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Video Game Intellectual Property Arbitration Award Upheld By Fifth Circuit Court of Appeals

Tuesday, April, 23, 2013



Despite a ruling by a Texas Federal court to vacate an arbitration award given to SouthPeak Interactive Corp., the Fifth Circuit Court of Appeals ruled just recently to reinstate the award, stating that the license was proper in the dispute.  SouthPeak Interactive Corp. develops and publishes interactive entertainment software for several gaming systems, including PlayStation®3, PSP®, PlayStation®2, Xbox 360®, Wii™ and Nintendo DS™.


The award was a perpetual license to intellectual property relating to a game that was developed for the company by one of its former partners.  According to the Fifth Circuit’s findings, the publishing agreement exchanged by the two companies was sound.  The particular game in question is entitled “Section 8” and was initially developed TimeGate Studios, Inc.  TimeGate Studios was a partner of Southpeak Interactive Corp. at the time in which the game was developed and had, according to the findings of the arbitrator, deceived and defrauded a predecessor to SouthPeak, Gamecock Media Group, when the original development agreement was signed between the companies. 


According to the ruling of the Fifth District Court of Appeals, “TimeGate had breached the agreement in so many ways and its relationship with Gamecock had become so contentious that the collaborative relationship presupposed by the agreement was no longer possible.  The perpetual license granted to Gamecock represents an attempt by the arbitrator to restore to TimeGate and Gamecock the fundamental goal of the agreement: mutual access to financial benefits derived from their joint creation and distribution of 'Section 8.'”


The origins of the dispute involve TimeGate breaching its contract with Gamecock by releasing the game for use with another platform and then putting out a sequel without Gamecock’s authorization.  The arbitrator determined that in addition to owing Southpeak $8.1 million in damages, TimeGate should also grant perpetual license to Southpeak for any sequels and resulting royalties from those sequels.