In early 1983, Atari offered Russ Haft () the opportunity to leave Mattel to form and run his own Intellivision programming group. The office would be in Southern California, close to Mattel Electronics and APh Technological Consulting, from where other programmers would be recruited. Feeling that Mattel Electronics had grown too big and bureaucratic, running a programming office hundreds of miles away from Atari headquarters in Silicon Valley was attractive.
Russ took the job. Mark Kennedy, Mike Winans, Eric Wels and (later) Andy Sells and Eddie Dombrower joined him from Mattel. Peter Farson and Gavin Claypoole joined from APh. They were located in unmarked offices along Lincoln Blvd. in Venice, just south of Santa Monica.
Atari had the Intellivision reverse-engineered to create a programming manual. Russ and his staff were told that they were being hired for their experience, not their knowledge. They could only program using this documentation given them by Atari. They could not use any specific knowledge learned at Mattel or APh. This way, Atari felt, they were protected legally from any claims of industrial espionage.
Mattel felt differently. They promptly sued Atari, Russ and the first programmers who had joined him for 40 million dollars.
But while the suit wound its way slowly through the legal system, Russ's group started work on a slate of Intellivision games based on popular arcade titles. To avoid using as much of Mattel's proprietary material as possible, the group was not allowed to use the Intellivision operating system, the Exec. Instead Russ and Mark wrote their own which would be in every cartridge. They dubbed their operating system the MCP, after the evil Master Control Program in the movie TRON.
Despite the suit, friendships started at Mattel continued. Mattel's management cautioned programmers to avoid talking about current projects with their now-Atari friends, but otherwise there was no attempt to stop "fraternization with the enemy." In fact, programmers from Mattel regularly drove over to have lunch with the Atari staff (and to hang out around their offices - they had better arcade machines than Mattel did) and Mike Winans attended the 1983 Mattel Electronics Christmas party.
Atari introduced their first three Intellivision games - , and - at the Consumer Electronics Show in Las Vegas, June 1983. The title screens for the games featured a large Atari logo with colors cycling through it (designed and programmed by Eric Wels). Executives from Mattel were upset when they saw the logo at the show, asking why the standard Mattel Electronics title screen looked so bland in comparison.
The three games came out for Christmas season 1983 under the Atarisoft brand - the only Intellivision games released by Atari. By this time, the video game industry was in full nose dive.
Mattel Electronics closed in January 1984. With the closing, Mattel Inc. dropped the lawsuit against Atari and the programmers.
Despite having a $40 million weight lifted from his shoulders, Russ Haft saw that it was time to get out of the game business. He left to start his own software company. Andy Sells was promoted to run the Venice office, although what its future would be was uncertain. Programming continued halfheartedly on Intellivision titles that were no longer on Atari's release schedule.
A few months later, Atari told the programmers the Venice office would be shut down. The programmers were offered jobs in Silicon Valley.
Only Mike Winans chose to relocate. The job of closing down the Venice office fell to him. He made arrangements for the equipment, files and arcade machines to be shipped to Northern California, gave notice on his apartment and put his personal affairs in order. The day he was set to move, Atari laid him off.
Atari discontinued distribution of the three Intellivision titles in 1984. The remaining inventory was purchased by ., which continued distribution through mail order. , the only other Intellivision title completed at Atari, was first released through INTV in 1987.