Fired Infinity Ward founders and employees accuse Activision of running a police state

The fired co-founders of Infinity Ward — the creators of the bestselling game of all time, Call of Duty Modern Warfare 2 — and some of their employees have accused Activision of running a “police state” in their latest amended lawsuit, which chronicles the legal battle between a game studio and its parent company.

The lawsuits — three of them altogether — are unique in game history as the biggest blow-up between a publisher and a developer, ever. There’s a lot of money at stake in this clash between creators and business owners.

Two fired co-founders fired off the first lawsuit in March. Then Activision filed a countersuit, and then employees who were denied bonuses filed yet another lawsuit. In the third lawsuit — which was amended on Thursday (available here) — plaintiffs allege that Activision forced Infinity Ward employees to “submit to secret interrogations” and created a “hostile work environment” at the studio. A trial date has been set for May 23, 2011, for the lawsuit filed by the two co-founders.

Activision, a division of Activision Blizzard, fired Vince Zampella and Jason West, two of the co-founders of Infinity Ward in March. The company alleged in its own lawsuit that the two men secretly conspired, while still on Activision’s payroll, to start a new game company and recruit Infinity Ward employees for it. Thomas Tippl, chief operating officer at Activision, said in an interview with me that the company has never encountered such a situation in decades of running its business.

Zampella and West filed a breach of contract lawsuit against Activision, saying that it had denied them $36 million in royalties due them for the unprecedented success of Modern Warfare 2, which has sold more than 20 million copies since its launch in November. Zampella and West were the key leaders of a studio that generated more than $3 billion in revenue for Activision. When they left, a few dozen Infinity Ward staffers joined them to start a new game studio, Respawn Entertainment. Many of those employees have now added their names to the lawsuit against Activision, which in turn has filed its own lawsuit against the founders.

Activision has been replacing employees at Infinity Ward. The lawsuit alleges that Activision Blizzard chief executive Bobby Kotick personally promised the group they would be paid their bonuses from Modern Warfare 2 in full. But the complaint alleges he reneged on that promise, withholding a total of $54 million due to the employees and the founders. It also breached a written promise that Modern Warfare 3 would not be the next game to be made by Infinity Ward. (Infinity Ward’s founders wanted to explore new territory for a game, but were told to stick to their knitting).

In April, the complaint alleges that Tippl told the employees who wanted their bonuses to “get over it.” Activision reportedly refused to make the payments because they were afraid that the employees would take the money and run and thereby leave Modern Warfare 3 in the lurch. Activision did pay about 40 percent of what was due; but another $30 – $45 million is due based on first-quarter sales of the game. The game was supposed to debut in November, 2011. All told, the group is asking for about $216 million in punitive damages and unpaid bonuses from Activision.

Among the “hostile tactics” Activision, used the complaint alleges, was forcing employees of Infinity Ward to submit to secret interrogations. They were allegedly instructed not to consult attorneys or discuss the secret interrogations with their departments or colleagues.

Meanwhile, Infinity Ward’s sister studio, Treyarch, is working on another Call of Duty game, Call of Duty Black Ops, for launch this fall. Treyarch is stepping up with a high-quality production and an analyst estimated that Black Ops orders are so strong that the game could sell 12 million copies this fall.