendi last week, it also served Sierra Entertainment (part of VUG) with its latest lawsuit.

The trouble began when Valve served Sierra On-Line, the then-Half-Life publisher, in August 2002, suing for copyright infringement in violation of the Copyright Act of 1976 because Valve claimed it continued to reproduce, use, distribute, and/or license one or more of the Valve games with regard to " cyber cafés," while this was allegedly outside of the contract agreements.

Presiding Judge Thomas S. Zilly of the U.S. District Court of Washington, Western Division, has been in the thick of things, trying to sort out the mess between the aforementioned companies, who are going back and forth accusing each other of wrongdoings.

While VUG claims Valve' s founder Gabe Newell and its marketing director Doug Lombardi have been misleading Vivendi and concealing facts, Valve is countering with claims of breach of contract, refusal to pay royalties, and purposely delaying Condition Zero (although it had gone gold, C0 was held back several months before actually appearing on store shelves).

Sierra entered into an agreement with Valve to develop " certain computer games" back in 1997, and Vivendi now claims that the same agreement granted Sierra the intellectual property rights to the games. In layman' s terms, they own HL and want to continue that train of thought and expand it to include HL2, as well as Valve' s Source Engine.

In a recent court filing, Vivendi claims trouble started early 1999, right after the retail release of the original Half-Life, when Valve informed Sierra that it did not like the initial agreement and that, unless it gave in to its threatening demands, Valve would delay production of future titles. In 2001, Sierra gave in, and a new Software Publishing Agreement was signed in which " Sierra agreed to relinquish intellectual property rights and to allow Valve certain rights to the online distribution of games." Valve did not disclose that it was already in the process of developing its Steam technology through which customers could bypass purchasing the game from Sierra, and instead buy it directly from Valve through their online delivery system.

Valve' s discontent began with Sierra distributing HL in cybercafés, but oddly enough, its own Steam technology allows for that very same tactic as we have witnessed through the beta test for its Counterstrike: Source, which was offered to cybercafés only.

The most recent court filing made by Vivendi' s legal representation on Wednesday, September 15, 2004, has a rather interesting dispute:

" During the parties' negotiations...Counterclaim Defendants [Valve] repeatedly and falsely assured Sierra and VUG that retail sales would remain ' the key to [their] strategy.' In September 2000, for example, Newell told Hubert Joly, then VUG' s CEO, that ' online is a way to nurture the retail business' and that he could not understand how one could make money by solely focusing on the online aspect. ' Sierra and VUG would later learn that these statements were flatly false. Counterclaim Defendant Newell also agreed, plainly with the intention to falsely imply that Valve had no present or future strategy to engage in widespread online distribution of the games. This misleading half-truth was Newell' s deliberate concealment of the extent to which Valve intended through the parties' negotiations to appropriate the substantial value of the distribution rights to Valve, rather than to Sierra and VUG.' "

By now, we all know that Valve' s intention is to allow customers to purchase Half-Life 2 the day it comes out in stores, but through their Steam delivery system. Valve has confirmed that those plans have not changed, no matter what the outcome of the next scheduled hearing may be.

Between now and the official trail date, March 21, 2005, Valve and Vivendi will appear in court no less than 10 times for various reasons, such as expert testimony, trial briefs, motion filings, and so forth.

If you think that, with all of these legal issues at hand, Vivendi and Valve would be sick of each other and have no desire to work on future titles, nothing could be further from the truth.. One of Vivendi' s many filings asks Judge Zilly " for a declaration that Sierra and VUG have the right to a fourth engine license pursuant to the terms of...the 2001 Agreement," while Valve declared that it will honor that same agreement.

We have contacted Valve and Doug Lombardi should be answering some questions by this evening. A VUG spokesperson said, " I cannot comment on pending litigation, or discuss the matter."

We will continue to monitor this matter and report back with updates when they become available. In the meantime, we' ll just wait for Half-Life 2 and hope the proceedings do not interfere with one of the most anticipated games in recent gaming history.