Context: IBM has had an active patent licensing program since 1985, generating billions of dollars in revenues from companies that often operate in segments of the technology industry in which IBM itself is not active but believes that its patented inventions are implemented. That is a fundamentally different situation from the high-profile litigation that Nintendo started against Palworld maker Pocketpair last year for the sole purpose of hampering competition (November 8, 2024 games fray article).
What’s new: In December, IBM settled its patent lawsuits against two major game makers. First, Zynga settled a dispute (December 17, 2024 GlobalData article) in which IBM had won a $44.9M damages verdict from a Delaware jury (article by IBM’s law firm Desmarais LLP). On Monday (December 30, 2024), IBM and Take-Two Interactive (which acquired Zynga (May 23, 2022 Take-Two press release)) filed a joint motion to dismiss the pending litigation. One of the patents IBM asserted against Zynga was in play (alongside two others) against Take-Two.
Direct impact: Knowing how the patent licensing business works (games fray‘s sibling site ip fray not only comments on patent cases but also engages in actual dealmaking), there can be no doubt that both game makers agreed to fork over money to IBM. They may have made lump-sum payments for a multi-year license and/or agreed to pay ongoing royalties.
Wider ramifications: IBM’s complaint claimed that “dozens of Take-Two’s peers in the industry [had] taken a license to use IBM’s patents,” suggesting that IBM struck deals with many other game makers without having to resort to litigation. To the extent there are unlicensed game makers out there who in IBM’s opinion infringe on its patents, they now face a risk of being the next target of an enforcement action.
IBM filed the complaint against Take-Two on September 30, 2024, two weeks after the jury verdict in the Zynga case. Presumably IBM’s plan was to settle both cases (the one with the Take-Two parent company and the one against the Zynga subsidiary it acquired during the course of the dispute with IBM) simultaneously. It may be attributable to the Holiday Season that the Zyngal deal was reached in mid-December and the one with Take-Two took two more weeks.
In the complaint against Take-Two, IBM accused the following products and services of infringement: “[the] Rockstar Games Launcher, its Rockstar Games Social Club website
[…], its NBA 2K Mobile Basketball mobile game, its Grand Theft Auto Online game, and its Red Dead Redemption 2 game.”
IBM’s jury win (over which Zynga could still have pursued an appeal) was based on the following two patents:
- U.S. Patent No. 7,072,849 (“Method for presenting advertising in an interactive service”) and
- U.S. Patent No. 7,702,719 (“Methods and apparatus for reducing the number of server interactions in network-based applications using a dual-MVC approach”).
Against Take-Two, IBM asserted the ‘849 patent as well as the following two patents:
- U.S. Patent No. 7,356,704 (“Aggregated authenticated identity apparatus for and method therefor”) and
- U.S. Patent No. 8,458,209 (“Virtual world query response system”).
Of all those patents, only the last one (the ‘209 patent) is game-related, though not exclusively so: virtual worlds have non-game use cases as well.
All of the above patents are relatively old. For a long period, IBM was the top U.S. patent filer, but the company has recently changed its IP strategy and sharply reduced its annual number of patent applications. IBM may now also be less active in licensing its patents to third parties.