Three big video game publishers sued Yahoo! for allegedly allowing the sale of counterfeit video games on its auction Web site.
Electronic Arts Inc. (ERTS) and the U.S. subsidiaries of Sega Enterprises Ltd. and Nintendo Co. filed the lawsuit in U.S. District Court in San Francisco. They are seeking an injunction to halt sales of counterfeit games on Yahoo! (YHOO). The suit is the first time the companies have taken on an online retailer. Electronic Arts is based in Redwood City, Calif., while Sega and Nintendo are based in Japan.
Diane Hunt, a spokeswoman for Yahoo! in San Jose, Calif., said the company hadn't seen the suit yet and couldn't comment on it. She noted that Yahoo! shuts down illegal auctions when it hears about them from buyers or sellers, but so far hasn't found a practical way to search through "millions of listings" for possible illegal items.
The lawsuit alleges Yahoo! profits from the sales and is aware they are happening. Richard Flamm, general counsel for Nintendo of America in Redmond, Wash., said Yahoo hasn't responded to requests to stop the activity.
Collectively, game publishers say they lose $3 billion a year to game piracy, either on the Internet or through fake games sold at retail. In the past, they have aggressively pursued pirates selling goods in international markets as well as students who make copies of their games and post them for sale on Web sites.
The case highlights the vulnerability of online auctioneers to liability issues involving the kind of goods that they allow to be sold on their Web sites. The game companies say auctioneers such as Yahoo! don't do enough to stop the activity.
Electronic Arts noted in the suit that it deliberately decided to kill an unpublished game, "Thrill Kill," because of its violent content. But, according to the lawsuit, the company was irked to discover "Thrill Kill" was being sold illegally at Yahoo! Auctions. Electronic Arts said it told Yahoo! about the activity, but its concerns were disregarded.
Nintendo likewise said counterfeit versions of games for all of its game consoles and handheld players are being sold on the Yahoo! site. In addition, sellers regularly hawk illegal devices such as "mod chips" that allow people to make illegal copies of game cartridges and convert them to PC games. Sega, meanwhile, said hot games for its Dreamcast console such as "Crazy Taxi," "Sega Rally 2," "House of the Dead" and "Soul Caliber" are being sold on Yahoo!.
The game companies want Yahoo! to make use of its automatic search capabilities to immediately detect and shut down postings by users who are selling counterfeit games.