Activision Blizzard Inc. (ATVI) reached a settlement of its $400 million claim against rival video-game publisher Electronic Arts Inc. (EA) that was part of a lawsuit scheduled for trial May 29 with the developers of Call of Duty: Modern Warfare 2.

Activision and Electronic Arts have decided to put this matter behind them,Â� Activision lawyer Beth Wilkinson said yesterday after a hearing in Los Angeles Superior Court.

The settlement removes Electronic Arts from a trial that pits Activision against the former heads of its Infinity Ward studio who created the billion-dollar Call of Duty franchise. Activision fired the developers, Jason West and Vince Zampella, in 2010, alleging they plotted with Electronic Arts to leave Activision and set up a new independent studio.

Activision had accused Electronic Arts of disrupting Infinity Ward by trying to lure away the two developers while they still had two years left on their contract. West and Zampella sued Activision after they were fired and seek more than $1 billion in damages.

The companies will ask the court to dismiss the claims, Wilkinson said, declining to comment further on any settlement terms. Richard Kendall, a lawyer for Electronic Arts, also declined to comment.

Activision, based in Santa Monica, California, the biggest U.S. publisher of video games, had added Electronic Arts in its counterclaims to a lawsuit brought by West and Zampella.

False Promises

Zampella and West in their complaint allege that Activision strung them along with false promises of royalties and creative control so that they would complete Modern Warfare 2, the game that helped Activision leapfrog Electronic Arts as the biggest video-game publisher.

Activision said in a May 9 regulatory filing that the developers damages claim has increased to more than $1 billion, from the $36 million the two sought in unpaid royalties when they first sued two years ago.

In its counterclaims, Activision sought to hold Redwood City, California-based Electronic Arts and the two developers liable for $400 million in damages from delays and disruptions at Infinity Ward.

Wretched Conduct

Activision dragged EA into the case hoping to distract from Activision wretched conduct towards West and Zampella,Â� Robert Schwartz, a lawyer for the two developers, said yesterday in an e-mailed statement. In dismissing EA today, Activision admits that it was never going to convince anyone that EA conspired with West and Zampella to breach their contracts or did anything else improper.

Wilkinson said at a May 15 hearing that Activision had paid $42 million in launch bonuses owed for Modern Warfare 2� to former Infinity Ward employees who left after West and Zampella were fired and who filed their own lawsuit that was combined for trial with West and Zampella.

The former employees, who seek $350 million in damages for unpaid royalties and bonuses, will be part of the trial on their other claims.

Wilkinson, who was hired May 10 by Activision as its new lead lawyer, asked California Superior Court Judge Elihu Berle at a May 15 hearing to postpone trial for 30 days so she can get up to speed. Berle yesterday denied that request.

The case is West v. Activision, SC107041, California Superior Court (Los Angeles County).

Article originally posted on Bloomberg: http://www.bloomberg.com/news/2012-05-16/activision-electronic-arts-settle-modern-warfare-claims.html

To contact the reporter on this story: Edvard Pettersson in Los Angeles atepettersson@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.