In May, a jury in a Texas federal court found that Finnish mobile game developer Supercell infringed on six patents held by gaming-focused Japanese internet media company Gree. The jury in the Eastern District of Texas found that Supercell “willfully infringed” on six patents held by Gree and awarded the company a lump sum of $92.2 million USD.
Tencent Holdings holds a controlling minority interest in the Helsinki-based mobile game developer, the Chinese conglomerate held a 50% stake in a Luxembourg-based consortium, which acquired an 81.4% stake in Supercell in 2016 to replace Japan’s SoftBank as the developer’s majority shareholder, before increasing its stake in the consortium to a controlling 51.2% in October of 2019. Supercell has developed several games that are popular esports titles in China and other regions such as Clash of Clans, Clash Royale, and Brawl Stars.
In the U.S., Clash of Clans has been downloaded 96.2 million times, Clash Royale 57.6 million times, and Brawl Stars 19.4 million times (Sensortower data for Clash of Clans is for downloads from Jan. 1, 2014, to May 31, 2021). Globally, Clash of Clans has been downloaded 732.7 million times on iOS and Android devices, Clash Royale 512.2 million times, and Brawl Stars 291 million times as of May 31, 2021, according to data provided by Sensortower.
Gree and Supercell have been sparring in court over patents for quite some time. Prior to this ruling, Supercell lost a similar case against Gree in September of 2019 that awarded the Japanese developer $8.5 million for infringing on five patents. Another trial is set to begin in August between the two companies to deal with further claims of infringement.
Darius Gambino, a partner at Pennsylvania-based law firm Saul Ewing Arnstein & Lehr LLP and an attorney specializing in intellectual property litigation, recently spoke with The Esports Observer about the implications of this case on mobile games and esports more broadly.
First, Gambino laid out what happened in May and where he thinks the case will be headed next.
“So you have the $92.2 million jury verdict, which Judge Rodney Gilstrap now has and what typically happens, and we saw this happen in the SCUF Gaming and the Steam controller case, is that once you have a verdict, the attorneys for each side make post-trial motions and, and that’s what is going on right now, though none of them have been filed yet,” Gambino said. “But I would expect that Supercell would come back and try to get this verdict thrown out or reduced in some way.”
He also found it interesting that the jury, which took two hours to deliberate, decided that Supercell “willfully infringed” on Gree’s patents.
“The thing that’s interesting about the verdict is that the jury actually found that there was willful infringement so that $92.2 million number could actually wind up getting tripled,” he said. “And that’s something else that’s in the hands of the judge right now.”
All these lawsuits – the one that ended in September of 2019, the most recent one in May, and the one coming up in August deal with different patents, according to Gambino.
“There are six patents that are at issue here. And just to put this in perspective, Gree and Supercell had a prior trial about six months ago before the same judge in the same court that resulted in about an $8.5 million verdict in favor of Gree. There’s this one now, and then there’s another one that’s coming up that’s scheduled for trial, in August. Each one is dealing with different sets of patents. This one in particular deals with the concepts that we normally associate with a city building game, where you start out with a blank piece of land or a blank canvas, and you’re adding a little settlement, and then a turret, for example, then you’re building it up over time.”
Gree could choose to sue other developers in different countries assuming it already holds patents in those regions because patents are territorial. “You have to hold a patent in each separate place where you would want to bring a suit,” Gambino said. He also thinks that Gree probably chose a United States court to sue Supercell because it would make the biggest statement.
“I think the reason they choose the U.S. is because these games are so popular here and it makes a big statement,” he said. “If you look at what the damages expert in this [most recent] case said, he was arguing that this particular game Clash of Clans made $3 billion over the time period of the infringement. That’s a pretty big number.”
Beyond the possibility that a judge could award “treble damages” (to the tune of roughly $276.6 million) because the jury in the latest trial ruled that the infringement was “willful,” Gambino says that Gree could ask a judge to file a preliminary injunction against games that infringed.
“We really haven’t ever seen that [an injunction against a game] before in the video game space that I can recall; a judge basically saying, ‘you have to shut this game down because it infringes.’ If we get to that point where this judge in Texas says, ‘Yes, I agree there should be an injunction against the infringement of these patents,’ and that means completely shutting down Clash of Clans, that would be a huge turn of events.”
Gree suing Supercell in China where Clash of Clans and Clash Royale are thriving esports is not likely to happen, at least for now, according to Gambino, because cases like these take an incredibly long time.
“Patent litigation in China is much more difficult. It takes a lot longer even for a Chinese company. One of the reasons I think that they chose the Eastern District of Texas for this particular litigation is that that jurisdiction is known to be notoriously fast and plaintiff-friendly. They chose that because they feel that they can move things forward quickly towards a verdict. And if they get that verdict, that may be all the leverage that they need to stop games in other jurisdictions where they have patents.”
Finally, Gambino thinks Gree will inevitably sue other mobile game developers because it has found success against Supercell in several lawsuits, and in turn, Supercell will file an appeal on this latest ruling at the D.C. Circuit Court.
Editor’s note: A paragraph that contained unintentionally misleading/confusing information about how Supercell operates its esports competitions and who it works with has been removed. You can learn more about Supercell’s Clash of Clans esports structure here.
