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Atari can appeal because law may change before hearing

Case pending two landmark verdicts

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A claim in a court case over payment discrepancies to the author of Atari computer games can proceed because the law may have changed by the time the case gets heard.

The Court of Appeal has allowed a part of Atari's argument to remain in its case, even though it has no prospect of success under current law. The Court said that the law could change because of two landmark verdicts expected between now and the hearing of the case.

The case involves game developer Chris Sawyer and Atari, which publishes and markets Sawyer's RollerCoaster Tycoon series of games.

The ruling relates to a counter-claim made by Atari against Sawyer and is part of pre-trial hearings. The full case is unlikely to be heard at the High Court until 2008.

The dispute began when Sawyer asked auditors to examine Atari's accounts in relation to his games, but was told that auditors could not see accounts further back in time than a certain date. Sawyer disputed this and said that Atari was breaching the terms of the licence he had signed with it.

Atari counter-claimed that Sawyer had broken its exclusive licensing agreement. They say he permitted a company called Frontier to produce an additional format of the game to be sold to a third party called the Thrills Game. Frontier produced a demo under the condition that it was only to be used as a demonstration version.

Atari argued that in granting Frontier the right to produce a demo disc, Sawyer was effectively enabling Frontier to sell its vision of the next game in the series to parties other than Atari, and was therefore an inducement on Frontier to breach its contractual obligations to Atari.

It is this point which has led to the Court of Appeal hearing. The counter-claim was ruled against by the High Court, but Atari sought leave to appeal to the Court of Appeal. That Court said that its appeal will depend on awaited Lords rulings.

According to the most recent judgments on the issue, someone can only be guilty of inducing someone to breach a contract if there is an intention to harm. That interpretation of the law is the subject of two separate appeals to the House of Lords, prompting fears that the law could change soon. Appeals court judge Lord Justice Chadwick said that it would be unfair to rule now if the law was about to change.

The two cases which have already been heard and await judgment from the Lords are that of Michael Douglas and Hello! magazine, and an employment contracts dispute involving Mainstream Properties.

"We must consider whether – notwithstanding that the judge took a correct view on the law as it was when the matter was before him (and as it remains in this Court) – this is one of those unusual cases in which a claim which the court considers has no real prospect of success (as the law stands) should, nevertheless, be permitted to go to trial," said Chadwick in his ruling.

"In my view this is such a case. This Court must recognise the possibility that, when judgments in Douglas v Hello! Ltd and Mainstream have been delivered by the House of Lords, it will be seen that the view of the law taken by the Court of Appeal in the Mainstream case was not correct. If that were the position, then there would be a potential for injustice if Atari's claim in respect of inducement to breach of contract were struck out on the basis of the law as it is now understood."

"The more sensible course, as it seems to me, is to allow the claim to proceed on the basis that, by the time the issue comes to trial, judgments in Douglas v Hello! Ltd and the Mainstream case may well have been handed down by the House of Lords," he said.

In his ruling, Chadwick said he would expect Atari to withdraw its case should the Lords leave the precedents set in the Douglas and Mainstream cases unchanged.

"If those judgments uphold the view of the law taken by this Court, then it may be expected that Atari will recognise that its claim in respect of inducement to breach of contract must fail; and the claim will be abandoned," he said.. "Alternatively, Mr Sawyer can apply, again, for the claim to be struck out. If those judgments indicate that a different view of the law should be taken, then the trial will proceed on the basis of the law as revealed by the House of Lords."

Copyright © 2007, OUT-LAW.com

OUT-LAW.COM is part of international law firm Pinsent Masons.

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