Electronic Arts, Zynga settle competing lawsuits

(Reuters) - The video game publisher Electronic Arts Inc and social gaming company Zynga Inc have agreed to settle competing lawsuits over alleged copyright violations and the recruiting of employees.

Terms of the settlement were not disclosed, but both companies agreed to permanently drop claims they had raised in litigation begun last August in San Francisco federal court.

Electronic Arts had alleged that Zynga’s new game “The Ville” ripped off EA’s “The Sims Social,” which had been launched the prior August and at one point become Facebook’s second most popular game ahead of Zynga’s “FarmVille.”

It said Zynga was able to clone “The Sims Social” in part with the help of executives it had hired away from Electronic Arts, and who had access to critical information on how that game was developed.

Six weeks later, Zynga countersued, accusing Electronic Arts of trying improperly to stop employees from switching companies. Zynga said this violated a 2011 agreement between the companies over employee solicitations.

In separate emailed statements on Friday, Electronic Arts spokesman John Reseburg and Zynga spokeswoman Kelly Kunz said: “EA and Zynga have resolved their respective claims and have reached a settlement of their litigation in the Northern District of California.”

Silicon Valley companies compete intensely to attract talented employees, but sometimes agree to refrain from poaching each other’s workers. In 2010, several companies agreed with U.S. antitrust authorities to stop entering such agreements.

Zynga is based in San Francisco, and Electronic Arts is about 25 miles south in Redwood City, California.

In October, Zynga said it would significantly scale back its investment in “The Ville” as part of a cost-cutting plan that included the phasing out of 13 older titles.

The company on February 5 reported a $6.9 million adjusted fourth-quarter profit, surprising analysts who expected a loss, but posted a net loss of $209.5 million for all of 2012.

In afternoon trading on the Nasdaq, shares of Electronic Arts were down 20 cents at $16.95, and shares of Zynga were down 6 cents at $3.19.

The case is Electronic Arts Inc v. Zynga Inc, U.S. District Court, Northern District of California, No. 12-04099.

Reporting by Jonathan Stempel in New York; Editing by Gerald E. McCormick, Gary Hill