Popular “Clash of Clans” mobile game maker, Supercell OY, is back in Marshall’s federal court this week, fighting claims that its mobile video games infringe more patents of Japanese game maker, Gree Inc.
In the case, Gree argues that Finland-based Supercell entered into an agreement with the company to license Gree’s Japanese-patented inventions — not Gree’s U.S. patents in dispute.
Gree further accuses three of Supercell’s mobile games – Clash of Clans, Clash Royale and Hay Day — of infringing the six patents-in-suit.
“These games have generated just shy of $3 billion in revenue and just over $1 billion in profit,” Stephen Becker, the damages expert for Gree, testified Tuesday.
Becker, an expert witness hired by Gree at $675 an hour to conduct a damages analysis in the case, testified in court his conclusion that Supercell should pay the plaintiff a running royalty of $61,486,131.
The six patents-in-suit cover inventions for prize selection, social gaming, attack strength and live battle as it relate to social media games.
To determine what that reasonable royalty would be in a hypothetical negotiation, Becker said he relied on internal documents from Supercell, data about the games, details on the patents and considered the confidential settlement agreement between Gree and Supercell for use of the Japanese patents. Features, players and non-playing players were also factors Becker took into consideration for his analysis.
Becker said he considered a running royalty most appropriate in the case as opposed to a lump sum.
“I think a ‘pay as you go’ royalty fits the circumstances,” he said.
Becker also considered the technical and economic aspect of the patents and the role they play as it relate to the profitability of the games.
“Do these games make money? Do they generate revenue? Are they popular? Are they profitable?” Becker said of the aspects he examined.
Because the games are generating a significant amount of revenue and a significant amount of profit, Becker said he researched how Supercell generated revenue, particularly since the games are free.
“How do they generate $3 billion from people playing free games?” Becker said of his research.
He determined that the company engages players to convert them from “non-paying” players to “paying” players.
“It’s not just about moving them over there, it’s getting them to stay there,” said Becker.
Through the “freemium” business model, Supercell provides the game free of charge, but requires a fee for additional features. Thus, developers use certain technology strategies to keep players paying, Becker determined.
“The entire of that $3 billion we saw comes from players converting out of non-paying status,” said Becker.
The longer people play, the more money is paid, he concluded.
“For each of these three games, time does equal more spending,” said Becker.
For features in Supercell’s Clash Royale that infringes Gree’s prize selection patents, Becker said, are the daily deals, choose your rewards and Legendary Kings chest features. The Legendary Kings chest feature is the number one purchase item for Supercell, in the US market.
The case continues in Marshall’s federal court with US District Chief Judge Rodney Gilstrap presiding.
In September 2020, a federal jury in Marshall found Supercell guilty of infringing five of Gree’s patents-in-suit. In that particular case, Gree accused three of Supercell’s mobile games Clash of Clans, Clash Royale and Brawl Stars of infringing the patents.
At that time, the jury ordered Supercell to pay Gree an $8.5 million lump sum royalty, representing damages for past and future sales.
Supercell, based in Finland, was founded in 2010 and releases mobile games and distributes its games internationally and throughout the United States, including Texas. Gree, a global social media company, was founded in 2004 and provides mobile content and services, including games, entertainment, media, advertising and investment services.