MLB Loses $2 Million Judgment in Suit Over In-Game App

A New York City jury on Tuesday awarded $2 million in damages to Sports Technology Applications (STA), a California-based sports software company that entered into a contract with MLB Advanced Media to develop an in-game app.

STA established that MLBAM, the Internet and interactive-media arm of MLB, breached the deal. STA also convinced jurors that MLBAM engaged in fraudulent acts by collaborating with a rival to develop a similar app.

Justice Joel Cohen presided over the litigation, which lasted seven years and involved numerous court filings. MLBAM parent company Major League Baseball declined to comment, citing pending litigation.

In the lawsuit, each side forcefully insists the other effectively “dropped the ball” in meeting their respective duties.

In 2012, MLBAM and STA signed a seven-year license agreement wherein, on a non-exclusive basis, MLBAM licensed trademarks and other intellectual property to STA. The app, which court documents alternatively refer to as “Victis” and “Sage,” involved challenging friends to see who was best at predicting up-coming plays by batters, pitchers and managers. Virtual caps and jerseys were awarded to winners. MLBAM agreed to promote the app through websites and social media, with at least 1 million impressions per year required. By the third year of the deal, STA would be on the hook to make a series of payments totaling $5 million.

As sometimes happens in business deals, each side’s expectations weren’t met. Frustrations grew until the two sides eventually—and acrimoniously—cut ties.

MLBAM’s court records offer a narrative that depicts STA as inept. MLBAM insists that STA “was never able to monetize its app or earn more than mere pennies from it” and “never paid MLBAM a dime,” let alone $5 million. MLBAM also complains that STA released the app nearly five months late, near the end of the 2013 regular season. Making matters worse, MLBAM contends, the app suffered from a bevy of technical issues, including server crashes. MLBAM acknowledges it declined to promote the app as aggressively as required in the contract. However, it explains this was due to a shortened time frame caused by the app’s late-season arrival. STA closed the app following the season.

STA’s filings tell a starkly different story. The company portrays MLBAM as engaged in disingenuous business strategies that prevented a workable relationship. First, STA’s main contact at MLBAM was a vice president of gaming who was simultaneously a “board member of PrePlay, a direct competitor of STA.” Second, STA says it learned that MLBAM was itself “a significant shareholder of PrePlay,” thus suggesting MLBAM was double dealing.

Toward the end of the 2013 regular season, STA says it received a letter from PrePlay claiming STA was infringing on PrePlay’s intellectual property. This is because MLBAM had granted PrePlay what STA describes as an “exclusive license for a gaming application”—a set of rights for which MLBAM had licensed to STA on a non-exclusive basis. STA charges MLBAM should have disclosed its dealings with PrePlay.

MLBAM flatly disagrees, stressing that it was under no obligation to divulge. MLBAM also argues that STA executives were well aware of PrePlay’s app, “which became available in 2012—more than a year before STA’s game launched—and STA’s employees and directors downloaded it and were familiar with how it worked.” STA contends this defense misses what it regards as a more central point: MLBAM provided PrePlay “with an exclusive license before the STA license was executed.”

Jurors sided with STA, which was represented by Damien Prosser and other attorneys from Morgan & Morgan. MLBAM, which was represented by Alan Littman from Goldman Ismail and other attorneys, can appeal.

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