Need to Know: Games and the Digital Economy Bill

The UK Digital Economy Bill has real implications for all UK creative industries, including games, meaning gamers and the UK games industry should be paying attention to the Bill’s progress through Parliament.  This post summarises what the Bill is and why it matters.

What is the Digital Economy Bill?
The Digital Britain Bill (“DEB” for short) is essentially the UK Government’s attempt to bring UK technology/IP law up to speed with the challenges of modern technology, particularly online piracy.  The Government’s Explanatory Notes give further helpful background here.
DEB actually covers a whole range of reforms, from IP to digital infrastructure to digital radio switchover.  But the aspects of DEB which are most relevant to games, and which also happen to be the most controversial generally, are these:
  • A new online copyright infringement regime (known popularly as Three Strikes, but it’s not really – see below) and
  • Proposed new Government powers to amend copyright laws without Parliament’s prior approval
DEB also proposes a new games classification system – more on that here.
New copyright infringement regime
The old deal…

Under the existing law right now, if a dev/publisher (i.e. the rights holder(s) for a game) wants to take legal action against a illegal downloader of that game (call him/her ‘X’), very basically the dev/publisher needs to:
  • Identify how and where the illegal downloading took place;
  • Find out the IP address of X;
  • Get a Court order forcing the relevant ISP to disclose the account details for that IP address, so that it can work out who X actually is; and
  • Commence legal action against X and prove to a judge that s/he did the illegal downloading and therefore infringed its copyright.
This can be expensive, difficult and lengthy because: (i) ISPs have historically refused to help rights holders to sue their own customers (hence the need for a court order); and (ii) actually finding the illegal download requires the rights holder to expend IT resources.  (It is mainly for this reason that the music industry in particular has tried to use these kinds of lawsuits to make examples of high profile pirates, rather than trying to sue everyone who downloads copyright materials illegally).
The new deal…

DEB now proposes a new legal regime which would go something like this:
  • When a rights holder (i.e. the games dev/publisher) believes that an ISP customer has infringed copyright (e.g. by downloading a pirated game), the rights holder can send a “copyright infringement report” to the suspected pirate’s ISP.
  • The ISP will then send a notification letter to the account holder and must add that account to a register of customers who are believed to have infringed copyright.
  • The Government would then be able to require ISPs to take “technical measures” against the suspected pirate.  This seems likely to include wide reaching action like broadband throttling or ultimately even account suspension (though the Government doesn’t intend to specify exactly what “technical measures” means or how they will actually work until after DEB has become law).
This proposed new regime is meant to be easier and cheaper because: (i) rights holders and ISPs work together; and (ii) a lot more action can be taken against pirates, potentially even suspending their net access altogether.  However, there is no suggestion that the Government is proposing a ‘three warnings and then we cut you off’ scheme.  So DEB does not = Three Strikes; it’s more complicated/nuanced/vague than that.

Anyway, the proposed new regime has caused a great deal of controversy in both mainstream media and teh internets, to say the least…(that much is clear from a quick Google of “Digital Economy Bill” if nothing else).  Here’s why…

Practical issues
  • How exactly would the new ‘technical measures’/three strikes regime work?
  • How will rights holders actually find pirates?  If it is through technology like deep packet inspection, that will itself cause a lot of controversy (remember BT and Phorm?)
  • Who will pay for all of this?  The rights holder or the ISP, or both?  What about the legal costs if cases are taken to court?
  • Even if you can get the address of the account from which the piracy took place, how do you prove on the evidence who the person in front of the pc actually was? (Remember the complaints against Davenport Lyons?)
  • What rights of compensation (if any) will customers have, particularly if technical measures are taken against them wrongly?
  • What impact will this have on rights holder/ISP/customer relations in the long term?
  • How will the ‘technical measures’, like broadband throttling, actually work?  Who will be accountable for their use?
Humans Rights issues/The right to a fair hearing?
How is the customers’ side of the story to be heard when ‘technical measures’ are taken against him/her?  The right to a fair hearing is a fundamental human right and is given legal force in the UK by the Human Rights Act 1998 and European Convention on Human Rights, but – so far – DEB has little to say about this.  This report from Parliament’s Joint Select Committee on Human Rights explains the issue succinctly:
We do not believe that such a skeletal approach to powers which engage human rights is appropriate. There is potential for these powers to be applied in a disproportionate manner which could lead to a breach of internet users’ rights to respect for correspondence and freedom of expression. We set out a list of points that the Government should clarify in order to reduce the risk that these proposals could operate in a manner which may be incompatible with the [European Convention on Human Rights…
And:
There is little detail about the right to appeal in the case of copyright infringement reports or decisions about the inclusion of certain individuals’ information on copyright infringement lists. We consider that statutory provision for a right to appeal to an independent body against inclusion on any infringement list would be a human rights enhancing measure.”
In fairness, we should point out that attempts have been made to address these issues so far; it is not at all as if DEB has sailed through Parliament so far.  For example, Lord Lucas in the House of Lords has been active in trying to reform DEB generally, and particularly regarding this new ‘technical measures’ regime (more here).

UPDATE:

In a nutshell, not a great deal has happened to address these concerns.  DEB provides that a consumer has a right to appeal to court if “technical measures” are made against him, but there is a great amount of detail about how this is meant to actually work that just isn’t clear yet.

Changes to copyright law
DEB also proposes to give the Government the power to amend copyright law through a shortcut procedure that bypasses Parliamentary scrutiny (this proposal is known popularly as ‘clause 17’).  The Government’s reasoning seems to be that it needs to be able to act fast in order to meet the increasing technological challenges to copyright protection. Example off the top of my head: the Government changes the law to make it easier to sue and heavily punish people who attempt to circumvent DRM protection.
This proposal has also come under heavy fire, so much so that the Government has had to back down and water down its original proposals.  Even so, it is not enough for some.  Again, the Joint Select Committee summarises the issue:
The broad nature of this power has been the subject of much criticism. In correspondence with us, the Secretary of State explained that the Government intended to introduce amendments to limit the power in Clause 17 and to introduce a ‘super-affirmative’ procedure. The Government amendments would limit the circumstances in which the Government could use their powers to amend the Act by secondary legislation and would provide a system for enhanced parliamentary scrutiny.”
Despite the proposed amendments we are concerned that Clause 17 remains overly broad and that parliamentary scrutiny may remain inadequate. We call for a series of clarifications to address these concerns.”

UPDATE:

Under heavy criticism, the Government appears now to have effectively shelved clause 17.  However, at around the same time, the Lib Dems proposed a new section which would give a court the power to take actio against web sites which host “substantial” amount of copyright-infringing material, potentially forcing the entire site offline.  Critics pointed out that this could mean sites such as YouTube being shut down.  Then, further controversy was caused when it emerged the amendment had in fact been drafted by the BPI.  You couldn’t make it up, eh?

The Current status of the Digital Economy Bill

UPDATE:

On 15 March 2010, the Bill passed the House of Lords and has now gone to the House of Commons.  In theory, a bill is first introduced to the Commons (the first reading, which is really a formality), then properly discussed for the first time in the second reading, then it goes to a committee/report stage for a fine tooth-comb analysis, before finally it has a third reading (essentially a closing debate).  Then, if the bill came from the House of Lords in the first place (which DEB did), it goes back to the Lords so they can review what the Commons have done for the bill, and then finally there is a vote.

BUT, there are several reports that the Government intends to ram DEB through before the general election, by having an extremely short second reading and dispensing with the committee/report stage altogether.  You can make up your mind as to whether having DEB brought into law before it has gone through the normal parliamentary process is a good or bad thing.  So far, the games industry and gamers seem pretty divided on the issue.

Of course, even if for some reason DEB doesn’t become law this term, then a new Labour or Conservative government would just have to deal with it after the general election.

Why is all this important for the UK games industry?

The games industry will be at the forefront of these developments. If the UK Government adopts via DEB a legal regime that permits technical action to be taken against the net access of suspected online pirates/copyright infringers, it would give the UK games industry a powerful weapon to deploy against games piracy/copyright infringement – which is of course often said to be the single greatest threat that the industry faces. So, in principle it would be possible to deploy ‘technical measures’ against individuals who repeatedly download and distribute illegal copies of games – which could for example prevent a repeat of Spore, said to be one of the most pirated games in history.
In fact, it may cover rather more than that – in principle, it may in the future be possible to take technical measures against all forms of online copyright infringement relating to a game, including individuals who distribute unauthorised game modifications (eg additional game levels or a total conversion mod) and/or who create user-generated content relating to games (eg unauthorised in-game footage posted on YouTube).
So the person who distributes a brilliant but unauthorised mod of a defunct but well-loved game, or the person who repeatedly posts unauthorised footage of upcoming or released games online, could potentially face technical measures against his/her internet access in the future. Obviously, the devil would be in the (legal) detail but, clearly, if this kind of action was possible it could transform the games industry.
BUT, and it’s a big but, time and again gamers have shown themselves to be hostile to what can be seen as attempts by the games industry to impose limitations on the way in which they can play and interact with games (as seen recently for example the continuing DRM saga).  The games industry would likely have to tread a fine line between relying on technical measures to protect their games but, at the same time, not alienating their customers or stifling the enjoyment and innovation derived from the creation and use of mods and other post-release user generated content.  It’s worth noting on that front that many games industry figures have already spoken out in favour of market-driven solutions to games piracy for example, rather than just relying on a legal regime.  But, one way or the other, in an industry which depends heavily on the loyalty and enthusiasm of its customers, this is likely to become an issue of great importance in the future. 
Ultimately, the question for the games industry may not be whether they can legally deploy these strategies to defend their games, but whether commercially they can risk it.
[image author: Andrew Dunn, obtained via Wikipedia]

Games developer fails in court claim over copying himself

You’d think the last thing a games developer should be worried about is copying his own work, right?  Wrong.  Last week, the High Court published its judgment of a claim brought by a games developer against his employer over a games concept which the developer had created when he was freelance but which later he copied and effectively pitched to his employer as a new company project.  The developer later sued for breach of copyright and confidence, in which we now know he was unsuccessful.  Read on for more details…

The story in a nutshell
The case went like this: a freelance developer created a games concept, later joined a games development company and copied his earlier work in order to prepare a highly similar games concept for the company, without telling anyone about the copying (so everyone else thought this was a brand new idea).  The development company took on the ‘new’ concept but ultimately it went nowhere and another company took over.  Subsequently, the developer sued for copyright infringement for the copying of his original concept.  The court held: no copyright infringement because no one had known the developer had already come up with the games concept when he was freelance so they had not ‘copied’ anything. The court also rejected a breach of confidence claim.

The case is one of the few recent times that a UK developer has been involved in a court battle.  In fact, several of the UK games establishment were name-checked: the case involved evidence from Adrian Smith (former boss of Core Design, developer of Tomb Raider, and who was also a defendant in the case) and Sir Ian Livingstone OBE (founder of Eidos plc, which gave the development company some advice regading the development of the games concept) and also involved UK developers CiRCLE Studios and Crush Digital Media (both of which subsequently went into administration – see here and here).

Need to know points

You can read a summary of the case below, but here are some upfront thoughts on the need to know/best practice points for developers which came out of this case:

  • When a freelance games developer joins a new employer, discussing his/her existing games concepts at the outset and how they will be treated going forward should help to avoid any confusion as to who owns the IP later on.
  • If a freelance developer creates a game concept before he joins a development company, DOESN’T tell the company about this and subsequently pitches the concept to them as a company idea then, if the game concept is taken forward, there is a risk that the developer may lose any IP rights he may have in the concept.
  • The judge said game concepts discussed by a game developer with his employer are unlikely to be confidential as between the two of them, so a developer could not generally prevent his employer from for example pitching the concept to publishers (unless there is some express agreement to the contrary).
  • Review carefully the provisions of your employment agreements which deal with ownership of IP rights, because they could be important if there is subsequently a dispute between the developer and the development company over who owns the IP rights in a game concept.
  • Pick your legal battles carefully.  Litigation is costly, lengthy and risky, as this case demonstrates.   A little advice early on from experienced litigation lawyers about your prospects of success and the legal cost/benefit analysis can save a lot of time, money and stress down the line.
So what happened?

In around 1998 a then-freelance developer, Stuart Burrows, developed the concept for a game which came to be known as “Tracktrix”, described in Court papers as follows: “Traktrix’s gameplay is very simple: get the ball from one side of an environment to another and enter the “Finish Area” within a time limit. The player achieves this by laying a track in front of the ball as it progresses“.  Burrows himself desribed it as “ ‘Marble Madness meets Tetris/Wetrix and a Scalectric track’ and ‘Super Monkey ball meets Tetris’ “.

Traktrix and Train Trax

Burrows later joined CiRCLE Studios as a senior games developer, but did not did not disclose to CiRCLE that he had already come up with the Tracktrix concept.  He copied parts of his original work on Tracktrix in order to pitch a CiRCLE projet which was similar to Tracktrix, again without explaining that he had come up with Tracktrix before joining CiRCLE.  CiRCLE then took the concept to publishers and, following the advice of Sir Ian Livingstone of Eidos, further developed it into a game concept known as “Train Trax”.

But ultimately no one was willing to pick up Train Trax.  CiRCLE later went into administration in 2007.  However, CiRCLE boss Adrian Smith and industry veteran Martin Carr formed another games development company, Crush Digital Media, which bought up some of the now-bust CiRCLE’s IP – including Train Trax.  Crush then hired Burrows to work on Train Trax further and tried again to get publishers interested in, again without success unfortunately.

It seems that Burrows later began to argue that CiRCLE and Crush had infringed his copyright in Traktrix, and had breached confidence, by seeking to develop and market Train Trax.   Lawyers were involved and the case went all the way to trial in 2009, despite Crush going the way of CiRCLE and entering administration in early 2009.

The High Court judgment

In a judgment published last week, Mr Justice Norris ruled that CiRCLE and its boss Adrian Smith had not copied Burrows’ copyright works in developing Train Trax because they had not known there was anything to copy.  As far as they knew, Burrows had invented the Traktrix concept (which became Train Trax) for the first time when he was a CiRCLE employee.  The judge found that Burrows had created Traktrix before he had joined CiRCLE, had then copied his own work to create a similar concept for the company and this then became Train Trax.  So it was Burrows himself, not anyone else, who had done the copying.  That was the end of the copyright claim.

As for the breach of confidence claim, the judge decided that a developer pitching a game idea to his employer ordinarily was not confidential as between the two of them.  He said: “Mr Burrows was employed as a senior games designer by Circle. It was his job to come up with ideas. If he came up with an idea and shared it with his employer he was doing what he was paid to do: the disclosure would not be in circumstances importing any duty of confidence owed by the employer to the employee.”

Thoughts

The judge was pretty clear the case should never have got to trial (he referred to “the regrettable fact that the action reached trial at all“).  That said, the legal issues in the case were fairly clear cut and he did not have difficulty in ruling in Smith and Crush’s favour.

Still, to my mind there were no real winners here.   Yes, the case established that effectively Crush still had the rights to Train Trax but no one wanted to buy it anyway, the game was never actually developed and Crush went into administration in early 2009 anyway.  As for Burrows, he was left emptyhanded and probably in fact received a substantial legal costs order against him (though it is always possible he may try to appeal).  Not a great result.

(Case name: Burrows v Smith & Another [2010] EWHC 22 (Ch))

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[Image credit: Mike Reeve http://en.wikipedia.org/wiki/File:Royal-courts-of-justice.jpg]

Bethesda vs Interplay: Bethesda appeals over Fallout litigation

The Fallout litigation continues with Bethesda reportedly going to the US Court of Appeal over its claim for a preliminary injunction to restrain Interplay using the Fallout IP, including developing ‘Project V13’,  Interplay’s rumoured Fallout MMO.  Bethesda’s original claim for a preliminary injunction was rejected in December 2009 (our summary of the dispute is here).
We have not yet seen any information regarding the grounds of the appeal, though no doubt they will emerge on the blogosphere in due course, at which point we will be able to have a closer look at the legal arguments.
In the meantime, Duck and Cover has released partial transcripts of Bethesda’s last attempt to secure the preliminary injunction – which do not appear to have been particularly successful.  The court’s formal judgment on the matter has not been released as far as we are aware, but from the transcripts of the actual arguments before the judge, it seems that Bethesda ran into difficulties with the judge over the exact reasons it sought a preliminary injunction.  The judge’s reasoning appeared to be that the purpose of a preliminary injunction is to prevent one party from doing something until the court has time to establish whether it is legally entitled to do that thing or not – but if Interplay is not actually working on its Fallout MMO project then logically there would be nothing to temporarily ban them from doing.  There were also issues regarding Bethesda’s claim of trademark infringement, which Interplay argued has no merit because there was never any breach of contract by Interplay and therefore it always owned the Fallout trademarks.
Now, some bloggers have derived from the above that Bethesda’s lawyers did not understand the purpose of preliminary injunctions.  That is of course possible, but also seems somewhat unfair.  A more likely explanation (assuming US preliminary injunctions are anything like their English counterparts, which seems very broadly right) is that they understand exactly what a preliminary injunction is for, understand that it could be an uphill struggle to win it at court, but they also understand that if they did win they could inflict serious damage on Interplay by effectively stopping them from doing anything with the Fallout IP for potentially quite a long time.  In fact, in some cases obtaining preliminary legal relief from the court can bring the other side to the negotiating table or even cause them to fold altogether (although obviously that doesn’t necessarily mean that Interplay would have done either).
So it may simply be that Bethesda gambled and lost the first time around.  Now, clearly, they would like another bite at the preliminary injunction cherry.  It will be interesting to see if they fare any better this time around…

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[Image source: Wikipedia]

Are modchips illegal?

[This article was first posted on Gamaustra here]

This article is about modchips: is their sale/use illegal or not?  We look at three recent cases in England, Spain and France – which show an interesting divergence of European opinion as to the legality of modchips: not every country thinks that modchips are a bad thing.  More below…

What is a modchip anyway? 
Wikipedia has a succinct definition:

A modchip (short for modification chip) is a small electronic device used to modify or disable built-in restrictions and limitations of many popular videogame consoles. It introduces various modifications to its host system’s function, including the circumvention of region coding, digital rights management, and copy protection (homebrew) software checks for the purpose of running software intended for other markets, copied game media, or unlicensed third-party.” 

Modchips exist for other devices (e.g. dvd players) but for today’s purposes we’re only talking about modchips which are used in games consoles and which are intended to circumvent games copy-protection: in other words, modchips which fool a console into thinking that the player owns an authentic, licenced copy of a game when it fact he/she does not.  An example of such a modchip is the wiikey, which (funnily enough) mods the Wii.

Why are modchips a problem?
Modchips are seen as a problem by the games industry because: (i) they are said to facilitate games piracy by allowing players to play unauthorised/pirated copies of games; and (ii) they enable a player to tamper with the innards of a games console.  The games industry periodically takes action to stamp out modchipping – for example, Microsoft banned a lot of Xbox Live accounts of owners of chipped consoles last year.
Of course, gamers may (and do) take a rather different approach.  Many argue: (i) it’s my console and I should be able to do what I want with it, including playing pirated games or modifying my console; and (ii) I didn’t ask console manufacturers to install arbitrary mechanisms for controlling what I can do with my console.  And so forth.

Still, the purpose of this post is not to debate the merits of these arguments, but simply to summarise what the legal position is regarding modchip in different jurisdictions.  (Caveat:  the following really is just a summary, so it should not be taken as a authoritative analysis of the law of these jurisdictions!)
England
Use and sale/distribution of modchips is illegal in England.
Section 296ZB of the Copyright, Designs and Patents Act 1988 (CDPA) makes it a criminal offence to sell or distribute “any device, product or component which is primarily designed, produce, or adapted for the purpose of enabling or facilitating the circumvention of effective technological measures” (this provision was introduced as part of the EU-wide anti-DRM laws introduced by the EU Copyright Directive of 2001).
So, under English law the sale or distribution or such devices intended to circumvent “effective technological measures” is a criminal offence.  Does this apply to modchips?  Yes, is the answer.  We know this thanks to recent case-law in the English courts. 
In a case called Gilham v the Queen, the Court held that that selling or hiring modchips will be a criminal offence under s296ZB CDPA if it is established that:
(1) The game is or includes copyright works.
(2) The playing of a counterfeit DVD on a game console involves the copying of a copyright work.
(3) Such copying is of “the whole or a substantial part” of a copyright work.
(4) The game consoles include effective technological measures designed to protect those copyright works.
(5) The offender sold or hired the modchip device in the course of a business.
In Gilham v the Queen, the jury found that modchips met of all of these requirements – and so they convicted Gilham.  He appealed, arguing that using a modchip does not lead to copyright infringement because there is no “substantial” copying of the game – all that happens when you play a chipped game is that a fragment of the game is copied to the console’s RAM at any point, which is insufficient to establish copyright infringement.
 This gave rise to tricky legal issues as to whether copying lots of little pieces of a copyright work (so-called “little but often” copying) could in some way turn into “substantial” copying.  Tough question…which the Court side-stepped by instead holding that the game drawings which appear on the screen, and the audio recordings which are played, are themselves copyright works which are “substantially” copied in playing the game.
So, selling modchips is illegal under English law.  What about just using a modchip in your console but not selling/distributing them?  You’re no better off really, because (following the logic in Gilham) using a modchip in your console would involve copyright infringement – which could have civil (and possibly criminal) legal implication of its own.
Verdict: sale or distribution of modchips in England is a criminal offence.  The use of  modchips in your own console would likely constitute copyright infringement.
Spain
Since Spain is also subject to the EU Copyright Directive (which led to the introduction of the law in England that has made modchips illegal -see above), you may expect to see Spanish law also ruling that modchips are  illegal.  Si?
Apparently…no.  Admittedly I’m by no means a Spanish lawyer, but I understand that the Spanish Penal Code does contain measures intended to prevent the circumvention of “effective technical measures“.  However, a Spanish court case in 2009 seems to have gone the opposite direction to the English courts.
The case followed a criminal complaint by Nintendo against Movilquick, a Spanish modchip distributor. The judge decided that flash carts could be used for “both legitimate and illegitimate purposes, but not only illegitimate” purposes.  He held that flash carts could be used for “pirated games” but may also have  “legitimate functions of employment” such as “backing up original games or other various functions such as managing photos, music or performance of [free] software“.  On that basis, he dismissed the criminal complaint.
Why is this interesting?  Well, it is not often that one sees the judiciary coming down on the side of gamers.  The judgement was not set out in great detail, so it is not at all clear why the judge decided to do so.  In particular, it is not clear how this decision can be reconciled with the EU Copyright Directive (or with the Spanish law that implements it). It is also not clear whether this is the only case-law on the subject – it may be that there are other Spanish cases elsewhere that go the other way. Still, I imagine it made Spanish gamers happy…
Verdict: using or selling a modchip/flash cart may be legal, but just wait for Nintendo’s lawyers to get the appeal going…
France
Ah, La France, home of la loi Hadopi (also known popularly as ‘3 strikes’) and also a subject of the EU Copyright Directive.  Do its judges sympathise with their English or their Spanish colleagues when it comes to modchips?
Answer: Spain, apparently. 
Details so far are sketchy (no sign of the actual judgment yet) but summary as follows: in December 2009, a Paris criminal court ruled that Divineo, a company which makes Nintendo DS flash carts – essentially, a type of modchip – did not break the law (i.e. presumably they do not “circumvent effective technical measures“).
The Court’s logic seems to have been that flash carts in fact extend the utility of the DS and that the user should therefore be free to use them as he or she wishes – a lot closer to the reasoning of the Spanish than the English court.  But, in the absence of more details being made public (especially the Court’s formal judgment), it is not entirely clear on what legal basis the Court made its judgment.
For completeness: Nintendo said it would appeal the decision and pointed out that Divineo has already been banned from selling flash carts by a Hong Kong court and ordered to pay damages to Nintendo.
So, are modchips illegal then?

It is pretty clear from the above that there is a divergences of opinion within the EU as to the legality of modchips.  The legislation is there (i.e. the EU Copyright Directive) to make modchips illegal, but that legislation has been interpreted (or possibly simply ignored) in different ways.

As often happens in the EU when different Member States take different approaches to legal issues, the answer may only come when the EU itself takes the opportunity to clarify the position (whether through a case before the European Court of Justice or through further legislation from the Commission)…but those opportunities are relatively few and far between.  Until then, that uncertainty seems set to continue…
What about modchips in other countries?
For those of you who are interested, here is a quick round-up of developments in the treatment of modchips in other jurisdictions:
  • USA: in principle, use of modchips may fall foul of the Digital Millenium Copyright Act (DCMA), which has been used previously to get at sellers of modchips (example here)
  • In Italy, back in 2005 a court ruled that the purpose of modchips was to ‘avoid monopolistic positions and improve the possibilities for use of the PlayStation’. The court said: ‘It’s a little like Fiat marketing its cars while banning them from being driven by non-European citizens or outside towns.’ “

  • In Australia, the Australian High Court ruled in 2005 that modchips for the Playstation 2 were not illegal.  As I understand it the Court’s reasoning was that, since the Playstation 2 technology had only ever sought to stop players playing unauthorised games but had not sought to stop them copying those games, a modchip which assisted players to play but not copy unauthorised games was not an attempt to circumvent “technological protection measures” under Australian law.  (As far as I’m aware, that position has not been contradicted in any subsequent case-law).

    (In England, the Court took a rather simpler approach by holding that the very act of playing a game using a modchip constitutes copying infringement – but there may have been good reasons why this
    argument was not adopted in Australia).


Closing thoughts
  • Even without having to get into a detailed legal review of the laws of different jurisdictions, it is clear that some countries have adopted a relatively hardline approach to modchips (e.g. the UK or USA).  In particular, the UK has made it clear that the sale of modchips may be a criminal offence.
  • But, maybe surprisingly, other countries appear to have taken a more neutral/favourable approach to modchips, recognising that modchips are not just about playing pirated games.  With games companies apparently remaining keen to shut down modchip sellers (as with the French action above), it will be interesting to see what 2010 brings…

Bethesda vs Interplay lawsuit isn’t over yet

The battle over Fallout continues.  Bethesda has failed in its attempt to obtain a preliminary injunction against Interplay in their ongoing legal battle over the Fallout IP – but this doesn’t mean the lawsuit is over by any means, contrary to what some reports have suggested.  The Fallout IP is still up for grabs
The story so far
We’ve blogged about this lawsuit previously (here and here), but here’s a quick summary:
Interplay agreed to sell the Fallout IP to Bethesda in 2007 as part of which it retained certain rights, including the right to develop a Fallout MMO.  Bethesda has now commenced a (USA) lawsuit arguing that Interplay is in breach of that agreement and has infringed Bethesdra’s trademark rights in the Fallout series.  In particular, it seems that Bethesda is angry that Interplay sold the Fallout 1 and 2 games and expansions as a ‘Fallout trilogy’ at around the same time that Bethesda released Fallout 3.  As a result, Bethesda argues that Interplay has lost its rights to develop a Fallout MMO (it is suspected that Interplay’s “Project V13” is its Fallout MMO).
Bethesda seeks an injunction 
Now it has emerged that Bethesda sought a preliminary injunction against Interplay.  The details of it have not been made public, but I would bet that what Bethesda did was ask the Court to order Interplay to effectively freeze doing anything in relation to the Fallout IP (including to stop selling Fallout games or developing the Fallout MMO) until the ownership of the Fallout IP is determined at trial.  At that point, the Court would either overturn the injunction (if Interplay won) or could be asked to make the order permanent (if Bethesda won).
But Bethesda clearly failed to convince the Court, whose order refusing to grant the injunction emerged on the net earlier this week.  The Court’s reasoned judgment has not been publicly released (and may never be) so we cannot know exactly why the Court came down on Interplay’s side.
But, in any event, Bethesda would probably have had a high hurdle to meet in the first place: injunctions are one of the judges’ nuclear weapons and therefore they will generally require a lot of convincing before they will grant you one.  Some jurisdictions make it harder than others to get injunctions: under English law, for example, even if you do get an injunction you may have to give the other side a “cross undertaking for damages” – in other words, a promise that if eventually it turns out you were wrong to obtain the injunction and the other guy was right all along, then you will compensate him for loss he suffers as a result of the injunction. 
What does this mean for Bethesda and Interplay?
This will have been a setback for Bethesda.  If they had won the injunction it would have been an important legal, commercial and psychological victory, and it may even have brought Interplay to the negotiation table (e.g. if the judge was particularly emphatic in Bethesda’s favour).
But the fact that Bethesda lost means that any legal and psychological victory belongs to Interplay.  Mind you, if Bethesda lost on a technical ground then maybe Interplay won’t have too much to crow about.  On the other hand, maybe Bethesda lost because the judge didn’t like its legal case – in which case, Interplay could take perhaps some heart that the court is on its side.  In fact, I have seen cases in the past when the guy who tried to get an injunction lost and then he made a settlement offer (though obviously there’s no evidence Bethesda might do that).  We just won’t know unless and until more details become public.
The battle will probably just continue anyway
Assuming that Bethesda does not wish to throw in the towel just yet (and recent comments from Bethesda suggest they still want to continue the fight), then it can just keep pushing ahead with the litigation – which would probably get to trial sometime in 2010 (unless it gets bogged down in skirmishes, of course).  Taking a long term view, all that will really matter is what the trial judge (and jury, if the parties have sought a jury trial) decides at the end of the day.
In the meantime, Interplay can still push ahead with selling Fallout games and developing its MMO (if that is indeed what it is doing) if wants, but would they want to go to all that expense if there is a real risk that they might lose their rights in the Fallout IP next year?  That will be one to discuss with the lawyers…
UPDATE: Interplay wants to keep fighting
Via Joystiq: Interplay had “released a short statement about the court case in the form of SEC Form 8-K, which is intended to provide information about major events to shareholders. Interplay is not happy to merely defend its rights to make and sell Fallout games: the statement reads that Interplay is going to continue pursuing ‘its Counter-Claims against Bethesda, including its claims for Breach of Contract, Tortious Interference with Prospective Economic Advantage, Rescission, Accounting and Declaratory Relief seeking an award of damages and other relief.’
Well, I just can’t wait for the next thrilling instalment…

New House of Lords proposal could water down Digital Economy Bill

A new proposal by the House of Lords could weaken the effect of the most contentious aspects of the Digital Economy Bill, being: (i) obligations on ISP to assist in curbing online infringement; and (ii) the Government’s ability to modify the Copyright, Designs and Patents Act 1988 by order. (Thanks to Tom Watson for this tip.)

According to the House of Lords website, the following addition has just been proposed to the Bill by the Lib Dems:

“Compliance with fundamental rights

In drafting or amending any code, laying any statutory instrument, or taking any other action under sections 124A to 124L of the Communications Act 2003 or under section 302A of the Copyright, Designs and Patents Act 1988, the Secretary of State must demonstrate before such action is implemented that he has considered whether such action is—


(a) necessary and proportionate to the goal of protecting and enforcing copyright, and


(b) that it appropriately balances the interest of rights holders and the interests of the public in due process, privacy, freedom of expression and other fundamental human rights guaranteed by inter alia the European Convention of Human Rights and the EC Charter of Rights.”

What does this mean?

Any way you look at it, this proposal (if enacted) would restrict the power of the Government to act unilaterally in taking measures intended to curb copyright infringement. 

With the first condition (“necessary and proportionate to the goal of protecting and enforcing copyright“), the hook is of course that the Secretary of State must demonstrate that the proposed action is “necessary and proportionate“.  This kind of wording has been the cause of much litigation over the years, particularly over similar concepts in EU law.

With the second condition (“balances the interest of rights holders and the interests of the public in due process, privacy, freedom of expression and other fundamental human rights…“), the Secretary of State would effectively have to certify that the proposed action complies with relevant human rights law – in particular, the European Convention on Human Rights, which enshrines such rights as: the right to fair trial; privacy; and freedom of expression.  (Interesting that the HL proposal does not refer to the Human Rights Act 1998, which imports the ECHR principles directly into English law – I wonder why not?)

A third condition, which is more subtle, is that the Secretary of State must “demonstrate before such action is implemented” that the proposed action complies with the above conditions.  So, the Secretary of State must do something to show he has complied with these conditions.  It is not clear what at present:  perhaps making a declaration or issuing a statement of compliance.

A fourth condition, which is more subtle still, is that the mere existence of this provision in the Digital Economy Act (when it finally becomes law) would mean that, if the Secretary of State wants to take action but fails to comply with the above conditions, then it is theoretically possible that the Government could find itself the subject of a judicial review challenge in court.  Obviously whether or not any such challenges would succeed would depend on the court, but the fact they could happen at all may give the Government pause for thought.

What next?  Is this all a storm in a teacup?

The Bill has recently completed its second reading and is due to go to a HL committee on 20 December 2009. This proposal will need to be discussed by the committee and, even if it is kept in the Bill, there is no guarantee that it may not be struck out in subsequent readings. So it is quite possible that this proposal may not make it into law.  Or it may survive, but perhaps in an amended form. 

But, either way, it reinforces again the point that some of the Lords are working to curb the Government’s ambitions in the Digital Economy Bill.  Watch this space…

The fallback position for human rights campaigners

One very last thought.  As a result of the Human Rights Act 1998 (section 4 if you want to be precise), the Court has the power to declare that an Act of Parliament is incompatible with the fundamental human rights contained in the ECHR, at which point the onus would be on the Government to amend the Act to make it compatible (or risk the public controversy that may follow by the law being declared to breach fundmental Convention rights).

Getting that far would be difficult, since the Court will not easily make a declaration of incompatibility (in fact it has a legal obligation to read legislation in a way compatible with the ECHR so far as possible) – but it is possible.

SO, even if none of the above proposal makes it into law, then in theory it may still be possible for campaigners to bring a legal challenge against the Digital Economy Act (once it comes into force) on the basis of incompatibility with fundamental human rights.  Again, whether or not that ever happens and, if so, what the Court decides, we’ll have to wait and see…

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No Doubt vs Activision: a legal analysis

The dispute between No Doubt and Activision over Band Hero (which we’ve blogged about previously) has continued to escalate, with Activision this week filing papers setting out its formal legal position.

Below, I set out a lowdown of what’s going on, what No Doubt and Activision argue against each other and my thoughts about  how the battle is shaping up.  Before we do that, a boring but necessary caveat: this post is of course written from the perspective of an English lawyer (me!) based on a review of the early legal papers and the contract.  It therefore deals with the legal issues in general terms rather than focusing on the finer points of Californian law.

The Lowdown

In November 2009, the rock band No Doubt commenced a lawsuit in California against Activision over the band’s appearance in Activision’s extremely popular Band Hero.  So far, the lawsuit is at an early stage: both sides have (as of this week) now filed their initial legal papers setting out their positions in the dispute and will probably need to file further legal papers against each other in due course.
 

No Doubt’s case


No Doubt say they contracted with Activision for their avatars to appear in Band Hero and sing a maximum of three No Doubt songs only.  They also say that they agreed to be photographed and have motion-capture video taken of them (to make game avatars for each of them) and to assist with marketing the game (e.g. press interviews).  In return, they received an undisclosed payment.

But the band argue that, without their authorisation, the game actually permits players to: (i) have band avatars play over sixty songs from other bands; and (ii) have No Doubt band members sing other bands’ songs in other bands’/singers’ voices, whether male or female (they give the example of Gwen Stefani singing the ‘Stones song “Honky Tonk Woman” in a man’s voice). This, they argue, has “transformed No Doubt band members into a virtual karaoke circus act”

Lastly, they say that when they found all of this out they asked Activision to ‘lock out’ this unauthorised functionality, but that Activision refused because it would be “too expensive” (Activision deny this allegation and say that No Doubt only made this request after manufacture of the game had already begun).

No Doubt’s legal arguments (the highlights):

  • No Doubt say that Activision knew that Band Hero would do more than their contract permitted, but Activision deliberately concealed this from the band in order to ‘fraudulently induce’ them to agree to have their avatars and songs in the game.
  • No Doubt say that Activision is in breach of contract.  In particular, they say the contract specifically provided that any use of the band’s name or likeness or any representation of the band in the game had to be expressly approved by the band first – but Activision did not obtain this approval.  They also say that they only gave Activision rights to use the whole band’s name and likeness and did give Activision to use band members on their own in the game (e.g. Gwen Stefani or Tony Kanal singing a song on their own).
     
  • No Doubt also argue under specific Californian laws and the common law right to publicity (in basic terms, the right to control the way your name/image is presented in public).

What do No Doubt want?

  • A Court order that Activision recalls all distributed versions of Band Hero and and an restraining order/injunction stopping Activision from using or encouraging others to use the band’s name of likeness in Band Hero.
  • Substantial financial damages, including a share of Activision’s profits from the game.

Activision’s case

Activision’s case, as set out in its legal papers filed earlier this week, is essentially that it denies that it has any liability to No Doubt.

Activision’s legal arguments (the highlights again):

  • Activision did have the rights under its contract with No Doubt to allow players to use band avatars to sing non-No Doubt songs (although Activision has not at this stage set out its analysis of the contract in detail).
     
  • Activision says it was “publicly known that certain users of “Guitar Hero” videogames are able to “unlock” in-game characters and then can choose to play songs performed by other artists using “unlocked” characters“.
  • Therefore, for a range of legal reasons (including consent, estoppel and waiver if you are particularly interested), Activision says that No Doubt cannot legally complain that Band Hero permits players to use band avatars to sing songs which No Doubt didn’t write or approve.
  • Activision counterclaims that No Doubt is itself in breach of contract for failing to provide the marketing services in support of the game which it promised to provide (possibly they stopped cooperating with Activision when they took legal issue with Band Hero itself?)

What does Activision claim?

Activision demands the repayment of (an undisclosed sum of) money given to No Doubt for carrying out marketing services in support of Band Hero which it promised – but failed – to carry out.  (If you’re interested, Activision’s claim is stated to be based on the legal doctrine of ‘unjust enrichment’. In simple terms: you have money that belongs to me and you have no right to it, therefore I want it back.)

How is the battle shaping up?


At this early stage in the litigation, based on the legal papers it seems to me that there are arguable legal issues both ways.  Based on their stated legal case and the contract, No Doubt appear to have an argument that the contract does not give Activision any rights regarding individual band members appearing in Band Hero and further that any appearance of the band in the game had to be approved by the band first – which they say Activision failed to obtain. 

On the other hand, Activision argues that the band already knew how they would appear in the game even before (or at least at the same time as) they entered into the contract – and they had plenty of time to say something if they were unhappy.  They also seem to argue (albeit without much legal detail as yet) that No Doubt have not suffered financial loss and if they did it was not caused by Activision.

No Doubt’s reply to that argument is that in fact the band knew nothing of the sort and that (i) the contract doesn’t say that either; and (ii) Activision deliberately misled them by failing to tell them what plans it had for the band’s and band members’ appearances in the game.  This second point will depend on factual rather than legal argument: No Doubt would need to demonstrate that some actual person from Activision deliberately misled them.  Whether or not that is true and can be proven remains to be seen.

One quite interesting issue, which will need to be explored in the litigation, is the question of loss.  Can No Doubt prove that their unauthorised appearance in Band Hero has really caused them financial loss?  Is it really the case that having your avatars sing songs which are not yours could cause you to lose reputation, business and goodwill?

Of course, all of the above is subject to one critically important caveat – nothing is ever certain in litigation.  You simply cannot predict all of the twists and turns that a lawsuit (espeically one as high-profile as this) can take during its course – and those who do try may end up looking a little foolish by the end (wise words there from your uncle GamerLaw).  We shall have to see what No Doubt, Activision and the learned judge have in store for us…

No Doubt, No Claim?

A quick look at several sites which have carried this story (and the comments threads on them) suggest perhaps a certain amount of scepticism as to why No Doubt have brought this claim – are they really that bothered that their avatars in a videogame can be made to sing non-No Doubt songs, or is this just a claim to grab money from Activision and its highly successful game?  I don’t know, is the honest answer.  But, it does seem to me based on the legal documents so far that No Doubt does have some at least arguable legal points.  As we said, whether or not they have enough to convince a judge and jury at trial remains to be seen.

What is at stake?

Quite a lot, potentially.  If No Doubt were to win at trial, it may be able to claim substantial financial damages including a share of Activision’s profits on Band Hero – which are probably pretty significant I imagine.  More importantly, No Doubt just may be able to secure a Court order for the recall of the game or at least a freeze on further sales – which could be seismic.  This however would be a pretty draconian measure and (if a US judge is anything like an English judge) he/she may well require a lot of convincing that it is necessary.

If Activision wins, however, then it may be able to claim the repayment of at least part of the fee paid to No Doubt.  It will also have won an important symbolic victory against any other artists who may be watching this case closely and considering what legal options they may have themselves.

The case also raises questions about the extent to which artists can control representations of themselves in games – a question which is likely to become increasingly important in the future.

What happens next?

That depends upon the choices which Activision and No Doubt make, as well as on Californian litigation procedure.  In general terms, there may be a further round of legal submissions, quite possibly followed by initial legal skirmishes in court, leading to mutual disclosure of documents, exchange of witness statements and – eventually – a trial before a judge and jury in Los Angeles.  At that point, who knows what might happen…

Or, it could settle early – which would avoid the embarassment and risk of a high-profile trial, but could prove expensive to one or the other of them (though possibly still cheaper than fighting all the way to the court).

As always, we’ll be keeping an eye on this one…

Image sources:
(i) Wikipedia – http://en.wikipedia.org/wiki/File:CoolGwenStefanitset.jpg  – Gwen Stefani (originally posted by Flickr by compulsiveprep_8)
(ii) Wikipedia – http://commons.wikimedia.org/wiki/File:Activision_logo.png – Activision logo
(iii) Wikipedia – http://en.wikipedia.org/wiki/File:Band_Hero.jpg – The North American boxart for Band Hero

Runescape, the Computer Misuse Act and theft

The background:

Details here.  A group of Runescape players mount a phishing scam, obtain other players’ accounts, strip those accounts of gold and loot.  Presumably they make an in-game or real-world profit.  Then the UK Police (specifically the Central Police e-crimes unit) swoop in.  They arrest a caution an individual in Avon and Somerset “on suspicion of a number of computer misuse offences”.

Police pwn players

This appears to have been the first time that a UK games company has gone to the police to protect the integrity of its game.  Not much at all has been said about exactly what offences have been alleged. 

UPDATE: I had initially thought that one way in which the Police could go after the accused would be to prosecute for theft.  However, on a closer look (and thanks to the guys in the comment thread), it seems that a better way may be under the Computer Misuse Act 1990 – with which I must admit I was previously unfamiliar.  Thanks!

What is the Computer Misuse Act 1990? (CMA)

In the late 1980s there was controversy in the UK regarding the legality of hacking, following a UK case called R v Gold and Schifreen – in a nutshell, two guys were able to hack a British Telecom system but, as the law stood at the time, hacking was not expressly illegal and therefore they were acquitted.  This was a factor in the Parliament of the day passing the CMA.

As a very quick summary, the CMA was intended to criminalise three kinds of conduct:

(i) Intentional attempts to cause a computer to perform any function with intent to obtain unauthorised secure access to a computer or data on it (the section 1 offence)

(ii) Same as (i) but with the intent to carry out a further criminal offence (e.g. hacking a PC in order to commit fraud) (the second 2 offence), and

(iii) acting in any way which causes the unauthorised modification of the contents of any computer, with the intent to impair the operation of any computer/programme or to hinder access to data on any computer (the section 3 offence).

Carrying out any of the above renders you liable to a fine and/or imprisonment (between six months and five years depending on how you plead to the offence).

Is the phisher/account-ninja covered?

‘Yes, but the wording isn’t brilliant’, seems to be the general answer.  Certainly phishing could be said to fall under the section 1 offence under the argument that the phisher sets programmes running which find out the account details etc of the innocent person(s).  To the extent that the phisher had intent to use those details to commit further criminal offences then he/she could also fall under section 2 – which carries harsher penalties.  Then there is the somewhat more nebulous section 3: does phishing or ninjaing someone’s account “impair” or “hinder” any other computer or program?  Maybe – perhaps if having your account details “hinders” your ability to use the programme?

But this gets even more interesting

Anyway, what we want to do is focus on section 2.  If the phisher stole Runescape account details with a view to somehow trying to gain access of others’ computers or stealing their bank details, then there would in principle be a case for arguing that they had had intent to commit further criminal offences under section 2.  But what if the phishers only intended to enrich themselves in-game by, for example, turning the stolen accounts’ assets into gold and transferring that gold to themselves or even selling it on the black market (which would be a breach of the EULA etc but not necessarily illegal as such).  Could enriching yourself in-game or in the real-world through a game by unauthorised means be classified as an offence?

That is the really interesting part to this case and, if the Police are interested in pushing for the strongest sentence possible against these phishers, they will need to consider this sometime soon – if they haven’t already.

That’s exciting, isn’t it?  Makes us think about adding a chapter to that book on virtual law which we’ll have to write one day…

In the meantime, the story goes on…

Little more has been announced since the Police announcement earlier this week, but no doubt further details will follow in due course.  It’s also worth bearing in mind that Jagex has stated that this is part of a long-term investigation in both the USA and UK – so there may be further twists in the tale yet…

Celebrities, attack!

Activision releases Band Hero and, very soon after, the rock band No Doubt sue Activision for unauthorised use of the band in the game amounting allegedly to the band being turned into a “virtual karaoke circus act“.  Before that, Courtney Love kicks up a stink about the use of Kurt Cobain in Guitar Hero 5.  This, ladies and gentlemen, is what happens when celebrities go bad

First up, what is No Doubt’s beef?  According to a LA Times article (courtesy of Game Politics), No Doubt had an agreement with Activision pursuant to which the band would feature in Band Hero singing their own songs.  However, Activision allegedly went far beyond that and the game allows other artists to play No Doubt songs and for No Doubt avatars to sing other artists’ songs.  Cue shock, anger, disgust from No Doubt + 1 lawsuit alleging breach of contract and No Doubt’s right to publicity. 

Activision’s response: they said, reasonably enough, that they had negotiated a detailed agreement with No Doubt regarding the use of the band in the game and that they believed that they were within their contractual rights.  Which basically means that the dispute seems likely to boil down to a matter of interpretation of the contract: either Activision is right or No Doubt is.

Courtney Love gets angry…again

Move on to example # 2 – Courtney Love jumping on the Angry Train re the appearance of Kurt Cobain as an avatar in Guitar Hero 5.  As with Band Hero, the Cobain avatar can be used to play Nirvana songs as well as songs from other artists.  Love (and, to a lesser extent, Nirvana bandmembers) argued that Activision should not have used Cobain’s image at all and threatened a lawsuit to block its use in the game. 

Activision’s response, again, was that it had entered into a detailed agreement with Cobain’s estate for the use of a Cobain avatar in the game.  So, once again, it comes down to a matter of contractual interpretation.

Thoughts

Both disputes would of course have to be decided ultimately by applicable US contract and IP law. That said, a few immediate thoughts are:

(i) In both cases, money seems the prime motivation.  But could No Doubt and the Cobain estate really show they have suffered substantial loss? (Certainly from a UK perspective anyway.)  Has it really hurt their image/materially infringed their rights for other avatars to sing their songs or vice versa?  Of course, it may not just be about financial loss – an equally effective remedy would be to obtain a Court order pulling the game altogether (which would no doubt bring Activision running to the settlement table).

(ii) This really does show, again, the importance of making sure your contracts are as clear as they can be and – crucially – that both parties have the same understanding as to what they are both giving and receiving.  Of course, it’s always possible that No Doubt/Courtney Love know exactly what rights they gave to Activision but are having a go anyway in order to extract a quick cash settlement – but that always runs the risk of Activision’s lawyers advising it to fight them all the way…
(iii) Have No Doubt/the Cobain estate really thought about PR?  It’s all very well standing on your legal rights, but part of our standard advice to clients before they push the litigation button is always that they should think very carefully about the implications that litigation could have on their standing with their customers and in the market more generally.  On the other hand, if Activision are in the wrong here then maybe they should have expected that at least one artist, at some point, was going to raise these issues.  That might well be something for all publishers to think on, what with the current trend towards introducing celebities into games…

As always, we’ll be keeping an eye on this one…

[image source: Wikipedia]

Analysis: Three Strikes Coming In?

This is the text of our guest editorial just published on gamesindustry.biz:

Fight the Good Fight

A battle is underway throughout Europe regarding the protection of online content (including videogames), in which governments, rights holders, ISPs and consumers are all weighing in and the resolution of which will have great importance for the games industry.

The genesis of this battle lies in the dissatisfaction of rights holders (from music and film companies to games developers and publishers) at the legal regime on which they must currently rely upon to protect their content. With court proceedings slow, lengthy and expensive, rights holders have been lobbying for legislation to compel ISPs to take ‘technical measures’ to curb online piracy/copyright infringement over their networks.

One well-known proposal has been to introduce a ‘graduated response’ (known rather better as ‘three strikes’), under which rights holders would work together with ISPs to identify individuals who are suspected of committing online copyright infringement/piracy, to serve them with warning notices and, if they do not cease their illegal activity, to take ‘technical measures’ against them including suspending their internet access.

This is a contentious proposal and ISPs in particular have resisted it, claiming that they are not responsible for policing the actions of their users or enforcing copyright. Furthermore, many consumers – particularly gamers – have also been hostile to the possibility of having their internet access suspended for any reason.

Most recently, there has been press coverage regarding a battle within the European Union over these proposals. In a nutshell, the EU is in the process of preparing new telecoms legislation (known as the Telecoms Package), as part of which it has been debating whether EU law should permit EU Member States to introduce into their domestic legal systems the ability to use technical measures to fight online copyright infringement/piracy – including games piracy. This proposal was championed by the Council of Ministers (the body which represents Member State governments) but was opposed principally by the European Parliament (the democratically elected body of the EU).

The battle coalesced around a controversial amendment to the Telecoms Package known as Amendment 138. This amendment was put forward by the European Parliament and would have required that any attempt to take technical measures against an EU citizen’s internet access could only be carried out pursuant to a Court order – which would make attempts by rights holders/ISPs to take direct unilateral action against suspected online pirates/copyright infringers very difficult.

So, for example, action against a suspected repeat illegal downloader of games would have to be approved at a court hearing in which the individual could defend him/herself. The European Parliament proposed Amendment 138 twice and twice it was rejected by the Council of Ministers in controversial circumstances. There seemed to be a deadlock.
With All Thy Might


But it looks like that deadlock has been broken this month, with the European Parliament reportedly dropping Amendment 138 in favour of a compromise text. This seems to remove one obstacle to the EU adopting a regime which is friendlier to the kinds of action which rights holders would like to take against suspected online pirates/copyright infringers.
Of course, that is by no means the end of the story. Even if and when the Telecoms Package is finalised, it cannot on its own introduce a three strikes system into the EU. Rather, it will still be up to national governments to decide exactly what their own laws should say about any technical measures to be taken against suspected online pirates/copyright infringers. These national governments – two leading examples being France and the UK – are therefore pushing ahead with their own proposals to fight online piracy/copyright infringement independently of the EU debate.
In France, the French legislature famously passed ‘la loi Hadopi’ (albeit on a second attempt, the first having failed), which has implemented a graduated response system into French law. That law quickly became the subject of a legal constitutional challenge, although it now seems that that challenge may have fallen away with the announcement earlier this week that the French Constitutional Council has in principle approved la loi Hadopi.

Implications for the UK?

In the UK, the government’s final Digital Britain report (published in June 2009) set out several proposals intended to reduce unlawful file sharing. The key proposal would impose a legal duty on Ofcom to secure a significant reduction in unlawful file sharing (the government suggested this should be a 70 per cent reduction) by requiring ISPs to notify the holders of accounts suspected to have been used for copyright infringement and making available to rights holders (on the basis of a court order) data to enable serious repeat infringers to be identified and court action taken.
However, the government also proposed that if such significant reduction was not forthcoming within 12 months of that system coming into force, then Ofcom should be provided with backstop powers including the ability to compel ISPs to impose technical measures to reduce copyright infringement (such as protocol blocking, bandwidth restrictions and content filtering). The report stopped short of proposing a full ‘graduated response’ system.
Then in August 2009 the UK government issued a statement that it is now considering providing for Ofcom to be given the power to suspend the accounts of serious repeat infringers. Most recently, Lord Mandelson has made comments about the need to implement something like the French Hadopi system. All of this suggests the government may be somewhat closer now to proposing the introduction of a graduated response system, or at least something like it, into the UK.
That said, a key point about both the French law and British proposals (as well as the proposals of other governments) is that it remains to be seen what and when concrete technical arrangements will actually be put in place to combat online piracy/copyright infringement, how successfully they will work and, crucially, what consumers’ reactions to them will be.
And Implications for the Games Industry?

The games industry will be at the forefront of these developments. If governments adopt legal regimes which permit technical measures to be taken against suspected online pirates/copyright infringers, it would give the games industry a powerful weapon to deploy against games piracy/copyright infringement – which is of course often said to be the single greatest threat that the industry faces. So, in principle it would be possible to deploy technical measures against individuals who repeatedly download and distribute illegal copies of games – which could prevent a repeat of Spore, said to be one of the most pirated games in history.

But it may cover rather more than that – in principle, it may in the future be possible to take technical measures against all forms of online copyright infringement relating to a game, including individuals who distribute unauthorised game modifications (eg additional game levels or a total conversion mod) and/or who create user-generated content relating to games (eg unauthorised in-game footage posted on YouTube).
So the person who distributes a brilliant but unauthorised mod of a defunct but well-loved game, or the person who repeatedly posts unauthorised footage of upcoming or released games online, could potentially face technical measures against his/her internet access in the future. Obviously, the devil would be in the (legal) detail but, clearly, if this kind of action was possible it could transform the games industry.

On the other hand, time and again gamers have shown themselves to be hostile to what can be seen as attempts by the games industry to impose limitations on the way in which they can play and interact with games (as seen recently for example the DRM debacle or the reactions to the recent Pirate Bay case).
The games industry would likely have to tread a fine line between relying on technical measures to protect their games but, at the same time, not alienating their customers or stifling the enjoyment and innovation derived from the creation and use of mods and other post-release user generated content. In an industry which depends heavily on the loyalty and enthusiasm of its customers, this is likely to become an issue of great importance in the future.
Ultimately, the question for the games industry may not be whether they can legally deploy these strategies to defend their games, but whether commercially they can risk it.

Jas Purewal is an associate as Olswang LLP.