Legal MumboJumbo and Popcap Games

Earlier this week it was reported that casual games developer MumboJumbo had succeeded in its legal action in Texas against fellow casual games developer Popcap Games, with the jury awarding MumboJumbo damages of $4.6m.  More on the case below…
FYI, MumboJumbo is the creator of “such popular games as ‘Midnight Mysteries: The Edgar Allan Poe Conspiracy,’ ‘Luxor Adventures,’and ‘Samantha Swift and the Mystery from Atlantis‘ (‘fraid I’ve not played them).
What do we know about the case?
The litigation stemmed from a 2006 contract under which MumboJumbo agreed to produce, distribute and sell certain PopCap games in North America.  The jury reportedly found that “PopCap breached the contract when it went behind MumboJumbo’s back and decided to market and sell its games on its own”.  The case involved findings of breach of contract, fraud and tortious interference on PopCap’s part against MumboJumbo (serious stuff).  The press release statescentral to proving that portion of the case were PopCap’s own internal e-mail messages, which showed the company employed a calculated use of false and misleading statements in order to sour that business relationship“.  Serious stuff.
The jury awarded $4.6m in damages.  Separately, there will be another court hearing to work out the lawyers’ costs (which is standard practice in England and could add a fair bit on to the $4.6m for which Popcap already has to cough up).

According to Gamesindustry.biz, Popcap’s VP of public relations Garth Chouteau said of the judgment: “PopCap continues to believe that it did nothing wrong in this case, and will vigorously pursue its claims and defend itself through the appeals process.”  Which, it seems reasonably safe to assume, means that Popcap will be mounting an appeal against the decision.


What does all that legal mumbojumbo (ahahaha) mean?*
* sorry, couldn’t resist the weak pun
The judgment in the case has not been released, so there is very little to go upon at present unfortunately.  But I thought it might helpful, in very general terms (based in English law, which is very similar to US law in these respects), to give the lowdown on what those legal findings of breach of contract, fraud and tortious interference mean:
Breach of contract

A contract is an agreement (whether written or verbal) between two or more persons which has four basic characteristics: (i) an offer, (ii) acceptance of that offer, (iii) consideration (i.e. something of value in return for what is being offered) and (iv) intention to create legal relations (i.e. meaning to enter the contract).  Example: Ann buys from Bob a copy of Half Life 2 for £10 following an verbal agreement between them.
The ‘contract’ will contain the key elements of the deal (these are the ‘Terms and Conditions’ you hear about, plus other stuff), which both sides are meant to respect.  But if one of side breaks the deal, then in principle that entitles the other side to go off to court, provided you can prove:
(i) there is a specific enforceable term in the contract on which you can rely (e.g. Ann promised to buy Half Life 2 from Bob)
(ii) breach of that term (e.g. Ann took the game but refused to pay Bob)
(iii) loss (e.g. Bob lost out financially as a result of the breach of contract)
The basic way you calculate the loss is this: how much would you have gained had the contract been properly performed?  In the above example, Bob would have earned £10 had the contract been performed so that is the measure of his loss.  Obviously, with large contracts like the one that MumboJumbo and PopCap entered into, the amounts at stake – and therefore the potential contractual damages – can be very large and difficult to quantify exactly.
Note: one important point of difference between England and the USA is that, in England, breach of contract cases are decided entirely by a single judge, who will determine how much damages should be paid if any.  However, in the USA there is still jury trial available in breach of contract cases, in which case the jury determines the damages to be paid out (this is said to be one of the reasons that you see larger contract damages paid out in the USA than in England).
Obviously, real breach of contract cases are generally far more complicated than that.  There are often difficult arguments as to what the contract actually said, what constitutes a ‘breach’ anyway and what the innocent party is entitled even if he/she is in the right.  Then, on top of that, sometimes the innocent guy doesn’t just want compensation but also wants some protection that the wrongdoer won’t do it again…But you get the gist of it.
Fraud
Fraud is fairly simple to explain: it is any act by Ann which is intended to deprive Bob of a benefit or to cause him harm, for the enrichment of Ann herself.  The above example, where Ann takes the game but doesn’t pay Bob, could potentially be fraud if there was the appropriate intention.  Another example would be Ann impersonating Bob in order to get a whole bunch more copies of Half Life 2 at his expense.  A yet further example would be Ann entering into a business deal with Bob with the hidden purpose of making money at Bob’s expense or damaging his business in some way.
Fraud is one of the most serious legal offences around.  As a result, the law treats it pretty seriously and so it can have both civil and criminal consequences (i.e. you can sued for lots of money AND face criminal prosecution potentially).  If Ann was found liable for fraud, she could find herself having to (for example): compensate Bob for his loss; pay over to Bob all of the profit she made at his expense; give disclosure as to exactly what she did and how; and potentially face other legal/regulatory/professional proceedings depending on what she does for a living.
Tortious interference
This is difficult to summarise because it is not clear exactly what kind of ‘tortious interference’ Popcap was found liable for.  But, in very general terms, English and American law recognises the concept that a person can deliberately do things which are intended to disrupt other people contracting with each other or break their existing contracts with each other.  For example, Ann finds out that Carl has contracted with Bob and offers Carl incentives/bribes/whatever in order to persuade him to contract with Ann instead.  Obviously, in that kind of situation Ann may just be a good businesswoman and no harm in that, but sometimes it goes beyond that and the law needs to step in to stop someone deliberately encouraging the breaking of contracts.
If and when more details about the MumboJumbo/Popcap case are released, then hopefully we will able to apply some of the above to the actual facts.  Now, that’s the end of Civil Law 101 for today, kids…
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[Image credits: Popcap Games ]

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]

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…

Evony vs Brit blogger in Oz

Evony vs blogger

Just a quick one: the Guardian reports that the US company which owns Evony, the (in)famous web-based game, is suing a British blogger (Bruce Everiss) over allegedly libellous comments he made regarding Evony in his blog.

In Australia?

However, Evony is bringing its libel claim aginst Everiss in Australia, rather than in Britain or the US.

The Guardian quotes Evony’s lawyer: “[Everiss’s] actions bring an enormous discredit to all online journalists internationally and have substantially impacted Evony’s reputation in Australia” said the lawyer acting for Evony, Dean Groundwater of Warren McKeown Dickson.

By contrast, it seems that Mr Everiss is arguing that this action is nothing more than libel tourism (the kind of comment which we have heard a lot recently in England as much of the press have attacked English libel law as being too claimant-friendly).

Hello Mr Jurisdictional Challenge!

Unsurprisingly, the first step in the litigation will reportedly be the Court of New South Wales having to be decide whether it has jurisdiction to hear the claim (this could be Evony seeking a declaration that the Court has the proper jurisdiction, or it may be Everiss seeking a declaration that the Court does not).  Sounds legalistic perhaps, but it will decide whether or not the litigation will go ahead to consider Evony’s actual complaints.

What’s libel?

A very quick and rough summary of libel under English law (which is very similar to Australian law):

A communication is libellous if it is in written form and makes an allegedly factual claim that may in some way harm the image of another person.  Generally, that factual claim must be proved to be false and must be published to someone other than the person who is defamed.  A person who is libelled has the right to comemence Court proceedings seeking (usually): (i) an apology; (ii) a Court order forbidding further publication of the libel; and (iii) financial damages.

Libel law is a very complex (and high risk) area of law so obviously it is never as simple as the summary above may suggest.  There can be very difficult issues for example regarding the standard and burden of proof.  Libel is also subject of many defences – in particular, truth is an absolute defence to libel.

Each of these points may have to be fought out between Evony and Everiss in the coming months, so it will be interesting to see how this develops…

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

UK games class action lawsuits edge a bit closer?

Just a quick one: the UK Government has released a paper regarding the role and powers which it proposes to give to a new consumer champion (known as the Consumer Advocate) who will have the power to take on large companies on behalf of consumers.  A key proposal is that the Consumer Advocate will be able to commence class action type lawsuits on behalf of consumers.

We have blogged previously about class actions in the games industry and the increasingly high profile which they are attaining.  At present, all of the high profile class action lawsuits against the industry have been in the USA – principally because that is the largest games market but also because the US legal regime is friendly to class actions.  The UK legal system, however, has not historically permitted US-style class action lawsuits.

As we’ve said before, sometimes class actions can be useful where there is a legitimate grievance against a business organisation with (hopefully) deep pockets, especially if there is no specialist regulator policing the industry’s actions.

The games industry fits all of that: many times in the past gamers have felt they got a rough deal – take for example the  Red Rings problem with the Xbox 360 – which it has taken a long time to resolve with games companies (although it has been more or less resolved with Microsoft’s additional consumer protection).  At the same time, in the UK there is no specialist regulator policing what the games industry does – the nearest would probably be the Office of Fair Trading, which has a general remit over retail traders.  So, it may be that UK class action type lawsuits could be of real help to UK consumers, including gamers.  That said, there is a big if: in the US, consumers can start class actions themselves, but it seems likely that under the new UK proposals the Consumer Advocate would be able to pick and choose what class actions to commence. 

So the creation of the role of Consumer Advocate being proposed by the Govt could actually prove quite useful to the games industry, since its existence would limit the ability of UK consumers to bring something like the more speculative class action lawsuits that have been seen previously in the USA.  Still, the mere possibility of any class action lawsuit in the UK against games companies is perhaps unlikely to be good news to the big players any way you cut it. 

In any event, the Govt proposals are still at the consultation stage and there is a way to go yet before we get close to a draft Bill or actual law.  More on this as and when…

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…

A touch of class? Class actions and the games industry

Our article on class actions has been published on Gamesindustry.biz:

Disputes are inevitable in any industry. They can be can be expensive, time-consuming and risky, but they are often caused by genuine differences between businesses – from time to time deals fall through and contracts are broken, which may lead to the innocent party feeling aggrieved and deserving compensation. In other cases, disputes can form part of a useful business strategy, for example a lawsuit against a competitor. And sometimes individuals or businesses may use disputes to try to secure a quick and advantageous outcome, such as a cash settlement….”

More here

Litigation stormclouds over the games industry

Disputes are inevitable in any industry.  Sometimes disputes are generated by genuine differences between businesses –  from time to time deals fall through and contracts are broken, which can lead to one party feeling aggrieved and deserving justice.   Sometimes, dispute resolution is deployed as a useful business strategy against a competitor.  And there is also a third way in which some individuals or businesses can use dispute resolution  – to secure cash settlements.



Over the last few years, disputes both within the games industry (a recent example being the ongoing lawsuit between Interplay and Bethesda) and against the industry have been gaining a progressively higher profile.  Most recently, this year seems to have become the year in which the class action lawsuit made its presence felt in the games industry.
What is a class action lawsuit?
A class action lawsuit is a legal action brought in a court against a defendant entity by a group of claimants who represent the whole ‘class’ of persons who are in the same position as them – if the representative group wins, then all persons in that class can benefit from that ruling even if they were not in any way part of the legal proceedings  (unless they express opted out.  A famous example is a group of American smokers who sued tobacco companies on behalf of all (or most) American smokers.
The value of class action lawsuits is primarily that they make it relatively straightforward for a large group of persons to commence a single lawsuit, often seeking substantial damages from a large corporation, rather than each person having to bring individual lawsuits at his/her individual cost and risk.
There are of course different models of class action lawsuit in different counties, but by far the most well-known is the US class action lawsuit.  Class actions are particularly popular in the US due to a range of factors, including a relatively robust consumer protection regime, advantageous procedural rules (there is no ‘loser pays legal costs’ rule in the USA) and the propensity for US juries to award substantial damages to claimants.  Previous targets of class action lawsuits have included the tobacco, oil/gas and fast food industries to name a few.

Class action lawsuits and the games industry
 
In 2008, a class action lawsuit was commenced against Rockstar Games and Take-Two Interactive over the “Hot Coffee” matter, although the matter settled earlier this year with a $30m payout to the claimants. [need other previous examples].

This year, several well-publicised class action lawsuits have been commenced or threatened against the  games industry.  A first example is the lawsuit commenced against Sony over alleged hardware failures in the PS3 caused by firmware updates.  A second example is the lawsuit (commenced earlier [this/last] week against Facebook and social gaming company Zynga over allegations that players were made to pay unauthorised charges (e.g. recurring SMS subscriptions) in order to play games such as Mafia Wars and Farmville – this appears to be the first class action lawsuit commenced against the social games industry.  A third example is the very recent threatened lawsuit by Xbox 360 players against Microsoft over its recent banning of certain Xbox Live accounts whose holders were said to have modded their consoles (we assume for current purposes that this lawsuit will be commenced in the future).

The fundamental question for the defendant to a class action lawsuit (Sony, Facebook/Zynga and Microsoft in the above examples) is whether they afford to let these lawsuits get to trial.  Standard litigation practice in these circumstances would be for their lawyers to investigate the allegations and then advise on the legal merits of the claim, its prospects of success and the potential costs if it was fought to trial and won (or lost). 
However, ultimately it will be for the board of directors to make a business decision as to whether it is in the best inerests of the company to fight the litigation or to settle it (and sometimes that decision has to be revisited several times as the litigation progresses).  In making that decision, the directors have to look at the legal advice as critical (and non-legal) issues including the impact of the litigation on their customerbase and business partners;  negative PR; and (importantly) the potential negative reaction of banks and other funders such as venture capitalists.  Sometimes (and anecdotal evidence would suggest more often in the US), a defendant may decide therefore that the cost/benefit analysis is in favour of settling a class action lawsuit (even a speculative one) rather than ride it out and risk massive damages awards against it from a sympathetic judge/jury.
What choice the defendants in the above lawsuits take will, of course, remain to be seen.
Closing thoughts
Our standard advice is to involve your lawyers as closely as needed regarding any development which may become cause problems in the future  – whether with business partners, competitors, consumers or regulators.  In other words, some legal advice early on may well help to avoid real problems later on.  That said, looking at the games industry as a whole, it seems clear that the future will bring more legal claims against games companies, some of which will certainly be class action lawsuits.  

Jas Purewal is an associate at Olswang LLP (email: jas.purewal@olswang.com).