Zynga’s Legal Woes Mount

Electronic Arts on Friday filed suit against Zynga claiming it ripped off EA’s The Sims Social in producing its new game The Ville. The EA copyright lawsuit is the latest legal woes for the popular social media games publisher.

EA’s Lucy Bradshaw says in a blog post Friday.

The similarities go well beyond any superficial resemblance. Zynga’s design choices, animations, visual arrangements and character motions and actions have been directly lifted from The Sims Social.

Zynga, however, contends EA doesn’t understand copyright principles and that EA’s SimCity Social bears an uncanny resemblance to Zynga’s game CityVille.

When it comes to copyright issues, it’s the expressive elements (graphics, animation) that really count, not the game play. I’d certainly not expect the artists at Zynga to have done any copying, but they may have created graphics that look almost identical.

Double-Whammy Legal Blow

Zynga not only has to combat this copyright lawsuit, but it also faces  legal action by its investors who allege the company and its executives engaged insider trading.

Back in April, Zynga insiders sold 43 million shares of stock at $12 per share, making over $500 million. Three months after the stock sale, Zynga reported second quarter revenues that came in 5 percent lower than Wall Street analysts’ estimates. As a result, Zynga’s share price plummeted 40 percent overnight and triggered allegations by investors of insider trading.

Schubert Jonckheer & Kolbe is investigating whether Zynga’s insiders, including CEO Mark Pincus, were privy to insider knowledge when they sold their shares in April, says a Kotaku report. And law firm Levi & Korsinsky issued a statement that it too was investigating “concerns that Zynga misrepresented and/or failed to disclose materially adverse facts about its business and financial condition.”

Personally, I’m more than a little skeptical here – not about Zynga, but about the analysts. The whole social gaming sector is pretty new and Zynga itself is only five years old, with less than a year of experience as a public company. While companies provide plenty of information to analysts, I really doubt if anyone even with the analyst’s knowledge of such a  volatile sector could be that precise in forecasting the revenues.

How could Zynga’s executives have anticipated that with rising numbers of users that a 5 percent revenue shortfall would trigger such a dramatic drop in the stock price? It seems quite a reach.

However, remember Zynga is now a publicly listed company and not only has to behave impeccably but also look the part.

Despite facing mounting legal woes, this kind of storm is nothing new to Zynga. I expect them to weather it. The really hard work for them is to continually keep on coming up with new and engaging games.

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Comments

  1. BY KF says:

    Zynga, however, contends EA doesn’t understand copyright principles and that EA’s SimCity Social bears an uncanny resemblance to Zynga’s game CityVille.

    What?
    Sim city has been around forever while Cityville has only been out since 2010. How can they copy something that didn’t exist. Wait, someone has a time machine!

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