Activision and 7 Studios sued over Scratch contract breach

Scratch DJ Game, a joint venture between Genius Products and Numark Industries, has filed a complaint against Activision and 7 Studios, alleging that the companies conspired to withhold and delay the release of Scratch: The Ultimate DJ, a competitor to Activison's upcoming DJ Hero.

Developer 7 Studios has been working on Scratch: The Ultimate DJ for publisher Genius Products since February of 2008. According to the suit, Activision purchased 7 Studios earlier this year "in order to delay and prevent the completion of the Game - in effect holding its competitor's game hostage."

Scratch, according to the complaint, "is believed to be ahead of [DJ Hero] in terms of the development of, and scheduled release date for, the Game," and is also "far superior" according to "early consumer reviews." These factors, along with the knowledge that 7 Studios was in financial trouble after losing "a significant client," lead to the purchase of the financially troubled developer earlier this year.

The complaint goes on to allege that 7 Studios, after its acquisition, revised the development schedule for the game, demanding "new terms that were commercially-unreasonable, in bad faith, and punitive," going as far as to demand full rights to the game if now-increased milestone payments were not paid on time.

Genius is asking the court both for "substantial damages" and the immediate return of the game, including assets, builds, and even prototype game controllers, which the complaint alleges are being held by 7 Studios under tight security.