Zynga and Electronic Arts Agree to Drop Court Claims Against Each Other

Andrew Klips  |

Social game maker Zynga Inc. (ZNGA) and game maker Electronic Arts, Inc. (EA) have come to an agreement to mutually drop competing lawsuits over alleged copyright violations and employee recruiting, according to a filing with the U.S. District Court for the Northern District of California.

Terms of the settlement were not disclosed, but it has been agreed that all claims and counterclaims will be permanently dropped.

The battle between the two gaming companies started last August when Electronic Arts charged that Zynga’s game “The Ville” infringed on copyrights protecting Redwood City, California-based EA’s game “The Sims Social.”  Further, Electronic Arts alleged that Zynga was able to reproduce the game in their own format by poaching EA employees that had intimate information about the development of the popular game.

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San Francisco, California-based Zynga denied the contentions and fired back with countersuit claims contending that EA was had violated a 2011 agreement between the two firms by taking inappropriate steps to try and keep employees from leaving its company to pursue employment at Zynga.

In response to 2010 initiatives of U.S. antitrust officials, many companies do not enter into “no hire” agreements as frequently as they did in the past amid stiff competition to hire and/or retain talented employees in Silicon Valley.

Ultimately, The Ville never garnered the support of users that was originally anticipated and Zynga cut expenses related to its development in October as part of a wider budget cut.  Zynga posted a nearly $210 million loss in 2012, although it did manage to beat analyst expectations with 1 cent per share in earnings in the fourth quarter, according to its statement on February 6.

Shares of Zynga have had a nice, little run with the earnings beat, breaking through technical resistance at $2.75 to climb as high at $3.75 per share on February 11.  The subsequent four days saw a retracemtent with shares falling back to Friday’s closing price of $3.20.

Electronics Arts has had a fruitful 2013 to date.  Shares closed at $16.97 on Friday, representing 17 percent increase in value since the start of the 2013 year.

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