Social gaming giant Zynga is the subject of a new patent infringement lawsuit, the latest in a string of such claims from other gaming developers. Now that Zynga’s under a microscope as it moves toward a planned initial public offering in a rough macro-economic environment, will its legal troubles be too much for potential investors to handle?
In the most recent patent infringement suit, social gaming startup Agincourt Gaming is seeking unspecified monetary damages and a permanent injunction that Agincourt’s lawyer claims “could shut down Zynga’s multibillion-dollar business.” A press release issued Wednesday by Agincourt’s lawyer reads:
Agincourt, a recent entrant into the social gaming space, owns foundational patents that claim priority back to 1996 and cover the processes for credits-based online gaming and a prize redemption system based on the outcome of game play. The company, which owns and operates an online game called Pantheon, is uniquely positioned to profit from the enormous market potential for the sale of virtual goods. “Agincourt’s patents cover the most lucrative aspects of online social gaming – including those comprising the bulk of Zynga’s revenues – as they contain the crucial ‘link’ that allows for global, interactive prize redemption over the Internet,” said Bill Carmody, a senior partner at Susman Godfrey, Agincourt’s lead counsel.
When reached Wednesday, a Zynga representative declined to comment on the Agincourt lawsuit.
This is certainly not the first time Zynga has been served with legal papers. The San Francisco-based company has been named as a defendant in 24 cases in the past 12 months, according to legal information site Justia.com.
Now, it’s worth mentioning that most companies begin attracting lawsuits as they become more successful: Facebook has been targeted by 78 lawsuits in the past year. But Zynga repeatedly has come under fire in both lawsuits and the press for allegedly replicating games. Even though copying game design and concepts is not expressly illegal, Zynga has ruffled feathers in the gaming space for its supposedly copycat practices — and if it’s found that the company has actually violated patents or copyrights, it could be in real trouble.
As Zynga gets larger — and potentially goes public — it has much more to lose if it is found guilty of actually violating intellectual property laws. Zynga has shown a new emphasis on its privacy controls in the run-up to an IPO, and a strong defense of its IP situation may be next to help calm jittery potential investors.