The lawsuit is for breach of contract and alleges that Mgame has not been providing adequate technical support for Yulgang, and Mgame has not been supporting CDC Games in their efforts to combat pirate servers.

The contract between CDC Games and Mgame requires that Mgame assist with the protection of the game from illegal intrusions by hacking and the companies should work together in the event of any hacking. The contract also calls for Mgame to use its best efforts to address identified technical bugs and security defects to ensure a quality game experience for online players. The management of CDC Games has been attempting to work in good faith with the management of Mgame, encouraging them to honor both of these critical obligations. Mgame has been unresponsive to these requests, which CDC Games believes has resulted in increased exposure to piracy of the game and has put the game player's experience at risk.

On October 17, 2007, Mgame unilaterally announced that they have terminated the contract with CDC Games because they believe CDC Games is in breach of contract for non-payment. The management of CDC Games strongly believes that these accusations and actions are baseless and hold the potential to harm the loyal players of Yulgang, one of the top-10 most popular online games in China, as well as damage the overall online game industry in China.

"We regret that our many attempts to work with Mgame constructively and in good faith have not been successful," said Xiaowei Chen, Ph.D., president of CDC Games. "We have even been working directly with the Chinese government and they too, have reached out to Mgame to encourage them to work with us constructively to settle this dispute and avoid any potential harm to the Yulgang players or overall games industry in China. Although we finally had no choice but to file the lawsuit, we still hope this dispute can be settled amicably."

Added Chen. "We have been very successful in our direct efforts to shut down pirate servers, and our spearheading of the formation of the Online Games Alliance Against Piracy (OGAAP) should help to expand our success to an industry-wide level. We simply cannot understand why Mgame has refused to assist in our direct efforts against games piracy and also refused to join the OGAAP initiative. We hope they will live up to their contractual obligations to protect Yulgang for the benefit of our loyal base of players, as well as lending their support and commitment to our industry-wide games protection efforts."