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Activision denies Genius allegations in DJ game dispute [UPDATED]

April 16, 2009 |  2:17 pm
Scratch: The Ultimate DJ
Scratch: The Ultimate DJ, developed by Genius Products, is at the center of the company's lawsuit against Activision. Credit: Genius Products

Another day, another twist in the battle of the disc jockey video games.

First, a quick primer: Genius Products has been working on a game called Scratch: the Ultimate DJ, and it hired a small design firm, California 7 Studios, to do a lot of the heavy lifting. A lawsuit filed this week alleges that Genius and Activision Blizzard, a game publishing giant, started talking about collaborating on a game. When they couldn't reach a deal, Activision, which is creating its own game, DJ Hero, went ahead and bought 7 Studios.

Big problem: 7 Studios was still under contract with Genius. Tempers flared, lawyers got involved.

It's looking now as if the judge in the case issued a bench ruling Wednesday. The Los Angeles County Superior Court hasn't issued any paperwork on the decision, so we're still piecing together what the judge actually said based on the small shreds of information the two sides have provided. But here's our best read:

Genius seems to have won one early victory: Activision and 7 Studios were told to return some of the assets they allegedly wouldn't hand over, including game code and custom turntables used to control the game. Genius said it was "very pleased" and now "able to complete our game in a timely manner."

But after declining to comment Wednesday, Activision unloaded its PR guns today, issuing a statement that trashes Genius and denies wrongdoing:

Activision Publishing strongly denies the allegations made by Genius Products and Numark Industries and believes that the claims are disingenuous and lack any merit. Yesterday, the L.A. Superior Court found that there was no evidence of any wrongdoing by Activision and refused to grant any restraining order against Activision.

These allegations are nothing more than an attempt by Genius to place blame for the game's delay, as well as to divert attention from the cash flow, liquidity and revenue challenges Genius detailed in its March 30, 2009, SEC filing. By their own admission in October 2008, the game had fallen behind in production, which was well before Activision had any involvement with Genius, Numark or California 7 Studios regarding the game.

The lawsuit will have no impact on Activision's upcoming DJ Hero(R) game, a turntable-based music game that the company has been independently developing.

Activision purchased 7 Studios on April 6, 2009 to bolster its development capabilities. 7 Studios had continued to develop Scratch: The Ultimate DJ, and Activision did not interfere with or delay their efforts to complete the game. In fact, Activision provided the fledgling developer with much needed financing during these difficult economic times.

We'll update you as we find out more.

CORRECTED 2:45 p.m.: A previous version of this post said Activision acquired 7 Studios to help make DJ Hero. In fact, Activision won't say why it bought 7 Studios.

-- Chris Gaither