Sony Sued by Game Developer For Failing to Pay Royalties

Video game developer Tangent Games sued Sony Interactive Entertainment on Tuesday in California’s San Mateo County Superior Court for breach of contract, claiming that Sony has failed to pay Tangent Games the royalties for the distribution of the video game to subscribers of Sony’s PS+ service.

Tangent Games stated that Sony breached “its obligation to pay at least $8 million in royalties owed to Tangent…as required by [the] development agreement into which the parties entered.” Specifically, Tangent Games developed “a single-player experiential horror game” called “Here They Lie” for Sony and Sony agreed to pay Tangent royalties for the distribution of the game to PlayStation subscribers as compensation for developing the game. However, Tangent claimed that Sony has not paid it the distribution royalties that it agreed and is obligated to pay under the 2015 agreement.

During the agreement negotiations Sony Computer Entertainment America (SCEA) “sent Tangent a draft of the Agreement that sought to carve out an exception to Sony’s obligation to pay royalties in a then proposed section 4.2.1 of the Agreement. SCEA requested that it be allowed to distribute the Game without any royalty obligation to Tangent as part of a PS+ game of the month program or similar PlayStation promotion.” However, Tangent refused this proposal and told Sony “that Tangent would not accept royalty-free distributions of its Game. Over the course of the parties’ ensuing negotiations…[SCEA] deleted the proposed language that would have authorized SCEA to distribute the Game to PS+ subscribers on a royalty-free basis.” Tangent added that after dropping this proposed exception, SCEA “never made the request again and the Agreement contains no language specifying that Sony may distribute the Game to PS+ subscribers on a royalty-free basis.” Tangent further stated that both parties signed this agreement without the exception.

 The agreement, the complaint said, requires that SCEA calculate and make royalty payments. “Royalties will not be due or payable on (i) no cost distribution of the Game (ii) a sale of the Game as a stand-alone unit at less than the total cost of goods plus federal, state, local or foreign withholding sales, excise or value added taxes and duties; and (iii) distribution of the Game for replacement or corrected copies.” Moreover, the calculation of royalties will be “as a percentage of the overall amount earned in sales, but it does not limit what sales constitute royalties.” Tangent said that “outside of the three enumerated exceptions, SCEA agreed to pay royalties to Plaintiff for all distributions of the Game. Moreover, the regime for the payment of royalties encompasses more than direct sales of the Game.” Tangent pointed to PlayStation Now, a subscription game streaming service operated by Sony, stating that “a distribution made as part of subscription-based service to users counts as a distribution for which Sony must pay royalties” because “a distribution of the Game based on consumer payment is not ‘no cost’ as there is a prerequisite subscription fee.” PlayStation Plus (PS+) is also a subscription service; Tangent accuses Sony of also not paying royalties for these circumstances, despite being required by the Agreement.

Tangent Games has sought a declaratory judgment, an award for damages, an award for costs and fees, prejudgment interest, and other relief as determined by the court.

Tangent Games is represented by Gerard Fox Law P.C.