A quick guide to the EU data protection proposals
This week the EU proposed a major overhaul of its data protection. As the largest trading bloc in the world, what the EU thinks about data matters. Here's a summary that my firm, Osborne Clarke, prepared:
All organisations hold and process personally identifiable data – not least about their staff, customers or suppliers, or all three. In Europe how this data is handled has been regulated by data protection laws since the early 1980s. Those already complex laws are set to be shaken up by the European Commission (EC) which on 25 January 2012 announced a radical overhaul of the Data Protection Directive.
If adopted the changes will have a huge impact on all organisations with European facing operations, as will the suggested penalties for those who get it wrong. Large fines (up to 2% of global turnover have been proposed) are being lined up for local regulators to impose on non-compliant organisations.
If adopted the changes will have a huge impact on all organisations with European facing operations, as will the suggested penalties for those who get it wrong. Large fines (up to 2% of global turnover have been proposed) are being lined up for local regulators to impose on non-compliant organisations.
In short, the new laws will:
- increase the regulatory burden on organisations with European operations
- increase the amount of time, money and personnel required to achieve compliance
- raise the stakes, in terms of potential fines and brand damage, which could arise from non-compliance
Once the EC's proposals have passed through the European parliamentary system, because they are in the form of a "Regulation" they will have direct effect in every EU Member State with minimal further scope for debate, or rationalisation. While a more harmonised data protection regulatory landscape sounds appealing, the uncompromising approach taken by the EC's draft Regulation is a cause for concern for business.
Key points proposed by the EC's draft Regulation include the following:
(a) Fines – national data protection regulators will be given the ability to impose significantly higher fines of up to 2% of global turnover where basic knowledge/consent obligations or requirements to adopt good policies and procedures are not followed.
(b) Data Protection Officers (DPO) – private sector companies with more than 250 employees, or whose core activities involve regular monitoring of individuals, as well as public authorities will all be required to formally appoint a DPO. The DPO must be empowered by their organisation to act as an independent assessor of its compliance with data protection laws and report to the board of directors in doing so. The Regulation specifically requires the DPO to co-ordinate data protection by design and privacy impact assessment initiatives (see below for more details on both) and to be responsible for data security initiatives generally. Responsibility for training staff is also mentioned as important. In short, the DPO must ensure that his/her organisation has adopted good data governance policies and procedures.
(c) Audits, data protection by design and privacy impact assessments – organisations will be required to demonstrate that they have undertaken regular data protection audits and privacy impact assessments (PIAs) using recognised industry standards (such as ICO's PIA criteria). Key will be demonstrating that new processing systems and activities have been only introduced after privacy compliance and risk mitigation steps have been implemented. A key role of an organisation's DPO will likely be co-ordinating such privacy by design initiatives. Regulators can designate processing activities in respect of which organisations should always proactively run a PIA before processing commences. The Regulation sets out a starting point list which includes any activities using data about an individual's "economic situation, location, health, personal preferences or reliability of behaviour".
(d) Security breach notification – organisations will have to notify data protection authorities within 24 hours of establishing that they have suffered a data breach or explain why it is not possible to provide full details of the breach. Slick internal procedures will therefore be required to verify suspected breaches and establish what has been lost or subject to unauthorised accessed.
(e) Expanded consent requirements – the EC's proposals include a radical overhaul of the level of consent that is required before organisations process data. At the heart of this change is the requirement that consent to use personally identifiable information should always be obtained in advance and on an opt-in basis before it is used. Thankfully the EC has pulled back from requiring parental consent to be obtained from under 18 year olds, as required by an earlier draft of the Regulation leaked in November. The bar is proposed at 13 in the draft Regulation published in January.
(f) Data portability – individuals will be given the right to demand that an organisation should transfer any or all information held about them to a third party organisation in a format which the individual determines. This increases the control that individuals have over data which identifies them and makes it easier for them to transfer business or employment relationships. It remains to be seen who will be required to cover associated costs of such an exercise, but it seems very likely that the transferring organisation will be expected to do so.
(g) Jurisdictional reach – the new laws will apply to anyone processing data in the EU as well as those outside Europe who offer goods or services to EU citizens. For a multi-national organisation, the location of its European HQ will determine which EU Member States' laws bind it, and which regulatory authority will have jurisdiction over it. That said, individuals will be given wider ranging powers to bring action personally against an organisation (either in the country where a non-compliant organisation is located or in the individual's local courts). Trade associations will also be empowered to bring class actions on behalf of their members. For the first time data processors will share equal responsibility and liability for compliance with the new laws raising the stakes for IT service suppliers.
(h) Data transfers – Europe's painful data transfer laws will be relaxed in that more options will be made available to enable organisations to share data with non-European third parties. Specifically, the policy implementation known as Binding Corporate Rules will be formalised as a mechanism enabling data transfer compliance, which is good news for multi-site, multi–national businesses.
(i) The right to be forgotten – individuals (children, defined as under-18 year olds, are mentioned in particular) will have the ability to demand that information published about them online is deleted and is not republished. Organisations which receive such a demand must take all reasonable efforts to inform other website operators of the existence of the complaint which they have received. The right, which is particularly relevant to social media businesses, is subject to some exemptions. These including one benefiting journalists publishing stories in the public interest, raising the question is a blogger or someone who posts an opinion on a website a journalist? But questions remain about how practical the regulation is and who would bear the costs of complying with it.
For more information about the proposed amendments to Europe's data protection laws or for a copy of Osborne Clarke's guide to complying with them please contact James Mullock (james.mullock@osborneclarke.com) [Jas: you can read more about what James thinks about the new proposals here, here and here]
What does this mean for the games industry?
If/when these proposals become EU law, in theory they will apply legally to the games industry in the same way they apply to any other industry. In practice though I suspect these laws could be a particular headache for games businesses because:
Key points proposed by the EC's draft Regulation include the following:
(a) Fines – national data protection regulators will be given the ability to impose significantly higher fines of up to 2% of global turnover where basic knowledge/consent obligations or requirements to adopt good policies and procedures are not followed.
(b) Data Protection Officers (DPO) – private sector companies with more than 250 employees, or whose core activities involve regular monitoring of individuals, as well as public authorities will all be required to formally appoint a DPO. The DPO must be empowered by their organisation to act as an independent assessor of its compliance with data protection laws and report to the board of directors in doing so. The Regulation specifically requires the DPO to co-ordinate data protection by design and privacy impact assessment initiatives (see below for more details on both) and to be responsible for data security initiatives generally. Responsibility for training staff is also mentioned as important. In short, the DPO must ensure that his/her organisation has adopted good data governance policies and procedures.
(c) Audits, data protection by design and privacy impact assessments – organisations will be required to demonstrate that they have undertaken regular data protection audits and privacy impact assessments (PIAs) using recognised industry standards (such as ICO's PIA criteria). Key will be demonstrating that new processing systems and activities have been only introduced after privacy compliance and risk mitigation steps have been implemented. A key role of an organisation's DPO will likely be co-ordinating such privacy by design initiatives. Regulators can designate processing activities in respect of which organisations should always proactively run a PIA before processing commences. The Regulation sets out a starting point list which includes any activities using data about an individual's "economic situation, location, health, personal preferences or reliability of behaviour".
(d) Security breach notification – organisations will have to notify data protection authorities within 24 hours of establishing that they have suffered a data breach or explain why it is not possible to provide full details of the breach. Slick internal procedures will therefore be required to verify suspected breaches and establish what has been lost or subject to unauthorised accessed.
(e) Expanded consent requirements – the EC's proposals include a radical overhaul of the level of consent that is required before organisations process data. At the heart of this change is the requirement that consent to use personally identifiable information should always be obtained in advance and on an opt-in basis before it is used. Thankfully the EC has pulled back from requiring parental consent to be obtained from under 18 year olds, as required by an earlier draft of the Regulation leaked in November. The bar is proposed at 13 in the draft Regulation published in January.
(f) Data portability – individuals will be given the right to demand that an organisation should transfer any or all information held about them to a third party organisation in a format which the individual determines. This increases the control that individuals have over data which identifies them and makes it easier for them to transfer business or employment relationships. It remains to be seen who will be required to cover associated costs of such an exercise, but it seems very likely that the transferring organisation will be expected to do so.
(g) Jurisdictional reach – the new laws will apply to anyone processing data in the EU as well as those outside Europe who offer goods or services to EU citizens. For a multi-national organisation, the location of its European HQ will determine which EU Member States' laws bind it, and which regulatory authority will have jurisdiction over it. That said, individuals will be given wider ranging powers to bring action personally against an organisation (either in the country where a non-compliant organisation is located or in the individual's local courts). Trade associations will also be empowered to bring class actions on behalf of their members. For the first time data processors will share equal responsibility and liability for compliance with the new laws raising the stakes for IT service suppliers.
(h) Data transfers – Europe's painful data transfer laws will be relaxed in that more options will be made available to enable organisations to share data with non-European third parties. Specifically, the policy implementation known as Binding Corporate Rules will be formalised as a mechanism enabling data transfer compliance, which is good news for multi-site, multi–national businesses.
(i) The right to be forgotten – individuals (children, defined as under-18 year olds, are mentioned in particular) will have the ability to demand that information published about them online is deleted and is not republished. Organisations which receive such a demand must take all reasonable efforts to inform other website operators of the existence of the complaint which they have received. The right, which is particularly relevant to social media businesses, is subject to some exemptions. These including one benefiting journalists publishing stories in the public interest, raising the question is a blogger or someone who posts an opinion on a website a journalist? But questions remain about how practical the regulation is and who would bear the costs of complying with it.
For more information about the proposed amendments to Europe's data protection laws or for a copy of Osborne Clarke's guide to complying with them please contact James Mullock (james.mullock@osborneclarke.com) [Jas: you can read more about what James thinks about the new proposals here, here and here]
What does this mean for the games industry?
If/when these proposals become EU law, in theory they will apply legally to the games industry in the same way they apply to any other industry. In practice though I suspect these laws could be a particular headache for games businesses because:
(1) the modern games industry is built on data collection and use more than any other creative industry;
(2) the games industry hasn't historically worried too much about data protection (except maybe when something like the Sony PSN or similar hacks happen); and
(3) these reforms will in principle affect every business in the games industry, from indies through to the largest publisher. Yes, they'll hit the publishers hardest because they're the most substantial in size, but it's not publishers alone who would have to comply with these laws.
Example: most publishers would be obliged to appoint a Data Protection Officer since they have a headcount of >250. Indies don't and therefore wouldn't have the same obligation. BUT, both publishers and indies would have the same obligation to, for example, notify regulators of data breaches within 24 hours or give users the 'right to be forgotten'.
As a result, many commentators have already pointed out that these reforms have the potential to add a big layer of red tape to small businesses of all kinds in the EU. Whether that remains the case once this becomes law we'll have to wait and see - but any way you cut it, you need to know what's coming up for the future of data protection if you're involved in exploiting data.
In the meantime, if you want to understand how data protection law works at the moment and therefore what your legal obligations are right now, read this guide to data protection I wrote on gamesindustry.biz.
In the meantime, if you want to understand how data protection law works at the moment and therefore what your legal obligations are right now, read this guide to data protection I wrote on gamesindustry.biz.
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Posted on 26.1.12
Crowdfunding is amazing
I've been thinking about crowdfunding for a while, and I was generally aware from industry stories and client experiences that it is an interesting way to get funding for games. Besides which, I'm interested in how best to make it work legally (more on that later). Then I was asked today to look into some notable examples of crowdfunding for games. 5 minutes into a Google search on the subject blew me away and I felt I should share some of what I found with you. Here's just a few examples:
- Warballoon Games (USA) raised $20k in 5 days for “Star Command”
- Zero Point Software (Denmark) raised over $125k for “Interstellar Marines”
- Six to Start (UK) had a target of $12,500 for “Zombies, Run!” but actually raised $73k
- Rik Falch (USA) had a target of $13,000 for his “D-DayDice Board Game” but actually raised $172k
It's not just about record-breaking statistics either. We should bear in mind games like The Indie Stone's Project Zomboid, where devs are able to make a game via alpha-funding. The best example of alpha funding though is probably Minecraft (don't think I need to say anything more than the name there - you get what I'm talking about!) Plus, there's some pretty ambitious crowdfunding projects. Slightly Mad Studios have launched their World of Mass Development for example, then you've got games like Nexus 2 (as of the date of this post, it has Euro 110k in funding but Euro 290k to go...)
All this is amazing, especially when you consider the sheer amount of time and energy that goes into every other form of fundraising for a games business, like bank lending or angel or venture capital investment. Sure, crowdfunding alone won't fund many businesses, and I'm sure there's plenty of failed crowdfunding proposals, but it's clearly a serious option to consider when making your next game.
All this is amazing, especially when you consider the sheer amount of time and energy that goes into every other form of fundraising for a games business, like bank lending or angel or venture capital investment. Sure, crowdfunding alone won't fund many businesses, and I'm sure there's plenty of failed crowdfunding proposals, but it's clearly a serious option to consider when making your next game.
That said, because this is a legal blog, I'll have some legal suggestions to make about what to bear in mind when crowdfunding your next game - it's an awesome funding channel you should be making use of, but it's not free money either. More on legal tips for crowdfunding soon - watch this space...
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Posted on 23.1.12
What happens when a game with virtual goods closes?
This is a post by Jas and Jonny Mayner.
As reported last week (see here and here) casual game developer ZipZapPlay (owned by PopCap since April 2011) will be putting up the “Shop Closed” sign at Baking Life on 31st January 2012. The Facebook game reportedly once attracted 6.7 million users per month, but at present only around 760,000 users are rolling their virtual dough each month.
Speaking of virtual dough, in a statement on the game’s Facebook page, ZipZapPlay have told users that “All virtual currency (Zip Cash) and virtual items will be lost after January 31st. Any remaining Zip Cash (even if it was purchased and unused) is not transferable between or among different games or applications and is not redeemable for any sum of money or other monetary value.”
This has led to familiar grumblings on forums and news sites about the legality of cutting off access to virtual worlds, including virtual goods and currency that gamers have invested time and real money in accruing. So we thought we'd think about this: what are the legal implications if a game which sells virtual goods closes?
The legal bit:
Gamers' relationship with the developer, including regarding virtual goods in a game, is typically set out in T&Cs, which as a rule are pretty clear about who owns what. For example, in the ZipZapPlay T&Cs, the very first paragraph is headed “Limited Licence to Use; Ownership” and reads:
"Unless otherwise specified, the Baking Life App, virtual currency, virtual items, all content, text, graphics, logos, button icons, images, audio clips, digital downloads, data compilations, and software contained on the Baking Life App (collectively the "Materials") are the property of ZipZapPlay, or their suppliers, ... You may access and use the Baking Life App and the Materials only for your personal and non-commercial use”. (underlines added)
In other words “we own all this stuff but you can play with it”. There are plenty of other examples throughout the Terms whereby ZipZapPlay are pretty clear that money paid for virtual currency is non-refundable and that they can deny access to the game for any reason. This is pretty standard in the games industry: pretty much any game which uses virtual goods/currency will say something like it.
So, legally, what could consumers do about it when a game closes down and shuts off their access to virtual currency/goods?
(1) Argue that they have property rights in the virtual goods
The main problem is the absence of a proper cause of action or legal basis for a claim. As discussed on Gamer/Law previously, issues of virtual property and virtual currency have to date been considered to be matters of contract law (although any alternative view has not been tested in front of a court so we don’t know their legal status for sure). The relevant contract in this instance is the Baking Life Terms of Service which users accept before they can access the game and which incorporate the End User Licence Agreement between ZipZapPlay and each user.
So, a developer in this situation would point to the contract and says that resolves the matter entirely: gamers have no rights in virtual goods, end of case. But the gamer would need to persuade a judge that the contract alone cannot be the answer – the fact that the gamer has been sold virtual goods means that he/she has acquired some kind of additional property rights, meaning the game can't just be shut down. At most, they should have continued access to the game and at the least they should get compensation. But that would be a tough argument to run, given the lack of any legal precedent. Still, sooner or later, we're likely to see something like it being run…
(2) Argue the contract is unfair
Many countries have consumer protection laws which make certain contracts with consumers void in certain situations. EU law in particular has a powerful consumer protection regime, which among other things makes contract terms that cause a "significant imbalance" in the supplier/consumer relationship void unless they are "reasonable". This could apply to a term in game T&Cs that allows the developer to close the game just like that.
Would that convince a judge? We don't know, since it's never been tested and – more generally – the application of those consumer protection laws to digital products is pretty untested too. That said, there's at least a fighting chance that it could work.
(3) Other legal means
There may be other legal means that a gamer could pursue, for example to claim that the advertising/marketing of the game was unfair/illegal if in fact access to virtual goods could be shut down at any time, or possibly to argue that the developer made some sort of misrepresentation to encourage him/her to agree to the T&Cs. If ZipZapPlay somehow represented to users that they would in fact have property rights over their virtual goods and virtual currency held on account (and there’s no evidence of that), and if users relied specifically on that representation when deciding to accept the Terms, play the game and hand over real money, then those users might have a claim in misrepresentation. So that’s a few “ifs” adding up to a “might”. Tenuous stuff.
What does all this mean?
It means that, at the moment, developers could close down a game and all access to virtual goods in it, at any time and without offering any compensation, and any legal challenge against it would be difficult. But it is only difficult because there is no precedent – it is entirely possible that someone could mount a test case against this kind of thing at any time. In fact, tests cases have previously been started but not finished: similar issues were raised in the Evans v Second Life case in the U.S. and we’ve not heard anything about that for a while.
Sooner or later, the games industry is going to have to tackle the issue that they are promoting the purchase of virtual goods and currency without actually giving much legal comfort to consumers against them. Clearly, exactly how far that protection should go can fairly be debated and will depend on the kind of game and virtual good – but it still needs to be discussed. Otherwise, we might find judges and regulators getting involved.
In the meantime, expect more game closures and more complaints. Sometimes that might lead to the developer making offers like Zynga did when it closed down Street Racing, sometimes it might just fizzle away – but sometimes it might lead to a legal fight. [Jas: personally, I suspect that would be a legal fight in the form of a class action lawsuit by lots of people affected by the loss of their small-value virtual goods, like if a game closed, or possibly by a single person affected by loss of access to a very high value virtual good – e.g. the $330k value Crystal Palace Space Station in Entropia Universe)].
Would this really happen? These days, I don't even bother with people asking me whether virtual goods could really ever be the property of a user. I just point them to this case of a UK man being JAILED for stealing Zynga Poker chips.
Would this really happen? These days, I don't even bother with people asking me whether virtual goods could really ever be the property of a user. I just point them to this case of a UK man being JAILED for stealing Zynga Poker chips.
More generally, think about this: given that a big part of the appeal of these titles is the creation and control of an ongoing world (be that a bakery, kitchen, farm or something else) how many customers will be motivated to spend any more time in that world with a closure date looming? Baking Life players are being directed to other PopCap titles, but there are bound to be a lot of customers out there whose disappointment at the loss of a favourite game will be compounded by the nagging sense that investing time and money in social games might just be a waste of both. If these sorts of title sunsets occur with any regularity will customers move away from buying virtual goods altogether?
[Postscript by Jas: I realise of course that this definitely isn't the first game featuring virtual goods to close down - even in the last few years, the social games giants have killed off plenty of underperforming games featuring virtual goods. Our thinking behind this post was more to show what the arguments would be if there was a legal fight over such a closure, as well as to suggest more generally that we think the time is coming when there will be more of those legal fights than we've seen so far. That will very intimately be bound up with how virtual goods themselves are being used ofc - as we've noted before, social games virtual goods have been treated different to virtual worlds virtual goods for example.]
[Postscript by Jas: I realise of course that this definitely isn't the first game featuring virtual goods to close down - even in the last few years, the social games giants have killed off plenty of underperforming games featuring virtual goods. Our thinking behind this post was more to show what the arguments would be if there was a legal fight over such a closure, as well as to suggest more generally that we think the time is coming when there will be more of those legal fights than we've seen so far. That will very intimately be bound up with how virtual goods themselves are being used ofc - as we've noted before, social games virtual goods have been treated different to virtual worlds virtual goods for example.]
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Posted on 23.1.12
Some thoughts about SOPA
I don't need to tell you all what the US Stop Online Piracy Act is about, because the Internet has talked about nothing else for the last few days (or at least, those parts of the Internet which haven't been closed in protest against SOPA). It caused a great, great deal of controversy, far more than the UK's Digital Economy Act ever did. Now it has been put on ice until "consensus" can be reached.
This is a short post with some thoughts from me about SOPA. For anyone who might be in doubt, I was opposed to SOPA, for the reasons I set out below. That said, I thought it might be helpful to actually read SOPA and give you some legal comments about it. Here goes...
How SOPA would work:
The stated objective of SOPA was to tackle websites which are "dedicated to illegal or infringing activity", but which are outside the USA's legal reach (i.e. they're based outside the USA geographically). Based on my reading of the draft legislation, it would work something like this:
(i) A rights holder (e.g. a movie studio or games publisher) and/or the US government identifies a site involved with illegal or infringing activity.
(ii) It can then notify the support network around that site – e.g. ad networks or payment providers but also ISPs – to cease supporting the site.
(iii) The support network then decides whether to cease supporting the site and/or sends a notification to the site.
(iv) The site can then send a counter notice explaining why it objects to the original notice from the rights holder (i.e. why it shouldn't have support withdrawn).
(v) The rights holder can then sue for a court order banning anyone assisting the site. If the rights holder wins, then in practice it can shut down or starve out the site.
(vi) The site's main protection is that it can sue for damages if it is "knowingly misrepresented" to be involved in illegal/infringing activity.
My main (legal) problems with SOPA are these:
(1) it circumvents due process, by effectively encouraging the support network around a web site to withdraw its support and then deal with the consequences later - rather than testing it out in court.
(2) there are already legal mechanisms in place to deal with websites that in any way involve or encourage content piracy - I've not been persuaded, nor seen any evidence, that additional powers are needed.
(3) The actual wording of the draft legislation was far wider than its stated objectives. I'd encourage that anyone interested in this point actually reads the draft legislation rather than relying on press reports/commentary about it. You can find it here: http://www.opencongress.org/bill/112-h3261/text.
I deal with legal wording all the time and I can see that the draftsman tried to cut down the ambit of the legislation somewhat, principally by peppering the key clauses with the phrase "an Internet site dedicated to theft of US property", which it defined at length as follows:
"Section 103:
1) DEDICATED TO THEFT OF U.S. PROPERTY- An ‘Internet site is dedicated to theft of U.S. property’ if--
(A) it is an Internet site, or a portion thereof, that is a U.S.-directed site and is used by users within the United States; and
(B) either--
(i) the U.S.-directed site is primarily designed or operated for the purpose of, has only limited purpose or use other than, or is marketed by its operator or another acting in concert with that operator for use in, offering goods or services in a manner that engages in, enables, or facilitates--
(I) a violation of section 501 of title 17, United States Code;
(II) a violation of section 1201 of title 17, United States Code; or
(III) the sale, distribution, or promotion of goods, services, or materials bearing a counterfeit mark, as that term is defined in section 34(d) of the Lanham Act or section 2320 of title 18, United States Code; or
(ii) the operator of the U.S.-directed site--
(I) is taking, or has taken, deliberate actions to avoid confirming a high probability of the use of the U.S.-directed site to carry out acts that constitute a violation of section 501 or 1201 of title 17, United States Code; or
(II) operates the U.S.-directed site with the object of promoting, or has promoted, its use to carry out acts that constitute a violation of section 501 or 1201 of title 17, United States Code, as shown by clear expression or other affirmative steps taken to foster infringement."
I don't think it needs a great long legal analysis from me of the meaning of that passage above for us to see that, in fairness to the drafters of SOPA, they made an effort to cut down the scope of the Act. Clearly weren't intending some kind of Wild West scenario where they can take aim at any web site they like - they were trying to focus upon sites which are basically built for content piracy and nothing else. BUT, the big problem is that the wording is still too wide. Worse, if it became law, the interpretation of the wording would pass to rights holders (who would actually take action first) and then pass to a judge only if the web site objects and forces the rights holder to take legal action.
In other words, my problem #3 re the wording with SOPA is this: it wasn't as bad as some folks made out, but it was still bad enough to cause a real problem.
[It's also worth noting that other opponents of SOPA would add two more problems with it: (4) that it restricts free speech; and (5) legal action is not the solution to piracy. As to (5), as readers will know, I've defended the right of rights holders to take legal action to defend themselves if necessary but equally I think that's just ONE option that we can take - there are lots of other, better routes we should follow too, like better technological/business models]
Anyway, as I said, SOPA has been killed off for the time being. Its US Senate cousin, PIPA, may or may not be put on ice as well - let's see what the next month or so brings.
How does this matter?
Clearly if SOPA had come into being then it would have handed a new and powerful weapon to rights holders, which could quite possibly have been misused in the wrong hands. The setback to SOPA is clearly a victory for its opponents - but SOPA and its ilk aren't dead yet. On the contrary, the tide of legal change over the last year or so has very much been on the side of those in favour of piracy laws. For example, the Digital Economy Act passed in the UK back in 2010 gives the UK government the power to take steps very much like those in SOPA - but it hasn't activated them yet. In the meantime, rights holders have taken to court action - such as the successful attempt to force BT to block access to Newzbin. In France, as another example, the government has pressed ahead with its controversial HADOPI legislation. There have recently been similar attempts or an ongoing process in countries like Canada and Australia, too.
They, and laws like them, won't go away anytime soon. That said, as I set out in my 2012 predictions earlier this month, I'm hoping that this year marks the high water point for the kind of attitude that thought wide-ranging laws like SOPA were ok, and instead we see a new approach which combines an evidence-led approach to piracy combined with an understanding that legal action is just one of many options (and possibly the action of very last resort). We also need laws that balance the interest of large rights holders with those of small rights holders, consumers and others in the Internet ecosystem. Piracy is important, and it needs to be dealt with, but worrying about piracy alone and only taking legal action over it can't make good content and it won't make for a good business, either.
To round off, I thought I'd quote my favourite of the high profile responses to SOPA, that of Jimmy Wales of Wikipedia, who I thought was closest to my thinking regarding SOPA and the legislative approach it represents:
"Proponents of SOPA have characterised the opposition as being people who want to enable piracy or defend piracy...But that's not really the point. The point is the bill is so over broad and so badly written that it's going to impact all kinds of things that...don't have anything to do with stopping piracy."
Posted on 18.1.12
What is administration?
Last week I wrote my ten predictions for the games industry in 2012. One of them was that we would see more developer collapses in 2012. Sadly, that's already taking place, with news today that UK developer Monumental Games has gone into administration.
I thought you might find it useful to know a little about administration, which is the most frequently seen form of insolvency proceedings for businesses in the UK. Here's what I said when speaking with Gamesindustry.biz back in 2010:
Q: What is administration?
Administration is a legal process which comes into play when a company finds itself in severe financial difficulties - and specifically when it finds it's no longer able to pay its debts and continue as a going concern.
In those circumstances either the creditors or directors of the company - or the courts - can appoint an administrator. This is a licensed professional, usually an accountant, whose job it is to take over the trading of the company.
There is then a hierarchy of objectives that he or she then has to try to attain. The first is to try and rescue the company - to take control of it, find out where the inefficiencies and problems are, and turn it around.
If, however, that's not possible then the administrator has a duty to look into trying to achieve the maximum possible return for the creditors - either by way of selling the company on and paying them out of proceeds or breaking the company up, and again, trying to make the most out of it.
In the worst case scenario there could be a fire sale, to sell anything you can in order to make money to pay those people owed. In those circumstances the process changes from administration to liquidation.
Q: How does a company decide when it's necessary to enter administration?
There are two key legal tests - the first is whether the company is able to pay its debts as they fall due (creditors, supply partners and so on); the other is whether its assets have become less than its liabilities, ie taking the company as a whole, is that still lower in value that the amount it owes to other people?
There are two key legal tests - the first is whether the company is able to pay its debts as they fall due (creditors, supply partners and so on); the other is whether its assets have become less than its liabilities, ie taking the company as a whole, is that still lower in value that the amount it owes to other people?
In reality there's a great deal of investigative work that needs to be done with your accountants or lawyers to work out whether or not the company can continue or not.
Q: And who does the administrator actually work for?
Although they can be appointed by different interested parties - perhaps a substantial creditor or the directors - the administrator answers to the court. They have responsibilities to both the court and the creditors of the company as a whole.
What that means is that when appointed the administrator has to put together proposals for what it wants to do with the company - and they then have to be voted on by the creditors or representative committee.
So they're not acting for themselves, or necessarily for the person that appointed them - they're acting for everybody that who is involved with the company.
Q: In terms of timescale for wrapping up administration proceedings, are we talking days, weeks, months or years?
It really does depend upon what kind of deal there is on offer for the company. Sometimes you see administrations being turned around extremely quickly if there is a buyer who's standing by to take over the whole of the company. That does happen sometimes, in a matter of days.
However, if there isn't already someone standing by then it can take quite some time, both for the administrator to work out what's going to happen to the company going forwards, but also to liaise with the creditors to make sure that the people who need to be paid can be paid - and that includes creditors as well as employees.
It can take days, but sometimes it can can months or years. It really depends upon the company in question and how valuable an attraction it is for the market.
Q: What sort of rights do employees have in terms of unpaid wages or benefits?
There are certain legal minimum amounts that the employees will be entitled to, but that depends on their exact employment status, how long they've been with the company and factors like that.
There are certain legal minimum amounts that the employees will be entitled to, but that depends on their exact employment status, how long they've been with the company and factors like that.
But those minimum amounts are protected by law, in that if the company isn't able to pay them then the employees will have a limited right to effectively seek those amounts from the government.
Q: What happens if a partner or supplier enters administration?
If a partner or supplier of your business faces financial difficulties or even insolvency proceedings (of which administration is one type), it's vital that you consider your legal position regarding them as soon as possible. This will usually focus upon the contracts and documentation in place as well as your trading relationship with them. In particular, well-drafted contracts will contain provisions setting out the procedure to be followed if one party is likely to or actually enters insolvency proceedings.
You should also consider carefully the asset position - ie what stock or monies of yours do they hold (or vice versa), what impact could this have on your business and what do you do about it? These can raise complex legal matters, so you would be well recommended to seek legal advice as soon as possible in order to protect your position.
You can read more about insolvency (for companies) and bankruptcy (for individuals) in the UK at http://www.bis.gov.uk/insolvency.
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Posted on 10.1.12
On piracy
About this time last week I wrote the second of my monthly columns on Edge, this time about defending the rights of developers to take legal action against pirates of their games. You can read it here. The genesis of the post was me reading about CD Projekt, developer of The Witcher 1 and 2, deciding to take legal action against pirates of its games, as well as some recent appalling statistics published by Torrentfreak about piracy of PC and console games in 2011. This made me decide to write about two things: (1) my views that the arguments opposing legal action vs pirates aren't actually that good; and (2) that I feel really sympathetic for developers like CD Projekt and Crytek, whose bottom line has been savaged by piracy. Anyway, so I wrote the column. Then the Internet got a bit excited for a day or so.
The Escapist wrote a nice piece here; Kotaku wrote a pretty negative piece here. My friend Will Luton of development studio Mobile Pie wrote his rejoinder to me here. And there was a lively discussion on Twitter, some useful extracts from which I thought I'd set out at the end of this post (see below).
Clearly everyone has different views about piracy and how to reduce it: the purpose of my Edge column was to point out that legal action is one, valid route, and that the arguments against using it don't really stack up in my view (although equally the way it's been deployed to date haven't been great either). On the other hand, as I've said time and again on this blog, generally legal recourse is one important option open to games businesses BUT it can't build a good business for you - only you can do that. That's why technological solutions and innovations in business models should be the real focus, supplemented by the law when necessary.
Anyway, enough from me. Read what others said (for those of who you were engaged in these Twitter discussions, thanks and I know the below only has a fraction of what we talked about - but hopefully it's some of the helpful bits for other people):
Posted on 9.1.12
Gamer/Law's ten 2012 predictions
You’ve guessed it: I thought I’d jump into the it’s-a-new-year-let’s-make-some-predictions business for 2012. And, like all forward-looking predictions, I’ve mixed a few safe bets with some slightly more “punchy” predictions (which FYI is lawyer-speak for taking a massive bet on something!) Here goes, in no particular order:
(1) At least one celebrity will win substantial damages against a publisher
Consider the field. Back in 2008/2009 a whole bunch of US football players won about $28m in damages from EA over their unauthorised appearance in John Madden football games (reduced on appeal) and there’s still other celebrities either considering or taking legal action over their appearance in sports games – including an ongoing class action lawsuit brought by former college atheletes. Axl Rose is suing Activision over Slash’s appearance in Guitar Hero. No Doubt are also suing Activision over their appearance in Guitar Hero. A Cypress Hill rapper sued Take Two over his alleged unauthorised appearance in a Grand Theft auto game. Lady GaGa sued Mind Candy over their release of a song by Moshi Monsters character Lady GooGoo.
The games industry is realising the power of brands, especially celebrity brands. Celebrities are realising the power of games as a revenue generator and promotional tool. Sooner or later, this is going to lead to a big problem. The examples above are largely near misses or still-brewing problems: I think one of them, or another like them, is going to lead to a serious collision in 2012.
(2) The Infinity Ward lawsuit will go to trial and be ENORMOUS.
Read this interview with me here for details. The trial will likely take place sometime around mid-late 2012 I’d guess – assuming it doesn’t settle first. My totally speculative bet is that, given the amounts and issues at stake, it really should settle – but it won’t, because of the personalities and personal comments that have become involved. Then again, as I’ve said many times before, lawsuits are a real rollercoaster so who knows what will happen...
(3) The legality and ethics of free to play will be a big issue in 2011.
I’ve been influenced by my friend Nicholas Lovell of Gamesbrief on this issue – read his post here. I’m going to be speaking and writing about this a fair deal more in 2012, so watch this space. In the meantime though, the short version is: the more that f2p focuses on influence/compulsion mechanics to get player to cough up dosh, the greater the legal and ethical risks it can raise – including the potential for regulators to start getting involved. Stories like a UK child running up £900 in debt on Farmville for his mum or a US child running up $1400 on Smurfville don’t really help.
(4) There will be more class action lawsuits...and no one will care.
There have been lots of class action lawsuits over the last 2 years or so in the games industry. There was the Madden lawsuit I mentioned earlier (and there’s other class action lawsuits over Madden ongoing atm too). There was the Other OS class action lawsuit (since dismissed in Sony’s favour). There has since been another class action lawsuit against Sony following the fallout from the PSN outage this year. There were class action lawsuit over Facebook and Zynga over privacy issues. And so forth.
This is what they all had in common: no one really cared, apart from the defendants of the lawsuits. This is a shame: whether you agree with these class action lawsuits or not, they’ve clearly had an impact on a wide number of players in the games industry and it’s a pity there hasn’t been more attention drawn to them (both to those lawsuits which raise legitimate grievances as well as to those which are just money-grabbing). So, I wanted to use this prediction to both show that there will be more such lawsuits in the industry in 2012 – and that most people will ignore them.
(5) Data privacy will continue quietly to become one of the biggest issues in the games industry...and again no-one will care.
People are really motivated by data privacy protection. We’ve seen that with the problems encountered by the search engines and social networks regarding their use of data harvested from their users – Facebook above all. The modern games industry, especially mobile and social games, is built on constant data collection. With a few honourable exceptions, the majority of the games industry doesn’t care a great deal about protecting that data. This is going to be a problem.
In fact, it’s already a problem, but it’s going largely undetected in public so far. Behind the scenes, savvy games developers and publishers will be looking at how they use and protect user data in 2012, but the majority won’t. At some point, this is going to blow up – possibly worse than it did for the search engines/social networks.
(6) Virtual goods will creep towards full legal status, but won’t get it (yet).
In 2011, a man was successfully criminally prosecuted in the UK for effectively stealing virtual goods. This involved recognising that virtual goods are property (I called it at the time the “first virtual goods crime”). Similarly, in a lawsuit in Holland a court was invited to accept that virtual goods are property and therefore capable of being owned by players.
As this blog has argued previously (see here and here for example), there is a real issue over whether virtual goods should be considered goods (i.e. property) or just services: Gamer/Law’s views are that they are at least capable of being property, which would have huge implications for how virtual goods are treated in games at the moment. The examples given above are good indications that this question is slowly being answered: I expect to see more of this in 2012, but we’re still some distance from any kind of authoritative answer.
(7) Multiple developers (possibly even publishers) will go into insolvency – leading to a renewed focus on insolvency law.
There was a lot going on in the developer world in 2011. Several developers told me they expected life to be hard in 2012 and that some of their competitors would not make it. I agree, sadly. Hard economic times, aa lack of games funding, developers focusing on the wrong kinds of games and the sheer amount of competition all mean that times are going to get tougher for developers next year. Publishers aren’t immune either: there are several mid-level publishers who are already in trouble.
As a result, my rather sombre and sad prediction is that we’ll see more insolvencies and layoffs from developers and possibly even publishers in 2012. As a result, there will be renewed interest in legal matters arising from a company going under, not paying its employee or its debts and what happens to its valuable assets (like its IP). On the plus side, I’d also expect to see a number of new studios arising out of their ashes, as has happened over the past couple of years.
(8) Indies will both cooperate and fight more with each other.
The market pressures I outlined above will also weigh heavily on developers who have the stamina to keep trading. As a result, I’m already seeing a whole range of different moves by indies to collaborate more with each other, from networking events to formal joint ventures. Equally, I’m beginning to see a rise in developers having legal fights with each other, either because the collaboration didn’t work out or because of freestanding issues like IP infringement. Expect more in 2012 – possibly even some high profile lawsuits between the new generation of successful developers.
(9) Games industry unionisation won’t happen...again.
Remember all that furore over the working conditions at Team Bondi and the various recriminations over it? There was various talk about whether developers should have a representative body to defend them in these situations – effectively, a union. Well, nothing happened. Nor has anything happened really with previous problems of this kind – check out for example this BBC article back in 2006.
So why is this worth a prediction? Because actually I think there’s something to be said for a representative body of that kind – whether it be an actual union or different national bodies (like TIGA or UKIE in the UK) taking on some of those responsibilities. Excessive crunch and other unsatisfactory working practices clearly do go on in the games industry, and a body with collective bargaining powers would be useful in bringing them to an end. But, for various reasons, nothing has happened so far in the games industry despite it being fundamentally similar to the film or music industries (both of which ofc are heavily unionised). Answers on a postcard why that’s the case and whether/when that might change...
(10) The high point of pro-film/music film IP laws will pass...but the games industry won’t be involved.
It’s fair to say that the majority of changes to IP law over the last decade have been far more influenced by the music and film industries than any of the other creative industries – including the games industry. This is ofc despite the sharp rise in the games industry’s size and profile relative to music and film over the last few years. This is a shame: the games industry has just as much to gain from a well-crafted set of IP laws worldwide as music and film do. But it just hasn’t got its act together.
In the meantime, I’m predicting that history will show (heh, what a pretentious phrase) that 2011 was the high point of pro-music/film IP laws (by which I mean IP laws which focus more upon protecting the interests of large IP rights holders rather than consumers or small IP rights holders) and 2012 was the beginning of a move towards a more balanced approach. For example, in the UK 2012 will mark the quiet shelfing of large portions of the aims of the Digital Economy Act 2010 and (hopefully) its replacement with a more sensible evidence-led approach (see my friend Jonny Mayner’s summary of the latest proposals following the UK Hargreaves Review here). In the USA, I’m (maybe rather boldly) predicting that the likes of SOPA will either be watered down or lawmakers will finally become aware that the majority of consumers don’t actually want laws like them. It’s just a shame the games industry had nothing to do with these changes.
So those are my ten predictions for 2012. Let’s see how right, or terribly wrong, I will be this time next year...
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Posted on 2.1.12
What does UK IP reform mean for the games industry?
This is a guest post by my friend and fellow lawyer, Jonny Mayner. IP law is pretty important to the games industry, since it governs the stuff that games are (legally) made of. Being a clever IP expert as he is, I thought I'd ask him to explain what the UK government is doing to update IP law...
Earlier this year the UK Government tasked a chap called Professor Ian Hargreaves with the unenviable job of reviewing the state of Intellectual Property law in the UK. The key question posed by the Government was "Could it be true that laws designed more than three centuries ago with the express purpose of creating economic incentives for innovation by protecting creators’ rights are today obstructing innovation and economic growth?".
Professor Hargreaves' answer ran to around 100 pages plus annexes, glossaries and extensive footnotes, but as he helpfully stated in his foreword "The short answer is: yes." [Jas: plus you can add to that the various shouting going on around the music, film and tech industries about whether IP law is fit for purpose anymore- like Larry Page's alleged claims to UK Prime Minister David Cameron that Google couldn't have been made in the UK due to its antiquated IP laws]
So what to do? Well, helpfully Professor Hargreaves made some recommendations on that front and in recent months the government, mostly through the agency of the Intellectual Property Office (IPO), has issued various consultations and reports on proposals for reform.
Read on for a summary of the current state of play and what they might mean for the games industry:
Copyright:
(1) Establishing a licencing and clearance system for orphan works – so that old IP can be put to further commercial and non-commercial use (orphaned works are copyright works where you can't work out who the owner is after a "dilligent search").
How useful is this going to be for games? We really don't know, but it seems less likely to be useful for games than it will for e.g. music or film. The reason for this is that, when it comes to an IP which could be turned into a game (eg a great classic book or a film) we'd guess you'll usually be able to work out who the owner is - so no issue of orphaned works arises. Plus, it's important to distinguish orphan works from abandonware: just because a title is no longer being commercially exploited (i.e. abandoned) by its copyright owner does not mean that it has been orphaned.
That said, maybe we're wrong. If any of you devs have wanted to make a game from an existing IP but couldn't find the owner, email us!
(2) Creating a private copying exception in copyright law – so you can e.g. carry on burning your CDs to iTunes without fear of being sued for it. Given that games tend to be platform-specific, allowing for format shifting of this type is not likely to impact the games world too much. That said, depending on how broadly the reform is drafted it may provide consumers with wider rights to copy their games than before. With that in mind it may be important for the games industry to make its voice heard in the consultation period lest the new law bring any nasty surprises.
(3) Creating a parody exception in copyright law – so that po-faced rights owners who can’t see the joke can’t sue under copyright law (at the moment, if you create a parody of a copyright work, you can be sued for copyright infringement even though you're trying to make a point for parody value, not actually copy/make money from the original). That always seemed like a silly state of legal affairs, but this reform should sort it out.
This reform will be good news for comedians, but I'm not sure if it will have much impact on the games industry- mainly because games don't really involve much parody. Still, it's worth knowing if you did decide go incorporate parody into your game that- eventually- it'll be legally ok in principle (though, as always, there'll probably be legal complications, eg you might intend a parody by making Chronic the World's Slowest Hedgehog, but if you sell it for money you may still get caught out by trade mark law…)
(4) Preventing the use of contracts to overcome exceptions to copyright law – so that a publisher can’t restrict users' statutory rights (including any new private copying right) by imposing restrictions in an EULA. This has the potential to introduce several changes to the drafting of EULAs, so watch this space...
Patents:
(1) Examining patent thickets as a possible barrier to market entry for small and medium sized businesses - a patent thicket is described in the IPO's preliminary report on the issue as "a dense web of overlapping intellectual property rights that a company must hack its way through in order to actually commercialize new technology". The report is sparse on specific proposals for reform and it raises more questions than it answers, but the fact that the government is looking at this at all may be of interest to games industry stakeholders of all sizes.
General: an evidence-based approach to future IP reform
One of the most important changes proposed by the Hargreaves review was a move to an evidenced-based approach to IP reform. On other words, we should only change IP law in response to issues that have been factually demonstrated to be real issues. Issues which people claim are issues, but which they can't factually prove to be issues, don't deserve legal change. Consider what that would mean for various changes to IP law to combat issues like content piracy in the past (answer: many of them would I suspect not become law, because demonstrating the financial impact of piracy and why it needs a LEGAL solution is infamously hard).
Professor Hargreaves clearly hoped the government would take this on board and therefore be cautious when it comes to future IP law change - here's hoping...
Next steps:
So what next? Well, the Government's consultation on copyright reform is open for responses until March 2012, so the games industry has until then to make its views known. On the patents front the IPO's report also moots the possibility of a consultation to gauge industry appetite for reform or views on any specific proposals.
What ISN'T being discussed:
The list is as long as your arm, but examples include:
- No general fair use defence to IP infringement
- No discussion of whether the current copyright term (generally 70 years after author's death)
- No proposals regarding cutting edge IP issues like legal treatment of user generated content or virtual goods
- No proposals to deal with patent trolls
- No proposed clarification regarding complicated issues like when a piece of content (eg a game)is a cloned from or 'inspired by' an original
Some of these matters aren't being dealt with because the UK government can't do it without accompanying EU legal change; others because the government just doesn't consider them sufficiently important yet. Some are more for courts than the government because they require interpretation of existing law, not new law. Unfortunately, these are some of the most important issues as far as the games industry is concerned.
As a result, our conclusion regarding the impact of the UK government's legal proposals on the games industry is: not that much, really. Which is a shame (although, given the games industry had by far the least involvement in IP reform compared to the other creative industries, that's maybe not a surprise).
Anyway, we're still at the consultation stage regarding these reforms, and there will be a lot more reform required over the next few years one way or the other. As always, watch this space for any developments that will affect the games world...
Earlier this year the UK Government tasked a chap called Professor Ian Hargreaves with the unenviable job of reviewing the state of Intellectual Property law in the UK. The key question posed by the Government was "Could it be true that laws designed more than three centuries ago with the express purpose of creating economic incentives for innovation by protecting creators’ rights are today obstructing innovation and economic growth?".
Professor Hargreaves' answer ran to around 100 pages plus annexes, glossaries and extensive footnotes, but as he helpfully stated in his foreword "The short answer is: yes." [Jas: plus you can add to that the various shouting going on around the music, film and tech industries about whether IP law is fit for purpose anymore- like Larry Page's alleged claims to UK Prime Minister David Cameron that Google couldn't have been made in the UK due to its antiquated IP laws]
So what to do? Well, helpfully Professor Hargreaves made some recommendations on that front and in recent months the government, mostly through the agency of the Intellectual Property Office (IPO), has issued various consultations and reports on proposals for reform.
Read on for a summary of the current state of play and what they might mean for the games industry:
Copyright:
(1) Establishing a licencing and clearance system for orphan works – so that old IP can be put to further commercial and non-commercial use (orphaned works are copyright works where you can't work out who the owner is after a "dilligent search").
How useful is this going to be for games? We really don't know, but it seems less likely to be useful for games than it will for e.g. music or film. The reason for this is that, when it comes to an IP which could be turned into a game (eg a great classic book or a film) we'd guess you'll usually be able to work out who the owner is - so no issue of orphaned works arises. Plus, it's important to distinguish orphan works from abandonware: just because a title is no longer being commercially exploited (i.e. abandoned) by its copyright owner does not mean that it has been orphaned.
That said, maybe we're wrong. If any of you devs have wanted to make a game from an existing IP but couldn't find the owner, email us!
(2) Creating a private copying exception in copyright law – so you can e.g. carry on burning your CDs to iTunes without fear of being sued for it. Given that games tend to be platform-specific, allowing for format shifting of this type is not likely to impact the games world too much. That said, depending on how broadly the reform is drafted it may provide consumers with wider rights to copy their games than before. With that in mind it may be important for the games industry to make its voice heard in the consultation period lest the new law bring any nasty surprises.
(3) Creating a parody exception in copyright law – so that po-faced rights owners who can’t see the joke can’t sue under copyright law (at the moment, if you create a parody of a copyright work, you can be sued for copyright infringement even though you're trying to make a point for parody value, not actually copy/make money from the original). That always seemed like a silly state of legal affairs, but this reform should sort it out.
This reform will be good news for comedians, but I'm not sure if it will have much impact on the games industry- mainly because games don't really involve much parody. Still, it's worth knowing if you did decide go incorporate parody into your game that- eventually- it'll be legally ok in principle (though, as always, there'll probably be legal complications, eg you might intend a parody by making Chronic the World's Slowest Hedgehog, but if you sell it for money you may still get caught out by trade mark law…)
(4) Preventing the use of contracts to overcome exceptions to copyright law – so that a publisher can’t restrict users' statutory rights (including any new private copying right) by imposing restrictions in an EULA. This has the potential to introduce several changes to the drafting of EULAs, so watch this space...
Patents:
(1) Examining patent thickets as a possible barrier to market entry for small and medium sized businesses - a patent thicket is described in the IPO's preliminary report on the issue as "a dense web of overlapping intellectual property rights that a company must hack its way through in order to actually commercialize new technology". The report is sparse on specific proposals for reform and it raises more questions than it answers, but the fact that the government is looking at this at all may be of interest to games industry stakeholders of all sizes.
General: an evidence-based approach to future IP reform
One of the most important changes proposed by the Hargreaves review was a move to an evidenced-based approach to IP reform. On other words, we should only change IP law in response to issues that have been factually demonstrated to be real issues. Issues which people claim are issues, but which they can't factually prove to be issues, don't deserve legal change. Consider what that would mean for various changes to IP law to combat issues like content piracy in the past (answer: many of them would I suspect not become law, because demonstrating the financial impact of piracy and why it needs a LEGAL solution is infamously hard).
Professor Hargreaves clearly hoped the government would take this on board and therefore be cautious when it comes to future IP law change - here's hoping...
Next steps:
So what next? Well, the Government's consultation on copyright reform is open for responses until March 2012, so the games industry has until then to make its views known. On the patents front the IPO's report also moots the possibility of a consultation to gauge industry appetite for reform or views on any specific proposals.
What ISN'T being discussed:
The list is as long as your arm, but examples include:
- No general fair use defence to IP infringement
- No discussion of whether the current copyright term (generally 70 years after author's death)
- No proposals regarding cutting edge IP issues like legal treatment of user generated content or virtual goods
- No proposals to deal with patent trolls
- No proposed clarification regarding complicated issues like when a piece of content (eg a game)is a cloned from or 'inspired by' an original
Some of these matters aren't being dealt with because the UK government can't do it without accompanying EU legal change; others because the government just doesn't consider them sufficiently important yet. Some are more for courts than the government because they require interpretation of existing law, not new law. Unfortunately, these are some of the most important issues as far as the games industry is concerned.
As a result, our conclusion regarding the impact of the UK government's legal proposals on the games industry is: not that much, really. Which is a shame (although, given the games industry had by far the least involvement in IP reform compared to the other creative industries, that's maybe not a surprise).
Anyway, we're still at the consultation stage regarding these reforms, and there will be a lot more reform required over the next few years one way or the other. As always, watch this space for any developments that will affect the games world...
Posted on 31.12.11
The Internet v CD Projekt: a Legal Perspective
This is guest post by John Wrigley, a gamer and law student
As a law student and as an enthusiastic gamer, I can't help but have noticed the recent controversy surrounding CD Projekt. In case you haven't been following it, the story goes something like this: CD Projekt release The Witcher 2 without any DRM. Some people, as some people inevitably do, pirated it. Now CD Projekt are sending letters to people that they believe have pirated the game demanding a sum somewhere in the region of €750, with the backup threat of a legal suit if the person does not pay up. Many people are quite upset about this, including Mr John Walker at Rock Paper Shotgun, whose recent words on the subject you can find here and here. This post attempts to offer an insight into the legal position behind the events. What this article isn't about is creating solutions or settling the debate, its purpose is solely to try and raise awareness of the legal doings and beings and to maybe try to challenge some of the common misunterstandings about the way the law works.
The First Argument: CD Projekt are threatening the innocent
By far the most emotive argument that is often proffered is that CD Projekt are blackmailing people by saying “Pay up... OR ELSE!” and thereby are removing access to justice and denying due process and so forth. Sadly, from a legal perspective, the case seems to be slightly different. Granted, for CD Projekt to call this a “fine” (as they did in the posts linked above) is perhaps unwise. But the principle of what they are doing (and until we see an actual copy of their letters, we can argue over nothing else) is perfectly sound, at least within a legal perspective. One obvious problem is if people are intimidated by these letters, and that is obviously something to avoid, but again, without seeing any of the actual letters that have been sent, it seems far too soon to actually make any comments about it. What we do know about these letters is that what they are offering is an out of court settlement, something which is not only allowed but encouraged by the courts. When a case is open and shut (i.e. Person A says that Person B has done something and Person B admits to it) then there is absolutely no reason to go to court, no reason to waste time and money on lawyers, judges, buildings and so on and so forth. It is trite law that it is cheaper to settle out of court than to go into court and lose, especially since judges can (and almost always do) order the loser of a case to pay the costs of the winner. So if you haven't downloaded The Witcher 2 illegally and CD Projekt cannot prove that you have then actually the entire process won't cost you a single penny. You will only HAVE to pay if you are found guilty - if you are not guilty, it won't cost you anything to refuse to pay the initial settlement and if you are guilty, it'll be a heck of a lot cheaper if you do.
Of course, one problem with this is that people may wonder how they can convince a judge that they are not guilty. It should first be noted that if CD Projekt do take you to court, they have to prove that you downloaded the game, the only thing that you will ever have to try and prove is that their proof is wrong. This could actually be easier than anticipated, as IP tracing is far from a reliable source of evidence. It is entirely possible that someone has spoofed your IP or someone has downloaded using your insecure internet connection or someone in your household has used your internet connection to download it without your knowledge or consent. This last reason seems the least persuasive - by giving someone unrestricted access to your internet connection you accept liability for their actions - legally speaking there is no other workable system. It's the same with any service which you sign up for and which you give other people use of, at least from a civil perspective. The IP spoofing is much harder to get around and also much harder to prove and does provide a legitimate reason for concern.
The easy argument is that civil cases only require proof “on the balance of probabilities” (i.e. is it more likely than not that the accused did the thing he/she is accused of?) and if you think that this is wrong then we should be having a jurisprudential argument (the theory of law) rather than one about CD Projekt's practices. But that one is only convincing to a certain point and it certainly does us no help. Sadly, the evidential argument is out of the scope of this particular post and so I'm not going to try and offer any form of conclusive point about it. I will, however, say that I personally consider that the claims of thuggery and bullying are probably unfair (although of course this depends on the actual contents of the letters being sent), I would be loathe to accept the concept of a court accepting a simple IP trace from a torrent site as being conclusive. These cases will depend entirely on the facts that can be proved, particularly in relation to what method of proof CD Projekt actually have and it will certainly be interesting to see how they play out in court.
The Second Argument: The sum asked for is too high
Other comments being made are the fact that the money being asked for is considerably higher than the actual price of the game. This argument has been met in many different ways, all of which seem unconvincing. For the pros, people are saying “Well, it's something to dissuade people from pirating!” An argument can be made that this is outside the scope of what CD Projekt are entitled to do with their civil settlements. This argument has merit, but it IS within the scope of the court to issue compensation with this in mind and there is nothing against CD Projekt offering a settlement within that range. If the person being challenged thinks that a court will give a lower level of compensation, they are more than welcome to chase it all the way through the legal system.
Another argument is that the pirates should just have to pay the retail price of the game. This clearly doesn't make any sense because then you are punishing CD Projekt for demanding that they obtain a benefit for their burden - lawyers cost money, ya know. A more reasonable argument is that CD Projekt should ask for legal fees plus the cost of the game plus any reasonable damages that are due for the effort and whatnot that chasing them down costed. And actually, that's a brilliant solution. That is what they should be doing - that's the point of a settlement, after all. “This is the minimum amount of money that we KNOW we will get. Pay it and we won't bother trying to press for more - especially since we will probably get more.” Win win. Remember kids, compromising is fun!
The Third Argument: Piracy is not a lost sale
The third argument, and the most uncertain, is that a pirated copy does not equal to a sale lost. This is a huge topic and I don't want to do it injustice, so this discussion is simply a brief overview of the legal implications of this argument. On the face of it, it is true that piracy is a lost sale. There is absolutely no evidence to suggest that someone who has pirated a game would have actually bought the game. Indeed, I would be willing to suggest that actually, many people who pirate the game would not actually have bought the game - for whatever reason they have. This is where the law of equity (a particular branch of the law which deals with moral rights and prevents people from doing anything which might affect their conscience) steps in, which (in this particular instance) says that if the gain something for which you should have given something, you aren't allowed to argue that you shouldn't have to give what you owe. In other words, because you get to play their game, it's unfair that you refuse to pay for it. Obviously this is an extremely controversial topic, but it would seem hard to defend against this concept. Even if we argue that the equitable rule doesn't apply, the underlying principle that people should not be able to obtain someone else's intellectual property (indeed something that somebody has spent time, money and effort constructing) without giving something back is one which is hard to support.
One counter to this is the idea that piracy can actually lead to a sale. This situation is less clear cut - although you gain from playing the game, you do actually pay for it and so there is no equitable dillema. Maybe an answer to this is that if you can prove that you bought the game within some reasonable window (and you can prove it) then CD Projekt should be as happy to drop the case as they they are (or as happy as they claim they are) if you bought the game and then downloaded an alternative copy. Looking forward, maybe we should consider the return of the demo in some form or other. Ultimately, it's hard to find a good solution, and to attempt to do so would be out of the scope of this article, but it certainly seems reasonable for gamers to want a sample of a game before they sink money into it, especially as promotional material can only tell you so much.
Conclusion
This article is not a conclusive argument either for or against CD Projekt, but hopefully it offers a breakdown and analysis of the main arguments being offered and the responses to them, at least from a legal perspective. Regardless of if you think that this is a bad policy, please, Internet, please stop simply saying that CD Projekt are robbing people of due justice and perverting the course of legality. There is a legitimate case for CD Projekt to be claiming against these people, at least within our current legal system. People who pirate a game are obtaining somebody else's intellectual property without compensating them from it and the law says that this is wrong. A better place to argue would be if you think that, in a civil case, a person should have to prove something beyond all reasonable doubt, as they do in a criminal case, or if we should reform the way in which people are allowed to make or accept out of court settlements. Alternatively, there's a good discussion about if what Projekt CD are doing is good from a PR point of view or if they are doing the most constructive thing possible to combat piracy in the long run. There are lots of discussions that can be had surrounding this case, I just wonder if the one currently so predominent is slightly missing the point.
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Posted on 29.12.11
Happy Holidays from Gamer/Law
What you might expect a lawyer to say at Christmas:
Please accept with no obligation, implied or implicit, our best wishes for an environmentally conscious, socially responsible, non-addictive, gender-neutral celebration of the winter solstice holiday, practiced within the traditions of the religious persuasion of your choice, or secular practices of your choice (with respect for the religious/secular persuasions and/or traditions of others, or their choice not to practice religious or secular traditions at all). Furthermore, we offer our (non-binding) best wishes for the onset of the generally accepted calendar year of 2012 but not without due respect for the calendars of choice of other cultures whose contributions have helped create a diverse global community (which is not to imply that any local community, or combination of local communities are any less valuable than any other community or the global community). These wishes are offered without regard to race, creed, colour, age, physical ability, choice of computer platform or sexual preference of the wishes. Happy (if happiness is within your belief systems) Holidays (if you recognise them).
:) Instead I'll just say have a merry Christmas! There'll still be a post or two from Gamer/Law before the end of the year though, including Gamer/Law's ten games law predictions for 2012, so watch this space...
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Posted on 24.12.11
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