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.
October 5, 2013
Earlier this week, Judge Kimba Wood of the US District Court for the Southern District of New York issued a 44 page opinion dismissing 6 of the 7 claims brought by Zuffa in its lawsuit against the state regarding its legislation banning professional MMA. Zuffa’s claim that the MMA regulation is unconstitutionally vague is the only claim that survived the Motion to Dismiss.
The Motion to Dismiss was filed in October of 2012 and heard in February of this year. Notably the Motion to Dismiss is based on Federal Rule of Civil Procedure 12 (b)(6) which allows a court to grant a party the right to dismiss claims if there is “a failure to state a claim upon which relief can be granted.” In order to survive a 12(b)(6) motion, the claims “must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.”
In this case, the Court found only Zuffa’s claim that the NY ban is unconstitutionally vague survived.
We note that the Court dismissed Zuffa’s First Amendment claim as the Court sided with New York. The Court held that the central question in determining First Amendment protection was whether the activity is primarily communicative and expressive. The Court held that MMA “lacks such essential communicative elements.” In a Footnote to the Opinion, the Court stated, “The fighters’ pre-fight and post-fight antics do not change the Court’s conclusion that the core conduct at issue – live MMA combat between professionals – does not qualify for First Amendment protection.” The Court concluded that it is MMA, not the surrounding fanfare that must convey the particularized message.
The sole claim standing after the Court’s ruling was its cause of action that the professional MMA ban in New York was unconstitutionally vague. The Court held that this claim could go forward. One of the interesting reasons was due to oral arguments of this motion in which New York’s attorney indicated that the law in question could feasibly see an exempt organization (as defined in the law) regulate pro MMA events in the state. It also did not agree with New York’s argument that the legislative history trumped the statutory language. In light of the varying interpretations of the statutory language, the Court found that Zuffa has adequately alleged its claim for vagueness.
The UFC sent out a press release stating that it was pleased with the Court ruling. It’s an interesting spin on the Court dismissing most of your case. While Zuffa left open the possibility of appealing the Court ruling related to its First Amendment claim, it would wait and see what happens to the vagueness claim.
At this point, the parties begin the discovery phase (written questions, request for production of documents, depositions) with the intent that this case move to trial. With no trial date set, this process could drag on. Furthermore, there’s nothing which would preclude New York in attempting to move for summary judgment after discovery which would again attempt to dismiss Zuffa’s claim before trial. We could also see the Court stepping in to force the parties to mediation.
Even if this case is tried and the Court strikes down the law and Zuffa wins, it still would mean that it would have to go to Albany to get professional MMA regulated within the state. Without a new law in place, New York would go unregulated. In its press release, the UFC had called for a “new law on MMA” in New York. Thus, all roads still go through Albany.
We will see what happens from here. As always, MMA Payout will keep you posted.
October 2, 2013
According to the New York Post, Judge Kimba Wood has dismissed Zuffa’s claim that the New York law banning MMA violates the First Amendment. Judge Wood did leave Zuffa’s claim that the New York law could be unconstitutionally vague.
MMA Payout will have more on this later today.
September 12, 2013
How much do UFC fighters receive for having their likenesses in video games? If you’re Carlos Condit its $22,500. This was revealed in a lawsuit filed by Condit’s tattoo artist against the makers of the UFC video game according to The Hollywood Reporter.
The legal wrangling arises out of the THQ bankruptcy and the bankruptcy court’s valuation of a copyright infringement claim by Condit’s tattoo artist, Christopher Escobedo. Condit’s lion tattoo over his rib cage is displayed in the video game, UFC Undisputed. Escobedo inked the tattoo on Condit.
Since THQ is in Chapter 11 bankruptcy, the lawsuit that was originally filed in Arizona Federal Court came under the jurisdiction of the Bankruptcy Court. Escobedo’s original complaint requested damages in the amount of $4.16 million which was 2% of all post-bankruptcy petition sales.
Escobedo’s rationale for the hefty amount was based on the sales of the game (4.1 million units of the game sold), that Condit was a popular fighter (as he was the interim Welterweight champ at the time) and Condit’s character appeared in the video game with the visible image of the lion tattoo. Escobedo’s lawyer argued that the Court should take into consideration what a hypothetical negotiation would produce between Escobedo and THQ. The Bankruptcy Court did not agree and determined the value to Escobedo was the same amount that Condit was paid for his likeness: $22,500. Even after a motion for reconsideration, the Court was not swayed.
The Court provided this guidance as to its ruling:
“As THQI demonstrated, the value of Escobedo’s claim must be reduced to reflect (a) the exceedingly low value of a license of a single tattoo to a game depicting more than a hundred fighters, hundreds of tattoos and songs, and myriad other creative elements, (b) the likelihood that a tattoo on another person’s body is not copyrightable, (c) the likelihood that Condit has an implied license to license to THQ his own digital image (including an image of the Lion Tattoo), without restriction by a tattoo artist; and (d) the likelihood that, if the Lion Tattoo is copyrightable, Condit would have to at least be considered a joint author of the tattoo with an equal right to license it to others.”
Tattoo copyright issues is starting to become a concern and has drawn notice from the NFL and its player’s union due to potential liability issues. Its an interesting question as to 1) who own’s the copyright on the tattoo? 2) whether the actual artist should be compensated for its depiction? 3) what are the rights of the individual that actually has the tattoo?
But maybe the first question is whether a tattoo deserves copyright protection. While most legal analysts believe that a tattoo can be copyrightable, one has to consider whether the individual sporting the ink has an implied license once they leave the tattoo parlor. One of the proposed ways to address the situation is to have tattoo artists sign waivers for their work and/or compensate the artists in other ways (autographed ball, shorts or maybe tweeting out the work with the artist’s handle). It appears that most times that level of publicity is want the artists wants for business.
The one other takeaway from the Escobedo claim is that Condit received $22,500 for his likeness in the video game which makes one consider the pay of other lesser and more known fighters in the video game. Its another area of compensation in addition to actual fighting.
August 26, 2013
It is well known that Zuffa is an aggressive defender of its intellectual property. It found itself in an unenviable position as the company it hired to issue DMCA takedown requests issued notices to child pornography sites claiming that Zuffa was the lawful rights holder.
IP Arrow, the company that Zuffa hired to do this work is an anti-piracy company that represents over 10,000 of Zuffa’s copyrights. Its latest reported request on August 23, 2013 has it making takedown requests of over 131 URLs. IP Arrow has been identified as a company owned by Morganelli Group LLC.
According to tech blog, Techdirt.com, “IP Arrow is issuing takedown links to files that appear to be child porn while making the claim that Zuffa/UFC hold the copyright to these photos.”
More from Techdirt.com:
Judging from the quality of the DMCA notices it’s issued, IP Arrow either has no idea what it’s doing or just doesn’t care. What’s worse is that its submitted links have been taken down nearly 100% of the time, despite the fact that its DMCA notices are loaded with content its clients don’t own.
The DMCA takedown notices request the online service provider (e.g. Google) take down the offending material and that it makes a sworn statement that it has a “good faith belief is not authorized by the copyright owner” and that the notification is accurate, and under penalty of perjury, that the complaining party is authorized to act on behalf of the owner of an exclusive right that is allegedly infringed” See 17 U.S.C. sec 512(c)(3)(v)-(vi).
Techdirt had attempted to contact Zuffa about these takedown notices but had not received response. It had heard from Lynda.com, another client of IP Arrow, which issued the following statement which we might assume may be the same position Zuffa would take:
…On our behalf, IP Arrow issues batch DMCA takedown notifications for links to directories containing our content. Those links often contain keywords designed to drive traffic to adult or illegal material in directories that happen to also contain lynda.com videos. Many of the URLs highlighted in this TechDirt story, implied to be targets of erroneous takedowns, at one time contained our files but no longer do.
It would be easy to conclude that the UFC may argue the same thing. At one time, the sites targeted by IP Arrow – including the porn sites, had keywords which may have included Zuffa content. Therefore, the takedown notices would not appear as arbitrary as it might seem. Nevertheless, its hard to fathom that all of the sites that are being taken down contained Zuffa-owned material.
Based on a look at some of the takedown notices sent out by IP Arrow, we may assume that Zuffa never held a copyright interest in any of the sites. Moreover, from a PR standpoint, the practice of sending out blanket notices, especially to porn sites may look as though it is tied to these sites. This is something it likely does not want to have happen. What we may surmise is that these takedown notices were incorrectly aggregated. Thus, the notices were likely made to sites that did not infringe UFC copyrights, another bad scenario.
But, the “whac a mole” strategy may have turned into a “excavate the earth” as IP Arrow is using a broad stroke in taking down any sites remotely linked to Zuffa. Is Zuffa taking advantage of the system by issuing these notices? Will this strategy show any results? Or, will it just be a useless exercise in taking down sites that will “pop-up” somewhere else?
August 21, 2013
ESPN’s Josh Gross reports that Bellator will let Ben Askren leave for the UFC if Dana White wants the welterweight standout. Bellator head Bjorn Rebney told ESPN that it would not make an offer to Askren.
Askren’s last contracted fight was this past July. Similar to Alvarez, its believed that Bellator has the right to match any contract offered to Askren. However, it appears that it is passing. The news was surprising considering Askren’s record and perhaps not surprising considering Askren’s wrestling-heavy, grinding style which is not exciting. After a bitter legal battle with Eddie Alvarez,which ended in a settlement and Alvarez coming back to Bellator, the company has made a decision on Askren.
When asked about whether Askren would be on Bellator’s first PPV in November he indicated that there would be “no chance.” Thus, it was likely that the parting was mutual.
Askren has already been in contact with Dana White via twitter:
— Ben Askren (@Benaskren) August 21, 2013
Askren is a dominant wrestler and a personality but his style may have been a reason Bellator has decided to give up on re-signing him. However, Bellator needs top level talent for the company and the PPV. Askren is dominating and Bellator could have utilized this. Perhaps Bellator saw another Alvarez situation on the horizon and thought best to let him go rather than get embroiled in another costly lawsuit. We will see if Askren does end up in the UFC and how his talent does in the UFC’s welterweight division.
August 13, 2013
MMA Fighting reports that Eddie Alvarez and Bellator have come to an agreement to settle their lawsuit. As a result, Alvarez will fight Michael Chandler on Bellator’s first PPV November 2nd.
The settlement between party ends a contentious lawsuit which had both sides arguing over the contractual terms of Alvarez’s Bellator contract and whether or not Bellator had matched the terms of a contract offered by the UFC. It also highlighted the potential contract Alvarez would have received if he had been allowed to leave for the UFC. No terms of the settlement have been announced although it is being rumored that Alvarez will be able to leave Bellator if he loses to Chandler but if he wins he must do the trilogy with Chandler.
Alavarez-Chandler II will co-main event the card with Tito Ortiz facing Rampage Jackson in the main event.
All’s well that ends well. As we had opined previously, it was likely that the two sides would come to an agreement before the November PPV. The fact of the matter is that litigation is a slow process and factual discovery can be a money draining exercise. Also, the fact that Bjorn Rebney or Eddie Alvarez did not have to be deposed was a good result for both sides. No one had to be grilled by attorneys about Bellator business practices regarding matching terms or about Alvarez’s interviews regarding Bellator alleging lying to him.
Both sides needed each other and with the foreshadowing of Alvarez’s manager publicly stating that he hoped the two sides would settle, it became a foregone conclusion that it would happen. With Alvarez-Chandler as a co-main event, Bellator needs to re-sign Ben Askren and have him on the card as well. At this point, Bellator should re-introduce MMA fans to the first Alvarez-Chandler fight. It is widely popular on YouTube and would give these two some much needed (in-ring) publicity leading into their rematch. The settlement, while it may be just a short-term gain, could provide a necessary lift for the organization.
August 6, 2013
MMA Fighting reports that Eddie Alvarez’s manager is hoping that a deal with Bellator can be reached. Glenn Robinson, Alvarez’s manager, extended the olive branch with the statement.
Alvarez and Bellator are engaged in a lawsuit over the ending, or lack thereof, of Alvarez’s employment with the organization. While Alvarez had proclaimed that he would not settle and take his case to trial and went on a twitter campaign suggesting that Bellator misrepresented a document he relied upon, it appears that Alvarez may have rethought his situation. Certainly, the sobering fact that a trial would not happen until late next year at the soonest motivated this possible turn of events.
In the last settlement discussions as reported to the court, Bellator had offered Alvarez two PPV level fights with the first being a shot at the lightweight title currently held by Michael Chandler. Alvarez declined the offer and countered with just one fight for Bellator. This stalled the negotiations.
The question is whether a settlement could occur before Bellator’s November 2nd PPV. It appears that both sides need each other. Bellator needs an opponent for Michael Chandler and a strong undercard for its Tito-Rampage main event. Alvarez needs employment. Both have been spending money on legal fees and both probably don’t want to do that anymore. It makes sense that Robinson has sent out this message in hopes of engaging in talks. The interesting point here is whether or not Alvarez will get the “same deal” that has been litigated. Meaning, would Bellator give Alvarez the same terms as it offered before the lawsuit. Or, will Bellator factor in the time, legal expense and public relations hit it took during the time of the lawsuit.
June 26, 2013
The “Joint Proposed Discovery Plan” filed with the Court in the Eddie Alvarez-Bellator case reveals the sobering reality of the judicial system. Among the dates set by the Court, a pretrial conference will occur sometime after September 15, 2014 which would mean an actual trial in the case would not occur until late fall 2014 or even early 2015.
The Court held an initial status conference this week which included the rendering of a “Joint Proposed Discovery Plan” which essentially lays out the plan on litigating the case. This includes the written discovery and a plan on how many people will be deposed by each party (each side will have a maximum of 10 depositions). It also includes a time for expert reports and expert depositions.
A pretrial conference may take place “any time after September 15, 2014 and after resolution of any dispositive motions (motions to dismiss claims)” according to the Order.
At that pretrial conference, the Court will likely appoint a Court date. Thus, it’s most likely a trial would not commence until late 2014 or even 2015.
Another interesting note that has come out of the case is that the parties have agreed to a Discovery Confidentiality Order which may prevent the public from seeing documents deemed confidential by the parties.
Another interesting point was the status of the settlement talks which occurred prior to the filing of the discovery plan. Bellator had offered Alvarez two PPV level fights with the first being a shot at the lightweight title currently held by Michael Chandler. Alvarez declined the offer and countered with just one fight for Bellator. This stalled the negotiations.
And this is why Alvarez should not have stated that he was not going to settle with Bellator. A trial date at best would not happen until the fall of 2014 (Alvarez will be out of action for 2 full years if this happens) but this does not even include any scheduling delays or motions to continue a trial date which are norms in litigation. The parties have already noted that there may be scheduling issues with third parties (UFC?) and “disputes regarding designation of documents as confidential.” Thus, there are already logistical obstacles and it’s still June 2013. We shall see how this progresses and if the parties will look to settlement discussions. But, in my opinion, the parties will want to conduct some discovery and depositions before any further discussions on settling occur.
May 23, 2013
Welcome to another edition of The Wrestling Post. In this post, we take a look at Hulk Hogan’s ongoing battle with Gawker, the WWE donates money to head trauma research and a Court denies a WWE Motion to Dismiss in a Copyright Infringement lawsuit.
Hogan versus Gawker continues
Hulk Hogan is seeking to eliminate all semblance of his sex tape from the internet according to TMZ. The professional wrestler is embroiled in a lawsuit with the Gawker web site over the sex tape which Gawker had posted on its site.
Hogan successfully filed a temporary restraining order requiring that Gawker take down the video and the accompanying post describing Hogan’s tape. Gawker took down the video but left the post describing the video citing the Judge’s decision to grant the TRO as “unconstitutional.” Gawker also left on its site links to other web sites where one could obtain the video.
Hogan’s lawyers have filed a Motion an Order to Show Cause to determine why Gawker should not be held in contempt of Court for disobeying an Order from the Court. On the other hand, Gawker has filed a Motion for Stay of Hogan’s Temporary Injunction. In its briefing, it cites a list of reasons why the Judge’s granting of the TRO was incorrect. Two of the more interesting arguments is that the state court judge was “collaterally estopped” from its ruling as Hogan’s TRO was already ruled on in Federal Court in October. In addition, Gawker argues that the state court judge admitted (which she did) that she did not look at the video or plan to do so, yet ruled on the content.
Payout Take: This lawsuit will be interesting from the perspective of whether Hogan can rid the internet of the offensive tape. Gawker’s stance on the state ordered TRO is noteworthy considering that Hogan’s legal strategy may have doomed him (i.e., he filed his lawsuit in federal court first and then voluntarily dismissed the case but not before that Court ruled on this same injunction.) We will see how this legal case plays out to see whether a Court will overturn the injunction based on the prior ruling or whether the issue is moot due to the ruling in the present forum.
WWE donates $1.2 million to head trauma research
USA Today reports that the WWE has donated $1.2 million to head trauma research.
Via USA Today:
World Wrestling Entertainment, known for past stars such as Hulk Hogan and current champ John Cena, says it is making a gift of $1.2 million over three years to further research aimed at developing a treatment for Chronic Traumatic Encephalopathy. The brain disease, associated with repeated concussions, has come under scrutiny amid concussion-related lawsuits by more than 4,000 former NFL players against the league. CTE has been linked to depression and dementia.
The donation is being made to the Sports Legacy Institute in Boston, a non profit run by former WWE Wrestler and one time Tough Enough competitor Christopher Nowinski. Nowinski, a Harvard graduate, whose wrestling career was cut short due to a concussion.
Payout Take: The donation is a step in the right direction in the continued evolution of the the WWE that recognizes its newfound duties as a publicly traded company and the importance of corporate social responsibility. While many skeptics may think that the donation is “after the fact” for many wrestlers and/or preventative PR in light of the NFL concussion litigation, it shows that the WWE is taking steps to ensure that it does not make any further mistakes with the treatment of its talent.
WWE’s Motion to Dismiss Copyright Lawsuit Denied
The Hollywood Report reports that a Texas music composer has won an initial round in the legal battle over the rights to entrance music he composed for wrestlers. While Papa Berg, the composer that is suing the WWE, had portions of his lawsuit dismissed, the Court allowed him to proceed with his copyright infringement lawsuit. The WWE attempted to dismiss the lawsuit in its entirety or in the alternative, have the lawsuit moved to Connecticut (the WWE’s headquarters).
The bulk of the ruling by the Texas Court was based on jurisdictional issues, the lawsuit alleging that the WWE “misappropriated his songs, caused royalties to be misdirected and interfered with a video game deal.” In the latter claim, Berg did not discover that the WWE had the rights to his songs until video game maker (pre-Bankruptcy) THQ contacted him about the right to use a song in one of its WWE video games.
Notably, for those old enough to recall the AWA and NWA, Berg composed the Freebirds’ “Badstreet USA” entrance song and Sting’s “A Man Called Sting”
Payout Take: Although the issue at hand was a civil procedure question concerning jurisdiction, once the lawsuit gets to the merits of whether or not the WWE infringed Berg’s copyright will it get interesting.