Settlement reached in ‘Call of Duty’ case

The publisher and creators of the multibillion-dollar Call of Duty video game franchise opted for a cease-fire rather than a courtroom showdown.

In a case scheduled to begin today in Los Angeles County Superior Court, Jason West and Vince Zampella, co-founders of the Santa Monica game studio Infinity Ward, were to argue that top U.S. game publisher Activision had unfairly fired them in 2010. Activision filed its own lawsuit, claiming that it was justified in terminating West and Zampella, despite the fact they had spearheaded its biggest moneymaking franchise, because they had breached their contracts.

Activision and Bobby Schwartz, attorney for West and Zampella, each issued identical statements saying, “All parties to the litigation have reached a settlement of the dispute. The terms are confidential.” Such a resolution avoids the likelihood that the case would be a hot topic in Los Angeles next week during the annual Electronic Entertainment Expo, the video game industry’s showcase of new games and products coming in 2012 and 2013. “It's good news for both parties to settle the issues privately rather than on the national stage,” says Colin Sebastian, analyst at Baird Equity Research.

“For Activision, there doesn’t appear to be any major negative financial impact, in part because they are exceeding their financial guidance,” he says, “and it also allows management to focus on the future rather than the rear-view mirror.”

There were hints a settlement might be coming. Judge Elihu Berle had made a comment last week that the trial might be short, says Mark Methenitis, editor-in-chief of the Law of the Game blog. He suspects Activision is “making a substantial payout. . . . If I had to guess, this was just a shortcut to approximately the same outcome the trial would have had, a payout to the parties by Activision in exchange for being done with this issue and Activision having full right and title to all the Call of Duty (intellectual property).”

Activision had noted that as much as $1 billion in damages might be at stake in a recent filing with the Securities and Exchange Commission.

West and Zampella founded a new Los Angeles studio, Respawn Entertainment.