Video games giant Nintendo of America zapped Atari Games Thursday with a countersuit designed to stop the smaller company from making games for the popular Nintendo system.
The suit, filed in federal district court in San Francisco, is the latest shot fired in a heated battle for sales in the $2-billion video game market, now dominated by Nintendo.
The battle started when Atari Games sued Nintendo for $100 million in damages two weeks before Christmas. Atari Games charged the Japanese company with monopolizing the market because Nintendo's video game system accepts only special game cartridges made by Nintendo.
Atari Games, under a licensing agreement, has produced games for Nintendo using the Nintendo cartridges. But Atari Games claims that it has suffered from $30 million to $35 million in lost sales because Nintendo wouldn't sell it enough of the special cartridges for its Pac-Man, RBI Baseball and Gauntlet games.
Nintendo has said that it restricts supply of its special cartridges to control game quality and to prevent a glut of video games. On Thursday, Howard Lincoln, Nintendo senior vice president, added that Nintendo allocated its special cartridges fairly to all its licensees, and said that a shortage of computer chips restricted supplies.
Nintendo's suit against Atari Games cites the smaller company's claim that it developed a game cartridge compatible with the Nintendo system and that it plans to market four new, unlicensed games. In the suit, Nintendo accuses its former licensee of violating their contract, violating state and federal copyright laws and unfair competition. Nintendo also revoked its licensing agreement with Atari Games.
A spokesman for Atari Games, which is not related to computer maker Atari Corp., said the company couldn't comment on the suit because it had not received it.
The David-and-Goliath battle between the video game companies has attracted a good deal of attention in the industry.
"It's important," said Chris Garske, general manager for Activision Video Games in Menlo Park, which makes games under license for Nintendo. "Everyone in the industry is watching it closely."
A victory for Atari Games would mean that software makers are free to make as many games as they want for the Nintendo system, said David Morse, president of Epyx Inc., a Redwood City, Calif., software firm. "Right now, Nintendo tells everyone how many games they can make and how much profit they can make," he said.
However, some believe an Atari victory could also lead to a glut of games and price cutting, conditions that precipitated the collapse of the video game market in 1984. "It's probably better for the industry if Nintendo wins, although (software makers) might make more money in the short run if Atari wins," Morse said.