Zynga, Playdom settle trade-secret suit

By Dow Jones Newswires
Posted Nov. 23, 2010 at 3:43 p.m.

Social games leader Zynga Game Network Inc. said Tuesday that it had settled a suit it filed against Walt Disney Co.’s Playdom unit, ending a year-long battle over trade secrets with one of its closest rivals.

Zynga, known for games including “Farmville” and “Mafia Wars,” sued Playdom in September 2009, alleging that Playdom induced four former Zynga employees to steal trade secrets and use that information to help Playdom develop online social games to compete with Zynga’s games.

In particular, Zynga complained in the lawsuit that the employees took its “playbook,” a manual for developing successful and distinctive social games.  Zynga also claimed a former employee copied hundreds of files related to an unreleased Zynga game and took them with her when she joined Playdom.

Playdom, which makes “Mobsters” and “World Series of Poker,” was subsequently acquired by Disney for up to $763 million.

“The settlement reflects the very serious nature of the conduct involved,” Zynga general counsel Reggie Davis said in a statement. He didn’t provide details of the settlement.

A Disney spokesman declined to comment.

The settlement comes amid a boom in online social games, which are challenging traditional console videogames for popularity. Privately held Zynga has attracted outside investors, including Kleiner Perkins Caufield & Byers, and has an estimated value of more than $5 billion.

Zynga has 198.5 million monthly active users on  Facebook Inc., while Playdom has 34.8 million, according to market research group AppData.

Court orders earlier in the year suggested that the case was going against Playdom.

In March, a Santa Clara Superior Court judge issued a preliminary injunction prohibiting Playdom from using any of the material taken from Zynga.

In August, the court sentenced a former Zynga employee to 10 days in country jail for destroying and withholding evidence.

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