Atari 2010 Annual Report Download - page 44

ANNUAL FINANCIAL REPORT – REGISTRATION DOCUMENT
44
Risks stemming from dependency on customers and the delisting of products
The Group has historically been selling its products primarily through a centralized network of distributors consisting of a
series of "major accounts". A limited number of customers account for the bulk of sales by most of the Group’s
distribution subsidiaries, meaning that they are strongly dependent on those customers.
The sale, effective July 7, 2009, of all European and Asian distribution operations to Namco Bandai Games Europe has
caused this risk to shift over to Atari, Inc., the Group’s US subsidiary.
However, the transition toward the online gaming segment, which is based on a model where subscriptions are bought
directly by consumers, will cause a significant reduction in the Group’s exposure to the risk of dependency on customers
and delisting.
LEGAL RISKS
In the ordinary course of business, Group entities may be involved in various court, arbitration, administrative and tax
proceedings. The significant legal risks to which the Group is exposed are presented below.
Other than litigation referred to in this document, there are no other administrative, legal or arbitration proceedings,
including pending or threatened proceedings of which the Company is aware, that could have or in the last twelve
months have had a material impact on the financial position or income of the Company and/or the Group.
The Company considers that, given the status of the proceedings and based on the information at its disposal,
contingent liabilities should be classified as contingent liabilities within the meaning of IAS 37, and that accordingly no
provisions need to be set aside.
Disputes to which the Company is a party
Former employee
A significant case arose in a previous year, in which the Company was sued by a former employee who claimed that he
had co-authored one of the Group’s best-selling franchises. The plaintiff was seeking damages for moral prejudice and
financial loss suffered as a result of the allegedly unlawful distribution by the Group of games based on that universe.
The claim was for close to €17 million. At this stage of the proceeding, the Company is categorically rejecting the
plaintiff’s claim of authorship and/or co-authorship and considers the grounds and amount of his claim to be unfounded.
The parties have filed their respective briefs with the judge in charge of preparations for the trial, after no significant
progress was made during the fiscal 2009-2010. No date has been set for the trial and no decision is expected before
2011. The preliminary audience’s court is scheduled for early September 2010.
Based on pending proceedings and the available information, the Company considers that a contingent liability must be
recognized in connection with this dispute, as prescribed by IAS 37. Accordingly, no significant provision has been set
aside.
Disputes to which Atari Europe SAS is party
BVT production fund v. Atari Europe SAS
This dispute concerns two German entities, the BVT production funds, which financed the production of certain
interactive games, under a series of agreements entered into with various Group companies.
Following exchanges of letters and an audit in December 2008, the BVT funds instituted proceedings in February and
March 2009 in Germany, claiming that Atari Europe had failed to perform several contractual obligations arising from its
publishing agreements with the funds. The funds are suing Atari Europe in the German courts for 2 million euros in
damages.
Atari Europe has filed its briefs with the Munich Court and is contesting all of the plaintiffs’ allegations. A full complaint
was filed with the courts of competent jurisdiction in early November 2009. A hearing took place in November 2009.
Subsequent to the hearing in November 2009, the Munich Court issued an opinion in February of 2010. Most of BVT’s
claims were dismissed, with the primary exception related to claim that Atari’s improperly developed and sold certain
titles on the MAC platform. The Munich Court ordered Atari to provide data related to the MAC sales to BVT. Atari
complied but appealed the Munich Court’s ruling. BVT has also appealed the court’s decision. Oral argument on these
appeals is scheduled for December 2010.
Disputes to which Atari Inc. is a party
Research in Motion Limited v. Atari Inc. and Atari Interactive Inc.