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Activision was founded by several ex-Atari employees who had left due to Atari's policies on programmer recognition (or the lack thereof). One of these employees was Bob Whitehead, creator of the 'Venetian Blinds' technique, which was first used in Atari's Video Chess to display 8 objects in a row instead of the normal 6. Even though Activision had never used the Venetian Blinds technique in any of their games up to this point, that didn't stop Atari from threatening to sue Activision for 'stealing' the technique along with other various bits of proprietary information. Atari knew they probably couldn't win the lawsuit given that Activision wasn't even using the technique in question, but what they were hoping for was that they could either scare Activision into getting out of the games business or scare away people from doing business with them.
Now Activision knew that they hadn't stolen anything from Atari, but the accusation had caused a hit to the morale around the office. So as a way to cheer everyone up, Crane and Whitehead decided to create an elaborate practical joke. They created a small demo which displayed a window with a beautiful sunset in the background (this would later become a standard feature of many Activision games). Covering this window was a set of venetian blinds. The player could use the joystick to raise and lower the blinds at will until they grew bored. Not much of a demo, but still rather snarky and hilarious given the circumstances Activision found themselves in.
According to Crane, they took the demo to the CES and showed it to a few people who had knowledge of the lawsuit (it was not on public display) asking people 'Is this what Atari means by the Venetian Blind Technique?' In the end the lawsuit never happened, it is thought that Atari and Activision settled out of court but the details are still not known to this day. What we do know is that Activision and Atari came to some sort of agreement which opened up the flood gates to other third party companies to being making their own Atari 2600 games. Once the dust had all settled the Venetian Blinds Demo was quickly forgotten about until it surfaced as a bonus freebie on the Activision Anthology. This marked the first time the demo had been seen by anyone since 1982.
Although Activision never made a game out of this demo, the sunset was later used in the background of Barnstorming, Chopper Command, Seaquest and Pitfall II - Lost Caverns.
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