This sounds like a brainteaser. In an antitrust class action
settlement last week, Electronic Arts agreed to pay $27 million
and gave up the right to certain exclusive licenses. Yet its
settlement with game players can still be called a win. How can
this be?
Back in June 2008, gamesters represented by Hagens Berman
Sobol Shapiro sued EA in federal court in California, claiming
that the company's exclusive licenses with the National Football
League and the National Collegiate Athletic Association, among
others, gave EA an illegal monopoly in the market for
interactive football videogames. EA, as you well know if you've
spent 10 minutes watching football of the televised variety,
distributes the wildly popular Madden NFL and NCAA Football
videogames. On Friday, the company's lawyers at Latham & Watkins
submitted a proposed settlement agreement to U.S. District Judge
Claudia Wilken of Oakland, California. EA agreed to cough up $27
million to the class and said it would not enter another
exclusive trademark license agreement with the NCAA's trademark
and licensing arm when its current agreement runs out in 2014.
EA also said it wouldn't sign an exclusive licensing deal with
an indoor league, the Arena Football League, for the next five
years.
You'll notice, however, that EA did not agree to any
restrictions on its licensing arrangements with the NFL. That's
where the game maker's fortunes truly lie: The Madden games, on
average, outsell the NCAA games by three to one, according to
Jesse Divnich of the videogame research and consulting firm
EEDAR.
And that's why the two sports law experts we consulted said
that the settlement is a victory for EA. Michael McCann, a law
professor who runs the Sports Law Institute at Vermont Law
School, said the deal may have little impact on football
videogame competition in the long run, since it's difficult for
new publishers to enter the videogame arena. EA's powerful name
recognition for the Madden games won't be touched in any way by
the class action settlement, and until at least 2014 EA will
remain the unqualified leader in NCAA football videogames as
well. Plus, McCann said, any other company that wants to develop
an NCAA game will have to worry about ongoing federal court
litigation involving whether the game maker is improperly
profiting from using the likenesses of NCAA athletes. (In
pending cases at the 9th and 3rd circuit courts of appeal, EA is
represented by Davis Wright Tremaine.)
Daniel Lazaroff, a professor at Loyola Law School and the
director of its sports law institute, said he'll be interested
to see if any class members raise objections to the settlement
at an upcoming fairness hearing. Class members will receive at
most $6.79 per game purchased in damages. (Certain NFL Madden
games are included in the titles eligible for cash payment.)
As usually happens, the proposed settlement also addresses
attorneys' fees. EA said it will not object to Hagens Berman's
request for up to 30 percent of the final settlement amount and
costs of up to $2 million.
The plaintiffs' attorney, Shana Scarlett at Hagens Berman,
did not respond to a request for comment. Timothy O'Mara, who
represented EA for Latham, also did not get back to us.
(Reporting by Erin Geiger Smith)
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