Developing Concerns : Video Game Development Lawyers & Attorneys: Reed Smith Law Firm: Intellectual Property, Marketing, Promotions & Privacy Law

Gamasutra has a great article on why it makes good business sense to utilize players as developers of new content.  It can be a new revenue stream for the publisher, it can build brand loyalty, it can increase the game's long tail, and it can mean fresh content without having to build it yourself.  So pretty much all positives and very few, if any, negatives.

At least, there are very few negatives so long as you build the legal structure appropriately.  There is a ton to consider when developing a means by which players can build, distribute, and monetize their own content - a typical development agreement between a publisher and a developer can span dozens of pages of dense, legalese print. Is this something you think you can implement in the context of a player/developer relationship?  Doubtful.

So what are the issues that should be considered?  This post will by no means cover them all, but here are a few key highlights:

Intellectual Property

The grand poobah of the issues bucket list.

1. You as the "publisher" (note the use of quotes here, since that distinction is becoming less relevant in this context) need to have in order to distribute and exploit the player-created content.  But there can be a tendancy to take more than what you need in order to "lock down" these rights.  I challenge my clients to constantly ask themselves whether they need all of the rights they are seeking, or whether something less would work just as well, and be easier to monitor.  After all, licenses can be perpetual; grants of ownership may be subject to reversionary rights later in life.
   
   The question of license-vs.-own becomes even more important if you want to take the content and exploit it internationally.  For example, do you know your requirements as publisher for comply with various countries' moral rights laws?  Does the country you seek to exploit the work in even allow you to do what you want to do?
    
2. Consider the kinds of content you are allowing players to create, and whether ancillary IP laws like VARA may apply.  (How this could happen is a fascinating question, but that's another post).
    
3. When players create content, publishers have no way of knowing whether the content is original or not.  There's no clearance process to speak of, so taking advantage of the safe harbor provisions of the DMCA is incredibly important.  For example, have you appointed a copyright agent, or are you at risk for a Righthaven-like troll coming after you?  Do you have an appropriate notice-and-takedown regime in place?
    
4. Aside from copyright issue, have you considered the impact of trademark laws in the player-created content?  After all, the DMCA doesn't apply to trademark issues so how will you handle a situation where someone uses the McDonald's Arches as an architectural work, or the Nike Swoosh on virtual clothing.
    
5. What about publicity rights?  If I put my face on a digital item then distribute it through your player-created content network, can I turn around and sue you for infringement of my right of publicity?  Maybe, maybe not depending on whether there is an implied right to use my name/image/likeness, but why not deal with it up front?

Revenue Share

1. Are you taking an off-the-top fee like Apple does, or is your rev share more complex?  If it's more complex, what kind of definitions for "gross" and "net" are you using?  Keep in mind that there are industry standards with this, so if you depart from that standard, you should have a good reason for doing so (and a compelling sales pitch as to why that departure is good for the player).
    
2. Are you providing access to any sort of dashboard or control panel so players can monitor the exploitation of their content?  What promises, if any, are you making with regard to access to and usefulness of this program?
    
3. What rights, if any, will players have to dispute the revenue share?
    
4. On what kind of payment cycle will you pay players?  Will you keep any of the player's share as a holdback, and if so, how much and when will this be liquidated.
    
5. If you're going international, where does currency exchange fees come into play?

Nature of the Content

1. How will you respond if someone uploads buggy content, or even worse, content that contains malware?  Do you know the extent of your liability?
    
2. Will you engage in a rigerous approval process (a la Apple App Store), or take a more laissez faire approach (a la Google Play).

The above checklist of questions is not meant to be all-encompassing, but as you can see there are more than a few issues that need to be thought through prior to launching a player-created content system.  Moreover, you should seek out an expert to assist with your decision-making and documentation thereof.  Not only will this help you understand the contours of the issues you face, but this will also help you create player agreements that are easy to use and easy(ier?) to understand.

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If you haven't already heard, over this last weekend a character in World of Warcraft went on a killing spree.  A virtual killing spree, but a killing spree nonetheless.  Video of the massacre can be found on the linked page (thanks to Wired for the coverage).

The Wired article points out that the scene was very similar to an episode of South Park called "Make Love, Not Warcraft."  If you haven't seen it, you can watch it here: http://www.southparkstudios.com/full-episodes/s10e08-make-love-not-warcraft.

Go ahead, we'll wait..........

Great episode, right?  Of course, as we lawyers are wont to do, we read stories like this do not focus on the "life imitating art" aspect.  Instead we pose questions to ourselves like "who's liable for what?"  It's sad, but true (sigh).  So here are some initial thoughts on legal liability:

The Hacker

There are a lot of people who were harmed here, but we can make things simple by classifying them into two categories: Blizzard and other players.  As to Blizzard, they could pursue a number of causes of action against the Hacker.  For example, trespass to chattels (an archaic legal name for "you improperly took my stuff, or otherwise deprived me of it") could exist.  So too could a copyright cause of action depending on how the exploit occurred (consider the glider case - MDY v. Blizzard - and whether this would rise to the level of a precondition to the license agreement [pdf]).  Other causes of action may similarly apply, depending on facts like the nature of the exploit, the location of the Hacker, the systems used to take advantage of the exploit, etc.  After all,

As to other players, however, this is a more complex question than you might think.  After all, WoW is a game where players can and often do kill each other.  So we would have to separate the killings from those inside a no-PvP zone, and those outside.  For those inside, causes of action against the Hacker may be available because no one would expect to be killed in a no-PvP zone.  However, you have to ask whether it would be worth anyone bringing a claim for loss of virtual property triggered by a WoW death for several reasons.  First, players may not even own the lost property depending on what was lost and the applicable EULAs/Terms and Conditions.  Second, what is the value of that property?  If it is something Blizzard could restore at the touch of a button, perhaps there is little to no value to the lost items.  Third, what if the player whose character was attached had no right to certain lost items in the first place (e.g., purchased through illegal online auctions, stolen etc.).  For these reasons, it would be difficult to value what may have been lost, thereby reducing the incentive for someone to sue the Hacker.

For the killings in a PvP zone, there might not be any cause of action available for players to sue the Hacker in the first place.  After all, they were in a PvP zone, and thanks to a legal doctrine known as assumption of the risk, that might be the end of the case.  Assumption of the risk states, in its most basic form, that if I engage in an activity I know to be dangerous, I cannot sue for damages if I'm hurt by the activity.  Consider jumping off a high dive into a pool with no water - I know there's a chance (a really good one) that I'll be hurt badly.  So if I jump and get hurt, I can't sue - I "assumed the risk" inherent in the activity.  Same goes for being in a PvP zone.   Of course, that's not to say someone won't come up with some creative legal theory, but making it stick will be difficult in this circumstances.

Blizzard

Could players sue Blizzard because it did not catch and fix the exploit prior to the Hacker's massacre?  Perhaps, but this will depend entirely on the facts.  If Blizzard knew of the exploit but did nothing about it, that could form the basis of a negligence case.  But if Blizzard was caught entirely by surprise by the existence of the exploit, a negligence case could be difficult to prove.  Moreover, Blizzard appears to have acted quickly in hotpatching WoW so that the exploit could no longer be used, meaning that a claim of ongoing negligence would be difficult to win. 

Besides, Blizzard's EULA states that the software is provided "as is."  This gives Blizzard another defense should a player whose character was killed by the Hacker try to pursue a legal claim against Blizzard.

Take-Away Points

What from the game dev/publisher side can be learned by this experience?  A few thoughts:

1. People will always find some way to take advantage of your game - expect it and have a plan to deal with it.
    
2. Put that plan on paper before you need it.  I don't know whether Blizzard did this, but given the speed with which everything happened, it would not surprise me if they did.  Having a plan in place prior to needing it is a "good fact" that can help reduce claims of negligence down the road.
   
   Also, don't create a plan then lock it in a box.  Review it regularly, and revise as necessary to keep up with new threats and technologies.  A plan dealing with a computer crisis circa 1992 isn't a good plan for 2012.
    
3. Take action to stem the damage being done as soon as you reasonably can, regardless of whether that damage is legally cognizable or not.  Be careful not to act too soon, however.  Never act just for the sake of doing something quickly - do your research and act responsibly, just do it as quickly as you can.
    
4. Review your EULAs and Terms and Conditions documents.  If you don't know what precondition language I referred to in the above sections, read the links, then drop me a line.  It is something you definitely want to look into.

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I, like many gamers, thoroughly enjoyed the “Kevin Butler, VP” ads Sony ran over the last year or so. Here’s a compilation of some of the best (my favorite is the second):

So I, like many people (including our friends at [a]List) were a bit puzzled by "Kevin" showing up in a Bridgestone commercial. And particularly puzzled by the fact that he appears to be excited about the Wii:

For those of you didn’t watch the clips, "Kevin Butler" isn’t a VP of anything. He isn’t even real. He’s a character that is played by an actor named Jerry Lambert.  So if "Kevin Butler" is a fictional character, who controls whether Kevin appears in ads for Sony, Bridgestone, or anyone else?

The short answer either the owner of the character, if the character is properly protected at law, or no one. 

Figuring out who owns a fictional character can be difficult because the general rule of "the creator is the owner" doesn't always apply to fictional characters, especially those created for advertising purposes.  Advertising agencies often create on a "work for hire" basis, meaning that the entity that created the character may or may not own the character.  

Once you figure out who owns the character, you have to figure out whether the character is protectable.  Fictional characters are protected under copyright law only if they are properly the subject of copyright law.  Most characters are ideas, and you should recall that copyright law protects expression, not ideas.   At what point is a character "expression" as opposed to an idea?  Or, put another way, is a story about an aging boxer from Philadelphia an idea, or is Rocky a characte protected by copyright law.

Determining when a character is "properly the subject of copyright law" is a job only a lawyer could love.  There are varying tests, facts that need to be shown, etc.  If you have questions about the specifics, feel free to drop me an e-mail.

Even if a character isn't protected by copyright law, it could be protected by trademark law.  Consider this: Mickey Mouse is a trademark for Disney's goods and services.

Bottom line: determining if a fictional character is protected by law is a headache.  Why does this matter?  Because ownership of fictional characters means the right to control how they are used.  After all, one could imagine that Sony would not be too thrilled about its character appearing excited about a competitor's product (though perhaps they don't care and have moved on to new advertising campaign ideas). 

So, let's say you are creating characters that you want to protect.  What can you do to ensure that your character isn't used for the benefit of a competitor:

1. Consider how much you've put into your character.  Is your character a mere archetype , or is there something more - a backstory, an identifiable but uncommon persona, catchphrases, etc.?  None of these by themselves will necessarily grant your character copyright protection, but they help (regardless of whether the legal test is the "sufficient delineation" test, the "story being told" test, or some hybrid of the two).
   
   Remember, not all characters are deserving of legal protections, and so it may not be worth it to put your time and energy into building up every character in this manner.
    
2. Audit your ad agency agreements.  Who owns the ideas that your ad agency brings to you?  Who owns the physical execution of those ideas?  Only way to know for certain is to do an audit, and make corrections where there are gaps or inappropriate transfers of rights.
    
3. Consider whether your character can function as a trademark.  Trademarks are different from copyrights in that trademarks protect identifiers of the source or origin of goods and services.  Perhaps your character should be treated like Cap'n Crunch instead of Rocky.
   
   Trademarks don't expire so long as you use them appropriately, but be careful when trying to claim expressive content as a trademark.  You can run into problems doing this (based on a Supreme Court case called Dastar which, among other things, held that one cannot use trademark law to do an end-run around the time limits of copyright law - that's an over-simplified statement of the law, and I strongly encourage you to speak with a tech-saavy lawyer about Dastar's implications if you have any questions about this).
   
   The better approach is to consider the purpose of your character up front, and decide what form of protection is appropriate (if any).

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Though not all advertisers are aware of it, advertising agencies sometimes receive incentives or rebates from media companies for steering clients in the direction of that particular media outlet?  That is, the people you pay to help you promote your products and services may be paid by the people who are recommended to you as sound media partners.  Potentially problematic conflict of interest?  You betcha.

The practice is less common in the US than in other jurisdictions, but it does happen, as revealed in a recent survey conducted by the Association of National Advertisers and Reed Smith (the firm of yours truly).  The survey found the practice most likely in radio and tv advertising, though still a factor in new media advertising (Internet, social media, etc.).

Why is this an issue?  Because companies that advertise their products or services (in other words, everyone) should expect impartial advice from the people they pay to help promote their products and services.   Or at the very least know when there is a potential conflict and so can assess the agency's recommendations more accurately.  Moreover, for companies with large-scale ad budgets and/or lots of bargaining power, this could mean a reduction in your overall expenditures if you are able to get a pass-through on rebates or incentives.

So what should games companies do about this issue?  Understand how the "dollar flow" goes with regard to their ad spends, and make sure that knowledge is reflected in your assessments of ad agency agreements and recommendations.  Here are some "best practice" tips from to help with this:

• Require your ad agencies to be completely transparent regarding any rebates / incentives offered and received, and make sure that the entire benefit of the rebate goes to you, the advertiser (or if you're willing to give some portion of it to the agency, but either way, state how much you get).
   
• Clearly specify how rebates will be handled.  Do they come back to you within 30 days?  Can they be put into the account as a credit against outstanding fees?  If you don't say, there's the potential for the agency to sit on the rebates for a while, making this an interest free loan to the agency (assuming you get it back at all).
   
• In the case of "global" advertising arrangements, make sure that this language is reflected in both the agency and holding company levels so that leave no stone unturned.
   
• Consider conducting periodic audits to ensure that unauthorized incentives / rebate activity is not occurring.

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Right of publicity issues have been making waves left and right in the games industry for a couple of years now.  There was the Justin Bieber/Joustin Beaver flap.  No Doubt's publicity suit against Activision goes to the jury.  Take Two was sued by a man claiming to be the real life inspiration for the main character in GTA: San Andreas.  And of course the NCAA sports-related publicity lawsuits (of which there are many).

Rights of publicity are one of those things that causes games companies agita (translation for our non-Brooklyn readers: a combination of anxiety, agitation, and heartburn).  The reasons for this are varied: publicity rights are state-created, and so there is a lack of uniformity in their application; video games are speech and entertainment, meaning that it is often unlcear whether a particular use of someone's image is "commercial" or not; etc.  While obtaining permissions for a particular use is always safe, the reality is that a lot of times permissions are not a realistic solution. For example, consider a games company that attends a major industry event (a la E3), and wants to take pictures of event attendees who stop by the games company's booth.  Can the company place the images it took on its website?  What about its annual report?  Or what about a company that wants to use an image as part of a game to comment upon/make fun of social or political issues (e.g., the Hackman games from a few years ago)?  Would permissions be readily given in either of these contexts?

As a result of the challenges involved in obtaining specific permissions, many games companies have wondered whether there is an implied right to use a person's name or likeness.  In most situations, there is no such implied right.  However, thanks to a (fairly) recent decision in California, there are some circumstances where you can imply a right to use another's image or likeness.

The case was brought by Shirley Jones (of the Partridge Family fame) over photographs taken of her while she attended a red carpet event.  The photographs were taken by professional photographers and wire services in attendance at the event, then licensed to a company called Corbis.  Corbis then licenses the photographs to others.

Jones sued Corbis for violations of her right of publicity (which, in California, is codified as Cal. Civ. Code 3344).  The judge ruled in favor of Corbis on the grounds that Jones had granted implied rights to use her image and likeness.  The implied right arose because:

• Jones chose to walk down the red carpet where she knew photographs were being taken (she even posed for some); and
   
• There was recognition of the long-standing practice in the entertainment and photography industries to take photographs on red carpets which would then be sold and reused by companies like Corbis.

As a result, the court found Jones had impliedly given to the news services and photographs a right to use her name/likeness, including a right to sublicense those rights to Corbis.

Does this mean there is an implied right to use someone's name or likeness in all situations?  Not exactly.  First, this is a California-specific case, so it may not be adopted elsewhere.  Second, it relies on very specific facts regarding what Jones knew about the industry and the taking of the photographs.  Without those pieces, there would not likely have been any implied right. 

That does not mean that the case is not worth consideration by games companies, however.  This case does clarify a few things for companies who hope to take advantage of an implied right to use another's image or likeness.  Here are some thingsyou can do to put itself in a place similar to that of Corbis:

1. Understand the background practices, norms, and customs of events you stage and attend.  Are there photograph areas?  Are photographs typically taken?  What happens to these photographs after they're taken?
    
2. Know what you say about privacy and publicity rights.  Often companies will have general privacy policies that they haven't updated in months (or longer), and old privacy policies typically contain language like "we will not use anything about you without your express permission."  Having a statement like this will only undercut your ability to claim an implied right to use.
    
3. When in doubt, provide notice to people that you intend to take photographs/video and use their image.  This is not a "silver bullet" but it can help rebut an argument that a photograph's subject didn't know that photographs were being taken or that you intended to use those photographs in certain ways.
    
4. One strategy that is particularly effective is to hire a professional photograph to attend an event and have that photograph take "souvenir-style" photographs (the "hey, would you like a picture" type photographs).  The photographs then gives subjects a stub of some sort with the means to identify the photograph if the subject(s) would like a copy for themselves.  One the back of the stub, you can provide some information about your future use of the photographs, and give subjects the opportunity to have their photograph removed from the stock if they choose. 

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Important legal news out of the EU (and no, "important legal news" is not a contradiction in terms).  The European Court of Justice has issued a decision in a case involving resale of digital goods.  Our colleagues in the EU have written an excellent piece that breaks down the decision, and they have this to say about the case:

In a landmark judgment delivered by its Grand Chamber on 3 July 2012 (Case C-128/11), the European Court of Justice (ECJ) has effectively declared the second-hand sale of physical copies and downloaded copies of software to be legal. The ECJ explains that the principle of exhaustion of the distribution right applies not only where the copyright holder markets copies of his software on a material medium (CD-ROM or DVD) but also where he distributes them by means of downloads from his website. This decision which markedly extends the scope of the principle of exhaustion beyond what has been the understanding to date has a potentially significant impact on the way software is sold and consumed.

The full article can be found here.  It is absolutely worth a careful reading, especially for games companies that do business (or will want to do business) in the EU.  So, in other words, its important for just about all games companies.

Now, some of you loyal blog readers may recall that one of the very first posts to this blog was about sales of "used" digital goods, and how game companies can structure their End User License Agreements (or "EULAs") to approve of or restrict secondhand sales (depending on what the desired end result is).  If you would like a more full treatment of US law regarding secondhand sales of digital goods, you could read End Runs (an article written by yours truly in the Los Angeles Lawyer magazine), but here are the broad strokes:

• What do you tell consumers about the transaction?  Do you call it a license?  Do you have a license agreement?  If you don't, the transaction is likely to be deemed a sale.
   
• If you have a license, do you:
  
  
  • Restrict the use of the digital goods in significant and material ways?
     
  • Restrict resales/secondary transfers by the user?
     
  • Have a tracking/monitoring system in place to guard against violations of the license?
     
• Even if you have a license, do you do (or not do) something that implies that you intend the transaction to be something other than a license?

As you can see, the inquiry about "exhaustion" does not appear in the US analysis of whether secondhand sales of digital goods are legal or not.  At least, it doesn't literally appear in the analysis, but the principle of "exhaustion" in the EU is closely aligned with the "first sale" doctrine in the US, which forms the underpinnings of the secondhand sale analysis. 

The "first sale" doctrine is an exception to copyright law's grant of exclusive rights whereby an owner of a valid copy of a work can resell that work to any third party without the original author's permission.  Imagine a hard copy book - if you own that book, you could legally sell it to your neighbor or a used bookstore, and not run afoul of copyright law.  A digital eBook version, however, is a different story, and that's where the above analysis comes into play.  The "license versus sale" analysis is used to determine if the eBook transaction is a "sale" (to which the first sale doctrine applies) or a "license" (to which the first sale doctrine is not applicable).  In short, the US and EU inquiries are not wholly unrelated.

Yet notwithstanding the similar theoretical underpinnings, it is the differences in approach between the US and EU that can have a significant impact on games companies doing business in both regions.  So, what should a games company think about in terms of the varying US and EU interpretations of "sale?"  Here are just a few thoughts off the top of my head:

• What exactly is the reason behind the need to control secondhand sales of a particular work?  Is the work of an ilk where it is important to craft appropriate licensing regimes, or can your interests be protected in other ways (e.g., spending more on innovation and new content rather than licensing enforcement).
   
• Taking the ECJ position that "perpetual" license grants are akin to sales could cause a games company to time-limiting a license in order to avoid exhaustion.  However, if you time-limit your license grant, you must have some system to track and enforce the limits (and evidence showing you actually do these things).  Failing to track and enforce the time limits may cause your license to be deemed a sale transaction in the US.
   
• Games companies that use a subscription model, as well as cloud gaming companies, may think that the ECJ decision does not apply to them as the license is granted in exchange for regular payments.  However, there are all sorts of digital goods that can be "sold" within the context of a subscription game.  Digital items, avatars, power-ups, plug-ins, etc. can all be sold (and therefore potentially resold) even if a subscription is required in order to access the item.  Thus, this decision is of import to games companies of all stripes.

As to how we are helping our clients move forward after this decision, I think our EU colleagues put it best when they said:

Creative lawyering should make it possible to find solutions which will enable the software industry to comply with the ECJ case law while maintaining its interests.

We will be giving careful thought to the best ways for our games clients to avoid unintended consequences stemming from international distribution of their works while still maintaining their interests.  We encourage all games companies to do the same. 

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One of the joys of being a lawyer is that you get paid to think about risk.  Well, not so much "think about" as "eat, sleep, and live" risk.  It's inherent in the job we do.  "Can I do X," says the client.  "Well," says the lawyer, "if you do, there is a risk that..."

And when this speech starts rolling, you can almost feel the business team's eyes rolling into the backs of their skulls.  It's not that the business doesn't care about risk.  Most business people, in my opinion, do care about risk.  They just don't value it the same as lawyers.  The "why" of this is not something I can speak to with any expertise, but I think one contributing factor is a mismatched perception of when a deal has been sufficiently finalized to control for risk.

Take, for example, a fairly typical license deal cycle.  An idea is generated, business people talk to business people, and a tentative arrangement (the "cocktail napkin" arrangement) is hammered out.  Then (hopefully) the legal team is brought into the loop, and sometimes is told something like "we need a term sheet today," or "a full agreement will kill this deal," or "if we don't get something -- anything -- in writing today, someone else will swoop in and take the deal."  So the legal team hammers out a short term sheet with some, but not all, pertinent language in it, and puts a little gem like this at the bottom:

The parties will use good faith efforts to execute a long-form agreement within X days of the effective date of this term sheet.  Until such time as the long-form agreement is executed, this term sheet will remain in effect.

On the one hand, you've got a signed agreement, so the business is happy.  They're excited to start work.  They might even start work on the assumption that any remaining details will be worked out at a later date.  After all, you've "papered the deal," right?

On the other hand, the lawyers know that the agreement you've signed is woefully insufficient at controlling a variety of foreseeable risks.  Not everything can be crammed into four or five pages, and risk mitigation for certain circumstances is often left out in favor of the more salient deal points like timing, money, etc.  And yet there is no obligation to do anything about it on their party - "good faith efforts" is not the same as "you will."

Thus, you've got a split in perception of risk control, and so long as the business thinks the deal's risks have been dealt with, their incentive to push through the long-form will be reduced.  Then attention gets directed elsewhere, and before you know it, you're at the end of the deal cycle and the long-form never got signed.

Fortunately, situation such as this sometimes blow up and stand as a cautionary tale for others to learn from.  Take this one for example: last week, a Swedish company called ProCloud Media Invest AB sued Paramount Pictures for backing out of a licensing arrangement for ProCloud to develop games based upon Paramount's entertainment properties. ProCloud's lawsuit claims that it paid Paramount Pictures $1 million and "fully performed" the dutuies of a "co-producer," but the studio shuttered its digital entertainment division before ProCloud could started producing the subject to the license.  Now, ProCloud is suing Paramount for $10 million.

Digging into the complaint a little bit, one learns that the parties executed a "deal memo" and an amendment to the deal memo, but never executed the full, long-form agreement.  The complaint further alleges that four weeks after executing the amendment, Paramount shut down the digital entertainment studio.

Out the outset of some (brief) analysis, let me be clear.  I HAVE NOT READ THE DEAL MEMO OR THE AMENDMENT.  I don't know what these documents say, nor am I expressing any opinion about what either party should or should not have done in this situation. Rather, having been in situations similar to this, I can tell you that termination provisions in deal memos do not tend to be overly extensive.  It would be a rare deal memo that contemplates a termination provision for a complete shuttering of the business line.  Meanwhile, a full license could (should) include well-crafted license termination conditions. 

So, as a lawyer for a video games company, or perhaps a business development team member who plays a bit of a legal role, how can you ensure that you get the protections of the long-form while facing the inertia of a business that just wants to move forward?  Here are some tips to consider:

1. If possible, set an expiration date on the deal memo.  If you set an expiration on the deal memo or, say, 60 days after signature, this puts a lot of incentive on all parties to come to the table and negotiate the long-form.  It is a much better way to ensure that a long-form gets done as opposed to the "gem" stock language from above.  Of course, this is not something that you can get into every deal, but can be a powerful tool when appropriate.
    
2. Tie specific provisions to long-form execution.  One of my favorites is tying the payment schedule to the long-form execution, as opposed to payment on execution of the deal memo.  Money gets everyone's attention, so even if you can't put a short expiration date into the deal memo, tying the long-form execution to the payment schedule is a way to build a similar incentive.
    
3. Make sure the long-form is in your queue.  All too often, the responsibility for ensuring execution of the long-form falls through the cracks because the business thinks legal is handling this, and legal thinks the business is driving it.  Take ownership of this up front, keep the business people in the loop on its progress.  This will show the business that you - legal - are taking this seriously, which can communicate more about risk control than any conversation you could have with them.  
    
4. Take the time to put license terminations into a deal memo.  Know that even if you follow the above tips, you may find yourself operating under a deal memo for an extended period of time.  Company cultures, industry norms, development schedule - all of these can give rise to a situation where is it not tenable to negotiate out a long-form.  In such situations, even basic "the license may be terminated at licensor's discretion in the event that..." provisions can be lifesavers.

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As I read about Rockstar's new strategy for dealing with players who use cheats and hacks in Max Payne 3's multiplayer mode to gain an unfair advantage, I think it's pretty genius.  The traditional options - account suspensions, bans, etc. - don't seem to be working.  They don't have much of a deterrent effect, as evidenced by the fact that hacks and exploits are continually developed for both older and new games.  Moreover, these options are typically "nuclear" in nature, and can backfire unless they are implemented very carefully.  You can't give back a player the days s/he's missed as a result of a suspension, and you may not be able to restore an account that's been banned or terminated.

So a new system needs to be created, and I like what I see of Rockstar's strategy.  I like it because the idea of putting "cheaters" into a pseudo virtual jail and letting them duke it out Hunger Games-style may ultimately create a deterrent against use of cheats and "unfair exploits."  After all, what's the point of using a hack to gain an unfair advantage if the only people you can compete against are using that same unfair advantage?  I also like it because it allows those people to continue to interact with your game, and hopefully continue to drive your bottom line.  In contrast, a permanently banned player cannot generate new revenue for you.

Note: I put "cheaters" and "unfair exploits" in quotes because not all exploit users should be considered cheaters.  Sometimes, people figure out a way to take advantage of the game environment that was not envisioned by the developers, yet is still entirely consistent with the game's reality.  Those people are not "cheaters" in my mind, even if that exploit does give them an unfair advantage over those who haven't figured it out.  At the same time, however, we can all agree that there are a lot of hacks, cheats, and exploits that should be - and usually are - considered "cheating."  So what we have here is a definitional problem, which we'll explore a a moment.

For all of the positives Rockstar's strategy has, backfiring problems are still a possibility.  The first person who is unfairly (or incorrectly) placed into the "Cheater's Pool" will be evidence of that.  (I can see the message board flame wars now).  Indeed, any anti-cheating system that has any form of punishment for players runs the risk of backfiring on the company that implements it.

But potential backfiring problems are not reasons to neglect an anti-cheating strategy altogether.  Instead, consider these tips to help you avoid backfiring issues with your anti-cheating strategy:

1. Define What "Cheating" Is With Clarity and Precision.  As stated above, not all uses of exploits should be considered cheating.  I recommend that my clients consider the question from an in-game perspective.  In an immersive game experience, what would the character-players think about the exploit?  Would it be a manifest "deus ex machina" situation that causes confusion and feelings of unfairness among other players, or would it cause other players to say "man, I wish I had thought of that, that's genius."  The former is clearly a problem; the latter, maybe not as much.
    
2. Make Sure Your Definition of "Cheating" Is Reflected in Your Terms of Service.  All too often, game companies do not take the time to document their intentions in ways that bind players.  Sure, your ToS may prohibit "cheating," but what really does that mean.  As discussed, "cheating" can be a vague, undefined concept.  While having a lack of clarity may be a benefit in certain situations, more often than not having greater clarity in your terms or "house rules" will put you in a decision to make reasonable decisions that you (and your players) can live with.
    
3. Do Your Own Investigations Before Taking Action.  This is especially important if, like Rockstar, you ask players to report examples of cheating.  It is not above some players to abuse the reporting system by submitting false reports of cheating by players they don't like, can't beat, etc.  Make sure you have your evidence before you take any action to punish a player.
    
4. Implement a Reasonable Appeals Process.  Sometimes, even strong factual evidence may be interpreted incorrectly.  Reasonable companies will give players subject to potential punishment an opportunity to plead their case, and will actually consider what the players say.  That does not mean you must wait on a response before taking any action, but make sure your system is fair to the person who is under investigation.
    
5. Give Players a Means of Redemption.  Games are meant to engage as many people as possible in a world that they can share with one another.  Thus, it doesn't make a whole lot of sense to brand a player and restrict how that player can interact with your game forever hereafter.  You don't have to make it easy; just make sure there is some means of redemption.  Otherwise, the player will be incentivized to move on to a new game - probably one of your competitor's - and you've just lost a player (and the associated revenue stream) for good.
    
6. Be Reasonable/Don't Be Arbitrary.  This is by far and away the most important thing to keep in mind.  The "be reasonable" mantra is reflected throughout this post, but the other side of that coin is "don't be arbitrary."  If an action is "cheating" for Person A, it should be "cheating" for Person B.  Moreover, the punishment for Persons A and B should be the same, regardless of outside factors.  Nothing undercuts the credibility of an anti-cheating system like arbitrary action.  To ensure you do not act in arbitrary ways, consider developing SOPs for responses to cheating.  Centralize responses in one team, as opposed to having a slap-dash "whoever is driving the console makes the decision" response system. 

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Those of us who watch legal developments in the video games and new media industries have been following the Xbox 360-related battle between Motorola (now owned by Google) and Microsoft for quite some time.  We at DevelopingConcerns been waiting for a resolution from the International Trade Commission before writing a post, so that we can provide our dear readers with those little nuggets of wisdom we've become (not all that) famous for (as opposed to our atrocious attempts at humor, which of course have subjected us to public ridicule the Internet over).  

Well, waiting until a final resolution isn't going to happen; we're writing this up midstream.  Why?  Because the recent involvement by Capitol Hill lawmakers, and potential impact of the ITC granting an exclusionary order (more on his later), make this a perfect time to jump in.

By way of background, the International Trade Commission is an independent governmental agency which conducts investigations and provides general trade research to both the executive and legislative branches of government. The ITC is responsible for, among other things, investigations under Section 337 of the Tariff Act of 1930 (19 U.S.C. § 1337), prohibits certain unfair practices in import trade, including the infringement of certain statutory intellectual property rights and other forms of unfair competition in import trade to be unlawful practices. A lot of Section 337 investigations involve allegations of patent or registered trademark infringement, although other forms of unfair competition (e.g., misappropriation of trade secrets, trade dress infringement, passing off, false advertising, and violations of the antitrust laws) may also be asserted.

The instant case - the Motorola v. Microsoft Xbox 360 case - focuses on patent infringement issues.  More specifically, it focuses on the use of so-called "standard essential patents" (or "SEPs") in Xbox 360s.  SEPs are those patents that are an integral and necessary part of an industry standard, and typically are shared amongst all players in a particular industry in order to ensure that all devices/technologies within that industry adhere to the applicable standard.  In exchange for contributing the SEP to the standard, the company holding the patent will be paid a license on reasonable and non-discriminatory (or "RAND") terms.  [Note: internationally, the term is often referred to as "FRAND," or "fair, reasonable, and non-discriminatory" - the two acronyms are basically interchangeable). 

In this case, the most important SEPs at issue are those covering the H.264 video compression standard, and the 802.11 WiFi standard.  Theoretically, if Motorola demanded RAND fees, and Microsoft paid them, then Microsoft would have the right to incorporate these SEPs into the Xbox 360, so as to ensure that the device plays nicely with everything else that makes use of these SEPs (wireless routers, Internet video playback, etc.).  And life would go on as normal.

Of course, that didn't happen.  The reason is because Motorola and Microsoft could not come to an agreement on the nature of RAND fees.  The potential reasons for the failure to agree are too numerous to speculate, so suffice it to say that the parties couldn't come to terms, and so an ITC complaint was filed and an investigation was launched. 

That was in 2010 (see 75 FR 80843 for the official announcement of the launch of the investigation).  A lot has occurred since then.  For a blow-by-blow recap, read through the excellent coverage that Florian Muller at FOSS PATENTS has put together - complaint, announcement of initial decision, and the release of initial decision.  Here's what you need to know:

• The Administrative Judge (the first hearing officer at the ITC) has found that through incorporation of the at-issue SEPs into the Xbox 360, and by not coming to terms on RAND licensing fees, Microsoft has infringed upon the patent rights of Motorola
   
• Motorola, however, has appeared to act in ways that are somewhat disingenuous, and contrary to the entire ideal of SEPs.  Specifically, Motorola did not seek "reasonable" licensing fees from Microsoft.
   
• Notwithstanding Motorola's actions, Microsoft did not prevail the equitable defenses, and so the Administrative Judge recommended an exclusion order (an import ban) on Xbox 360s (at least until the parties agree on licensing fees for the SEPs).

Read the full public version (which is redacted in part) of the initial decision (via Wired.com).  The judge has some very choice words for Motorola's conduct, and indeed suggest that Motorola never intended to grant RAND terms.  That's what's really interesting about this case: if a system is built upon all industry members agreeing to a particular standard, what happens when the holder of the patent related to that standard starts acting in ways that are not "reasonable" or "non-discriminatory?"

Fortunately for this blog, lawmakers from both sides of the aisle (or perhaps more accurately, from different parts of the country) are weighing in on this question, and both companies are seeing support from Congressmen for their respective positions.  Predictably, Microsoft is getting support from Washington's Congressional delegation, and Motorola is getting support from Illinois (former home of Motorola, before the Google acquisition).  The Congressmen and Congresswomen are casting the battle as one of public policy versus strong IP protection - of fair play and the American economy over rewarding those who spend time and money inventing new technologies.  Only time will tell which side - if either - is victorious.

In the meantime, does this mean that the Xbox will be banned from the US?  Certainly not in the short run.  Now that the Administrative Judge's initial decision has been rendered, the case will go to the six-member Commission, which can review, modify, overturn, or accept the initial decision.  The deadline for this is August 23rd.  After that, the Commission's decision will go the President, who has 60 days to decide whether to accept or overturn the decision.  Therefore, Xbox 360's won't be yanked from store shelves anytime soon.  In the long run, I'd say it's unlikely that Xboxs will be banned in the US because Motorola's conduct (as reported in the initial decision) suggests it never intended to grant Microsoft a license.  My personal feeling is that, at some point, public policy will come into play (perhaps at the ITC, or perhaps at the administration level), and Motorola's apparent unwillingness to negotiate RAND fees will come back to bite it.  The law may require a different answer, but my gut says that somehow, we'll find a solution to this issue that allows Xboxs to stay on the market. 

Of course, no gut feeling is ever 100% right, so we will keep watching this case (and so should you) as the eventual result could have significant ramifications throughout any industry that takes advantage of mutually agreed-upon standards.  If our legal system can be used to destroy the current status quo of standards-related industries, then either industry will need to come up with a new legal solution (escrowing the IP for blind distribution as determined by a neutral trustee?) or we will find ourselves back to the format wars.  The later is not the most efficient way to progress.  Ask anyone who bought into laser discs over DVDs, or HD-DVDs over Blu-rays, how great format wars are.

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Over the last few months, a lot has been written about kompu gacha.  Kompu gacha, or "complete gacha," is a virtual item sales strategy whereby users purchase a virtual item that is part of the set of multiple virtual items.  Once the entire set is collected, the user receives a significant prize.  The catch, though, is that the virtual item that the user gets for his/her purchase is selected at random from among all of the items in the set, and some of the items in the set are far more rare than others.

Here's a great graphic, courtesy of Tyler York's article on Gamasutra, that lays out how gacha works:

Think of it as a cross between buying a pack of baseball cards and the Golden Ticket promotion in Willy Wonka and the Chocolate Factory. 

For a time, kompu gacha was huge in Japan.  Some reports suggested that people (including children) were spending hundreds of thousands of yen a month playing gacha games (100,000 Yen is approximately $1,200 USD at today's exchange rates).  Then, the Japanese Consumer Affairs Agency gets involved. 

News of the agency's inquiry had dramatic effects upon Japan's social game companies.  Some companies took voluntary steps to limit gacha plays, but ultimately this wasn't enough to satisfy the agency's concern.  Ultimately, the agency issued a notice that, as of July 1, gacha games would be considered illegal.

But that's the law in Japan.  What about US law?  Would gacha games be subject to similar legal constraints here in the States?  And what about gacha-variant sales like the "mystery box" - how should US law frame this type of sales activity?

Thoughts on the legality of gacha, and some thoughts on ways that companies can implement blind virtual item sales, after the jump.

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Lots going on in the games industry recently, and with E3 on deck, the flurry isn't likely to slow down.  Here are some key developments in legal issues related to video gaming.  The highlights: an author learns that idea theft cases against games companies can be just as difficult as idea theft cases brought against movie and TV studios; the trades will be devoid of more juicy details from the Infinity Ward lawsuit; rights of publicity cases, now with a pending jury decision; and the future of unlockable content is at stake:

• Ubisoft seeks to stop the copyright infringement lawsuit brought against it by author John Beiswinger.  Earlier, Beiswinger opted to voluntary drop the suit without a settlement with Ubisoft.  Upset by this (and the need to defend itself in court), Ubisoft is now seeking a declaration that its Assassin's Creed games do not infringe Beiswinger's novel LINK, as well as costs and attorneys' fees.
   
• Activision has ended its contract row with former Infinity Ward heads Jason West and Vince Zampella, which comes on the heels of Activision and EA settling their related dispute.  This case is too important to deal with in brief, so a retrospective will be forthcoming (I can tell how excited you are at the prospect).
   
• EA will have to participate in the Bill Russell, conspiracy-related lawsuit the former basketball star has brought against the NCAA.  The crux of this case is EA's agreement to abide by the NCAA's prohibition on compensating student athletes.  This will be another one to watch closely, as it could affect just about every form of video gaming that involves collegiate sports.
   
• No Doubt's publicity lawsuit against Activision for inappropriate use of the band's image/likeness in Band Hero will go the jury.  Look for this case to become a foundation upon which future use of avatars and unlockable content will be based.
   
• Epic wins $4.45 million in Silicon Knights countersuit.  You may recall that the suit began when Silicon Knights sued Epic for $50+ million based on claims that Epic's Unreal Engine didn't live up to the promises made by Epic (thereby forcing Silicon Knights to build a new engine from scratch).  Epic countersues, claiming that Silicon Knights may have infringed upon Unreal Engine code in building the new "from scratch" engine.  Now, Epic wins... epically.  How's that for a reversal of fortune?  Lesson here: resorting to a lawsuit may not always be the best way to resolve your differences.  You could end up owing the company you're suing, which just adds insult to injury.
   
• Social game maker Blingville LLC has agreed to not use the -ville suffix in its games, thereby resolving a trademark dispute with Zynga. 

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Over the weekend, some criticism has hit the web regarding 2K Sport's $1 Million Perfect Game Challenge.  For those unfamiliar with the challenge and the current issue, here's a quick recap.

• 2K Sports has offered a contest for players of MLB 2K12 to see who can pitch a perfect game.  For the non-sports fans out there, a perfect game is when a pitcher throws 27 (or more, as needed) straight outs.  The opposing team cannot touch base - no hits, walks, or hit batsmen.
   
• The first 8 people to throw a perfect game in MLB 2K12 will be invited to New York City to compete in a tournament.  The winner of that tournament will win $1 million.
   
• Some participants figured out a way to make it a whole lot more likely that they would pitch a perfect game by substituting the regular players on the opposing team for worse players off the bench.  Imagine how much easier it would be to throw a perfect game if you didn't have to face A-Rod, Prince Fielder, or Matt Kemp, but instead faced 9 AAA-level players who collectively have a batting average below the Mendoza Line. 
   
• Articles on Kotaku suggest that at least one of the 8 finalists chosen to compete in the perfect game tournament used this exploit to secure the tournament spot.  2K Sport's reaction has thus far been to say that the contest was run properly.
   
• There is nothing in the official rules of the Challenge that specifically prohibits activity like the exploit, but that's not to say 2K has been silent on the issue.  The 2K Sports challenge page itself says:

You may not make any substitutions or lineup changes prior to the game starting. You must use the pitcher and batting lineup that is set to start the game for that particular day.

Uh oh.  What do you get when you combine actions by the finalists that violates the spirit of the challenge (if not constituting actual cheating) with conflicting statements by the contest sponsor?  A situation only a lawyer could love. 

Thoughts on potential liability arising from this situation, and how the issue could have been avoided, after the jump.

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It's the day after May Day.  And since there's no good way to make a transition from that into some bullet point topics of interest for games companies, let's just get right into it, shall we?

• EA's declaratory judgment against Textron in the lawsuit over the inclusion of Bell helicopters in Battlefield 3 can stay in California.  Sometimes, it pays to move quickly when threatened with a potential lawsuit.
   
• Speaking of lawsuits, if you're involved in a copyright infringement suit and you're seeking a preliminary injunction against an infringer, then you need to be aware that the "presumption of irreparable harm" may no longer be valid (it depends on your jurisdiction).  Instead, you may need to show evidence of irreparable harm (PDF) if you are to prevail on the prelim.
   
• Developing Concern's own Patrick Sweeney was recently interviewed by Ayzenberg for a feature on developing trends in game finance and monetization.  Great read for those who are interested in how games are getting funding and making money in today's games market.
   
• Amazon settles its digital purchase sales tax dispute with Texas.  Amazon will now invest roughly $200 in capital investments in Texas, and will begin collecting sales taxes on digital goods sold to consumers in Texas.  Read our previous coverage of the issue with collecting sales taxes on digital goods.
   
• The US DOJ has indicted 10 individuals for making and selling mod chips that circumvent DRM technologies.  The indictments stem from "Operation Tangled Web," which was launched in 2008.  As GamePolitics points out, the mod chip issue is being considered by the US Copyright Office as an exemption to the DMCA (the law under which the 10 individuals are being prosecuted).  I have no idea whether the DOJ's prosecution of mod chippers will have any impact on the Copyright Office's rulemaking, but whatever the Copyright Office decides it is unlikely to be of much help to those individuals already in the DOJ's sites.
   
• A Pennsylvania man has sued Ubisoft for copyright infringement.  The man claims that Ubisoft's marquee franchise "Assassin's Creed" infringes upon his novel "Link."  The basis of the claim is that both storylines involve the ability to relive ancestral memories.  Although a lot of fact development will need to occur before any final judgment can be rendered for this case, a quick perusal of the complaint indicates that a lot of the "substantial similarity" may stem not from original expression but rather from the ideas of reliving ancestral memories (there's a device that allows you to tap into those memories, while reliving those memories you interact with historical figures, good battles evil, etc.).  If that's the case, the plaintiff may find it difficult to prove copyright infringement because, as we've said a few times here, copyright law does not protect ideas.
  
  In the meantime, however, the plaintiff appears to be on the receiving end of a lot of vitriol from fans of Assassin's Creed.  Sometimes, legal actions have non-legal consequences (a factor that should always be kept in mind when exploring your own legal options).
   
• EMI filed a lawsuit in New York federal court alleging that Def Jam Records owes UMI for making unlicensed use of EMI's music in Def Jam’s new video game, Def Jam Rapstar.

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Blending characters and story lines from two distinct universes has long been a staple of the entertainment industry.  Comics, movies, and video games have all done it.  And with the upcoming Avengers movie and the release of Street Fighter x Tekken, the desire to create crossovers does not appear to be diminishing.

From a legal standpoint, I find crossover projects to be a lot of fun (fyi: when a lawyer says "fun," that probably means "complex, detailed, and time-consuming" - not exactly the same definition as most people would have for "fun").  There are a myriad issues that can fall out from a crossover project, and any company thinking about this kind of game needs to have solid legal representation from the get-go.  Here's but one example.

Let's say that Company A has a well-known character - something instantly recognizable by the masses.  So too does Company B.  These companies have trademarked their respective characters (a process that is not necessarily automatic, nor necessarily possible in all situations - another complexity!), and have been diligent in protecting those trademarks.  The companies are approached by Publisher, a video game publisher who has a great idea for a new crossover game utilizing characters from both companies.  Everyone thinks this is a great idea (new revenue streams almost always seem like great ideas), and so Company A and Company B enter into separate agreements with Publisher.

Fast forward a year or so, and Publisher has fallen on hard times.  Publisher goes into bankruptcy and now the bankruptcy trustee wants to assign the agreements with Company A and Company B to a third party.  Neither Company A nor Company B is comfortable here.  They don't know the new publisher at all, and they are concerned that the new publisher will sacrifice game quality to hurry up production and see immediate return on investment.  As a result, the brands of both Company A and Company B could suffer.

So, what rights does Company A/Company B have to stop Publisher's assignment?  Can Publisher move forward with its plan without either (or both) Company A's or Company B's consent?   Exploration of these questions, and thoughts on how to structure future trademark license agreements to deal with these issues, after the jump.

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Though celebrity endorsements have always been a popular means of advertising products, recently there has been an uptick in celebrity endorsements of video games.  Here are two of my favorite examples:

 and

By appearing in ads, celebrities are aligning themselves with your brand, and conversely, your brand becomes aligned with the celebrities.  Many times, this is a good thing. 

Sometimes, however, the brand and the celebrity drift apart. This may be caused by a scandal, by some statements some feel are inappropriate, or simply by a difference of opinion in political or religious belief.  Such is the case with the recent lawsuit filed by Ben Stein (yes, that Ben Stein) against electronics maker Kyocera.

Stein claims that Kyocera backed out of hiring him as a celebrity endorser because of his views on global warming.  Stein is seeking $300,000 for, among other things, breach of contract (which in this case would likely be an oral contract as there does not appear to have been a signed agreement).

Assuming for our purposes that there is an enforceable agreement between Stein and Kyocera, what could Kyocera have done to protect itself from this kind of situation?  More importantly, as games companies become more and more interested in hiring celebrity talent to appear in commercials, what can video game companies learn from this?

Thoughts after the jump.

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Starting the week off right, with some news and notes on items of interest to the games industry:

• HBO has fired back in the suit brought by a former MTV reality personage over use of the phrase "Johnny's Bananas," asking a New York state judge to dismiss the suit in its entirety.  Reasons: 1) no publicity rights in a nickname; 2) the show made no references to the individual, but rather used the phrase in a different way, unaffiliated with the plaintiff; and 3) time-barred by New York's applicable statute of limitations.  Previous coverage of this suit.
   
• Arnold v. Mutual of Omaha Insurance Co. - a California Supreme Court case that explores the differences between an employee and an independent contract.  Particularly useful for games companies as many game development services are performed by independent contractors (especially if you're a small/indy/emerging growth company).  Note the checklist of factors the court provides.
   
• Psystar has filed a petition for cert with the US Supreme Court in its long-running dispute with Apple over Psystar's distribution of "mac clones."  At the same time, Apple lost its bid to keep certain documents related to the litigation sealed, meaning that some information submitted in briefs and contained within decisions will now become part of the public record.  All those interested in copyright protection and software (so, pretty much everyone who reads this blog) should follow this case closely.
   
• Ninjavideo co-founder sentenced to 22 months in prison after pleading guilty to conspiracy and criminal copyright infringement.  Perhaps Ninjavideo's motto should be changed from "this sh*t is ninja" to "copyright law is no joke."
  
  This development will be particularly interesting to keep in mind as the ongoing debates over SOPA/Protect IP Acts continue.  More on SOPA/Protect IP coming, so stay tuned.

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When it comes to exploration of copyright law in the games industry, one aspect tends to dominate the discussion - works-made-for-hire.  Innumerable agreements permeate the industry that use this model, whereby one person creates a copyrightable work for another, but the commissioning person is treated as the "author."  This is not the only ownership-related model that should be kept in mind, however.  Another ownership model can be just as important, and in some cases, much more tricky.

That ownership model is known as "joint works," in which two or more parties share the copyrights in and to a work.  Why is a joint work ownership model considered more "tricky" than a  work-made-for-hire model?  Two reasons:

1. You must have a clear expression of intent to create a joint work; and
2. Joint works entitle the mutual owners to do certain things without the permission (and sometimes to the detriment of) the other owners.

The importance of the first issue - having a clear expression of intent to create a joint work - cannot be overstated.  Take, for example, the recent case of Malcolmson v. Topps, Inc., Docket No. 2:08-cv-02306-GMS (9th Cir. 2011) (unpublished opinion).  In this case, the court rejected Malcolmson's claim that he was a "joint author" of Topps' Battletech game because Malcolmson could not prove that he was an "author" of the work at issue.

Before you start yelling at the computer screen, let's make one thing clear - there is a difference between a general conception of "being and author" and what the law considers to be "authorship" of a copyrightable work.  There are two ways that one can establish "authorship," particularly in the joint work context.  First, you can have a written agreement making this fact plain.  In the absence of a written agreement, however, establishing authorship can be more difficult as you will have to prove several things.  The Ninth Circuit's decision in Aalmuhammed v. Lee, 202 F.3d 1227 (9th Cir. 2000), sets for a list of non-exhaustive factors to prove authorship in the absence of a written agreement (note: this is my paraphrasing for ease of consumption):

1. Exercise of control over the work - the person who is the "effective cause of the work;"
2. Objective manifestations of shared intent to be coauthors (as compared to subjective intent);
3. The appeal of the work turns on contributions of the putative "joint authors," and the success of the work cannot be apportioned to any one party over another.

In the Malcolmson case, the plaintiff (Malcolmson) did not have a written agreement with the makers of Battletech, nor could he raise a genuine issue of material fact under the Aalmuhammed factors.  Therefore, he could not make out a claim of being a "joint author" even though he made contributions to the Battletech universe by writing a back story for one of the characters.

Even if Malcolmson could have raised an issue of material fact at a pre-summary judgment stage, he may still have had difficulties in proving the allegations, especially in terms of his establishing control over the work. Of course, this inquiry could have been avoided had Malcolmson had a written agreement with the Battletech makers stating their joint work intentions.  Thus, this case underscores the importance of having a written agreement when you intend to create a joint work.   

And to that end (shameless plug alert), you should have an attorney review the agreement to make sure that the agreement does in fact contain an "objective manifestation of shared intent to create a joint work."  All too often, a simple phrase like "we'll create this thing together" can fail the "objective manifestation" test because of the lack of clarity. 

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According to a lawsuit filed on September 30th, the answer is "yes."  Plaintiff Astrolabe, Inc. filed a lawsuit against two individuals for maintaining online databases of historical time zone information.  The plaintiff alleges that it owns copyrights in the software program ACS Atlas, and that the defendant's website, by offering historical time zone information, infringes upon those copyrights.

Let's give Astrolabe the benefit of the doubt and assume that it meant to draft the complaint so that the allegation was that the defendant's websites copied the code or table structure of the ACS Atlas because, as we've said a number of times on this blog, you cannot copyright ideas or facts.  Facts are facts; data is data.  Such things are not protected by copyright.

Copyright does not protect facts, ideas, systems, or methods of operation, although it may protect the way these things are expressed.  United States Copyright Office.

Thus, no infringement of copyrights can occur if the things being infringed are facts and data because facts and data are not copyright protected.

That is not to say the suit is totally without potential merit.  If the alleged infringement is against original expression (e.g., introductory paragraphs and explanations about those facts), or the software code that drives the database, then copyright law may come in to play.  Even the layouts of databases and menus pay be subject to copyright protection.  See Positive Software Solutions, Inc. v. New Century Mortgage Corp., 259 F.Supp.2d 531 (N.D.Tex. 2003) (finding that "data structures" - layout of a database - could be subject to copyright protection).

Outside of the facts/expression issue, there are a couple of additional issues with this complaint:

First, Atlas ACS does not appear to be registered with the US Copyright Office.  A federal registration (or at least a pending application, depending upon your state of residence) is a prerequisite to filing a copyright infringement lawsuit.  17 U.S.C. 411(a).  It is unclear from the complaint whether ACS Atlas has been registered or not.

Second, assuming that the protected expression is the data structures built within the databases, one has to wonder whether the merger and scenes a faire doctrines will come in to play here.  These doctrines are limits on the monopolistic power of copyright law.  The merger doctrine holds that protection is denied to expression that is inseparable from the ideas, processes or facts underlying the expression.  Gates Rubber Co. v. Bando Chemical Industries, Ltd., 9 F.3d 823 (10th Cir.1993).  Similarly, the scenes a faire doctrine, in the context of software, states that protection is denied to those elements of a program that have been dictated by external factors.  Id. at 838.

Both of these issues came to bear in a case brought in the District of Massachusetts (the same court Astrolabe brought its case in) - Baystate Technologies, Inc. v. Bentley Systems, Inc. 946 F.Supp. 1079, 1087 (D.Mass.,1996).  In that case, the court relied on both the merger and scenes a faire doctrines to find that no infringement of software had occurred.

Third, there is a three year statute of limitations when it comes to civil copyright infringement cases.  17 U.S.C. 507(b).  If the defendants can show that they have run their websites - with the allegedly infringing content - for more than three years, then it will be up to Astrolabe to show that it did not, nor could not have known, about the infringement until recently.  This may be difficult to prove, depending upon the facts.

Fourth, the complaint seeks costs and attorneys' fees.  However, these remedies are only available if the work was registered prior to or within three months of registration.  17 U.S.C. 412.  Therefore, awarding attorneys' fees and costs will only be possible if ACS Atlas was registered prior to publication.  That does not appear to be the case.

Finally, there might be a fair use argument here.  The two defendants appear to be employed by the NIH and UCLA, so there may be a strong argument for the alleged infringement being an educational use.  Of course, fair use is very fact-dependent, and the other fair use factors (the cost to license the portion of ACS Atlas that is being infringed, how much of the Atlas is being infringed, and the potential effect upon the work as a whole) may require a certain result.  But at a minimum, from the facts currently at hand, I would say that fair use is certainly a potential defense.

The bottom line here is that this complaint does not look very likely to succeed unless facts not within the complaint are established.  Even then, the chances of success may be slim depending upon what original expression (if any) is being infringed.

What Can We Learn: Here are a couple of takeaways when it comes to copyright infringement lawsuits:

1. Always, always register your work.  Copyright law gives you sufficient incentives to do this, and makes enforcement of your rights a lot harder if you don't.
2. Register your work at the earliest opportunity.  Failure to do so can result in a loss of important incentives - statutory damages, costs, and attorneys' fees.
3. Copyright law is an area full of complexity - understand that not all "infringement" is actionable.  Merger, scenes a faire, and fair use may require that an "infringement" actually be legal.

Ultimately, this may be another example of copyright law being used to monetize underperforming IP assets, which, as we all know from the story of Righthaven, is not necessarily a winning strategy.

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I am, like many other people, a fan of Entourage.  For those of you who did not see the eighth, and final, season, I promise not to write any spoilers.  All you need to know is that one subplot arc for the season was an animated show casting Johnny "Drama" Chase in the lead.  Drama played a monkey, called "Johnny," who was something of a cross between Homer Simpson and Larry David on Curb Your Enthusiasm.  He would find himself in situations that would pique his ire, and hilarity would ensue.  Hence the name "Johnny's Bananas."

Now, HBO has been sued over its use of "Johnny's Bananas" in the show and on merchandise related thereto.  The suit is being brought by reality television personality John Devenanzio on the grounds that he is known by the nickname "Johnny Bananas" and that HBO's use of the phrase in the show and on merchandise related to the show violations his New York state rights of publicity (among other things).  See N.Y. CVR sections 50-52.

Does Devenanzio have a right to "go bananas" on HBO?  Thoughts on his case, and the implication for game developers, after the jump.

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As it's Friday, it must be time for a Quick Hits/Courtroom Roundup recap post.  So without further ado:

• Anheuser Busch must share the "Budweiser" mark with Czech brewery Budějovický Budvar, at least in the EU.  You have to be impressed that I got all that punctuation in there (no idea if it's correct, but it's in there).
   
• The "sharing is caring" attitude in the EU continues.  Use of trademarks as keywords is "likely" okay so long as the use does not "jeopardize" the mark's reputation.
   
• GoPets Ltd. can't assert an interest in gopets.com because the company didn't exist when the domain was first registered. Thus, only the initial registration of a Web domain counts as a “registration” under anti-cybersquatting law.  Read the full decision here (PDF).
   
• State-based right of publicity laws preempted by federal COPPA law when use of a child's image and likeness is without parental consent?  According to one California judge, it might.  Not sure I completely understand the reasoning.  You can read the complaint here (order granting motion to dismiss not yet available).
   
• Bethesda denied a restraining order in the long-running lawsuit over a Fallout MMO.
   
• FCC finalizes its Net Neutrality rules (if they can really be called "net neutrality," that is).  Effective date: November 20, 2011.

Enjoy the weekend.

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News story today from GamePolitics.com about the South Korean Game Rating Board (GRB) accusing several MMO publishers of obstructing an investigation related to in-game "jackpot items."  The crux of this investigation appears to be that players spend virtual currency for an unknown item.  The item may be powerful, it may be worthless, but players are willing to shell out virtual dollars in the hopes that they will get the powerful item at a significantly reduced price.

I'm no expert on South Korean law, but in the US, this type of activity could well be legally problematic.  Why?  Because, as we've covered on this blog before, every US state has some form of law against illegal lotteries.  And "jackpot items" could very well constitute an illegal lottery.

What exactly is a lottery?  From a legal perspective, three things define a lottery: prize, chance, and consideration.  Prize is usually defined as something of value, and clearly virtual items are "something" that has "value" (if they didn't, no one would spend virtual, or real, currency on them). So we've got prize. Moreover, chance is clearly present.  Some players will get items of value, others will not.  That just leaves consideration.

Consideration in the area of lottery law is something of a term of art.  In can be generally understood as the giving of something of value, but this includes a significant expenditure of time, energy, or attention (this is in contrast to other areas of law, where consideration refers only to monetary value).  Thus, for the "jackpot items"activity to be an illegal lottery, the exchange of virtual currency for a chance to get a great virtual item must constitute consideration.

Leaving aside those circumstances where a player buys virtual currency with real money (there's no question that would be consideration), does this impact every game on the planet, which necessarily involves the expenditure of time, energy, or attention to earn virtual currency, could be subject to lottery liability for "jackpot" items?  

Perhaps, but I see a few problems with this. 

First, most game players spend time with a game as a form of entertainment.  I buy a game to play it, and the earning of virtual gold, items and badges is all part of the experience.  Therefore, at the end of the day, I got full enjoyment from the fruits of my labor - my time spent playing the game, and earning virtual currency, yielded me exactly what I was hoping it would, an experience.  My participation in a "jackpot" item activity is all part of that experience, not the sole reason I played the game (goldfarmers notwithstanding). 

So, if the time I spent in the game was because I wanted the experience, and not because I wanted to earn money for jackpot item drawings, then perhaps the jackpot item activity doesn't have a consideration element. Of course, some argued this in the context of the Deal or No Deal text message cases, without much success.  But unlike the Deal or No Deal cases, where the "experience" lasted a grand total of 10 seconds (or less) while you sent a text, in a video game the experience could be 50, 60, even 100 hours or more.  I think it's hard to argue that the "experience" theory is little more than a cover for the sweepstakes - for me, it's the whole reason I play the game in the first place.

Second, it may be that virtual currency is obtainable without the need to either buy it or grind away earning it.  What if every new player of a game was given 10 at the outset of the game, and was given the opportunity to participate in a "jackpot" item drawing?  In this case, the new player didn't buy the gold, nor did the player spend significant time earning it.  Arguing consideration in this case would be difficult, and made even more difficult if all "jackpot" item drawings were restricted to noobs.

Third, what if you removed the virtual currency element from the equation?  What if you granted every player a "mystery item" upon leveling up?  Sure, the player spent time leveling the character, but I cannot imagine anyone seeing this as a problem.  Furthermore, this would strongly reinforce the "experience" theory espoused above.

The bottom line is that, when it comes to lottery laws, there is a real risk for US games companies.  Not only are lottery laws enforced by federal agencies, they are also enforced by state agencies and consumers.  This is the proverbial litigation trifecta - federal investigations, state investigations, and class actions.  So knowing which side of the law you fall in can be incredibly helpful if you want to avoid significant legal costs and penalties. 

If you have any questions about lottery law, you should speak with someone who is knowledgeable about this area if you have questions - this is not something you want to "take a chance" on (sorry, had to say it).

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For anyone interested in brand protection (and every company should be), you should be aware of the launch of the .XXX top level domain (TLD) registration system.  What's a TLD?  Is those letters after the "dot" in a URL - as in, .com, .net, .org, etc.  And now, there's .XXX, which is intended primarly for adult entertainment services.

This presents a bit of an issue for brand owners because this will open up a whole new world of potential Web addresses.  Consider this: right now warcraft.com links to Blizzard's World of Warcraft registration/login page.  But warcraft.xxx?  That all depends upon what (if anything) Blizzard does to protect its brand in the face of the upcoming .XXX TLD launch.

What options does Blizzard (and similar brand owners) have to protect their brands from fetishists with odd proclivities?

Right now, the best tool at your disposal is registration of your mark with ICM (the company authorized by ICANN to act as the registry for .XXX domains).  Registration prevents your brand from becoming a .XXX domain for a period of 10 years. 

The registration period for making the required filing is now open, but won't remain so forever (the period is slated to close at the end of October).  Once registered, others will be blocked for 10 years from trying to register the same domain.

More information about registering a brand to avoid a .XXX domain can be found here.  Games companies of all types should consider taking a proactive approach to .XXX domains because, really, no one wants to know what Skyrim.XXX will look like if you don't.

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Privacy.  So hot right now (Paris, please don't sue us!).

Games clients, regardless of size or type, tend to feel exposed when it comes to privacy.  What to say, what to do, and how to do it - the questions around privacy are seemingly endless.  Moreover, as technology quickly outpaces the law, the questions ramp up exponentially in scope and importance.

It is vitally important, then, that games companies understand current trends in privacy-related issues.  Three big ones to mention today:

1. Changing privacy policies in the wake of AT&T Mobility v. Concepcion (PDF)
2.  Analytics: good for social games, bad for privacy?
3. Kids and privacy: the FTC is revising its COPPA rules

Analysis after the jump.

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Interesting story today on Wired.com and ComicsBeat.com about Marvel's "comics for comics" promotion, which incentivizes comic book stores to destroy copies of DC Comics' Flashpoint series.  If comic book stores rip covers off the Flashpoint books (thus rendering them basically unsellable), and send them to Marvel, Marvel will send the stores a variant edition of Fear Itself #6.  So basically, it's "destroy our competitor's product and we'll send you special editions of our products."  No love lost between Marvel and DC, I guess.

This leads to the obvious (for this blog) question: is Marvel's promotion legal?  Short answer, yes in the case of comic books.  Maybe not in the case of other media.  Reason: different ownership structures.

In the case of comic books (as with other printed works), retailers typically purchase the copies that sit on their shelves.  This means that the books can be kept, sold, or destroyed; it's all up to the store what they want to do with those individual copies.  If a store wants to rip up the copies of books it owns, it can do so.  Therefore, someone who incentivizes the comic book store to destroy its own property is not liable for that destruction.

This ownership issue is not as clear cut in other media, particularly software.  Software tends to be licensed to retailers rather than sold, meaning that the copies of that software that sit on store shelves are not the property of the retailer.  Instead, they are the property of the publisher/distributor, who in effect "rents" shelf space on which to hawk its wares.  If the retailer destroys the software, it is destroying the property of another.  

This is why, in my opinion, you're not likely to see the "comics for comics" idea become "games for games."  Games, as pieces of software, are not typically "sold" to retailers.  In fact, they may not even be sold to consumers (think back to the EULA cases we've covered before, which discuss the difference between sales and licenses).  Best Buy does not necessarily "own" the games it "sells" to consumers. 

So what happens if you incentivize the destruction of another's property?  Answer: Nothing good.  There are any number of state law causes of action (conversion, theft, misappropriation, interference with contracts, even potential criminal charges for theft/vandalism), plus a potential breach of contract action against the retailer depending upon the specifics of the retail sales agreement (for which the retailer may turn around and sue the incentivizer). 

Bottom line: incentivized destruction of competitors' products is not something I anticipate will make its way to the video game industry because the ownership issues involved with copies of software are not as clear cut as they are with print media.

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A couple of interesting copyright developments, plus...

• George Lucas lost a copyright fight in the UK over Stormtrooper helmets.  The reason: the helmets were ruled "industrial works," not "sculptures," meaning that the term of copyright protection in the helmets was only 15 years.  The differentiation between "industrial works" and "works of art" does not exist in American copyright law, so not to worry US game devs.
   
• Marvel has won a copyright battle over superheroes including Spider-Man, Iron Man, and the Incredible Hulk.  Marvel was sued by the heirs of comic book artist Jack Kirby, who argued that they had successfully terminated the publishers' rights to the characters.  The court disagreed.  This is an important development in copyright law (with particular application to the games industry because of the developer/publisher relationship), and more thoughts on this are likely to follow.
   
• A British court has ruled that British Telecommunications PLC must block its subscribers from accessing a website that provides pirated movies.  The case, being heralded as a "test case victory" for content owners in the U.K., could led to similar results for websites providing pirated/cracked games.  This may be another way to tackle the piracy problem if you don't have a lot of faith in DRM.
   
• EA ordered to respond to an antitrust lawsuit regarding unpaid student athletes.

And now for a few news items that, though a bit off the "courtroom roundup" theme, are interesting nonetheless:

• Video games as a means of relieving stress and achieving enlightenment?
   
• Nintendo slashes the price of the 3DS.  Does this mean 3D is a fad?  I mean, it's not like this was ever tried before.  Oh, wait... Virtual Boy anyone?

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[This post was written by Drew Boortz and Julya Vekstein, a summer associate in Reed Smith's Washington, DC office]

When does a work made abroad and published on the Internet qualify for protection under US copyright law?  Or, perhaps more importantly, when does such a work not qualify for protection?  That was the focus of the (somewhat) recent case of Kernal Records Oy v. Mosley.  Mosley is the classic boy-meets-song, boy-takes-song, song-owner-sues scenario.  In this case, Finnish recording company, Kernal Records, claimed that producer Timbaland and musician Nelly Furtado copied the sound recording and musical arrangement of "Accidjazzed Evening" and used it in Furtado’s song "Do It." The controversy began with a single YouTube video claiming to show the similarities between songs.  It ended with a determination that the Finnish song was a "US work," and that the case should be thrown out because the record label did not satisfy the requirements for bringing a copyright infringement lawsuit.

We’ve covered copyright issues here before, but to quickly recap: copyright law protects original expression, and grants to authors certain exclusive rights – the rights to copy, sell, distribute, and make derivative works of the original being chief among them. When a work is taken and copied, sold, distributed, etc., without the permission of the author, the exclusive copyrights of the author are "infringed," and that’s when the lawyers come out to play.

Of course, nothing in the law is that simple, and bringing a lawsuit for copyright infringement is subject to a few constraints. One of the most important constraints is the fact that, in order to bring a lawsuit for copyright infringement of a work created in the United States, that work must be registered with the US Copyright Office. Note that this applies to "works created in the US."  Works created outside the US are treated differently. And based on the facts of the Mosley case, it would seem that the requirement to register a song created by a Finnish artist would not apply. However, the court in Mosley applied the requirement to register and, since the song was not in fact registered, the court threw out the case.

How could a song owned by a Finnish record label (and presumably created in Finland) get treated as a "work created in the US?" Well, the answer takes a bit of mental gymnastics, so click through the jump to read on.

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Regular blog readers (all six of you) have probably noticed a drop in the frequency of posts.  Here's hoping that this post gets us back in to the swing of things.  And now, legal-related games industry news from in and around the interwebs.

• EA buys PopCap.  Looks like EA has Zynga in its sights. 
   
• Louisiana revises its tax incentive offerings.  No more transferrable credits, but those credits are now refundable.  In plain English, that means sales of the tax credits aren't allowed, but if the credit is worth more than your total tax liability, the state pays you.
   
• In other tax incentive-related news, Michigan has limited its interactive entertainment credit to a total of $25 million across all projects.  This is a steep drop from the previously unlimited amount of funding. 
   
• Angry Birds dev Rovio has sued Ideal Toys Direct, Inc. for copyright infringement.  Rovio is alleging that Ideal Toys' "Roly-Poly Birds” and “Roly-Poly Farm Animals” line of products are substantially similar to characters in Angry Birds.  If the allegations are true, then this would appear to be a modern day version of the H.R. Puff n' Stuff case (with fewer cheeseburgers being affected, of course).
   
• Games begetting movies?  First Ubisoft, and now Rockstar.  Care to place bets on whether a Red Dead Redemption game will fare better or worse than Prince of Persia: The Sands of Time?
   
• The "truthiness" behind the creation of a Stephen Colbert-themed video game.
   
• [Shameless plug] Upcoming speeches/presentations by the DevConcerns team to include talks on protection or fictional characters in old and new media, and entertainment-related tax credits.  More information on these talks, and possible presentation notes, to come.

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On June 28, consumer advocacy group Consumer Watchdog sent a letter and complaint to the Federal Trade Commission asking it to investigate Facebook for antitrust violations related to its use of Facebook Credits.  Consumer Watchdog's complaint is premised on the fact that, starting Friday, July 1, 2011, any purchases of virtual goods on the Facebook platform must be made using Facebook Credits.  This means that Facebook members cannot use their own credit cards, PayPal accounts, or other forms of electronic currency to make purchases of virtual goods.

Perhaps you're thinking "so what?"  Is one form of electronic currency materially different from another?  According to Consumer Watchdog, the answer is "not at this time, but eventually there will be significant consequences for consumers." 

In short, Consumer Watchdog sees three problems with Facebook's terms related to the Credits:

1. No other form of digital currency can be used on Facebook;
2. Game developers and virtual goods merchants who have a presence on Facebook cannot offer lower prices outside of Facebook; and
3. Game developers and virtual goods merchants have to give Facebook a 30% cut of any sales for Facebook Credits.

In Consumer Watchdog's view, Facebook is exerting monopolistic control over the digital currency market in order to harm competition.  For game devs and digital goods merchants, this would mean lower profits (they have to pay Facebook 30%) and Facebook-dictated price levels (can't charge a lower price off Facebook).  For end users, this may mean an increase in overall prices as merchants try to make back the cut they pay to Facebook.

Of course, these are just Consumer Watchdog's allegations at this point.  The FTC has not yet made public its intention to either open or deny an investigation.  Moreover, according to news reports, Facebook has not yet commented on Consumer Watchdog's allegations, so it's impossible to know its side of the story.  Therefore, whether this will end up being much ado about nothing, or be a revisiting of the landmark Windows antitrust litigation from a decade ago remains to be seen.  But for anyone participating in the virtual goods space, this will be one to watch.  Stay tuned for more information as it develops.

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We knew this was coming.  After the Federal Trade Commission announced it would look into Apple's in-game purchase system (as a result of children racking up incredible bills that they're parents had to pay), it was only a matter of time before a class action was filed.  Well, that time has come.

On April 11th, a class action was filed (PDF) against Apple, Inc. in the Northern District of California, alleging that Apple's in-game purchase system:

1. Constituted a breach of contract (Ed note: the contract calls this claim a "breach of contract," though the complaint is better characterized as asking that the contracts be voided);
2. Was an unfair trade practice (pursuant to Cal. Bus. & Prof. Code 17200 et seq.)
3. Violated in California Legal Remedies Act (Cal. Civ. Code 1750 et seq.); and
4. Resulted in unjust enrichment of the company.

The complaint alleges that there are likely thousands of people in the class, and seeks actual damages, punitive damages, attorneys' fees, and costs.  The total relief being sought by the plaintiff is not identified, but is alleged to be in excess of $5 million.

The facts of the controversy are widely available on the web, but to briefly recap:

Apple's app/in-app item purchase system requires an Apple account, a password, and a valid credit card (or positive credit balance through purchases of Apple gift cards) in order to make a purchase.  When an app (or in-game item) is being purchased, Apple asks for the password linked to the account as a means of confirming the purchase (i.e., are you sure you want to do this?).  If the correct password is entered, the purchase is made. 

After the successful purchase of a game or in-game item, the device user had a 15 minute window during which purchases could be made without reentering the password (this has since been changed).  It is the windowing that is the heart of the problem because it (arguably) allowed children to make purchases without their parents' knowledge.  That is, a parent could enter his/her password to allow the child to purchase a game or in-game item, and then the child would have 15 minutes of free reign to make as many purchases as they wished.  As a result of the windowing, some parents have alleged that they received bills for thousands of dollars for items that they (again, arguably) never knew were purchased. 

Each one of the causes of action could be a post in and to itself (and may very well be, so stay tuned).  But here are a few initial impressions, and some thoughts for future app makers:

• It seems to me that class certification may be difficult to obtain because of problems proving commonality (a prerequisite to class action status which states that there must be common issues of law and fact among all class members; see Fed. R. Civ. P. 23(a)).  Every putative member of the class will have different purchases - different games, different in-game items, different quantities, etc.  Moreover, some of those purchases would have to have been authorized by the parents (they had to enter their password to make at least one purchase).  Therefore, it is possible that every class member will be in a different factual position from every other, which could cut against claims of commonality.

• Interestingly, only Apple is named in the complaint.  The individual app devs (who presumably are responsible for creating the in-game items, setting the prices for them, etc.) are not mentioned.  Again, this presents a problem for the plaintiffs as to the unjust enrichment claim since roughly 70% of the damages they incurred would have gone someone other than Apple's coffers.  In addition, to the extent that the unfair competition claim relies on the high price levels of in-game items (see below), Apple may be able to show that it was not responsible for any damage arising therefrom (this of course will depend on the facts that come out in discovery).

• Speaking of facts, there are some problems here for Apple (and for the game devs).  Chief among them are that some items that were clearly directed towards children cost upwards of $100 each.  This is a very, very bad fact, and one that makes the overall in-app system appear more like a prototypical unfair trade practice than it may otherwise be.  Moreover, children are a protected class - legally they do not have the same mental faculties as adults, and are therefore thought to be particularly susceptible to deceptive or unfair commercial practices.  If you are making games or in-game items that target children, you will want to think very carefully about all aspects of the game, including:
   
  • What does the interaction with the child look like?  At what point are you asking for a decision with a monetary impact?  Is it easy for a child to reach that decision point, and if so, how can you assure yourself that you are interacting with an adult, not a child? 
     
  • When selling items related to child-directed games, consider the price relative to both the item and the appeal to a child.  In other words, you should have a really good reason why one virtual item should cost upwards of $100 (that's going to be difficult to do).
     
  • Absolutely avoid exhortative language (e.g., "buy this now," "only 5 left," or "you need X to complete the level") if you know you're talking to children.  Doing so can cause a variety of legal headaches.

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Ever wonder why episodes of Law & Order often include a disclaimer to the effect that the story and the names used therein are fictional?  They do this to help avoid a couple of legal issues, once of which is the "libel in fiction" cause of action.  A "libel in fiction" action goes something like this:

Author creates a fiction work in which a character ("Character") has a few, well, "character" flaws, like  aggressive promiscuity, a tendency to bribe judges, etc.  Real Person, who as you might imagine is in fact a real person, thinks that Character is based on Real Person, and doesn't like how Character was portrayed.  So Real Person sues Author (and probably a number of other people) for libel (which is defamation in writing). 

Since this is a fiction work, however, Real Person has a problem - that pesky little thing called the First Amendment.  So Real Person has to go about proving that Character is so similar to Real Person that people will know Author meant to defame Real Person.  If the link between Real Person and Character isn't strong enough, the "libel in fiction" claim is not likely to survive.

As the links above show, "libel in fiction" is not an abstract concept, and has been litigated a number of times with contrasting results.  For example, back in late 1970's, the California courts dealt with a "libel in fiction" claim in Bindrim v. Mitchell, 92 Cal. App. 3d 61 (1979).  In that case, the court held that a psychologist who ran "naked encounters" could sue a book author and publisher for libel even though the book was fiction and the character upon which the libel claim rested was notably different from the real person.  There were enough similarities between the two for a reasonable person to draw the inference clearly.

Yet just recently, a California appellate court came to a contradictory conclusion in the case of Tamkin v. CBS Broadcasting, et al. (PDF).  In that case, two real estate agents sued several people involved in making CSI.  The Tamkins were real estate agents who sold a house to Ms. Goldfinger, a writer for CSI.  The deal turned sour, and Goldfinger backed out.  Later, when writing a "B story" for CSI episode 913, Goldfinger wrote a storyline involving a married couple who are mortgage brokers.  The "fictional" couple was given the same names as the Tamkins, and were written in a way that was fairly unflattering (e.g., they were involved in pornography/bondage, the husband was a suspect in the wife's death, etc.).  The Tamkins sues Goldfinger and CBS under the same "libel in fiction" theory as was used in Bindrim, but all of this wasn't enough for the appellate court to find for the plaintiffs.

Why the different result?  Two reasons: 1) in 1979 there was no Anti-SLAPP statute (Cal. Civ. Code 425.16); and 2) there were distinguishable differences between the real Tamkins and the "fictional" Tamkins.  We could go into significant depth on these reasons, but CBS' win on appeal is not the focus of today's post.  Today's post is on whether "libel in fiction" suits may make greater inroads into the realm of video games, much as they have done in movies, TV, and books. 

At a very basic level, the answer is "yes," video games should be ripe for "libel in fiction" cases.  They are creative works just like movies, TV, and books.  They tell stories just like movies, TV, and books.  And they are increasingly dependent upon story lines, characters, etc., just like movies, TV, and books (for example, think about the success of Heavy Rain and the anticipation over L.A. Noire).  However, there hasn't been nearly as much action in this area as one would anticipate. 

I can think of two reasons for this.  First, as the Bindrim and CBS cases demonstrate, "libel in fiction" cases are heavily fact dependent, and there is not a lot of clarity from one state to the next.  Second, video games are a unique medium that can make "libel in fiction" cases difficult to pursue.

Let's forget about genre games that are not grounded in reality (and so are probably unsuitable for defamation-based claims), and instead, let's focus on lawsuits like the one filed by Michael "SHAGG" Washington against Rockstar and Take-Two over Grand Theft Auto:San Andreas.  This lawsuit had some grounding in reality, which is to say, it could plausibly depict a real person.  In Washington's case, that depiction could be deemed defamatory (with all of the prostitute patronizing and gun battling that is possible in the game).  If we ignore factual discrepancies for a moment (since they are fact specific, it wouldn't do much good to try to parse out every permutation here), and consider whether this game would be suitable for a "libel in fiction" claim.

Recall that above I said the defamatory activities were "possible," not that they were absolutely included as part of "the story."  This is what makes games different from movies or TV.  In a movie, there is one outcome - whatever the screenwriter has imagined.  But in a video game, there is typically a world of possibilities.  While a writer and/or code may allow for the character to do things leading to defamation (like making a habit of stealing cars and/or assaulting people on the street), the choice of the player is what makes the character partake of that action.  This leaves potential plaintiffs with a much greater burden of proof - they not only have to show that the actions were defamatory, but that those actions actually occurred. This is probably while "misappropriation of likeness" is a theory that is more often seen in a video game context.  The only inquiry here is whether the image used is similar to the person, and where there was permission.  There does not need to be an inquiry into whether the image actually partook in defamatory activity.

That is not to suggest, however, that "libel in fiction" will always be difficult to prove in the context of video games.  As games become more dependent upon cut scenes, and as characters become more complex and developed, there may be instances where "libel in fiction" claims will be easier to show.

The Bottom Line: Game devs should be aware of the concept of "libel in fiction," and particularly of its often conflicting interpretations.  "Libel in fiction" cases are heavily fact-dependent, so make sure your clearance people are on the ball.  Moreover, devs should note that the application of "libel in fiction" theories will depend upon the state.  In this post, we've mentioned only California cases (though we linked to a cases in New York and Georgia).  But perhaps most importantly, game devs should remember what makes their work different from other creative endeavors, and strive to maximize the protections that are available due to that difference.  While simple reliance of "but the player didn't have to make the main character commit crimes and engage in dangerous behaviors" may not be enough to insulate your game from all defamation claims, it can be useful in certain circumstances.

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What do an app game about illegal immigration and a downloadable FPS have in common?  They are both games that were made to get people talking.  They also look to the legal grey area of parody/satire to avoid potential legal issues.  Which brings us to the topic of today's post - where does parody and/or satire (yes, they are separate, though related, concepts) come into play in the games context, and why is this useful.  But first, a bit of background.

For those of you who have not heard of the Smuggle Truck app controversy, here's the basic gist.  A game, distributed on the Kongregate network, asks players to smuggle immigrants across a "fictional border."   So perhaps one may think that a possible message of the game is that illegal immigration is okay. But as the Smuggle Truck story page explains, the game "...was inspired by the frustration our friends have experienced in trying to immigrate to the United States.  With such a troublesome issue being largely avoided in popular media, especially video games, we felt the best way to criticize it was with an interactive satire."  So the game, according to its makers, is not all that it purports to be.

Similarly, a few weeks ago the makers of Bulletstorm (which itself is no stranger to controversy) released a downloadable FPS called "Duty Calls."  Clearly, Duty Calls was intended as a swipe at Activision's Call of Duty franchise - it even says so on the bottom of the webpage - "Duty Calls is a parody. It is not associated with Activision or the Call of Duty games."

One game as "satire," the other as "parody."  What do these game devs gain by self-identifying as parody or satire?  If there are legal ramifications for calling one's game a parody or satire, is that self-identification all that's required?  Thoughts after the jump.

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This post was written by Marc Kaufman and Gerard Dovonan, members of Reed Smith's patent team.

Combine the rising prominence of video games as both an entertainment and expressive media with and the emerging popularity of cloud computing, and it makes sense that cloud-based gaming has become a very popular concept.  Cloud-based gaming allows users to directly stream and play video games over an Internet connection.  As opposed to networked and Internet gaming that has been around since at least the ‘90s, cloud-based gaming involves the game actually running on a remote server and a user playing the game through a client connected to the server.  This allows clients to play games that would ordinarily require powerful game consoles or high-end computers on lower resource computers and consoles – and in the future potentially tablets and smartphones.  Additionally, a user can instantly access new games without downloading them and may play from any location with a fast enough Internet connection.

With the huge potential for growth in the industry, it is no wonder that the industry took notice when OnLive, Inc. received US Patent No. 7,849,491, titled "Apparatus and Method for Wireless Video Gaming," in December.  However, the granting of the patent is only the tip of the iceberg.  The questions everyone in the industry should be asking themselves are 1) am I – or do I plan to be – potentially infringing this patent and 2) is this patent even valid?

In an article published by Gamasutra, David Perry, game industry veteran and CEO of cloud-based gaming company Gaikai, said he isn’t worried about the patent.  From the article, Perry seems to write off the patent.  First, Perry is quoted as saying that he doesn’t expect the general concept of remote gaming to be patentable.  Then the article goes on to explain that the patent claims are focused on a set-top-box style of streaming game delivery that would not overlap with Gaikai’s business model. 

We are not sure Perry should be writing this patent off so easily.

For one thing, the application for this patent was filed in 2002, an early date in the space of cloud-based gaming.  Further, even though Perry’s opinion that the concept of cloud-based gaming is unpatentable may well be true, the claims of this patent are more focused, beyond just the general concept.  The wording of the claims appears to allow for the claims to cover a wide variety of gaming devices.  For example, while claim 1 recites "operating a video game box;" this phrase could be broadly construed to include many computing devices.  It would be prudent for the cloud-based gaming industry to give this patent due consideration.

That said, a broad construction of claims cuts two ways.  Broader claims risk being found invalid. Ultimately, in this case, the long prosecution history may play a vital role in how broadly the claims may be construed and whether they are valid.  Without offering an opinion either way, it seems clear that this patent could stir up some controversy.

Finally, this patent does not stand alone.  It is part of a very large "family" of patent applications directed to similar subject matter.  Of the 74 patent applications in the family, 39 remain pending and in various stages of prosecution. These applications cover a broad range of technologies, such as "System for streaming databases serving real-time applications used through streaming interactive video," "System for acceleration of web page delivery," and "System and Method for Compressing Video Based on Latency Measurements and Other Feedback."  OnLive clearly develops many peripheral technologies that may also be fundamental to the growing cloud-based computing industry.  More importantly, OnLive could be building a valuable patent portfolio protecting these vital technologies.

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Interesting news last week out of Japan: a service which transfers TV programs to overseas viewers via the Internet is a violation of copyright law. 

Japan Broadcasting Corp. and five Tokyo-based local TV broadcasting firms sued computer company Nagano Shoten, which offered an Internet-enabled image-forwarding device embedded with a TV tuner.  This allowed customers to forward their television to wherever they may be.  To put this into a US context, think Slingbox.

Don't get me wrong.  I am not suggesting that Slingbox, or any other "place shifting" technology, is now facing potential copyright issues because the situation in the US may not be quite the same as in Japan.  One possible reason why place-shifting technologies may be treated differently in the US can be found in the 1984 "Betamax" opinion, which held that "time shifting" television signals constituted "fair use" under US Copyright law.  It may well be that "place shifting" is treated the same as "time shifting.  However, this is far from certain - you may recall the issues Cablevision had with its "remote DVR."  While that ultimately worked out for remote DVR technologies, there was still a lot of legal proceedings that needed to be completed before any kind of resolution was reached.  And that was still just time-shifting.  Place-shifting is likely to implicate a variety of different fair use factors.

Leaving aside the question of the legality of time-shifting versus place-shifting under US law, this raises an interesting question for purveyors of cloud gaming services like OnLive and Gaikai.  After all, place shifting is a big selling point of these services.  OnLive, for example, uses the tag line "Instant Gaming.  Anywhere.  Anytime."  If image-forwarding of copyright-protected works like television programs can be problematic, then so too can image-forwarding of video game play. Moreover, since so many video games are created and/or published by Japanese companies, this recent opinion by the Japan Supreme Court could have a major impact on cloud gaming services. 

Of course, unlike television image-forwarding technologies (which may not have had any type of license agreement with the television broadcasters and/or copyright holders), cloud gaming services will have some contractual relationship with the games' copyright holders (they better).  So the idea of place-shifting may have already been dealt with, and no changes may be required.  But at a minimum, this opinion from the Japanese Supreme Court should be an impetus to re-examine your license agreements to ensure that this hasn't created a problem for you. 

What does this mean for gamers?  Probably very little, although depending upon the agreements between the cloud gaming companies and the Japanese pubs, the available game libraries may change while potential issues are resolved. 

For game devs?  This ruling is definitely important for Japanese companies, but only slightly less so for US companies.  I doubt that concerns over place shifting will go away, so this is something that will need to be kept in mind when negotiating any future license agreement.

For pubs?  This would be an excellent time to review your agreements with Japanese studios.  Those of you ahead of the curve will likely take this opportunity to examine place-shifting in the broader context. 

For cloud gaming services?  As mentioned above, you should, at a minimum, ensure that place shifting is an item on your due diligence checklists, and that your license agreements (existing and future) contemplate this issue.  Whether or not the US follows the Japanese opinion and finds place-shifting to be problematic under copyright law, this is not an issue you will want to litigate in court (as any fair use case - except those obvious losers - is an involved process, and "involved" typically means "expensive" when it comes to lawsuits).

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This post was written by John Feldman, a partner in the Washington, DC office.

Zynga has joined the trend of using points as the mechanism to purchase items in-game.  Here are a few details, according to GameZebo (who in turn cites Techcrunch, Inside Social Games, and Fusible, who broke the story by tracking that Zynga bought the domain RewardVille.com weeks ago):

• At launch, the participating games will be FarmVille, FrontierVille, Mafia Wars, and Zynga Poker.
• Users will earn zPoints each time they play one of these games, which they will accumulate to level up to a higher zLevel.
• At each zLevel, users will earn zCoins which can be redeemed for exclusive in-game items.

At this point in time, you'd be hard-pressed to find a gamer that wasn't at least a little familiar with virtual curency systems.  But what if Zynga wanted to take its zCoins beyond virtual crops and guns, and wanted to offered participants the option to use in-game currency for a chance to win an incredible prize - a trip around the world, $1 million, what have you.  Would such a system be legal?

The answer will depend on the jurisdiction.  In the U.S., it is very likely that Zynga would need to offer participants a means of obtaining sweepstakes entries that does not require spending points.  Why?  Because in this context, points have value - they are generally redeemable for items in-game, which makes them seem like quasi-cash.  This is, of course, the purpose of the points. 

Under US law, though, you cannot tie the expenditure of cash (even things that are quasi-cash) to obtaining entries in a sweepstakes.  Doing so transforms an otherwise legal sweepstakes into an illegal lottery (again, generally speaking - there are some exceptions to this rule, but we won't cover them here).  To avoid the illegal lottery problem in the US, sweepstakes sponsors typically offer an alternative, free method of entry (e.g. a self-address stamped envelope, an e-mail, etc.).  By offering the alternative method of entry, you are no longer required to spend something of value in order to enter the sweepstakes, and thus the sweepstakes is highly like to be legal (speaking again in broad generalities).

However, US law is not a proxy for international law, and point systems play out differently in various jurisdictions. I won't try to cover the world here, but let's consider one large market for video games: Australia. Australia's law is a bit more complex than the US in that you can require entrants to make a purchase in order to participate in a game of chance, but you cannot require a fee.  Stick with us, because this is going to get a little bit tricky.

A "purchase" means that you spend some form of valuable currency to receive an item of value.  This may be a real-world item or an in-game item - a t-shirt, a key chain, in-game crops, a bulletproof limo, etc.  So long as you couple the sweepstakes entry with a "purchase," the game is legal in Australia.  A "fee," on the other hand, is the payment of something of value for nothing but the sweepstakes entry.  This is prohibited in Australia, even in the face of a "free method of entry" (which would render the game legal in the US).

There are some clever ways to structure your sweepstakes that can avoid this issue.  For example: 

1. As mentioned above, you can couple of the sweepstakes entry with something else of value.
    
2. You can use the point-commerce as a measurement tool - e.g., "accumulate 500 points and get an entry into a sweepstakes," or "every time you spend 50 points, you get a sweepstakes entry."  In this scenario, you do not "spend" your points on the sweepstakes entry.  Instead, you are being rewarded for doing something - accumulating points, spending the points on valuable items (in-game or not), etc.  As long as the points are not "spent" for the sole purpose of obtaining sweepstakes entries, there isn't any payment of a "fee."
    
3. You can create different classes of points. Some points can be used for "purchasing" in-game items; some points can only be used for entering sweepstakes. You can accumulate both classes of points from the same transactions. E.g., "When you accomplish a certain number of kills you will receive 50 Redeemable Points (redeemable for in-game items) and 10 Game Points (redeemable only for sweepstakes entries).

Of course, that is not the end of the story (if it were, the world wouldn't need lawyers - oh, the horror...)There are permit requirements in some states and territories, which can be tricky to navigate in and of themselves.  So the bottom line here is to always check with a promotions lawyer before launching an international sweepstakes.  Laws change and there are many other restrictions and regulations that could apply. But, it's certainly interesting to note that as points become the ubiquitous currency for in-game commerce, there are ways to layer on a sweepstakes that may even permit a required purchase depending on the jurisdiction.

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All across the Internet trade press, people are talking about a few new Bungie titles.  No, not that they're making another Halo game (though rest assured that Microsoft's 343 industries is not letting Master Chief die).  These are titles that haven't been officially announced.  So all of this is nothing more than idle speculation, right?

Maybe... maybe not.  Here's what we know: Bungie has filed four copyright registrations for visual material.  The titles given to these materials are:

• New Monarchy
• Osiris
• Seven Seraphs
• [No title disclosed on the registration, but Internet reports give it the name "Dead Orbit"]

To see the records themselves, click here and enter "bungie" in the search box (make sure to select the author option).

Some reports have characterized Bungie's filings as trademarks, but a quick perusal of the PTO's website does not disclose any filings for these terms (or anything recent by Bungie at all). 

What exactly does this mean?  It means that Bungie has filed for copyright registration of graphical depictions of something - characters, bosses, world landscapes, etc. - with the US Copyright Office, and has been granted protection for those drawings/renderings.  We don't know is what those drawings/renderings look like (though a copyright search may disclose this), or even if they're related to upcoming titles.  But by filing for registration, Bungie has done a couple of things:

1. Created a basis to claim copyright protection in material that may be substantially similar.  This blog has covered the basics of copyright registrationand protection a few times - see here for more - so we won't repeat ourselves (this time).
2. Generated a lot of recent press, which can only serve to amp up excitement for games that may not have been started yet. 

Of course, the filings can also allow competitors to make some assumptions about the directions in which Bungie is headed.  For example, "Seven Seraphs" is likely related to the Seraphim, the highest choir of angels in the Christian angelic heirarchy, so one could assume that Bungie is working on a game based on Christian mythology.  A competitor could see the copyright filings and decide to publish a game based on the same concept (of course, it's not like a Christian mythology game is a new concept - Dante's Inferno, anyone?  Or the folks at Left Behind Games?).   

So there is something of a risk in filing for copyright registration for something other than a completed (or substantially competed) game.  In Bungie's case, knowing possible titles and themes may not be that big of a deal.  But in other situations, knowing a product name, feature, or purpose before a launch can be devasting. Take Microsoft's efforts to keep the name of the Kinect a secret, for example.  

More on the Microsoft story, and thoughts for future game titles, after the jump.

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Tournament play – it’s a stalwart of today’s video game experience. And it leads to some very interesting questions. For example:

• Is it possible to hit drives of nearly 400 yards in Tiger Woods 11? [Answer: it shouldn’t be, but somehow, it happens]
• When is it right to aim for a teammate instead of an opponent? [Answer: only if they owe you money]
• Or is the Golden Tee Online Tournament play illegal gambling? [Answer: sorry everyone - this answer you have to pay for].

Today’s interesting legal question regarding online tournament play is: are online tournaments the sole province of one person or company? The plaintiff behind a recent lawsuit filed against Activision, Blizzard, and Zynga may answer "yes."

The suit at issue was filed by Walker Digital - the parent company of Priceline.com – and alleges that Activision, Blizzard, and Zynga infringed patented technology that allows players to compete in online tournaments. The patent-in-suit - U.S. Patent Number 6,425,828 – is described as:

A method and a system for a distributed electronic tournament system in which many remotely located players participate in a tournament through input/output devices connected to a central controller which manages the tournament.

The method, as described in the patent, includes the steps of:

(a) uniquely identifying a player communicating with the central controller via an associated input/output device;

(b) responding to payment of an entry fee by the player for allowing the player to participate in a tournament occurring within a fixed time window via an associated input/output device;

(c) accessing a database to store in the database player information that is generated as the player participates in the tournament, such information being available for use in a subsequent tournament, which is administered by said controller and in which the player participates; and

(d) awarding the player a prize for achieving a preestablished performance level in the tournament.

The games at issue include some of the most famous titles in online game history – World of Warcraft, Call of Duty, Mafia Wars, 007: Goldeneye, DJ Hero 2, and others.

I’m not a patent lawyer (as I’ve said a few times on this blog), but I have to wonder how this patent is not subject to prior art issues. After all, online tournaments were around long before 2001 (the patent’s application date).

In addition, what exactly constitutes an "entry fee" for the purpose of this patent? The patent itself seems to suggest cash or cash-equivalent, since part of the "user information" is "billing information." But what about virtual currency, or "points." If a tournament accepts entries based upon points accumulated in the game, would that still fall under the patent-in-suit?

We will definitely be watching this case for future developments. Stay tuned.

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Brad Newberg of the Reed Smith Video Games Team has written a further in-depth analysis of MDY v. Blizzard that has been featured by the Washington Legal Foundation.  Previous blog coverage of the case can be found here.  Congrats Brad!  (Even though your analysis is noticeably void of bad puns).

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[Ed. Note: we seem to be having a few technical difficulties with this post.  Hopefully this version will have fixed the problem]

Okay, I don't really like bots. Of course, I don't generally dislike them either. It's just that I can't seem to stop with the bad puns.

Here's my thinking on bots: I've never understood why people would want to use them. Bots play videos games for you - you don't need to be involved with the game in any way other than starting it up. Now, when I play games, I do so because I want to experience what my avatar/character is doing (solve mysteries in the old west, explore alien worlds, save the human race from mutated zombies - you know, those things I would do in every day real life if I wasn't writing this blog). Having a computer play the game automatically takes away that experience, and leaves me with no payoff or sense of accomplishment when it's done.

But for those of you who feel differently, I have some good news/bad news. The good news -thanks to a recently-decided Ninth Circuit case, using (and making, selling and distributing) bots to automatically play games is not necessarily copyright infringement. Bad news: bots may still violate the Digital Millennium Copyight Act's anticircumvention laws.

Analysis of the decision after the jump.

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According to reports, Apple has removed a "jailbreak"-detection API from its latest version of iOS.  The API, which was introduced as part of Apple's Mobile Device Management functionality in iOS 4, would have allowed third party developers to check to see whether the device had been "compromised" (that is, not running as Apple intends - unlocked, jailbroken, etc.). 

While no one is sure exactly why Apple removed the API from iOS, some concerns have been raised that the API opened up a number of potential vulnerabilities in exchange for not much protection (it was theorized that the API could be "fooled" into thinking that a jailbroken device was operating normally, which would render the detection functionality essentially useless). However, I do not think that Apple's decision to drop the API is based on this concern alone. 

Rather, I think the decision reflects both this concern and a broadening attitude toward certain kinds of jailbreaking.  Remember, it was not too long ago that the US Copyright Office completed its Digital Millennium Copyright Act ("DMCA") Anticircumvention Rulemaking.  Through the Rulemaking, the Copyright Office concluded that jailbreaking smartphones to run third party software was not (in many, but not all, cases) a violation of copyright law.  By removing copyright law as a cause of action against certain jailbreakers, the Copyright Office also removed the potential penalties that could be obtained against such people.  This means that device manufacturers like Apple will likely be reassessing how they spend money in relation to the cat-and-mouse game that is jailbreak prevention. 

What can we read from the tea leaves offered up by this decision?  First, I don't think we can expect Apple to embrace the jailbreaking community wholesale.  Jailbreaking can still be a violation of contract law (through the license you agree to when you buy and active an iPhone), and will still likely violate the warranty Apple offers on its iOS devices.  Second, I would not be surprised to learn that Apple is refocusing its jailbreak prevention efforts on its enterprise customers.  These customers are typically much more concerned about rogue devices/software than the everyday user, and so I doubt Apple (or any other device manufacturer) will ignore jailbreaking completely.  Third, I think that in offering the API to all developers, there was an implied incentive to utilize it.  Adding code that is not part of the app's core functionality could lead to bloated, buggy code.  By removing the API (instead of just leaving it alone), Apple effectively kills the implied incentive, thereby helping ensure that apps offered through the App store are more streamlined/less buggy.  It also has the nice effect of keeping app sizes smaller, which may not mean much in individual cases, but in the aggregate, may add up to a lot of space.

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The Grand Theft Auto franchise is no stranger to controversy.  The San Andreas game itself was been the subject of number of legal actions (the "Hot Coffee" and "Playpen" issues are two that come immediately to mind).  Now, Rockstar Games and Take-Two Interactive (the makers of GTA:SA) have been sued for 1/4 of the total estimated profits of the game.  And trust me, those estimated profits are eye-popping.  The lawsuit complaint estimates that the game has garnered roughly $1 billion worldwide, so that 1/4 in damages sought would amount to a whopping $250 million.

Why are Rockstar and Take-Two being sued, and by whom?  The lawsuit was filed by a man named Michael Shagg Washington, and he is suing for fraud, misappropriation of likeness under Cal. Civ. Code 3344, and copyright infringement.  Having read the complaint (made available by IGN here), I have a few thoughts on this lawsuit.  In short, if someone were taking bets on Mr. Washington's bout with Rockstar/Take-Two, I'd put my money on Rockstar/Take-Two.

Thoughts after the jump.

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Video games are escapist fair.  They allow us to be soldiers, athletes, anthropomorphic hedgehogs, and just about anything in between.   I have been known, on occasion, to conquer the world, save princesses, win the Masters, and engage in aerial dogfights with 1040's Messerschmidts, all in the course of a single day.  The reason I spend time in these pursuits is that games allow me to add new dimensions and experiences to every day life.  

Yet adding new dimensions to every day life is not limited to just console gaming.  A couple of years ago, alternate reality games (or ARGs) were something of a rage.  I'm sure (hope?) some of you remember I Love Bees, Push, Nevada (Ben Affleck's marriage of television and ARGs), and Lost Ring (McDonald's ARG that tied in with the 2008 Olympics in China).  Then along game the augmented reality apps, which offered new possibilities for looking at the world.  With a simple touch of a button or on-screen icon, augmented reality apps can provide you with a sensory experience unlike what "real" life provides.  Want to know the location of Twitterers surrounding you, or want to use X-ray vision to find a nearby subway station?  There are apps for that. 

Now, Christopher Nolan, director of Inception, has taken augmented reality apps from minigame-saturated or information-heavy offerings to something that can be better described as a sensory-rich experience.  Here is Wired's overview of the Inception app (they do a better job discussing its feature set and potential than I could).  This is definitely an app I will be checking out.

If this were a blog devoted to gaming news, then this would probably be a great post.  But it's not.  This is a legal blog, so we ask legal questions.  Such as this: what liability does the app maker and distributor take on when offering augmented reality apps?  Here's another, why should augmented reality apps be treated any more differently than more traditional game-based apps?

Thoughts and answers after the jump.

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Money.  That's what I want.  But is it what you have?

It's a common problem - you've got a great idea, but you don't have the means to turn that idea into the next Zynga.  What are your options? 

• You could obtain financing from an angel (venture capital firm Kleiner Perkins recently launched a $250 million fund devoted to all things social media-esque)
• You could try to obtain government funding or grants
• You could try for a tax credit deal if offered by your state of residence
• You could directly appeal to an established developer or publisher (best of luck with this if you don't already have a "name")
• You could "self finance" (otherwise known as tapping your life savings, begging/borrowing/stealing from every family member and relationship, etc.)

Doesn't seem like a whole lot of promise there, does it?  Well, that's what the folks at Kickstarter.com probably thought.  Kickstarter.com is, according to its website:

...a new way to fund creative ideas and ambitious endeavors.

We believe that...

• A good idea, communicated well, can spread fast and wide.
• A large group of people can be a tremendous source of money and encouragement.

In other words, its a marriage of crowdsourcing and financing.  It works like this - the developer sets a target financing level, and asks the public to contribute money if it wants to see the project developed.  If the target threshold is achieved within the specified number of days, the developer gets the money (well, the money minis Kickstarter.com's cut and credit card processing fees) and can start the project.  If the financing threshold is not achieved, then no money is charged to any person who made a pledge.

Often, in exchange for making a pledge of a certain amount, a project developer will give away premiums or other items (e.g., for $10 you get a virtual high five; for $50 a free download of the game; for $1,000 you get me to come over to your house and clean your rain gutters; etc.).

Some thoughts on this financing model for the video game industry, after the jump.

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The landmark trial against alleged XBox modder Matthew Crippen has been dismissed by federal prosecutors.  The dismissal comes after the judge in the case publicly berated prosecutors, and raised "serious concerns about the government's case." 

For those of you unfamiliar with the case, the defendant was charged with violations of the Digital Millennium Copyright Act (commonly referred to as the DMCA) as a result of his modding XBox consoles to run "other than authorized" software.  According to the charges filed against the defendant, the modding violated 17 U.S.C. Section 1201(a)(1)(A), which makes it a crime to circumvent technological measures designed to control access to copyrighted works.

Based on the fact that the government dismissed its case, and the judge questioned whether the government had enough to bring the case in the first place, one can assume that modding is completely legal, right?  Not exactly.  This was just one case, with arguably bad facts for the government.  Another case, with another set of facts, may have an entirely different outcome.

Here's what we know about modding - it is, by definition, an issue under the DMCA if there is software involved.  Software is subject to copyright protection, and based upon the additions to copyright law made by the DMCA, actions you take to circumvent technologies designed to protect that software may constitute copyright infringement.  But that is not the end of the story, because the DMCA contains several exemptions to its anti-circumvention statutes, and there is the overriding defense of fair use that may be applicable as well (though the Crippen case has made it less likely fair use will apply, at least in modding-for-profit cases).

The DMCA exemptions specifically state that certain kinds of modding, from jailbreaking and unlocking cell phones to creating video mash-ups from DVDs, do not violate the DMCA's anti-circumvention laws.  While these exemptions might be of interest to the video games industry in certain situations, there is one exemption that is tailored just for us:

Video games accessible on personal computers and protected by technological protection measures that control access to lawfully obtained works, when circumvention is accomplished solely for the purpose of good faith testing for, investigating, or correcting security flaws or vulnerabilities, if:

(i)  The information derived from the security testing is used primarily to promote the security of the owner or operator of a computer, computer system, or computer network; and
 

(ii) The information derived from the security testing is used or maintained in a manner that does not facilitate copyright infringement or a violation of applicable law

If we unpack that statement a bit, it boils down to QA.  If your modding is done so you can test the security of the system used to protect the underlying work, then the modding is likely to be acceptable.  Other modding behavior, such as that engaged in by Mr. Crippen, is more questionable.

Then there is the overriding defense of fair use.  Fair use, as embodied in 17 U.S.C. 107, may seem easy to describe in the abstract, but it is difficult to grasp in its totality.  It basically says that certain activities, which in the abstract may meet the definition of copyright infringement, are nevertheless acceptable because of the good they do.  Examples of "classic" fair use activities involve teaching, criticism/commentary, etc.  However, each application of fair use turns on the facts at hand; there are no bright line rules when it comes to fair use - some commentary can still qualify as copyright infringement (see Gawker's battle with former governor Palin over her upcoming book).  So any modders hoping to rely on fair use should be wary of this strategy.  After all, fair use did not work so well for Matthew Crippen (PDF).

What, if anything, can be learned from this first modding trial?  First, modding is something that console manufacturers take seriously.  While modding may not turn into the same legal quagmire that file sharing has, it is still something that console devs take seriously.  And with both criminal and civil penalties available under the DMCA, anyone tinkering with console hardware or software should do the same.  Second, there is now one decision finding against fair use for modding-for-profit activities.  This is not an automatic bar for all future modding cases, but it does make a future defendant's case that much more difficult.

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Fashion and video gaming - two things that are not exactly known to go together.  After all, I don't usually wear "couture" when I'm cruising around the radioactive wasteland of post-apocalypse Las Vegas.

But yesterday saw a marriage of these two usually divergent concepts, thanks to the Senate Judiciary Committee's approval of S.3728.  The bill, which will move on to the full Senate for its consideration, would provide intellectual property protection for fashion designers, especially against knock-offs and counterfeits. 

Why does this matter to video gaming?  Consider what may be the hottest trend in video game IP right now - dance games.  Dance games typically have some on-screen avatar or representation of the dancer who's moves you follow.  If this avatar is wearing clothes that could be subject to protection under S.3728 (assuming it passes), then the avatar (and the game at large) could be infringing unless ythe developer licensed the clothing designs.

Let's put this into a more concrete example: Lady GaGa is known for some original clothing choices.  And the occasional pop hit.  Based on those hits, wouldn't it make sense to use GaGa's music for a dance game?  (I know this has already been done, but bear with me for this example)  And if you're going to do that, you'd probably  want to make use of her name and image as well.  After all, this was the pattern followed by the Guitar Hero/Rock Band genre of games.  But why stop there - why not incorporate her style choices as well?  After all, what's GaGa without a dress of raw meat? 

As it stands today, the game developer in this hypothetical would certainly have licensed her name, image, likeness, and music for the game (right, developers?).  But would the dev have thought to license the original IP in her costumes?  If S.3728 becomes law, it should have.

Couple of interesting things to note about this bill.  First, it has strong bi-partisan support.  Second, it does not speak to tax breaks or funding the government, so if Senate republicans are to make good on their threat, S.3728 should not receive much attention during the final days of the 111th Congress (at least until the minor issues of tax breaks and government spending are handled).

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A number of lawsuits and court decisions came to light today (at least, they came to light for me), but none of them merited a stand-alone post for this blog.  So in what may be a one-time phenomena (but hopefully will become a recurring post section), we're presenting the first Courtroom Roundup - a brief overview of interesting cases and decisions that in some (typically tangential) way impact the video games industry (if there was a direct impact, it would likely merit its own post).

With that being said, welcome to Courtroom Roundup: The Supreme Denial Edition

• IAC/Interactive Corp. et al. v. Cosmetic Ideas Inc. - What is required to sue for copyright infringement, filing an application for copyright registration, or having that application granted?

The first case - IAC/Interactive Corp. et al. v. Cosmetic Ideas Inc., case number 10-268 in the U.S. Supreme Court - concerned the question of whether someone can sue for copyright infringement after merely filing for registration, or whether someone must wait to file a lawsuit until the Copyright Office grants a registration. The question stems from the text of 17 U.S.C. 411, which states (in relevant part) "no civil action for infringement of the copyright in any United States work shall be instituted until preregistration or registration of the copyright claim has been made in accordance with this title." 

Some circuits - the Tenth and Eleven - have interpreted this statute as making registration - that is, registration granted by the Copyright Office - a precondition to filing a copyright infringement lawsuit.  (Ed. Note: there are some explicit exceptions to Section 411 for works refused registration and audiovisual broadcasts, but we're ignoring them for now).  Other circuits - the Fifth, Seventh, and Ninth - have interpreted Section 411 as requiring only that a registration be filed, not granted, prior to having the ability to sue for copyright infringement.

Bottom Line for the Games Industry: As of now, the circuit split stands.  Depending upon where you file suit, you may have to wait for the Copyright Office to grant a registration, which in some cases is taking more than two years to process (without paying special fees, that is).

•  Tiffany (NJ) Inc. et al. v. eBay Inc. - Should an online auction site be liable for trademark infringement committed by its users?

Our second case (also a denial of cert. by the Supremes) is Tiffany (NJ) Inc. et al. v. eBay Inc., case number 10-300 in the U.S. Supreme Court.  This case stems from the six year-long battle between Tiffany and eBay over eBay users selling knock-offs as "authentic" or "real" Tiffany jewelry.  The question raised by Tiffany's was whether eBay should be liable for damages caused by the sale of knock-offs.  To get to liability, Tiffany's raised several causes of action including contributory trademark infringement and false advertising.

At trial, eBay won on all counts because it showed that it took affirmative steps to remove infringing items once those items had been reported.  On appeal to the Second Circuit, the appellate court agreed with the district court as to trademark liability, but revived Tiffany's false advertising claim.  With the denial of cert. from the Supreme Court, the case (from the trademark side) has been effectively ended. (Ed. Note: the false advertising claim was recently rejected - again - by the district court.  See here).

Bottom Line for the Games Industry: When it comes to online portals and trademark infringement claims, potential plaintiffs should think of portals as falling into one of two buckets: those sites that play "above board" (that is, have procedures for dealing with infringements, and follow those procedures), and those that do not.  Compare eBay, with its infringement response protocols, to a bit torrent site like Pirate Bay, which typically does not.  While both may have generalized knowledge of infringements occurring through their online services, infringement actions against Pirate Bay-like entities are far more likely to success than those against eBay-like entities.  This is due in no small part to the eBay-like entities playing "above board."  So pick your targets carefully.

(Ed. Note: This is just a US perspective, though.  Recently, eBay was fined 1.7M Eur by a French court for failing to stop sales of fake Louis Vuittion items on its site.  So perhaps we should have a Bottom Line #2: the US is not the only law that should be considered when looking into infringement claims).

•  Harper v. Maverick Recording Co. et al. - availability of the "innocent infringer" defense to copyright infringement

As if you couldn't see this coming, the third case of this Roundup is also a denial of cert.  The case - Harper v. Maverick Recording Co. et al., case number 10-94 in the U.S. Supreme Court - concerns alleged copyright infringer and Kazaa-downloader Whitney Harper, and whether she can claim the "innocent infringer" defense.  The "innocent infringer defense" isn't really a "defense" at all since it does not mean the infringer is free from liability; rather, it just goes to reduce the amount of statutory that the infringer pays the copyright holder.  Under 17 U.S.C. 512(c), a court may reduce the statutory damage award to not less than $200 if the court determines that the infringer did not know, and had no reason to know, that the actions at issue constituted copyright infringement.  In Ms. Harper's case, the district court determined that she was an "innocent infringer" and reduced the damage award from $750 to $200 for each of the 37 works (that's a reduction to $7,400 from the minimum $27,750 that could have been obtained).

Upon appeal, however, the Fifth Circuit determined that the innocent infringer defense was foreclosed as a matter of law in this case under 17 U.S.C. 402.  This provision states (in relevant part) that the "innocent infringer" defense is not available if a copyright notice appears on the published phonorecord to which a defendant had access.  In other words, because record companies put copyright notices on physical CDs, and Ms. Harper could have accessed the CDs by visiting a retail store, she could not claim the "innocent infringer" defense.  By denying cert. in this case, the Supreme Court has upheld the appellate court's determination, which will raise the statutory penalties back into the $750 per work range.

Interestingly, Justice Alito dissented from the denial of cert. (he disagreed with the Supreme's decision to not hear the case), and wrote that since the law was drafted in 1988, before music downloading was a reality, there was an argument that Section 402 should not apply to music downloaders (an interesting point of view for this justice - it smacks a bit of the "living law" theory, doesn't it?).

Bottom Line for the Games Industry: Although this case dealt with phonorecords (that is, music), there is an analogous provision in 17 U.S.C. 401 - just replace "phonorecord" with "copy."  So putting copyright notices on physical copies of a game is not only a good idea, it can help forestall the application of the "innocent infringer" defense and thereby preserve a higher statutory damage award.  But unlike music, which cannot easily include a copyright notice within the work itself (imagine a HAL-like voiceover stating copyright notices for the first 4 seconds of every song), video games can.  There are load screens, transition screens, and other places where placing a copyright notice can be done without wrecking the gameplay experience.  And putting the copyright notice in the work itself can make it even less likely that the "innocent infringer" defense is available.  So in my opinion it's a good idea (and common practice) to include a copyright notice somewhere in-game.

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This morning, Attorney General Eric Holder announced the seizure of 82 websites used to traffic and/or sell counterfeit goods - everything from Timberland shoes and clothes to movies and music.  The sites were seized pursuant to 18 U.S.C. 981 and 18 U.S.C. 2323.  A full list of the sites seized is provided by Wired.com.

This crackdown, which was timed to coincide with "Cyber Monday," is part of "Operation Within Out Sites 2.0," and according to the Department of Justice, primarily targeted “online retailers of a diverse array of counterfeit goods, including sports equipment, shoes, handbags, athletic apparel and sunglasses as well as illegal copies of copyrighted DVD boxed sets, music and software.”  Hence the interest to the games community.  After all, piracy is not limited to just golf clubs and MP3's.

One interesting question is whether this seizure was done in response to the Senate Judiciary Committee's recent actions with regard to S.3804, also known as the Combating Online Infringement and Counterfeits Act, or COICA.  COICA sailed with unanimous approval through the Senate Judiciary Committee, and will be placed on the Senate's legislative calendar for the remainder of this session.  However, Senator Ron Wyden (D-Oregon) has threatened to block the legislation, and the bill itself has come under fire for the perceived ability of the US government to censor the internet at large.

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UPDATE: Last week we wrote about the House passing a version of the Copyright Cleanup, Clarification, and Corrections Act of 2010, and about how this could affect game developers (among others involved in digital and interactive entertainment).  Last Friday (November 19th), the Senate unanimously approved of the House's version of the bill (the version without the language regarding transfers of exclusive licenses).  Now, the bill awaits only the President's signature before it becomes law.  You can follow the bill's status viz. the President's signature here.

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On August 3, 2010, the Senate passed a bill known as "The Copyright Cleanup, Clarification, and Corrections Act of 2010" (S.3689).  This bill provided for a number of technical corrections to the Copyright Act, such as changing the title of Chapter 6 to read "Importation and Exportation" (as opposed to its current "Manufacturing Requirements and Importation."  Of course, a few substantive corrections have been made as well, including clarification that under Section 303(b), distribution of phonorecords (sound recordings) made before 1978 shall constitute a publication of an underlying musical, dramatic, or literary work (currently, the statute's wording is limited to just underlying "musical works," which can create confusion for sound recordings like audiobooks or non-musical plays).

A few days ago - on November 15, 2010 - the House of Representatives passed a version of S.3689 that was very similar to the bill passed by the Senate a few months back.  However, one provision of note that was in the Senate's version did not make it into the version passed by the House.  This provision would have allowed the holder of an exclusive right to a copyrightable work to sublicense that right to another party without the licensor's consent.

To put this into plain English, let's say I'm a studio with a great idea - I'm developing an MMO based on (of all things) developing an MMO (how meta is that!).  I have enough original expression, embodied in enough tangible media, to qualify for copyright protection.  (See our previous posts involving copyright for more on this).  In the process of developing this MMO, I decide to license exclusive publishing rights to Bob's Discount Game Publishing Service (a totally fake entity, as far as I know).  Now Bob's has an exclusive right that is part of the "bundle of rights" that make up copyright.  Can Bob's unilaterally sublicense the publishing rights to another entity without my approval?  What if our publishing agreement did not specify any right to sublicense the publishing rights?

The answer, plus reasons why this may matter to the video game industry, after the jump.

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Gamasutra has a great article, written by Cameron Davis, on how to pitch your project to publishers (onomatopoeia included).  It provides some salient insights on how to best convey your ideas to those who: a) have money; and b) can use that money to market and distribute your game to a wide-ranging audience.

In that same vein, we thought we could contribute to this discussion, but of course, being lawyers, we can't really help but speak to those legal issues that studios and developers should think about when pitching publishers.  As with most things legally-related, there are a million different ways to approach this topic: negotiation strategies, contract pitfalls, dealing with an "Alice in Wonderland"-esque definition of "net profits," etc.  This post, however, will focus on protecting the ideas you bring to the pitch.  Because while idea misappropriate would never happen in this business, chance favors the prepared (all apologies to Louis Pasteur for the paraphrasing).

Why should you care about idea protection?  Because ideas are illusive things, and are capable of legal protection only in certain circumstances.  Without being able to obtain those protections, there's very little to stop someone taking your ideas from a pitch and using them without your consent (or without paying you royalties).   Considering game devs can spend significant amounts of time thinking about a project, protecting that investment can be extremely worthwhile.

Thoughts on protection strategies after the jump.

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In video games-related Supreme Court news that has nothing to do with the Governator or obscenity (so please, try to stay interested), the Court has agreed to hear a dispute between Stanford University and Roche Molecular Systems Inc. over whether individual inventors or contractors retain intellectual property rights to federally funded inventions.

The case concerns the Bayh-Dole Act, which allows institutions such as universities, nonprofits and small business contractors to retain the rights to inventions created through federally funded research.  Check out Patently-O's analysis of some of the confusion surrounding Bayh-Dole.  The question before the Supreme Court is whether the law allows inventors employed by these institutions to unilaterally assign intellectual property rights to a third party.

For the record, I am not, nor do I think I could even pretend to be, a patent lawyer.  So I'm going to tread carefully here.  More after the jump.

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In case you haven't heard, today the Supreme Court will hear oral arguments in the case of Schwarzenegger v. EMA, the so-called "violent video game law."  See our thoughts and analysis of the case and its potential impact on the industry.

SCOTUSBlog has a great library of documents related to the case, including a total of 31 amicus briefs filed on both sides of the case.

One thing that seems to have gotten lost in the shuffle is the fact that the court is actually presented with two questions regarding the California law.  The first gets the most attention - whether the First Amendment permits any limits on offensive content in violent video games sold to minors.  If the Court decides that any restriction on violent video game sales to minors is a violation of the First Amendment, then the second question is unlikely to be answered.  However, given the trend of the Court to move toward greater impositions on speech (see, e.g., the "bong hits for Jesus" case, which was decide by a Court that was thought to be more "liberal" on free speech issue than the current Court may be), this first question may be answered in the affirmative.

If it is, then the Court will likely address the second question, which is almost as interesting as the first to those of us who are legally-minded.  The second question examines whether a state regulation for displaying offensive, harmful images to children is invalid if it fails to satisfy the exacting "strict scrutiny" standard of review.

Post continued after the jump.

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Last week Cryptic Studios announced a new feature for its Star Trek Online MMO: a significant user-generated content toolbox.  The new feature, dubbed "The Foundry" will allow users to customize pre-made assets like planets and star systems with their own content (e.g., encounters, objects, and stories) as well as author missions for other players to play.

According to the Foundry FAQ, "players can customize pre-made planet surfaces and star systems with their own encounters, objects, and story. They can also create their own star systems from scratch. More map features are planned for future updates."

"Cool," says the gamer in me.  This seems like a potentially solid strategy for addressing some of the complaints that the MMO has received (according to Gamasutra, Star Trek Online has received mixed reviews as critics cited issues with bugs, a lack of polish, and repetitive missions).  Put "mission control" into the hands of players, and crowdsource aspects of game development. 

"But wait," says the lawyer in me, "there are serious issues of copyright law to contend with here."  Analysis of the copyright law issues after the jump.

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Last week we posted about Pacman/"Hackman," and we discussed the potential copyright infringement liability Missouri Congressman Russ Carnahan could face for the creation of the "Hackman" game.  Today's post will focus on another potential sources of liability - trademark law, particularly trademark infringement and trademark dilution. 

Trademark law exists at the federal, state, and common law levels.  For this discussion, we'll focus just on federal trademark infringement and federal trademark dilution, which stem from the Lanham Act (15 U.S.C. 1114 et seq.). 

As an initial comment, one should remember that trademark law only comes in to play when there are goods or services being offered in commerce.  In the Pacman/"Hackman" situation, Representative Carnahan does not appear to be selling "Hackman" in any way - the game is free to play, and there is no evidence of "Hackman" appearing on products like t-shirts, coffee mugs, bumper stickers, etc.  Without a use of the "Hackman" designation in commerce, trademark law may not provide much satisfaction for Namco Bandai (and make this a very uninteresting post).  Therefore, we'll assume that Rep. Carnahan uses the designation "Hackman" in commerce by licensing copies of the game to other political candidates so they can create "offspring of Hackman."

More analysis after the jump.

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For many gamers, Pacman (or PAC-MAN for the purists) was a critical first introduction to the world of video games.  Even today, the game still has a lot of cache - just ask Google, which recently commissioned a Pacman doodle to commemorate the 30^th anniversary of the game's US launch.

Well, it's to be expected that anything this popular will eventually turn up in a political campaign.  Music, videos, and TV news broadcasts have been used in political campaigns, without permission, often resulting in great legal expense.  Just ask Don Henley, Rush, or Fox News how use of their IP in political campaigns worked out.  So perhaps it's of little surprise that now, video games have been thrown into the mix.

Missouri Congressman Russ Carnahan (D) has developed a Pac-Man themed videogame in order to attack his Republican opponent Ed Martin.  According to GamePolitics, "Hackman" replaces the game's titular star with Martin's head, and has the head chase, and be chased, by four rotating gavels (in place of the traditional red, orange, pink, and white ghosts). 

This raises the question: what legal liability could Congressman Carnahan face for appropriation of the Pacman idea, game feel, and game play?

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If you are interested in video games and the law, then you have probably heard of the recent decision from the Ninth Circuit Court of Appeals in Vernor v. Autodesk.  This was a case about software, and whether software is "bought" or "licensed" for the purposes of the Copyright Act.  Many people have written excellent recaps of the case, so we won't repeat it here.  But if you're interested, see here, here, here, and read the full decision here.

The upshot of the case is that a software user is a licensee, not an owner of a copy, where the copyright owner:

1. Specified that the user is granted a license;
2. Significantly restricted the user's ability to transfer the software; and
3. Imposed notable use restrictions.

To see whether Autodesk met those requirements, the court looked to Autodesk's Software License Agreement ("SLA").  For those who won't read Autodesk's SLA or the full court decision, Autodesk met those requirements.

What does this mean for video games?  For gamers, it may mean that you cannot sell or purchase used games if the game company has properly created a license instead of a sale.  How does a game company create one or the other?  Through the video game equivalent of an SLA - an End User License Agreement (or "EULA").  So for game companies, the Vernor decision requires not only an assessment of whether a license or a sale is intended, but also an examination of the EULA to make sure that the document creates the sale or license (as may be appropriate).

Unfortunately, it is not at all uncommon for EULAs to be "adapted" from one game to the next.  However, a EULA written in 2008 may not be sufficiently clear to comply with the requirements of Vernor.  So this raises the following question for game companies: do your EULAs create the transaction you think they do?

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