Zynga Turns the Legal Tables on Kixeye

The tables have turned, it seems.

Just two months ago, social-game maker Zynga (Nasdaq: ZNGA  ) was on the receiving end of a copyright infringement lawsuit from Electronic Arts (Nasdaq: EA  ) , alleging that Zynga had poached three key executives (two of which have since left) with the sole intention of ripping off The Sims Social with The Ville. The company proceeded to file a counterclaim that EA was engaging in "anticompetitive and unlawful business practices, including legal threats and demands for no-hire agreements."

Now Zynga is the one dishing out the lawsuits for losing top talent to the competition. The talent in question is Alan Patmore, former general manager of Zynga's popular CityVille title, who left for rival developer Kixeye in August. Zynga alleges that Patmore committed "wholesale theft" of some of Zynga's "most sensitive and commercially valuable data."

Zynga claims that Patmore did this by syncing sensitive data to popular cloud storage service Dropbox the day before he left, for the sole purpose of stealing the data. The company said Patmore even tried to cover his tracks by removing Dropbox from his Zynga-issued computer, but was sloppy and left a forensic trail.

If true, Patmore will certainly land in hot water, because those are some pretty serious and legitimate allegations he's facing. The suit targets Patmore directly, and not his new employer Kixeye. Still, Kixeye CEO Will Harbin is responding in kind:

Zynga is burning to the ground and bleeding top talent and instead of trying to fix the problems -- better work environment and better products -- they are resorting to the only profit center that has ever really worked for them: their legal department.

It is simply another case of Zynga vindictively persecuting a former employee as an individual. Given their financial situation it all feels pretty desperate.

Our games have little in common with the ones that Zynga is known for. We make synchronous, combat strategy games. They make asynchronous cow clicking games. We have 2 of the top 7 highest grossing games on Facebook. Why on earth would we want to emulate a business that has seen a 75% decline in share price since their debut? According to their S1 their games average $0.06 [average revenue per daily active user]. Our games generate up to 20x that. You do the math.

Zynga has some real allegations, but Harbin does have a point: who wants to be like Zynga right now?

Zynga's post-IPO performance has been dreadful, and investors are beginning to wonder if it's game over for this newly public company. Being so closely related to the world's largest social network can be a blessing and a curse at the same time. You can learn everything you need to know about this company and whether it's a buy or a sell in our new premium research report. Don't even think about picking up shares before you read what our top analysts have to say about Zynga. Click here to access your copy.

Evan Niu, CFA, has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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