SAN FRANCISCO (03/30/2000) - Videogame makers Sega, Nintendo and Electronic Arts have filed a lawsuit against Yahoo Inc. accusing the portal of ignoring sales of counterfeit videogames on its auction and mall areas. The lawsuit, which the manufacturers filed yesterday in U.S. District Court in San Francisco, accuses Yahoo of copyright and trademark infringement, unfair competition, and offering illegal devices for sale.
The lawsuit asks the court to order Yahoo to stop the sales. It also seeks compensatory damages of up to $100,000 per copyright violation, and up to $2,500 for each sale of the hardware devices, some of which are called "Mod Chips," that allow people to circumvent copyright protection, says Jeff Brown, a spokesman for Redwood City, Calif.-based Electronic Arts.
Yahoo spokeswoman Diane Hunt offers little comment on the lawsuit. "We're not aware of specific situations," she says. The gamemakers say people are selling the illegal items in Yahoo's auction area and in the shopping area that Yahoo leases to outside merchants. "They are openly sold and labeled" with phrases such as "back up copy," "compilation disk" and "never published," according to Brown. "It's very widespread and blatant." Electronic Arts sent two letters about the matter to Yahoo's general counsel last summer.
It followed the letters with phone calls -- all of which were ignored, Brown says. At an industry meeting with Yahoo representatives in December 1999, the company seemed unconcerned, he adds. "Yahoo's position was that they either didn't care or didn't feel the need to address the problem," Brown says. "That is essentially what's forced us to find a legal solution." Electronic Arts says the problem crops up on other Web sites but that the owners of those sites are either in discussions with Electronic Arts or have taken steps to resolve the problem.
The company doesn't know the extent of its losses to online piracy, but it notes that a study by the Interactive Digital Software Association pegged worldwide losses from Net piracy and counterfeiting at $3.2 billion. The issue of piracy looms large for makers of computer software. That's particularly true overseas, where enforcement can be lax and prices high. Within the U.S., makers of music CDs are battling with companies that offer ways to distribute digital music online. Representatives from Nintendo and Sega, the top two gamemakers in the U.S. after Electronic Arts, were not immediately available for comment.