THQ sues EA and Zuffa over video game acquisition
October 7, 2013
According to court documents filed in the U.S. District Court in Delaware , Bankrupt video game maker THQ is suing Zuffa and Electronic Arts, Inc. (EA) stating that EA had informed Zuffa of THQ’s shaky finances as EA and Zuffa worked together to so that EA could acquire the license to UFC video games. The Complaint was filed last Friday.
The issue goes back to 2006 when EA expressed interest in acquiring the UFC video game franchise from Zuffa. However, court documents stated that, “EA made what Zuffa considered to be an insultingly low offer for the UFC video game rights and was rejected.”
In 2009, THQ developed “UFC 2009 Undisputed” and it was a success selling over 3.5 million units. Despite the success two years prior, THQ’s finances declined in 2011 and the company determined that it would be unable to support its projects including the next games in the UFC franchise.
In 2011, THQ and EA discussed a potential sale of THQ as a whole to EA. According to court documents, “THQ provided EA internal financial information including detailed sales and revenue figures for the UFC Franchise, and projected marketing expenditures on the next UFC Franchise game.” Despite initial interests, EA broke off negotiations with THQ in December
2013 2011 citing disinterest.
Two weeks later, Zuffa criticized THQ about its expenditures and threatened to terminate its relationship with THQ based on its insolvency. There had been no prior evidence of dissatisfaction with THQ.
THQ entered into a $10 million settlement with Zuffa in exchange for the termination of its license and all intellectual property rights to the UFC game brand in 2012. However, THQ now claims that this was a fraudulent transfer as it believes that EA had contacted Zuffa and conveyed the internal financial information it was provided by THQ during the potential sale of THQ. THQ claims that it was “hamstrung” in negotiations with Zuffa due to its knowledge of THQ’s finances and the actual value of the UFC video game franchise was $20 million.
UPDATE 10/08/13: Some more info from the Complaint
EA Sports MMA was released in June 2009. You may recall that it featured the Strikeforce plus Randy Couture. This included Fedor, Nick Diaz, Jacare Souza and others. It also featured Bas Rutten as a trainer in the game. A hidden game feature was discovered where a player could create their own MMA fighter and could enable a player to create UFC fighters with the same tattoos, shorts, hairstyles, etc. Zuffa discovered this issue in late November 2010 and notified EA of its objection to the use of UFC licensed fighters. In March 2011, EA agreed to patch the game feature so that you could no longer recreate UFC fighters in the EA Sports MMA game.
Paragraph 19 indicates that after a “December 12, 2013 high-level meeting” negotiations between THQ and EA broke off. Obviously, the Complaint likely meant December 12, 2011 as Zuffa sent the demand letter to THQ on December 30, 2011.
The basic claim here is that THQ is claiming that when it had entered into negotiations to sell itself to EA due to financial troubles, it revealed confidential financials to EA as EA was doing its due diligence before the potential acquisition. Once acquisition talks failed THQ claims EA took what it had known about THQ finances and sent it to Zuffa. As many recall, EA had developed EA Sports MMA which did not do well because it did not have recognizable UFC names in its game. Thus, THQ argues there was reason why EA wanted Zuffa to terminate its relationship with THQ.
EA is set to unveil a new UFC game, “EA Sports UFC” this spring.
The Bankruptcy laws are a little complex and THQ is asking the Bankruptcy trustee to undo the authorized settlement to Zuffa as it was not market value. It also argues that EA tortuously interfered with its UFC contract by divulging confidential information to Zuffa.
MMA Payout will keep you up to date with this situation as it progresses.