Stardock Systems, Inc. v. Reiche

Stardock Systems, Inc. v. Paul Reiche III and Robert Frederick Ford, 2018 WL 7348858 (N.D. Cal. Dec. 27, 2018), is a case where the United States District Court for the Northern District of California applied American intellectual property law to the contents and sale of computer games. Paul Reiche III and Fred Ford are the makers of the critically acclaimed 1990 Star Control game series, and Stardock is the maker of the 2018 release Star Control: Origins. The lawsuit stems from a dispute over the ownership, licensing, and infringement of the Star Control intellectual property, including both trademarks and copyrights.

In the 1990s, Reiche and Ford licensed their copyrights to publisher Accolade, to create Star Control 3 without their involvement. That license expired in the early 2000s when the games stopped being sold, allowing Reiche and Ford to re-release their assets as the open source The Ur-Quan Masters. Around this time, Accolade and their Star Control trademark were acquired by Atari SA. Years later, Stardock purchased Atari's Star Control assets in a 2013 bankruptcy auction, and began developing their Origins game. In late 2017, Stardock's disagreement with Reiche and Ford escalated towards a legal battle, with each party asserting that the other was violating their intellectual property rights: Stardock was selling the original games on Steam without Reiche and Ford's consent, whereas Reiche and Ford announced Ghosts of the Precursors as a sequel to Star Control II without Stardock's consent. After Stardock filed a lawsuit on December 8, 2017, the dispute escalated to include the contents of the games, with Reiche and Ford counter-claiming Stardock misappropriated their characters and designs in Origins, and Stardock further claiming ownership over trademarks in the aliens from the original Star Control games.

In late 2018, Stardock applied for injunctive relief to protect Origins from a Digital Millennium Copyright Act Takedown notice, which was denied by Judge Saundra Brown Armstrong. Reiche and Ford issued an uncontested notice soon after, and both Steam and GOG.com removed the games from their stores. Soon after, Stardock agreed to indemnify the digital sales platforms from litigation, who restored Origins to sale. In June 2019, the parties came to a mutual settlement agreement. Stardock would own the Star Control trademark, and drop their claims to the alien names from the original series. Reiche and Ford would own the copyrights in Star Control I and II, and the parties would avoid using characters or stories that might infringe on each other's separate games. Reiche and Ford agreed to refrain from any announcements about Ghosts of the Precursors for a few years, which would be renamed as part of the agreement.

Original Star Control series
Star Control and Star Control II were created by Paul Reiche III and Fred Ford and published by Accolade. Released in 1990 and 1992 respectively, both games received numerous awards. Journalists have listed Star Control among their best games of all time, with Star Control II earning even more "best game" rankings through the 1990s, 2000s, and 2010s. It is also ranked among the best games in several creative areas, including writing, world design, character design, and music.

Star Control was Ford and Reiche's first collaboration. The sequel was more ambitious, forcing the duo to ask their creative friends for help, and forcing Ford to financially support the team when the production went over schedule. Accolade asked Ford and Reiche to make a third game at the same budget, which they turned down to pursue other projects. As Reiche and Ford held the copyrights over first two Star Control games, Accolade licensed Reiche and Ford's designs to make Star Control 3 with a different team. Released in 1996, Star Control 3 did not enjoy the acclaimed legacy of the first two games, with reviewers noting the change in authorship. Accolade's plans for a fourth Star Control game were ultimately cancelled during development, and fans continued to demand a new Star Control game well into the late 2000s.

Separation of rights
By the early 2000s, the Accolade's publishing agreement with Reiche and Ford expired. This was triggered by a contractual clause when the games were no longer generating royalties, allowing the copyrighted content to revert to Reiche and Ford. As the games were no longer available in stores, Reiche and Ford wanted to keep their work in the public eye, to maintain an audience for a potential sequel. Reiche and Ford still owned the copyrights in Star Control I and II, but they could not successfully purchase the Star Control trademark, leading them to consider a new title for a potential follow-up. This led them to remake Star Control II as The Ur-Quan Masters, which they released in 2002 as a free download under an open source copyright license. The official free release prevented the game from becoming abandonware.

Meanwhile, the Star Control trademark was transferred to Infogrames Entertainment. This happened when Star Control publisher Accolade sold their company to Infogrames in 1999, who merged with Atari and re-branded under the Atari name in 2003. In 2011, GOG.com began selling a Star Control re-release on their digital store. Ford contacted the sales platform, saying they could not sell the games without permission, leading GOG.com to separately license the Star Control trademark from Atari, and the games themselves from Reiche and Ford.

Atari declared bankruptcy in 2013, and their assets were listed for auction. Stardock became the top bidder on Atari's Star Control intellectual property. Upon hearing the news, Paul Reiche indicated that he still owned the copyright in the original Star Control games, so Stardock must have purchased the Star Control trademark, and this was confirmed by Stardock. Indeed, the Atari asset purchase agreement listed two assets sold to Stardock: the Star Control trademark and the Star Control III copyright. As Stardock began developing their new Star Control game, they re-iterated that they did not acquire the copyright to the first two games, and that they would need a license from Reiche and Ford to use their content and lore. Reiche and Ford echoed this understanding in a 2015 Game Developer Conference interview, stating that Stardock's game would use the Star Control trademark only.

Facts
In September 2015, Stardock announced that their new game Star Control: Origins would be a prequel to Star Control. Through email, Stardock asked Reiche and Ford for a license to use their character designs, but the duo repeatedly declined. By 2016, Stardock described Origins as an alternative timeline in the same Star Control multiverse, but with none of the older games' characters, to avoid infringing on Reiche and Ford's copyrighted lore. Despite Stardock's continued offers, Reiche and Ford declined to collaborate on Origins, citing a desire to create their own sequel once they finished their ongoing projects with Activision.

In October 2017, Stardock began selling the older Star Control games via the Steam store, as a promotion for Origins. Through email, the parties began to dispute what legal rights Stardock had purchased from Atari, and whether that included distribution rights over the original series. Despite private negotiations, Stardock declined to stop selling the games, leading Reiche and Ford to formally request that Steam remove the original series from their store via a Digital Millennium Copyright Act (DMCA) takedown notice. Stardock formally contested the notice, and the sales continued. When Reiche and Ford publicly announced that they did not consent to Stardock's sale of the original series, Stardock announced that they had purchased the Star Control publishing rights from Atari, while Reiche and Ford responded that Atari's publishing rights had lapsed by Atari's own admission.

Also in October, Reiche and Ford announced Ghosts of the Precursors as a direct sequel to Star Control II. Initially, Stardock supported this announcement for Ghosts of the Precursors as a "true sequel to Star Control 2", and claimed their new Origins game would take place in an alternate universe that split off from the original series' universe. By December 1, Reiche and Ford announced that Stardock had not negotiated their legal permissions, and that "our games' universe has absolutely no connection, hyper-dimensional or otherwise". Responding to allegations that Stardock threatened to stop Reiche and Ford from releasing Ghosts of the Precursors, Stardock announced their lawyers would handle the dispute.

Trademark claim
On December 8, 2017, Stardock filed a lawsuit against Reiche and Ford in the U.S. District Court for the Northern District of California. Stardock's main contention was that their Star Control trademark was infringed when Reiche and Ford announced Ghosts of the Precursors as a "direct sequel" to Star Control II. Stardock further contended that Reiche and Ford were not the creators of Star Control, and were misleading consumers about their involvement in the series. In the months that followed, Stardock applied for more than 20 new trademarks, and filed an amended claim in March 2018 to claim ownership over them. These trademark applications included names of alien races from the original Star Control, and the mark The Ur-Quan Masters. If authorized by the United States Patent and Trademark Office, Stardock's new trademarks could have the effect of preventing Reiche and Ford from using those aliens in a new game. When correspondence surfaced that Stardock planned to use The Ur-Quan Masters and Star Control trademarks to shut down criticism from both games' fan forums, Stardock CEO Brad Wardell responded that this was a moment of anger and he had no intention of actually doing so.

Defense and copyright counterclaim
In February 2018, Reiche and Ford answered Stardock's complaint by asserting several defenses, as well as raising a counterclaim against Stardock for copyright infringement. Reiche and Ford argued that their Ghosts of the Precursors announcement did not infringe Stardock's trademark, and suggested that Atari's trademark renewal was invalid given that Star Control was not used in trade for several years. Reiche and Ford also counterclaimed that Stardock was liable for copyright infringement due to Stardock's unauthorized use of characters and designs from Star Control I and II, and unauthorized sale of the original games. Reiche and Ford further pointed out that Stardock had no valid copyright or distribution rights because, under their original contract, Accolade had lost those rights in 2001 when it ceased to sell the games in stores. Reiche and Ford also represented that they never authorized Atari or Stardock to distribute their games, but that they did authorize GOG.com. Reiche and Ford further contested Stardock's claim over The Ur-Quan Masters trademark, and alleged that Stardock had misled customers about the duo's involvement with ''Origins. ''

Settlement discussions
In March 2018, Reiche and Ford described an alleged settlement offer made by Stardock, asking Reiche and Ford to compensate Stardock US$225,000 in damages, assign their Star Control intellectual property to Stardock, and refrain from making any game in the same genre as Stardock for five years. Reiche and Ford rejected this settlement as "unfathomable". Stardock responded that the two has misrepresented the terms of the confidential settlement offer, leading Reiche and Ford to publish the settlement offer publicly. A week later, the court ordered the parties to keep all settlement negotiations confidential. As Reiche and Ford were sued personally, they turned to crowdfunding to pay for some of their legal costs.

Ruling on Stardock's motion for preliminary injunction
On September 7, 2018, Stardock filed a motion with the Court requesting a preliminary injunction preventing Reiche and Ford from issuing a DMCA takedown notice against Stardock's forthcoming Origins game. Judge Saundra Brown Armstrong denied Stardock's request on December 27, 2018, agreeing with Reiche and Ford that Stardock had been aware of the intellectual property issues by their own admission, but still started work on a potentially infringing product, calling the situation one of Stardock's own making. Describing some of the claims as "frivolous", Judge Armstrong wrote: ""

After the ruling, Reiche and Ford issued a DMCA takedown notice to Steam and GOG.com. Stardock did not file a counter-notice, and the games were subsequently removed from sale at the beginning of 2019. Reiche and Ford defended the DMCA takedown requests by pointing out that the substantial similarities between Origins and Star Control II were evidence of intentional copying, in violation of copyright. Later that month, both Steam and GOG.com restored Origins for sale. When Stardock owner Brad Wardell mentioned that the digital stores had reviewed and reconsidered the takedown, Polygon revealed correspondence where Stardock offered to accept potential copyright liability and secure both stores from the consequences of litigation.

Final settlement
In June 2019, the parties successfully negotiated a legal settlement. They agreed that Stardock will own the Star Control trademark, and Reiche and Ford will own the Ur-Quan Masters trademark, with a perpetual trademark license to the Ur-Quan Masters fan community for their open source project. Stardock also agreed to avoid using any plots, characters, or locations that would infringe on Reiche and Ford's copyrights, with the parties committing to discuss further disputes. As part of this, Stardock dropped their trademark claims to the alien names from the first two games. Reiche and Ford also agreed to remain quiet about Ghosts of the Precursors for a few years, and that their game would be renamed as part of the agreement. One of the unusual agreements in the settlement was that Stardock's owner Brad Wardell would provide Paul Reiche with honey from his bee hives, in return for which Reiche will provide Wardell with mead.