Section 8 Video Game: Judge Rejects $7 Million Award to Publishers

A federal judge has rejected the $7.3 million award an arbitrator gave publishers of the first-person shoot game Section 8 in their lawsuit against the game's publishers.

Game developer TimeGate had sued publisher Gone Off Deep (and the companies that subsequently purchased it) in 2009 over royalties for the game. The defendants sued back, saying Timegate had provided them with a lousy game that didn't sell well. They also said TimeGate had screwed up by timing its release at the same time as Halo, "a similar but far more established game."

An arbitrator awarded the defendants $7.3 million in the dispute, but U.S. District Judge Keith Ellison of Houston threw out the award, saying the arbitrator had overstepped his bounds.

Ellison said the arbitrator should not have awarded because it involved a perpetual license with no royalties.

The court cannot conceive of a way in which a perpetual license, which violates at least two provisions of the parties' contract, and is inconsistent with the fundamental purpose of the contract, is rationally inferable from the contract itself.

The provision takes what was a temporary licensing agreement, which required collaboration and coordination between the parties, and expands it into a permanent contract under which the parties are able to develop competing products. The contract is turned on its head by expanding the rights of defendants to allow them to actually create sequels, ports, and add-ons related to the game, without any obligation to pay the game's developer, TGS [TimeGate Studios], royalties.

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