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Zynga Directed to Compensate IBM $45 Million for Violating 1980s Patented Technology Utilized in Well-Known Games

# Zynga Ordered to Pay $45 Million to IBM Over Patent Infringement

In a major legal judgment, Zynga, the mobile gaming behemoth known for hits such as *FarmVille* and *Harry Potter: Puzzles and Spells*, has been mandated to pay close to $45 million in damages to IBM. This ruling followed a jury’s determination that Zynga had violated two of IBM’s earlier patents, tracing back to the 1980s. The case underscores the ongoing friction between legacy tech companies, which possess foundational patents, and contemporary digital platforms that depend on these innovations for their expansion.

## The Patents at the Center of the Dispute

The two contested patents are crucial for the effective transmission of internet content, as per IBM. The first, referred to as patent ‘849, was conceptualized during the inception of IBM’s Prodigy service, one of the pioneering online services that predates the modern internet. This patent introduced novel techniques for showcasing applications and advertisements in an interactive environment, utilizing the processing capabilities of users’ personal computers (PCs) to alleviate pressure on host servers. This methodology enabled applications to be generated dynamically using objects stored locally on the user’s PC, rendering the system more efficient than traditional server-dependent approaches.

The second patent, ‘719, aimed to enhance the efficiency of internet applications by diminishing network communication latencies. It detailed technology designed to reduce the number of exchanges needed between a client and a server, thereby improving app performance and facilitating the development and updating processes.

IBM contended that these patents were vital to Zynga’s achievements, as they permitted the company to effectively deliver its games to millions of users without straining its servers. The jury concurred, determining that Zynga had intentionally infringed on both patents.

## A Decade-Long Legal Battle

The legal dispute between IBM and Zynga has been simmering for almost ten years. Court documents reveal that IBM initially notified Zynga of the suspected infringement in 2014. Instead of engaging in a licensing dialogue, as companies like Amazon, Apple, Google, and Facebook have previously done, Zynga allegedly postponed negotiations and delayed meetings for numerous years. During this interval, IBM asserts that Zynga expanded its usage of the infringing technology, openly stating that litigation would be the only viable solution.

IBM, which has invested billions in research and development over the years, argued that Zynga was seeking to evade licensing payments for technology that had been essential to its success. The company claimed it had no option but to seek legal recourse to safeguard its intellectual property.

## The Jury’s Verdict and Zynga’s Response

The jury’s ruling to award IBM $45 million in damages marks a significant triumph for the tech titan, which has been vigorously defending its early patents for years. IBM has previously reached settlements with companies like Priceline and Twitter over similar patent infringement allegations. Nonetheless, not all of its litigation has been fruitful. For instance, in 2022, pet supply firm Chewy successfully countered IBM’s patent infringement accusations in court.

Zynga, now a subsidiary of Take-Two Interactive Software, has voiced disappointment regarding the verdict. In an SEC filing, the company reassured stakeholders that the patents in question have expired, implying that Zynga will not be required to alter or cease operations of its games. Nevertheless, the financial consequences of the $45 million damages award could still influence Take-Two’s financial performance.

A representative for Take-Two informed Ars Technica, “We are disappointed in the verdict; however, we believe we will prevail on appeal.” The company intends to file post-trial motions and contest the ruling, asserting that the decision lacks support from the facts or the law.

## The Broader Implications for Patent Law

This case illustrates a broader trend in which older tech companies like IBM are leveraging their extensive patent holdings to seek restitution from emerging internet-based firms. IBM has been particularly proactive in defending its pre-internet patents, which it argues remain pertinent to contemporary technologies. In 2006, for example, IBM initiated legal action against Amazon over similar patent infringement issues and has continued to pursue litigation against other internet firms since then.

However, not all of IBM’s lawsuits have been successful, and some of its early patents have faced invalidation. As more of these patents reach expiration or are contested in court, IBM’s potential to generate income through patent licensing may begin to diminish. Nevertheless, the company remains steadfast in protecting its intellectual property, which it considers a crucial engine of innovation.

## What’s Next for Zynga and IBM?

For Zynga, the immediate priority is to overturn the jury’s ruling and evade the $45 million damages penalty. While the company has not been compelled to halt its game operations or redesign its platforms, the financial impact could still be considerable. Take-Two, Zynga’s parent corporation, has pledged to challenge the decision.