Bethesda vs Interplay

Thanks to Kevin from the Copyright in the Internet Age blog, as well as another, anonymous source, I managed to get access to all of Bethesda's filings regarding the Bethesda v. Interplay court case.

In the original complaint, Bethesda not only claims that the name Fallout Trilogy for a compilation sold in the United States and containing Fallout, Fallout 2 and Fallout Tactics is misleading and cannibalizes on Fallout 3 sales. They also claim that around August 2009, Bethesda became aware of compilations of Fallout games distributed under the titles Fallout Collection and Saga Fallout in other countries. "Upon information and belief" Bethesda alleges that Interplay began packaging, advertising and promoting these packages after Bethesda's launch of Fallout 3.

While a lot of Bethesda's arguments in the filings are reasonable, this claim is entirely false. Saga Fallout has been sold in Poland by CD Projekt since 2004, and the White Label Fallout Collection has been available in the UK since 2006, while a previous Ultimate Fallout Collection was released in 2004.

In the latest filing, after Interplay stated in its opposition that Bethesda's claims regarding the publication dates are false and attached photos of various editions of such compilations over the years, Bethesda states that none of these exhibits were authenticated and there is no way to verify the original dates. I guess all the stores offering them since 2004 and all the customers who have purchased them and posted about it on the Internet must have been deluded.

Furthermore, Interplay provides no evidence that any of the designs represented by those exhibits were in fact packaged, marketed and sold by Interplay prior to the execution of the APA. The best and only evidence that exists to establish the date of first sale of the “Fallout Trilogy” collection is the NPD database, which reveals that “Fallout Trilogy” was first sold in April 2009, two years after the execution of the APA.

Well, I guess people who were asking whether to buy the Trilogy or the Collection pack in 2006, and reporting issues with the Trilogy edition in January 2007, before the Asset Purchase Agreement (APA) was signed in April 2007, were simply making it all up.

All of this doesn't mean, however, that Interplay is likely to win the whole thing, as some of its shareholders seem to believe. Bethesda refutes most of Interplay's arguments, citing various precedents and stating that Interplay "attempts to create an alternate universe". Here's a summary of the most interesting parts:

  1. Interplay does not have the necessary funds to fulfill the Trademark Licensing Agreement condition of securing 30 million dollars for the development of a Fallout MMORPG. And even if one were assume that they somehow did secure the money, by teaming up with Masthead Studios Interplay is still in breach of the provision that does not allow it to sublicense any of the development rights without Bethesda's approval.
  2. The Merchandising Rights provision did not “grandfather” any prior packaging, advertising or promotional material, so even if they were identical to previously used materials, they would need to be approved by Bethesda before re-release, which Interplay did not do.
  3. While Interplay claims that the APA gives it "perpetual" or "permanent" rights to sell previous Fallout games, the agreement itself actually uses the word "perpetual" in regard to Bethesda's acquisition of the IP, not to anything else, and the word "permanent" does not appear there at all. And while Interplay claims that there is no provision allowing Bethesda to terminate it, even in the absence of an express provision, termination for material breach is implied in every valid and enforceable contract. "The suggestion that a licensor of a trademark may not terminate the license even in case of a material breach and must forever live with continuing violations of its intellectual property rights by the breaching licensee is simply absurd."
  4. Interplay's claims that if Bethesda is allowed to terminate the merchandising rights, it is allowed to rescide the whole APA are, according to Bethesda, nonsensical. While Interplay claims that the merchandising rights were an essential part of the consideration and that without them, they would have never sold the IP, the APA itself mentions no such consideration, stating that it is "based on the fair value" and "for the cash consideration described herein", and Interplay's SEC filings about the agreement don't even mention the merchandising rights. Interplay claims that the contract is indivisible and the merchandising rights part cannot be terminated without terminating the whole agreement, while Bethesda points out a clause stating that if any part of the agreement is held invalid by a court, the rest of the agreement will remain in full force and effect.
  5. Bethesda terminated the Glutton Creeper Games Fallout Pen and Paper d20 licensing agreement because it violated the 2004 Exclusive Licensing Agreement, which did not allow Interplay to license any rights connected with Fallout to a third party. I managed to also get a copy of the agreement and it indeed states: “This grant of exclusivity to Bethesda shall serve to prohibit Interplay (...) from licensing (...) any product that uses in any manner the name, assets, characteristics and/or brand of ‘Fallout.’”. No idea why Herve Caen thought he could get away with it.