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Over the years Atari in all of its various forms has been involved in many lawsuits. Although it is not unusual for a company to be involved in many lawsuits over its life; the level and uniquenes of Atari related lawsuits really do stand out. One patent lawsuit with Sega actually resulted in Sega paying a fee for patent use and even purchasing Atari Corporaton stock; in so doing becoming a partial owner in the company that sued them. This is unusual. In addition Atari Corp had a lawsuit with Epyx the designer of the Atari Lynx, litigation with Phillips over CD-rom's for the Jaguar, and worked with the Justice Department in an Antri trust suit against Nintendo in the late 80's. Atari Games Corp(separate from Atari Corp) was sued by Nintendo for making cartridges for its system without proper licensing. In addition both Atari Games Corp through its Tengen division and Nintendo released Tetris for the American market. Both assumed they had obtained the proper rights to distribute the game. Litigation ensued and the Tengen Tetris was removed from the market making it the rarest game for the Nintendo Entertainment System. (From this perspective one could accurately say "atari" made the most sought after title for the Nintendo Entertainment System!) Lawsuits and corporate maneuvering are what have kept the Atari franchise in all its forms so entertaining for investors just watching amused from the sidelines.
Below follows info about some notable litigation:
1989, 1990, or 1991? Atari Corporation files a lawsuits jointly with Sega of America against Nintendo claiming that Nintendo was violating anti trust and monopoly laws of the US in regards to its system exclusivity requirement for its NES system Licensess. Ultimately Nintendo's exclusivity requirement is lifted and hence forth game developers can make games for multiple platforms while still remaining Nintendo video game licensees.
Another lawsuit was filed against Epyx (Year and details being researched)
Below is from 1994 SEC Form 10-Q for Atari Corp
In September 1994 the Company reached a comprehensive agreement ("Agreement")with Sega Enterprises, Ltd. ("Sega") concerning resolution of disputes, equity investment, and patent and product licensing agreements. The results of the Agreement are as follows: (i) Sega will acquire 4,705,883 shares of newly issued Atari Corporation common stock at $8.50 per share for a total investment of $40.0 million; (ii) Sega will pay the Company $50.0 million inexchange for a license from Atari covering the past and future use of a library of Atari patents issued between 1977 and 1984 (excluding patents whichexclusively claim elements of the Company's JAGUAR and LYNX products) throughthe year 2001; and (iii) the Company and Sega agree to cross-license up to five (5) software game titles each year through the year 2001. Legal fees andexpenses associated with the Agreement are estimated to be approximately $20million. The Agreement is subject to regulatory approval and the Companyanticipates such approval in the fourth quarter 1994. After legal fees andexpenses as described above, upon approval, the Company will realize a netcash payment of approximately $70 million.The Company believes that its existing cash balances and the proceeds from the Sega Agreement will be sufficient to meet anticipated working capital requirements. The Company intends to increase expenditures in software development, product manufacturing, and promotional activities related to JAGUAR.
Below is from SEC Form 10-K for Atari Corp 1996
PROCEEDINGS Atari is a defendant in a civil action brought in the Superior Court of theState of California in and for the County of Santa Clara by Citizen AmericaCorporation, a former supplier, in February 1994 seeking damages of approximately $900,000 for alleged breach of contract and related claims. Atari believes this action will have no material adverse effect on its business, financial condition or results of operations.* Atari is a defendant and counter claimant in a civil action for allegedbreach of contract brought in U.S. District Court for the Northern District ofNew York, case number 95 Civ. 1945, by Tradewell, Inc., a New York corporation,seeking specific performance for release of goods having a value of $1.6million. Atari has counterclaimed seeking specific performance for the purchaseof media or, alternatively, damages in the amount of $3.3 million. As a resultof a partial settlement, Atari now seeks damages of approximately $1.3 million.Atari believes this action will have no material adverse effect on its business,financial condition or results of operations.* - --------------- * This statement is a forward-looking statement reflecting current expectations. Actual results could differ materially from those projected in the forward-looking statement due to numerous factors, including the risk related factors set forth herein. 5<PAGE> 7 Atari is a plaintiff in a civil action brought in the Superior Court of theState of California in and for the County of Santa Clara brought againstPhillips Laser Magnetic Storage ("Phillips") for breach of contract and breachof implied covenant of good faith and fair dealing arising out of Phillips'failure to deliver goods to Atari. Atari has been advised that Phillips intendsto file an unspecified counterclaim. Atari believes this action will have nomaterial adverse effect on its business, financial condition or results ofoperations.* Atari is a plaintiff in a civil action brought in the Superior Court of theState of California in and for the County of Santa Clara and removed to theUnited States District Court, Northern District of California brought againstProbe Entertainment Limited and Acclaim Entertainment for breach of contract and related claims. Counterclaims have been filed against Atari for alleged breachof contract. Atari believes this action will have no material adverse effect onits business, financial condition or results of operations.*
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