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Atari Sues Nintendo, Accuses Rival of Monopolizing Games

February 01, 1989|CARLA LAZZARESCHI | Times Staff Writer

Nintendo of America, maker of the red-hot video game system, was sued Monday for $250 million by archrival Atari Corp., which accused Nintendo of unfairly monopolizing the billion-dollar video game market.

The suit is the second in as many months charging Nintendo with illegally locking competitors out of the lucrative and fast-growing video game market. In December, Atari Games Corp., which is unrelated to Atari Corp., filed a similar suit for $100 million.

Analysts have said that if the legal maneuvers are successful, Nintendo stands to lose the hold it has on up to 85% of what analysts estimate will be a $2.3-billion market for video games this year.

A Nintendo spokeswoman said late Tuesday that the company was unaware of the Atari Corp. suit and could not comment on it.

Filed Tuesday in U.S. District Court in San Jose, Atari Corp.'s suit alleges that Nintendo has monopolized the video game market by preventing creators of games licensed for for Nintendo systems from selling those games for use on competing video game systems, such as those make by Atari.

In its complaint, Atari says "developers are faced with the choice between selling games only to Nintendo customers or not selling." As a result, Atari says game creators--fully aware of Nintendo's strong market position--"yield to coercion from Nintendo" and leave Atari and other manufacturers of video game consoles unable to obtain many popular games for use on their own systems.

An Atari official likened the arrangement to a computer manufacturer ordering a software publisher not to create a version of a popular program that could operate on a competitor's computer system.

"It simply doesn't happen that way in the computer world, and it shouldn't happen in the video game world either," said Joshua Tropper, an attorney for Atari Corp. "We want customers to be able to buy hot games that can be played on our systems, not just Nintendo's."

At issue, Tropper said, is the licensing agreement that Nintendo requires game developers to sign. The developer agrees that it will not create versions of a video game to operate on rival systems, such as Sega or Atari. The three video game systems each use separate operating systems, and games for one machine cannot be used on a competing one.

The suit from Atari Games--a creator of video games, not video game consoles--charged that Nintendo freezes out rival game makers by requiring them to put their games on Nintendo-made game cassettes.

Although Nintendo, which also publishes games produced by its own staff, says the requirement ensures high quality standards for all games designed for its systems, Atari Games said it effectively allows Nintendo to ration the number of games produced by rival game creators.

Atari Games has further challenged Nintendo by producing games on its own that can operate on the Nintendo system. Nintendo has challenged the move as an illegal appropriation of the proprietary technology in its game systems.

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