This is a post from Jonny Mayner with additional input from Jas Purewal. The Star Wars’ theme to the post is the fault/genius of Jonny (depending on how you feel about Star Wars, ofc).
This is a quick post looking back on some high profile IP cases in the UK on which we saw rulings in the first half of this year. Read on for a brief round-up of what the cases were about and how they’re relevant to games and tech. Continue reading IP Round-up: Newzbin 2, Copyright Infringement and Stormtroopers
This is a guest post by Jonny Mayner. Jonny Mayner spent most of his 20’s playing games and working in bookshops and the construction industry before getting down to the serious business of being a lawyer. He is currently a trainee solicitor at Osborne Clarke, soon to qualify and join the firm’s Intellectual Property Litigation team. He still plays games though.
Tim Langdell, the man behind Edge Games and long-time botherer of Edge Magazine (among others – read about his US shenanigans here and here) was dealt a critical blow by UK High Court last month, which we’ve just had a look at. In her judgement Mrs Justice Proudman pretty much flatly rejected much of Langdell’s evidence and ruled on various issues which will make it harder for him to assert IP rights in all things Edge-related going forward. (Jas: plus, now an English court and a US court have ruled that he is a Naughty Man.)
Earlier this month, the US Supreme Court handed down its decision in Brown v EMA, AKA the Californian ‘violent’ games law case, AKA Arnie vs all gamers, everywhere. The law, if upheld, would have given lawmakers the ability to ban certain games and place stringent requirements on others. However, the US Supreme Court struck down the law on the basis that games are protected by the free speech provisions of the US Constitution and that the Californian law was unconstitutional. So far, so good.
This is interesting: Atari is suing Tommo Video Games Distribution in the US in a $30 million claim over the Atari Flashback 2, according to Kidscreen. Details are very sparse at the moment but the allegation seems to be that Tommo is selling or distributing a counterfeit version of Atari’s Flashback 2 console, which I understand is itself is a repackaged version of Atari’s famous Atari 2600 console released in 2010.
I wanted to blog about this for two reasons:
(1) A quick recap about counterfeit goods.
Counterfeit goods are simply knock offs – goods which are manfactured to look, feel and operate like your goods but which are actually made by a rival third party. Because counterfeit goods are made without your authorisation, they infringe just about every intellectual property right that you may own in the original goods. In this case, IF Tommo is indeed manufacturing and marketing a counterfeit Flashback 2 without Atari’s authorisation (which remains to be proven), then in principle it may be infringing Atari’s copyright, trade marks, design rights and patents in particular. If there was an agreement between Tommo and Atari for the manufacture of the Flashback 2 and Tommo has gone outside that contract, then Tommo may in principle also be liable for breach of contract.
Consumers also are heavily affected by counterfeit goods, since they may be purchasing these goods without realising that they’re not genuine – and therefore they’re not getting the ‘real thing’ (in fact, they may be receiving technically inferior goods). Depending on what country consumers are in, their national consumer protection laws may help them to different degrees. For example, in the UK a consumer would under the right circumstances have a right to return counterfeit goods to the seller (not the manfacturer) and demand a refund under the Sale of Goods Act 1979.
(2) The Flashback 2 isn’t exactly new technology.
I was struck by the fact that the Flashback 2, which depends on Atari 2600 technology, basically goes back right to the start of the modern games industry. And yet Atari is reportedly commencing a $30 million action over that technology. It just goes to show that games businesses shouldn’t discount the value of their old hardware or IP too lightly – Atari clearly saw a market opportunity to bring their old console back and are now having to take legal action to preserve it.
- Consider whether there’s an opportunity to make money out of your old hardware or IP again (e.g. through a licence or re-release, maybe on one of the new platforms like Steam or iOS)
- This is critical: review your legal protection of your old IP. Have you maintained protection of their copyright/trade marks/patents? It won’t be expensive to take remedial action, but you never know when it might come in handy.
- Look at third party hardware and IP. Has it become abandonware and, if so, could you do something with it? NB that means getting a licence, not just charging in and using it without authorisation (I’ll be writing about the legality of abadonware soon…)
Image credit: Atari/CNET
The Dutch Supreme Court will be invited later this year to conclude that the theft of virtual goods from Runescape constitutes theft under Dutch criminal law; indications to date suggest that it may conclude that theft of virtual currency/goods IS criminal theft. To my knowledge, this is only the second time that a Western court has considered the (increasingly important) issue of the relationship between virtual goods and criminal law, the first time having been a UK criminal court earlier this year over Zynga chips.*
According to Futocop, this Dutch case apparently forms part of a long-running matter which began in 2008 when two boys were sentenced to community service and suspended juvenile detention after they forced a 13-year old to transfer a Runescape virtual mask and a virtual amulet from one avatar to another under the threat of physical violence. The detail is not entirely clear from Futocop, but I think what happened next is that the case was appealed, but the Court of Appeal ruled against the defendants and the case is now going even higher, to the Supreme Court.
One point in particular is worth noting. As part of the referral of the case to the Supreme Court, the Dutch Advocate General (a sort of legal expert whose job is to assist the court to make its decision) said that the economic value of the virtual goods is of particular interest to the question whether there is theft:
“Virtual objects can represent an economic value both inside and outside the game. They are also individually distinguishable and transferable“.
This comment is interesting because, if it was accepted by legal authorities, then basically that on its own could bring virtual goods and currency within the existing law. Put it another way: if both physical goods and virtual goods are recognised as having the same economic value even though one exists in the real world and one does not, then that is a powerful argument for both of them to be protected in the same way legally. In a way this is nothing new really: after all shares, electronic money and electricity are all legally protected even though you can’t physically touch them. But it is taking some time for courts to recognise that virtual goods fall into this category too. Of course, once that recognition is made, it opens up a whole new can of worms for the games and tech industry: who owns virtual goods? What can you do with them? What classes as virtual goods – game items, ebooks apps? And so on (more details on that here).
Anyway, in the meantime this case is due to go to the Supreme Court in October 2011, so expect more details later in the year…
* For those virtual goods scholars who are reading this post, to clarify: I know there have been previous opportunities in the West to consdier the legal status of virtual goods (e.g. Bragg v Linden Labs), but to my knowledge all of them resulted in settlements etc with no judicial pronouncements being made.
UPDATE: it seems the lawsuit is going ahead with a trial date of potentially late this year/early next year. I spoke to Develop about it here.
We all know the story by now: back in 2009 Jason West and Vince Zampella, then the heads of Infinity Ward (the Activision-owned developer behind the Call of Duty: Modern Warfare series) resigned in acrimonious circumstances and promptly sued Activision for substantial amounts of monies. Cue a massive brawl developing over the next months, including: dozens of Infinity Ward developers also suing Activision for unpaid bonuses; Activision countersuing West and Zampella; and finally, Activision suing EA for up to $400m for its part in allegedly wooing West and Zampella away. This whole shooting match was scheduled for trial to start on May 23rd, 2011 (i.e. 3 days ago). What’s happened?
Answer: it’s still very much alive but it hasn’t gone to trial yet and everyone still arguing about it, apparently. According to the LA Superior Court website, the case is still rumbling away, with the parties still debating a number of preliminary issues. All of which suggests that a trial is still some distance away.
None of this is particularly surprising, mind you – the timeframe in large litigation often slips as unforeseen developments crop up. In this case, the addition of a massive claim by Activision against EA in particular was always going to have an impact on the progress of the litigation. Still, no doubt we’ll hear about a renewed trial date in due course.
As I’ve written about before (see here), this is no ordinary lawsuit in the games industry. It involves one of the largest franchise in the modern games industry – Modern Warfare – some big personalities, huge amounts of money and – above all – as far as I know, it will be the first time that Activision and EA have squared off against each other in major litigation.
And they’re all fighting for pretty high stakes. West and Zampella are hoping for big pay-offs from Activision as well as creative control of the Modern Warfare series, while Activision wants to retain control of its most valuable IP and now win up to $400m from EA. As I said in a previous post, in 2010 EA suffered net losses of $677m and had net total assets were worth $2.729 billion, so having potentially to pay $400m to Activision would be a real headache (assuming of course that Activision wins, which is completely uncertain atm).
As always in litigation of this kind, we have to watch and wait to see what happens next. Many people predicted this case would have settled by now, but it shows no signs of doing so just yet…
More interesting developments in the Lodsys/app developers spat (more on that here): now Apple has got involved. Yesterday, Apple wrote to Lodsys asking it to withdrew its threats against a number of iOS app developers. You can read the full letter here.
Apple’s arguments were three-fold:
(1) The patent licences which Lodsys has granted Apple cover both Apple and its app developers – therefore Lodsys has no basis for arguing patent infringement by any app developers, because they already have the right to use Lodsys’ patents.
(2) Based on the limited evidence in Lodsys’ letters to app developers and on its site, all of the allegedly infringing acts take place via Apple products and services (e.g. the App Store), not on app developer products and services (e.g. the app developers’ apps).
(3) Lodsys’ claims are barred by the legal doctrines of patent exhaustion and first sale. Very basically, the argument here is that, once a product which contains your IP rights has entered the market, you lose certain rights to try to control how that IP is used. Otherwise, people who actually turn the IP into valuable products would forever be under the control of the IP owners (more detail here).
Overall it’s a very measured letter, which doesn’t issue anything like a threat to Lodsys but makes it clear that Apple is on the app developers’ side.
The ball is now ofc in Lodsys’ net. This letter doesn’t change anything in terms of Lodsys vs the app developers – Lodsys is still free to pursue legal action against them if it likes, or just to try to get a quick cash settlement from them. BUT, if that legal action were to go ahead, two things have now changed:
(1) The app developer can just adopt Apple’s legal arguments against Lodsys; and
(2) More importantly, if Lodsys was to take legal action against app developers there is a stronger possibility that Apple would join in on the app developers’ side (though that is far from clear).
This doesn’t really change the wider issues with software patents…
If Lodsys does now back down, it would largely be because Apple has demonstrated the weakness of Lodsys’ position – which is good for the affected app developers.
But what happens the next time someone comes along with a better software patent – perhaps one that hasn’t been licensed by Apple or one of the other mobile manufacturers? Or maybe one games company starts sending cease and desist letters to its rivals based on a patent it has just been awarded? In other words, I don’t think we’ve seen the last of software patent controversies in the mobile or games worlds just yet…
It’s been a busy time in the games/law world over the last couple of weeks. Here’s some highlights:
(1) Sony settles with George Hotz
Back in January this year, news broke that a group of hackers, led by George Hotz, had jailbroken the PS3. Sony were unhappy bunnies, so they sued Hotz and the other hackers. There followed a series of legal skirmishes, including jurisdictional challenges by Hotz and attempts by Sony to gain data from third parties like Twitter and Google on users of the hack. Now it seems that Sony and Hotz (plus presumably the other hackers) have settled their dispute. The terms of the dispute were not made public, but I would guess were fairly favourable to Sony since Hotz was in a relatively weak legal and tactical position. It will very likely have included Hotz having to promise not to distribute or encourage the PS3 hack, and may even go so far as Hotz helping to eliminate or at least neutralise the hack altogether.
In any event I think was a win for Sony, whose objective was clearly both to try to stop the hack as well as to send a message that it will not accept this kind of behaviour. Clearly people have different views as to whether litigation was the right route to take (my original post on the subject raised some of those views in the comments), but from my perspective Sony did the right thing here.
Mind you, Mr Hotz doesn’t appear entirely reconciled with Sony – he has apparently donated $10k to the EFF and made comments such as “At the end of the day, something I take comfort in. The PS3 got OWNED.”
(2) Class action lawsuit against Apple over in-app purchases
This is very interesting indeed. Apple is facing a lawsuit for alleged failures to exert proper controls over in-app purchases with the effect that unauthorised persons (including children in particular) can run up substantial unauthorised bills. The lawsuit is reportedly being brought by a US individual who is seeking class action status (which would basically mean that everyone in the US who is affected by the issue joins the lawsuit).
Make of that lawsuit what you will, but there clearly has been a rising tide of concern regarding the controls on in-app purchases. News reports of children running up huge bills began to surface last year, which was followed by a US congressman making public comments about his concerns with this issue. This was then followed earlier this year by the FTC announcing it would investigate the issue. In responses, Apple has already introduced new changes, such as requiring a password to be entered within an app for a purchase to be processed.
In legal terms, in-app purchases raise a whole can of worms which I’ll have to write a separate post about. But in a nutshell the problem is something like this:
- Apple has a contractual relationship with the iOS device owner, pursuant to which that owner is given an iOS account and password.
- When the owner uses that device to purchase an app or to make an in-app purchase that constitutes a separate contract between the owner and Apple.
- At the moment, that contract is meant to be evidenced by the owner inputting his/her account name and password – but historically Apple has only required them to be inputted periodically rather than every time anything is purchased. This is what it is now tightening up.
- If the account name/password has to be input every time a purchase is to be made, in principle that will stop any random person/child from purchasing an app/virtual goods without authorisation.
- But what about where a child or other person has the owner’s account name and password already? The owner doesn’t actually know that he/she has purchased anything and therefore complains to Apple. On the other hand, Apple has no way of knowing that this is not a legitimate purchase.
- The strict legal answer to this problem is not clearcut. On the one hand, you could argue that there is no contract here because the legitimate owner has not entered into the purchase. Or you might point to specialist legal doctrine like mistake to say that the purchase should not go ahead. On the other hand, Apple could argue that if the owner gives his/her details to a third party, even to a child, then it has authorised that third party’s conduct and should be bound by their actions.
- While the FTC and others like me are grappling with the legal issues of course, Apple is no doubt working on technical solutions to the problem. And, in the long run, technology may well provide a definitive answer – biometric scanning being one example.
Zooming out a little, to my mind this is really just one strand of a larger legal issue which has been lying latent for some time: the legal regulation of apps (and, by extension, virtual goods). Other strands which have yet to be explored include age ratings for apps and (my favourite subject) the legal status of virtual goods. Another, which we’re beginning to see more about now, is how far the terms and conditions of the different app stores can stand up to scrutiny. For example, just last week IGDA published formal complaints about the Amazon Appstore terms and conditions . I think we’re going to see more on these topics in 2011…
(3) More tech company patent battles
Patents seem to be at the forefront of the minds of a number of different tech giants at the moment. Earlier this year a legal a legal battle erupted between LG and Sony over Bluray technology, including in the PS3. Nokia has also sued Apple. Apple has sued HTC. Now Apple has sued Samsung, alleging both patent and trade mark infringement (of what it’s not clear at the moment, since I’ve not seen the court documents published yet).
In a way, all of this was to be expected really. Software developers still have relatively interest in patents, which are really still designed for industrial applications (notwithstanding movements afoot in Europe, and rules already in place in the US, to encourage software patents). But for hardware manufacturers patents are a very important part of their IP arsenal. And when very lucrative new technology comes out like the recent boom in smartphones and now tablets, you can be sure patents will figure in everyone’s calculation. These tech companies want to ensure there really hasn’t been copying of their products by their rivals, plus there is always the lure of commencing a tactical patent infringement lawsuit as a business weapon against your rivals.
So, we can expect more of these lawsuits in the future and, at some point, some of them will probably get to trial and we’ll see if any legal fireworks are let off at that point…
(4) ESRB changes age rating process
I understand that the ESRB – the games classification system in the US – has been amended in two important ways. First, a new automated online form has been released. Second, and more interestingly, apparently there is now a new rating process for console DLC.
Historically, ESRB ratings have only been required for ‘full’ games and any retail expansion packs – not downloadable DLC. However, the distinction between expansion packs and DLC has of course become largely academic in the modern day – which has led to a gap in the child protection rules for game content. That is what the ESRB is now seeking to plug.
BUT, really I think this is another can of worms for the following reasons:
- How is DLC actually to be rated? Will it use exactly the same rules as with games?
- What happens if the DLC has a different rating to the game itself?
- How will the third party download platforms, like Xbox Live, be involved to make sure the DLC age ratings are made sufficiently prominent?
- Who is going to pay for all of this and how will the ESRB cope with the additional regulatory responsibilities?
- What does “DLC” actually mean for these purposes? Does it mean all episodic content, however small? What about, say, map packs? What about virtual goods purchasable within the game?
- Most importantly, console DLC is all very well – but what about the vast casual and mobile games world? More regulation is needed there, too.
The original post is a little inaccurate – sorry. I understand that actually ESRB regulation already covers console DLC when necessary. The official ESRB guidance is that “Downloadable content…that will be appended to an existing, previously-rated product need only be submitted to ESRB for rating if its content exceeds that which is in the existing “core” product.” So, as long as the DLC is of the same standard as in the original game, then no additional ESRB rating is required.
The new changes discussed in the original post actually apply just to digital games bought through console storefronts like Xbox Live, where the ESRB has now implemented a new streamlined process. That said, as I understand it at the moment that changee does not extend to non-console casual games or mobile games (e.g. iOS or Android games – albeit both have their own ratings systems already.
I’m now thinking that hopefully you guys would find it helpful to have a slightly more in-depth look at how ESRB regulation works, so expect another post on the subject soon…!