Gearbox sues 3D Realms over new Duke Nukem game

Gearbox Software has filed a lawsuit against both 3D Realms and Interceptor over their use of the Duke Nukem trademark and copyrights in a new Duke Nukem title, “Duke Nukem: Mass Destruction.” I’ve put together this post to anticipate some common questions about the lawsuit and contracts like this in general.

What happened?

In 2010, Gearbox purchased the Duke Nukem IP, including all trademarks and copyrights, from Duke Nukem creator 3D Realms, with “limited exceptions.” A complaint filed in the Northern District of Texas states that 3D Realms then attempted to convince Danish developer Interceptor that the sale never happened. Interceptor then began to develop a Duke Nukem product, entitled “Duke Nukem: Mass Destruction.” Gearbox sent a Cease & Desist letter to 3D Realms, warning them to end their “collusion” with developers to exploit the Duke property and threatening legal action (as any good C&D letter will) if they fail to comply.

Days later, 3D Realms partners Scott Miller and George Broussard executed a “Breach Letter,” acknowledging that they had sold the rights to all future Duke titles to Gearbox and that the new game would be an infringement of that agreement. When Interceptor and 3D Realms failed to cease the development and advertising of the game, Gearbox filed their lawsuit on February 21.

Why Texas? And how can they make a company from Denmark come all the way there to defend the lawsuit?

In the complaint, Gearbox notes that the venue in Texas is proper since 3D Realms is headquartered there. Why, then, would it proper to also bring Interceptor, a company from Denmark, all the way to Texas? Because Interceptor has purposefully entered that jurisdiction to do business with 3D Realms, they have sufficient contacts in the district to be brought to court there.

Isn’t Interceptor an innocent party here? What recourse could they have?

If they truly are innocent here and were unaware that 3D Realms didn’t have the rights to create a new Duke Nukem game, they most likely have a couple of options. First, they could settle with Gearbox out of court, coming to an agreement to either pay them an undisclosed amount of damages or cease their use of the trademark and copyrights.

Second, they could potentially sue 3D Realms for breach of contract. Most agreements have a “Warranties and Representations” clause in them (see my post on the subject here).

I’m just speculating, but the contract between 3D Realms and Interceptor probably had a clause where 3D Realms warranted that they, in fact, owned the rights to be able to license the Duke Nukem name to Interceptor. If they didn’t actually have those rights, then Interceptor could sue 3D Realms for whatever damages are incurred due to that breach.

This could be anything that had to be paid as part of the lawsuit with Gearbox, as well as any money spent creating the game so far. They could even possibly get, as damages, the value of the contract in total, since that was their expectation when they signed the agreement with 3D Realms. This, however, is all speculation and one would have to have the agreement in hand to be sure.

There could also be an indemnification clause, which could say that 3D Realms would have to pay for whatever legal fees and costs that Interceptor spends defending themselves as part of that contract. Suffice it to say, if they entered the agreement in good faith, they most likely have legal options.

However, it is also entirely possible that Interceptor should have known about the sale of the Duke Nukem name to Gearbox. If Gearbox can prove that they knew, this would be bad faith, and they may still be on the hook. Once again, all of this is fact-dependent and will most likely come out in discovery should the dispute actually reach the trial stage.

Conclusion:

It remains to be seen how this will all shake out. My money is on settlement; it seems pretty obvious that, at the very least, 3D Realms were not in the right. Whether or not Interceptor knew about it, though, would be interesting to see. Usually, however, this kind of thing doesn’t make it as far as a trial. A settlement between the parties is likely.

If you are looking to license an IP, you may want to contact an attorney first to ensure clean chain of title and an agreement that protects you should things go wrong. 

originally posted on my blog at www.strebecklaw.com/blog