Zynga hits EA in court over employee hiring deal

SAN FRANCISCO Fri Sep 14, 2012 8:37pm EDT

The corporate logo of Zynga Inc, the social network game development company, is shown at its headquarters in San Francisco, California April 26, 2012. REUTERS/Robert Galbraith

The corporate logo of Zynga Inc, the social network game development company, is shown at its headquarters in San Francisco, California April 26, 2012.

Credit: Reuters/Robert Galbraith

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SAN FRANCISCO (Reuters) - Zynga Inc (ZNGA.O) fired back against rival gaming company Electronic Arts Inc (EA.O), saying an EA lawsuit breached a deal between the two that restricted how Zynga can try to hire the other company's employees.

Zynga's allegations on Friday came as a counterclaim to a lawsuit filed by EA last month in a San Francisco federal court. EA had accused Zynga of copying key elements of its popular "The Sims Social" game for Zynga's own title, "The Ville".

In its lawsuit last month, EA accused Zynga of obtaining "private" information about the Sims game after hiring three of EA's top employees shortly before its launch. Zynga is the dominant publisher of games on Facebook (FB.O).

Silicon Valley companies often compete hard to attract talented employees. Sometimes, though, companies have agreed to refrain from poaching each other's workers in controversial agreements. In 2010, several companies promised U.S. antitrust authorities that they would no longer enter into such deals.

In a court filing on Friday, Zynga said it reached a deal with EA in 2011 with lawful restrictions on how Zynga solicits EA employees. In exchange, EA released Zynga from legal claims surrounding its hiring practices, the document said.

Zynga had intended for that information to be blacked out from public view, but for the judge to be able to consider it as part of Zynga's legal argument. However, Zynga inadvertently made those details public in its Friday court filing.

By initiating its lawsuit last month, EA breached the promises it made in the 2011 deal, Zynga said in the filing. Zynga declined to comment on the material that was intended to be redacted.

EA spokesman John Reseberg on Friday called Zynga's claims "a predictable subterfuge," aimed at diverting attention from its copying of other artists.

"Zynga would be better served trying to hold onto the shrinking number of employees they've got, rather than suing to acquire more," Reseberg said.

According to Zynga's filing, an EA lawyer told Zynga that EA Chief Executive John Riccitiello was "adamant" about obtaining a no-hire agreement that would shut down Zynga's ability to hire EA's employees.

Zynga acknowledged signing a non-monetary settlement agreement with EA in September 2011 in an effort to head off litigation, Zynga's filing said.

That deal included "lawful, appropriate and extremely narrow non-solicit restrictions" in the context of a non-monetary settlement agreement, according to the filing.

In the filing, Zynga said EA "undertook an anti-competitive and unlawful scheme to stop Zynga from hiring its employees." Its general counsel, Reggie Davis, also said in a statement that EA's copying claims have no merit.

The case in U.S. District Court, Northern District of California is Electronic Arts Inc. vs. Zynga Inc., 12-4099.

(Editing by Martha Graybow and Richard Chang)

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