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During the 70's and up to the mid 80's, Atari was the recognized leader in all area's of videogames. Starting out and establishing the Video Arcade industry, Atari set the stage for the 10 billion dollar industry with the release of Pong the first arcade machine game relesead in 1,972.
Atari Pong would be a smash hit and Nolan Bushnell (ex-owner of Atari) knew it. Nolan being the superb salesman that he is, convinced Midway that Nutting didn't want it, and told Nutting that Midway didn't want it either, so Bushnell took the $500 in royalties he'd made off of Computer Space and set Al Alcorn to work on designing a simple game of TV tennis. He and partner Ted Dabney started Atari. Needless to say, Pong was a monster and before it could be patented, every company copied it, including Allied Leisure where Gene Lipkin was working at the time. "Nolan would roll over fresh if he hears this," says Lipkin, "but our Paddle Battle was a better game." Even Nutting Associates got into the Pong game with their own version called Space Pong. Pong would see many different cabinet versions from cocktail tables to dog houses to even Pong's in wooden barrels! Unfortunately Pong attracted so much attention, a certain company by the name of Magnavox took notice and for good reason, months earlier they demonstrated a home TV video game called Odyssey and Atari's new Pong game was strikingly similar, too much so. So after a little checking by Magnavox lawyers, sure enough, on the Magnavox guest book for the demonstration was the signature of none other then Nolan Bushnell himself. Magnavox sued Atari, Bushnell & Atari agreed to a license under the Sanders/Magnavox patents for which Atari paid a fixed sum as a paid-up license in June of 1,976 for domestic games. In later years Atari paid much more for foreign rights. All in all, the settlement was certainly in Atari's favor due to its huge success with Pong and its many variations and flavors.