November 17, 2004 10:44 AM PST

Patent suits target game industry

By Paul Festa
Staff Writer, CNET News

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While computer game fans shell out tens if not hundreds of millions of dollars for the latest shoot-em-up release, a little-known patent holder is hoping to make a different kind of computer game killing.

American Video Graphics (AVG), a Marshall, Texas, limited partnership, has wielded its arsenal of seven patents related to the display of 3D computer graphics to sue a who's who of companies in the computer game industry.

Defendants in the three suits, filed Aug. 23 in the U.S. District Court for the Eastern Division of Texas, Tyler Division, range from game makers (Nintendo, Sega, Atari and Activision) to entertainment companies (LucasArts and Vivendi) to hardware vendors (Hewlett-Packard, IBM, Dell and Gateway) to consumer electronics companies (Sony, Fujitsu, JVC, Sharp, Matsushita and Toshiba).

Many of the complaints stem from those companies' distribution of Microsoft's 3D software with the Windows operating system. Microsoft also is named in the complaint, specifically for its Xbox computer game system.

With titles like Microsoft's "Halo 2" shattering revenue records and besting Hollywood openings, the game industry may very well have a fat target painted on its back, analysts say.

"The games industry has been doing quite well, and it's a recession-proof business," said Billy Pidgeon, a New York-based analyst with the Zelos Group. "It's increasingly lucrative to go after companies in that industry."

AVG referred questions about the suits to its attorneys, McKool Smith in Dallas. McKool declined to comment. Defendants contacted by CNET News.com, including Microsoft and HP, declined to discuss pending litigation except to say the charges were without merit and would be contested vigorously.

One attorney, who represents one of the defendants in matters unrelated to the suits, said that like any patent case, the litigation will take time to play out.

"It's not over till it's over," said Neil Smith, an attorney with Howard Rice Nemerovski Canady Falk & Rabkin in San Francisco. "Most cases settle with license grants or dismissal, and in the area of 3D views, there is a great deal of prior art which may invalidate the patents."

Prior art refers to examples of technology that predate the patent's filing date, disqualifying it as a patentable invention.

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