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ORDER 1–

UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF WASHINGTON

AT SEATTLE

VALVE CORPORATION, a Washington

corporation,

 Plaintiff,

v.

SIERRA ENTERTAINMENT INC., (AKA

SIERRA ON LINE INC.), a Delaware

corporation; VIVENDI UNIVERSAL

GAMES, INC., a Delaware corporation; and

VIVENDI UNIVERSAL, S.A., a French

foreign corporation,

 Defendants.

No. C02-1683Z

ORDER

SIERRA ENTERTAINMENT INC., (AKA

SIERRA ON LINE INC.), a Delaware

corporation; and VIVENDI UNIVERSAL

GAMES, INC., a Delaware corporation;

 Counter-Claimants,

v.

VALVE CORPORATION, a Washington

corporation; GABE NEWELL and LISA

MENNET NEWELL, husband and wife and

the marital community composed thereof; and

SCOTT LYNCH and JULIE LYNCH,

husband and wife and the marital community

composed thereof,

 Counterclaim Defendants.

Case 2:02-cv-01683-TSZ-MAT Document 226 Filed 11/22/04 Page 1 of 4
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ORDER 2–

This matter came before the Court on cross-motions for summary judgment:

Defendants’ Motion for Partial Summary Judgment Re Cyber-Café Rights, docket no. 143,

by Sierra Entertainment, Inc. and Vivendi Universal Games, Inc. (“Sierra/Vivendi”); and a

Cross-Motion for Partial Summary Judgment Re Cyber-Café Rights, docket no. 165, by

Plaintiff Valve Corporation (“Valve”). Also pending before the Court are a Motion for

Partial Summary Judgment Re Contractual Limitation of Liability, docket no. 144, by

Defendants Sierra/Vivendi, and a Cross-Motion for Partial Summary Judgment Re

Contractual Limitation of Liability, docket no. 162, by Plaintiff Valve.

The Court having fully considered all of the papers submitted in connection with

these cross motions, and the argument of counsel, hereby ORDERS as follows:

I. Cyber-Café Rights

(1) Defendants’ Motion for Partial Summary Judgment Re Cyber-Café Rights,

docket no. 143, is DENIED. Plaintiff’s Cross Motion for Partial Summary Judgment Re

Cyber-Café Rights, docket no. 165, is GRANTED.

(2) Pursuant to 28 U.S.C. § 2201, the Court hereby finds that there is an actual

controversy between Plaintiff Valve and Defendants Sierra/Vivendi concerning the scope of

Defendants’ rights under the March 29, 2001 Software Publishing Agreement (“SPA” or

“2001 Agreement”) with respect to cyber-café distribution.

(3) The Court finds that it can now determine the respective rights and obligations

of the parties under the SPA with respect to cyber-café distribution. The Court finds that

there are no disputes as to any material facts, and based on the undisputed facts and

applicable law, Sierra/Vivendi, and their affiliates, are not authorized to distribute (directly

or indirectly) Valve games through cyber-cafés to end-users for pay-for-play activities

pursuant to the parties’ 2001 Agreement.

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ORDER 3–

II. Contractual Limitation of Liability

(1) Defendants’ Motion for Partial Summary Judgment Re Contractual Limitation

of Liability, docket no. 144, is DENIED. Plaintiff’s Cross Motion for Partial Summary

Judgment Re Contractual Limitation of Liability, docket no. 162, is GRANTED IN PART,

DENIED IN PART, and DEFERRED IN PART, as set forth below.

(2) Plaintiff’s Cross Motion for Partial Summary Judgment Re Contractual

Limitation of Liability, docket no. 162, is GRANTED as it relates to Plaintiff’s claims for

copyright infringement under Count I of the First Amended Complaint. Plaintiff’s claims for

copyright infringement are not “under or in connection with” the 2001 Agreement and the

limitation on liability provision contained in paragraph 8.2 of the 2001 Agreement does not

apply. Plaintiff may recover copyright damages for any infringement as allowed by law.

(3) Plaintiff’s Cross Motion for Partial Summary Judgment Re Contractual

Limitation of Liability, docket no. 162, is GRANTED IN PART, DENIED IN PART, and

DEFERRED IN PART as it relates to Plaintiff’s claims for breach of the 2001 Agreement, as

alleged in Count II of the First Amended Complaint, and the Supplemental Complaint for

Breach of Contract. The limitation of liability provision, contained in paragraph 8.2 of the

2001 Agreement, shall apply to all of Plaintiff’s claims for breach of the 2001 Agreement. 

Plaintiff may recover any general damages for breach of the 2001 Agreement. The general

measure of damages for breach of contract entitles the injured party (a) to recovery of all

damages that accrue naturally from the breach, and (b) to be put into as good a position

pecuniarily as it would have been had the contract been performed. Diedrick v. School Dist.,

87 Wash.2d 598, 609-10 (1976). Alternatively stated, the measure of damages is the amount

which would have been received if the contract had been kept, which means the value of the

contract, including the profits and advantages which are its direct results. Rathke v. Roberts,

33 Wash.2d 858, 866 (1949). The general measure of contract damages is not barred by the

limitation of liability provision in the 2001 Agreement. Plaintiff’s cross motion is DENIED

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ORDER 4–

IN PART and Plaintiff may not recover “special, incidental, consequential or punitive

damages of any nature,” for any reason, including without limitation, the breach of the 2001

Agreement, whether such liability is asserted on the basis of “contract, tort, or otherwise.” 

Plaintiff’s cross motion is DEFERRED IN PART as to the issue of bad faith. In the event

Defendants’ bad faith is established at trial, the limitation of liability provision contained in

the 2001 Agreement may not be applicable. Washington law will control.

(4) The Court will issue an Order in this matter as soon as possible explaining the

Court’s rulings.

IT IS SO ORDERED.

DATED this 22nd day of November, 2004.

/s/ Thomas S. Zilly

 

THOMAS S. ZILLY

UNITED STATES DISTRICT JUDGE

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