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MOSCOW -- The First International Bank of Israel (FIBI) was rebuffed by a U.S. judge recently in its attempt to improperly use the name and likeness of renowned Russian chess champion Garry Kasparov to recoup money it lost in a failed business loan to Kasparov Chess Online, Inc. (KCO), a venture with which Kasparov was associated.
In a Dec. 27 ruling, a U.S. chancery judge in the state of Delaware refused to grant First International Bank of Israel a temporary restraining order or a preliminary injunction against Kasparov Chess Online and several of its board members, calling the record in the case “far too thin.” The ruling came after the Israeli bank filed a surprise complaint on Christmas Eve asking for the injunction to force the company to reconnect its Web site on the theory that this would assist the bank in trying to recoup the $1.6 million it loaned the failed Internet business venture.
Kasparov Chess Online was a business venture created in mid-1999 by Garry Kasparov and a group of Israeli investors at the crest of the Internet boom to provide international subscribers the opportunity to play chess against each other online, to receive instruction and information from Garry Kasparov, and to promote the game of chess internationally, especially among children. Kasparov never received any compensation from the company and provided $110,000 in 2001 to keep the venture afloat. His role in the company was to oversee content for the site and to participate in promotional activities supporting it, while the Israeli investors would run the business side of the venture.
“I joined in this venture and put my name and my own money in it with great hopes of using the Internet to spread the game of chess throughout the world and especially to help children learn about and appreciate the game,” said Garry Kasparov. “Unfortunately, the economics of chess, the collapse of the high tech market, and some unwise spending decisions on the part of those controlling the business side of the venture combined to preclude us from realizing the potential of this super chess site and eventually taking the company public through an IPO, which we had all hoped to do. A number of people and institutions lost time and money in the venture, and that is regrettable.”
The company’s business plan was to gain subscribers and then make money through advertising, a common dot com strategy at the time. However, the business strategy proved untenable, and the company was unable to achieve profitability. It became apparent that there was a limited market for this service, and the company’s funding rapidly eroded.
The short history of the company has been marked by disputes between its minority Israeli stockholders who control the business and administrative functions of the company and its majority stockholders associated with Garry Kasparov. Although the directors associated with Kasparov had majority control of the company in theory, the physical location of the site was in Israel, and the Israeli directors refused to comply with instructions they received from the majority Kasparov directors and insisted on the continuing use of Kasparov’s name and likeness. The Israeli directors utilized their relationships with the Israeli bank to obtain the loan to the company, which was issued in the summer of 2000. In its lifespan, the company raised and spent 13 million dollars most of which went to pay for business and administrative operations in Israel.
Ignoring customary practices, the bank is seeking to hold both the company and its corporate directors responsible for the loan. The company’s directors did not guarantee the loan. However, First International Bank of Israel did not sue the company’s entire board of directors, but instead sued only those directors associated with Garry Kasparov and excluded the company’s Israeli directors from the suit.
Following the court’s refusal to grant the injunction the bank sought, FIBI threatened to sue Garry Kasparov in Israel, forcing him to cancel an event he had scheduled in Jerusalem this week. Kasparov had arranged for the event to show his support for Israel.
“At the end of the day, this is about a financial institution trying to squeeze individuals to pay a corporate obligation,” said Richard Conn, Kasparov’s attorney and partner with the international law firm of Latham & Watkins. “Through this lawsuit, the bank is attempting to seize permanent control of the world-class asset of Garry Kasparov’s name and likeness as compensation for a failed loan to a corporation.”
The company ceased operations months ago, and finally, in September of 2002, the Kasparov Chess Online board of directors voted unanimously to shut down operations of the company due to lack of funds. Employees were dismissed, site content was no longer updated, and Kasparovchess.com was eventually disconnected from the Internet. FIBI Bank responded by demanding foreclosure of company property, contending that company property includes the perpetual use of the name and likeness of Garry Kasparov in connection with the site. The bank filed its unusual Christmas Eve lawsuit in the U.S. State of Delaware where the company is registered without any attempt to resolve the dispute through negotiation and demanded a hearing on that date.
January 6, 2003
Contact: Kathleen Dezio
The McGinn Group
(703) 312-0170
