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Claims Japanese Rival Monopolizes Market : Atari Games Sues Nintendo for $100 Million

December 13, 1988|CARLA LAZZARESCHI | Times Staff Writer

Atari Games Corp. on Monday sued rival home video giant Nintendo Co. for $100 million, claiming it has unfairly monopolized the multibillion-dollar-a-year home video game market.

And, in a related move, an Atari Games subsidiary launched a line of Nintendo "clone" home video games on cassettes that are compatible with the Nintendo video player but not authorized by the Japanese game maker.

Two-Pronged Attack

Nintendo, whose U.S. operations are based in Redmond, Wash., declined to comment on the moves.

The two-pronged attack, which coincides with the pre-holiday rush for home video game systems, challenges one of the basic business strategies that has helped give Nintendo more than 80% of the home video game market: manufacturing all cassettes intended for its players.

Although Nintendo licenses more than 30 firms to develop game software and to market the completed game cassettes for its video player, the company insists on manufacturing and encoding all of the cassettes. The company claims this requirement assures that all game cassettes meet its quality standards and that the supply of games does not exceed demand.

However, Atari Games claims the requirement freezes out competition since all licensees must buy their game cassettes from Nintendo, in limited quantities set by the company. Atari Games, which is unrelated to computer maker Atari Corp., has had a licensing agreement with Nintendo for three games: Pac-Man, Gauntlet and RBI Baseball.

Frustrated by Supplies

"We have been able to get only a small fraction of the games we want (to sell) into the market," said Dennis Wood, senior vice president for Atari Games in Milpitas, Calif. "We are so frustrated by our inability to get the proper supplies."

In its suit, filed in U.S. District Court in San Francisco, Atari Games said it had lost between $30 million and $35 million as a result of the lack of adequate supplies. Atari is seeking three times its direct losses in its $100-million lawsuit.

In addition to the court challenge, Atari Games said Monday that it had replicated the game cassette's computer chip that Nintendo has used to ensure that only Nintendo-made games are played on its machines. Atari Games likened its achievement to developing "the functional equivalent of a key that unlocks the lockout system." The first games that Atari will market on its "clone" cassettes are Pac-Man, Gauntlet and RBI Baseball.

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