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Activision (NASDAQ: ATVI) can rock its shareholders just as hard as a blood-spitting Gene Simmons at a Kiss concert. And we all know why -- the Guitar Hero franchise is, simply put, one of the most popular videogames out there, and it is available for all the major console systems from Sony (NYSE: SNE), Microsoft (NYSE: MSFT) and Nintendo (OTC: NTDOY). It's also a pain in the neck for other publishers such as Electronic Arts (NASDAQ: ERTS), Take-Two (NASDAQ: TTWO) and THQ (NASDAQ: THQI), since they have to put up with the franchise's dominating power. But guess what, the inevitable has come to pass -- Activision is being accused of patent infringement!
Yes, you can't be very popular, you can't rake in millions and millions of dollars in profit for shareholders and expect to get away unscathed. Gibson Guitar, according to this Associated Press piece, believes Guitar Hero infringes on a patent it holds for a rock-concert simulator. The patent apparently goes back to 1999 and it contains a description for a system that uses a 3-D headset in conjunction with a musical playback. Activision decided to file a suit to get a court decision declaring that it is not infringing on any existing patent.
I guess we'll have to wait and see what happens with this lawsuit. Gibson obviously wants in on the monetary action generated by Activision's goldmine product. If Gibson prevails with its legal complaint, then it would obviously be bad for Activision and its shareholders (I am one of them). I'm not sure, though, if this is going to turn out to be a big deal; this is just my opinion, but it just doesn't feel like Activision is really doing much infringing on this patent. I read the patent after searching for it on Google and don't see how Activision would lose a legal defense against the claim. But, full disclosure -- I am not a patent lawyer.
I wonder how EA feels about this legal issue, considering it has its own Rock Band videogame on the market -- and remember, Rock Band was developed by Harmonix, the developers of the original Guitar Hero. Viacom (NYSE: VIA) owns Harmonix now, and in case you were wondering, Activision got the Guitar Hero brand after buying out Red Octane, Guitar Hero's publisher. Got all that straight in your head? At any rate, this should be an interesting one to watch...
Disclosure: Steven Mallas owns shares of Activision; positions can change at any time.
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