Atari 2012 Annual Report Download - page 38

ANNUAL FINANCIAL REPORT – REGISTRATION DOCUMENT
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practices concerning the use, transmission and disclosure of the information that it collects regarding our users. Any
failure by Atari to comply with its posted privacy policy, terms of service or privacy related laws and regulations could
result in proceedings against the Company by governmental authorities or others, which could harm Atari’s business. In
addition, the interpretation of data protection laws, and their application to the mobile/online gaming industry is often
unclear. There is a risk that these laws may be interpreted and applied in conflicting ways from state to state, country to
country, or region to region, and in a manner that is not consistent with the Company’s current data protection practices.
Complying with these varying international requirements could cause the Company to incur additional costs and change
its business practices. Further, any failure by Atari to adequately protect its users’ privacy and data could result in a loss
of player confidence in its services and ultimately in a loss of users, which could adversely affect its business.
Atari has engaged an outside non-profit self-regulatory entity to review its privacy policies and to provide guidance in this
area.
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 is no other governmental proceedings, judicial or
arbitration, including any proceedings which the company had knowledge, which is pending or threatened, which may
have or have had in the past 12 months, significant effects on financial position or profitability of the company and / or
group.
The company considers that, given the status of the proceedings and based on the information at its disposal, most of
the litigation risks should be classified as contingent liabilities within meaning of IAS 37, and that accordingly no
provisions need to be set aside. However, for some of the litigations, the Company has been able to estimate the
potential risk and as a result has accounted for provisions. As a result, it decided to account for €1.2 million of provisions
for the Fiscal Year 2011/2012 and €1.7 million for the Fiscal Year 2010/2011.
Main 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 former 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
2012. The preliminary audience’s court has been postponed to September 2012.
Hasbro, Inc. vs. ATARI SA
The case settled in July 2011 and each party fully released the other. Atari will continue to develop and market several
games under license from Hasbro and Wizards of the Coast, including the #1 Xbox LIVE® hit Dungeons & Dragons:
Daggerdale and Heroes of Neverwinter for Facebook. The litigation was as follows: Hasbro, Atari’s licensor for exclusive,
world-wide rights to create, design, develop, manufacture, have manufactured, market and sell digital games based upon
the Dungeons & Dragons worlds, sued Atari in federal District Court in Rhode Island on December 16, 2009. Hasbro’s
Complaint alleged breach of contract, asserting that Atari had entered into unapproved sublicenses, allowed access by
an un-authorized sub-licensee to confidential information as well as other claims such as intentional misrepresentation
and an accounting of monies paid for certain activities. Hasbro is requesting that the court determine that contract can be
terminated. Atari countersued Hasbro on December 22, 2009 for over $100 million in damages, alleging, among other
things, breaches of contract including unapproved removal of certain Dungeons and Dragons realms, and a claim of
tortuous interference with Atari’s relationship with its potential sub-licensees. On June 1 and 2, 2010 Atari and Hasbro
engaged in mediation. Upon the conclusion of the mediation, the case had not settled. Subsequently, discovery
commenced. The parties engaged in motion practice on various issues. There were discussion between the parties
about re-engaging in mediation in early 2011, but this process became unnecessary.
Walker Digital v. Atari, Inc., Cryptic Studios, Inc. and others
Atari, Inc. and its former division, Cryptic Studios, Inc. have been sued, along with 20 other video-game-industry entities
by a company known as Walker Digital LLC for patent infringement. Walker Digital has not specified the amount of
money that they are claiming as damages. The suit resides in federal court in the District of Delaware and was filed on
April 11, 2011. Atari has been served. Walker Digital is operated out of Stamford, CT. Cryptic is being sued for
technology associated with the game known as Star Trek Online and Champions Online. The technology allegedly
infringed is associated with making and using systems for remote auditing of computer generated outcomes, allowing
saving of game outcomes for further use as well as monitoring the amount of time a player spends playing a game. Atari
is being sued for technology that is claimed to be utilized by Faries vs. Darklings, Yar’s Revenge and Asteroids Online in
that the Atari system allows the saving of game outcomes for further use, as well as monitoring the amount of time a