Court Denies Fallout Video Game Temporary Restraining Order Against Masthead Studios

Bethesda Softworks and Interplay Entertainment have waged a long-running, real world copyright and trademark battle over the virtual-world Fallout video game. The Bethesda v. Interplay Maryland lawsuit apparently arose over an ambiguity in the scope of a license back to Interplay in developing future Fallout video games. In 2007, Bethesda and Interplay entered into an asset purchase agreement that assigned all rights in the Fallout trademarks and copyrights to Bethesda. And, in a simultaneously executed trademark license agreement, Bethesda granted a license back to Interplay that provides:

Subject to the terms and conditions set forth in this Agreement, Bethesda grants to Interplay an exclusive, non-transferable license an right to use the Licensed Marks on and in connection with Interplay’s FALLOUT-branded [Massively Multiplayer Online Game] MMOG (the “FALLOUT MMOG” or “Licensed Product”) and for no other purpose. The conditional license herein does not grant Interplay any right to sublicense any of the licensed rights without Bethesda’s prior written approval.

In its initial filings, Bethesda claimed that Interplay failed to meet other contractual requirements, including securing required financing and complying with commercial launch deadlines. Later, Bethesda claimed that the trademark license applied only to the Fallout mark and not to any of the elements or characters in the game. Interplay countered that Bethesda’s interpretation cannot be harmonized with the rest of the agreement that provides for Interplay’s right to use “non-FALLOUT MMOG, inter alia, any or all locations, graphic representations, creatures, monsters, names, likenesses, [etc.]” should the agreement terminate prior to commercial launch. The Maryland court appears to have initially agreed with Interplay’s interpretation by denying, without much analysis, Bethesda’s motion for preliminary injunction.

Undeterred, and possibly seeking a change of scenery, Bethesda has filed a new copyright infringement lawsuit against Masthead Studios in Los Angeles. Bethesda alleges that Interplay has, in violation of the trademark license, entered into a product development agreement with Masthead for the development of a Fallout video game called Project V:13 by improperly sublicensing Bethesda’s intellectual property. This time, Bethesda wastes no time in alleging that under the Interplay trademark license, in “plain, clear and unambiguous” terms, Bethesda “granted Interplay a conditional license to use only the ‘FALLOUT’ trademark and nothing more relative to a Fallout-branded MMOG. Bethesda did not provide Interplay with any license to use any copyrighted materials relating to Fallout — all copyrighted materials were retained exclusively by Bethesda.” Bethesda claims that Masthead’s performance of its duties under the Interplay agreement is both a direct and contributory infringement of its copyrights and filed for a temporary restraining order.

The Hon. John F. Walter, without even the benefit of an opposition from Masthead, denied Bethesda’s ex parte application for a temporary restraining order:

Plaintiff has not demonstrated that it will be irreparably prejudiced if the requested ex parte relief is not granted, or that it is without fault in creating the crisis that requires ex parte relief. Indeed, Plaintiff was aware as early as February 2011 that Masthead was potentially infringing its copyrights. . . . Bethesda Softworks LLC v. Interplay Entertainment Corp., Case No. 09 CV 2357, D. Maryland, Memorandum in Support of Plaintiff’s Motion for Preliminary Injunction at p. 7 (“According to Interplay, pursuant to this purported development agreement, Masthead Studios is assisting Interplay in developing its Fallout MMOG using the copyrighted Fallout works.”). Yet, Plaintiff waited seven months to apply for ex parte relief. The Court finds that Plaintiff unreasonably delayed in seeking relief, and that the emergency that allegedly justifies a TRO is self-created. Accordingly, Plaintiff’s Ex Parte Application for Temporary Restraining Order and Order to Show Cause Re: Preliminary Injunction is DENIED. If Plaintiff wishes to pursue its request for injunctive relief, it may do so by way of regularly noticed motion after complying with Local Rule 7-3.

Further, the Court denied Bethesda’s ex parte application for substituted service on Masthead, a Bulgarian software company.

The case is Bethesda Softworks, LLC v Masthead Studio, Ltd., CV11-7534 JFW (C.D. Cal. 2011).