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Disney's Playdom, Zynga Settle Trade-Secrets Lawsuit

Date: Nov 23 2010 05:52:49 Source: businessweek.com Views:
KeyWord: Disney, Playdom, Zynga, FarmVille, Mafia Wars

Walt Disney Co.'s Playdom settled a lawsuit filed by Zynga Game Network Inc., the biggest maker of games on Facebook, alleging theft of trade secrets.

Terms of the settlement are confidential, the companies said today in an e-mailed statement. Zynga is "extremely pleased" with the resolution, Reggie Davis, the San Francisco- based company's general counsel, said in the statement.

Disney is moving ahead with plans to use Playdom, the Mountain View, California-based maker of "Social City," to expand its presence on social-network websites including Facebook Inc., with more than 500 million users worldwide. Disney acquired the company in August for $563.2 million

Disney declined to comment on the settlement, Jonathan Friedland, a spokesman for the Burbank, California-based company, said in an interview. The company was aware of Zynga's lawsuit when it bought Playdom, he said.

"The settlement reflects the very serious nature of the conduct involved," Zynga's Davis said in the statement.

Zynga accused Playdom of using its "Playbook," a proprietary document that "is literally the recipe book that contains Zynga's 'secret sauce,'" according to papers filed in California state court in Santa Clara County.

That book contains "the most material non-public commercially valuable concepts, techniques, know-how and best practices for developing successful and distinctive social games," the company said in its pleadings.

'Mafia Wars'

Playdom also elicited proprietary information from prospective employees in the guise of pre-employment interviews in which Zynga workers were given a "small assignment" to contrast and compare the two companies' games and asked to propose new features, Zynga said in court papers.

The settlement also resolves claims against co-defendants, former Zynga employees Raymond Holmes, David Rohrl and Martha Sapeta. Rorhl was Zynga's director of game design, and Holmes was a senior systems designer, according to court papers.

Zynga, the closely held maker of "Mafia Wars," which is played on Facebook, is the largest provider of games on social networks, according to researcher AppData.com. Zynga also created "FarmVille," "Pirates" and "YoVille."

Playdom created "Mobsters," which infringes the "Mafia Wars" trademark, Zynga said in its pleadings. Other Playdom games are "Sorority Life" and "My Green Garden."

Disney, the world's biggest media company, fell 83 cents, or 2.3 percent, to $36.12 at 4 p.m. in New York Stock Exchange composite trading. The shares have climbed 12 percent this year.

The case is Zynga Game Network Inc. v. Playdom Inc., 109- cv-151723, California Superior Court (Santa Clara County).

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