Until 1980, if you owned an Atari Video Computer System, every cartridge you could buy came from Atari. Activision changed that. It was founded in 1979 by four of the programmers who had written Atari’s own VCS games, and its first products were cartridges for Atari’s console, made without Atari’s permission, documentation or development tools. Atari sued. How that suit ended, in a settlement rather than a ruling, shaped the business that followed: by 1982 Apollo, Imagic, U.S. Games and others were making cartridges for the machine, which later became known as the Atari 2600.
Fast facts
- Founders: Alan Miller, David Crane, Bob Whitehead and Larry Kaplan, all VCS designers at Atari, with Jim Levy as president.
- Left Atari: late September 1979, once venture capital was agreed.
- The suit: $20 million, alleging a conspiracy to take Atari’s trade secrets; reported by the summer of 1980.
- Settled: December 1981. Activision agreed to make games under a technology licence from Atari.
- Afterwards: Activision grew from 8 staff in January 1980 to more than 400 by 1983.
Four designers and a president
The four were among Atari’s most productive VCS programmers. Video Games Player reported in 1982 that between them they were “said to have created more than half of Atari’s home games up until that point”. Miller had written Surround, Hangman and Concentration; Kaplan later wrote Activision’s Kaboom!; Whitehead devised the “Venetian blinds” trick that let Video Chess put eight pieces on one line.
The founders later gave different reasons for leaving. Crane told Retro Gamer in 2006 that an internal memo listing cartridge sales showed the four of them accounting for 60% of Atari’s sales, “and drawing $30k salaries”. Miller had asked for designers’ names on their games: “management said ‘No, no recognition’. And that was pretty much the end of my time there.” The phrases most often quoted from these meetings with Atari’s chief executive, Ray Kassar, that programmers were “a dime a dozen” and no more important than “the man in the assembly line”, were reported by Retro Gamer only as “reputedly” said. Kaplan, asked in 1989 what led to the founding, talked about the market instead. Home video game sales had topped $330 million in a year, he said, and “Activision was founded to take advantage of this lucrative market.”
They did not simply walk out. Through “a mutual friend and lawyer” they met Jim Levy, then a vice-president at GRT, a cassette-tape company in Sunnyvale, who became the company’s president and, according to Kaplan, came up with the name Activision “from a combination of action and vision”. The company was first incorporated as VSYNC, Inc., after the VCS’s vertical-sync signal. “Over the summer of 1979, a business plan was written and submitted to a venture capital firm, Sutter Hill Ventures,” Kaplan said. “The plan was approved in late September. All four designers left Atari at that time.”
Building a VCS toolkit in a spare bedroom
Activision had no documentation or development tools from Atari, so its first job was to work out how the machine behaved and build its own development system. “The first company operation — reverse engineering the VCS and building a software development system — was accomplished in David Crane’s spare bedroom in his Sunnyvale apartment,” Kaplan said. The founders had already taken legal advice, and one of them later recalled being told to take nothing with them from Atari: “All we left with is what was in our heads.”
The suit
Atari did not wait long. At Activision’s first trade show, the Winter Consumer Electronics Show of January 1980, the founders later recalled, Atari ran a full-page advertisement in the show brochure condemning anyone who stole trade secrets. By the Summer Consumer Electronics Show, Creative Computing was reporting that Activision had announced four cartridges for the VCS and that “Atari has sued Activision for stealing trade secrets”, adding that a settlement seemed likely.
Video Games Player gave the size of the claim: Atari “filed a twenty million dollar suit for conspiring to appropriate company trade secrets”. What Atari counted as its secrets was, in Crane’s later account, the skill of programming the VCS itself. He remembered Atari’s lawyers pursuing Whitehead’s Venetian-blinds technique although no Activision game used it, and answering them with “a demonstration of a real set of Venetian blinds”.
The main suit never reached a verdict. “The litigation was settled in December,” Video Games Player reported in September 1982, “with Activision agreeing to manufacture video games under a technology license from Atari, whatever that means.” In Britain Computer & Video Games reported in March 1982 that Activision had “recently settled its differences with Atari and is continuing cartridge production”. It added that Imagic, another company formed by former Atari staff, was fighting its own lawsuit with Atari. Retro Gamer’s 2006 history says there were several suits over two years, and that Activision won or settled every one.
What followed
Because the case was settled, it set no legal precedent about who may write software for someone else’s console. What it did settle was that Activision could carry on trading, and others followed it. Video Games Player listed Activision, Apollo, Imagic and U.S. Games among the outside publishers in 1982, and called Activision “the oldest and largest” of them, with 18 VCS games on sale.
Activision also printed its designers’ names on every box, which Atari still would not do. Kaplan’s figures show how quickly the company grew. It had eight employees at the Winter CES of January 1980 and 15 by the end of that year: “By 1983, we were over 400 strong.” At the height of the boom, in mid-1983, it was receiving “more than 10,000 pieces of fan mail per week” and posting about 400,000 newsletters. Even its logo was built to fit the hardware. The “flying V” had to squeeze into “a 32-pixel eight-line space on the bottom of all game screens”, so the T and V of Activision were joined together.
Sources
- Larry Kaplan, interviewed by John Jermaine, Commodore Magazine vol. 10 no. 7, July 1989, pp. 49–51: the five founders; Jim Levy and GRT; the name and VSYNC, Inc.; the $330 million market; Sutter Hill Ventures and the September 1979 resignations; the spare-bedroom reverse engineering; staff numbers, fan mail and newsletters; the flying-V logo.
- Video Games Player vol. 1 no. 1, September 1982: the four designers and “more than half of Atari’s home games”; the $20 million trade-secrets suit and its settlement in December with a technology licence; designers’ names on Activision boxes; Activision “the oldest and largest”, with 18 VCS games.
- Computer & Video Games issue 5, March 1982: Activision’s settlement with Atari; Imagic’s suit.
- Creative Computing vol. 6 no. 9, September 1980, p. 18, report from the Summer Consumer Electronics Show: Activision’s four cartridges and Atari’s suit.
- Mat Allen, Activision feature, Retro Gamer issue 25, 2006, pp. 32–33: Crane on buying games only from the console’s maker; Crane on the sales memo and $30,000 salaries; Miller’s “No, no recognition”; the Kassar quotes reported as “reputedly” said; the lawyer’s advice; Atari’s January 1980 advertisement; the Venetian blinds; Activision winning or settling every suit.
- Computer Gaming World issue 32, November 1986: interview with Alan Miller (his Atari games).
- Electronic Games vol. 1 no. 1, Winter 1981, p. 51: Larry Kaplan as designer of Kaboom!.