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LUCASARTS ENTERTAINMENT CO. v. HUMONGOUS ENTERTAIN

September 1, 1993

LUCASARTS ENTERTAINMENT COMPANY, Plaintiff,
v.
HUMONGOUS ENTERTAINMENT COMPANY, a Washington corporation, Defendant.



The opinion of the court was delivered by: WALKER

 This suit arises as a result of an agreement between Electronic Arts, Inc ("Electronic Arts") and defendant Humongous Entertainment Company ("Humongous"), granting Electronic Arts the right to distribute Humongous' products, including a computer video game entitled Putt Putt Joins the Parade. Humongous' principals are former employees of plaintiff LucasArts Entertainment Company ("LucasArts"), who created a software tool called the Script Creation Utility for Maniac Mansion ("SCUMM") System. The SCUMM System is a tool used in the development of computer video games. LucasArts subsequently licensed the SCUMM System to Humongous under limited terms and conditions. Among other things, the license agreement states that Humongous may not sell its games which utilize the SCUMM program to any third party distributor other than LucasArts for less than a certain price and that Humongous must verify its compliance with the licensing agreement at LucasArts' request. The precise language as outlined in section A.1.1.1(b) of the license agreement is as follows:

 
For a period of three (3) years commencing on the Effective Date, [Humongous] may not sell any product it develops using the SCUMM System to any third party distributors in North America other than [LucasArts] for less than seventy-five percent (75%) of the six month rolling average wholesale price, net of any promotional allowances, at which such products are re-sold to North American retailers (current examples of which include Software, Etc.; Babbages; and Electronic Boutique). [LucasArts] reserves the right to verify such wholesale price upon [LucasArts'] request in writing to Licensee. After such three year period, the foregoing price restriction will be inapplicable.

 LucasArts brings this suit alleging, among other things, that Humongous violated the terms of the licensing agreement by (1) failing to follow the terms of the price restriction provision and (2) allowing a third party (i.e., Electronic Arts) to publish Putt Putt Joins the Parade. Humongous and Electronic Arts deny such allegations and bring counterclaims for violation of federal and state antitrust laws, intentional interference with contractual relations, intentional interference with prospective economic advantage, and unfair competition.

 Humongous now moves to amend its counterclaim to add a count for breach of contract and to add factual matter to its claim for interference with prospective economic advantage. In addition, Electronic Arts moves for partial summary judgment on its antitrust claims on the grounds that: (1) the price restriction in section A.1.1.1(b) of the Licensing Agreement between LucasArts and Humongous is per se illegal and unenforceable; (2) the restriction constitutes a per se illegal and unenforceable boycott; and (3) LucasArts' enforcement of section A.1.1.1(b) constitutes copyright misuse preventing enforcement of LucasArts' copyright. Finally, LucasArts moves for summary judgment on each of the claims set forth in Electronic Arts' and Humongous' counterclaim.

 Having reviewed the papers submitted and considered the oral arguments of counsel at a hearing on June 3, 1993, the court hereby: (1) GRANTS Humongous' motion to amend its counterclaim; (2) DENIES Electronic Arts' motion for partial summary judgment on its antitrust counterclaims; and (3) GRANTS LucasArts' motions for summary judgment on Electronic Arts' and Humongous' counterclaims.

 I

 Humongous seeks to amend its counterclaim to add a count for breach of contract and to add factual matter to its claim for interference with prospective economic advantage pursuant to FRCP 15(a), or, in the alternative, FRCP 13(f).

 FRCP 15(a) provides that leave to amend "shall be freely given when justice so requires." The Ninth Circuit has interpreted FRCP 15(a) with "extreme liberality," United States v Webb, 655 F.2d 977, 979 (9th Cir 1981), and the burden of showing why leave should not be granted rests with the non-moving party, Genentech, Inc v Abbott Laboratories, 127 FRD 529, 530-31 (ND Cal 1989).

 The court finds that allowing Humongous to amend its counterclaim to add a count for breach of contract will not affect the pending summary judgment motions and will work no prejudice against LucasArts. Similarly, allowing Humongous to amend its interference with prospective economic advantage claim to add factual matter inadvertently omitted will prevent re-litigation of issues relevant to LucasArts' summary judgment motion, increase judicial efficiency and serve the ends of justice.

 The factual allegations concerning LucasArts' bad faith behavior which Humongous wants to add were already described in the third and fourth affirmative defenses in Humongous' answer to the amended complaint. Thus, the amendment would not raise new facts and should not surprise LucasArts in any way. The amendment would simply permit Humongous to correct the pleading by incorporating the allegations of the affirmative defenses into the counterclaim. For the foregoing reasons, the court hereby GRANTS Humongous' motion to amend its counterclaim pursuant to FRCP 15(a).

 II

 In addition, Electronic Arts moves for partial summary judgment on its antitrust counterclaims, which allege that section A.1.1.1(b) constitutes an illegal price fixing agreement and an illegal boycott in violation of the Sherman and Cartwright Acts. Further, Electronic Arts contends that LucasArts' enforcement of section A.1.1.1(b) ...


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