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LEGAL ISSUES

Zynga Sued for Patent Infringement

The world's largest social gaming company is under fire for allegedly infringing on patents found in nearly every one of its games.

As the world's largest social gaming company preps for its $1 billion IPO, Zynga will reportedly have to deal with a new lawsuit. Agincourt Gaming, a Plano, Texas-based company and relative newcomer to the social gaming sector, has sued Zynga for patent infringement, seeking unspecified monetary damages and requesting a permanent injunction that could shut down the company's games on Facebook, such as FarmVille and Mafia Wars.

According to the lawsuit, the games that violate Agincourt's patents include Farmville, CityVille, FrontierVille, FishVille, PetVille, YoVille, Zynga Poker, Empires & Allies, Mafia Wars, Treasure Isle, CafeWorld, and Vampire Wars.

Agincourt, which is only really known for its Greco-Roman combat game on Facebook called Pantheon, alleges owning "foundational patents that claim priority back to 1996," including concepts and processes like a credits and prize redemption system based on the outcome of gameplay.

"Agincourt's patents cover the most lucrative aspects of online social gaming—including those comprising the bulk of Zynga's revenues—as they contain the crucial 'link' that allows for global, interactive prize redemption over the Internet," says Bill Carmody, a senior partner at Susman Godfrey LLP, Agincourt's lead counsel.

According to eMarketer, consumers spent $510 million on virtual goods in social games and are expected to shell out another $653 million this year.

This is not Zynga's first run-in with intellectual property issues. According to Gene Quinn, president of IP Watchdog, Zynga's recently revised S-1 filing reveals that the company has already dealt with a number of trademark, copyright, patent, and IP allegations in the past. In fact, Zynga's new Registration Statement says that the company's intellectual property practices "may not have been as robust as they are now, and there may be unasserted claims arising from this period that we are not able to anticipate."

Between Zynga's "weak patent portfolio" and the fact that the company will soon be flush with money once its IPO arrives, Quinn believes "Zynga will inevitably be the target of patent infringement litigations moving forward."

Zynga delayed its IPO to amend its S-1 form last week, but still hopes to raise $1 billion in its IPO and earn a valuation between $10 billion and $20 billion.

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