Category: Litigation

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.

Commentary: Midway directors not guilty of fraud

The legal action brought by aggrieved shareholders in Midway Games against Midway directors over the collapse of the company has concluded with a victory for the Midway directors.  This case shows once again the dangerous fallout that can emerge from the collapse of any business.  Read on…

The background is that certain shareholders in Midway Games (developer of Mortal Kombat) commenced US legal proceedings claiming that certain of Midway Games directors concealed the truth about the financial condition of the company (source: Gamesindustry.biz).  These shareholders, who lost millions when Midway Games entered insolvency proceedings in February 2009 and was subsequently sold for a fraction of its previous value, argued that the directors had deliberately kept the shareholders and the public in the dark regarding Midway’s financial condition in order to profit from their sale of their own Midway shares.  The directors in question were former CEO David Zucker, Thomas Powell (chief financial officer), Steven Allison (chief marketing officer), James Boyle (controller) and Miguel Iribarren (senior vice president, publishing).

However, a US District Court has now ruled in favour from the Midway directors, finding that they had not “said or did anything more than publicly adopt a hopeful posture that [Midway’s] strategic plans would pay off…” and, in any event, “such preening for the financial press is classic puffery”.

This case exemplifies the rule of thumb that when any business fails, both the creditors and the shareholders will look for someone to blame in order to try to recoup as much of their losses as possible.  A strategy frequently adopted is to go after those persons or entities with the deepest pockets and/or who had a say in the management of the company – quite frequently, the directors of a company will meet both of these criteria.

It helps that directors generally are held to a high standard of conduct regarding their management of a company, especially where that company is in financial difficulty.  Under English law (and most common law jurisdictions that we can think of), directors have a strict duty to act in the best interests of the company and not to act for their own private profit.  For example, this has previously been held to mean that directors cannot take up commercial opportunities that the company has rejected (unless of course the company gives a clear ok to the director).  The directors also have a duty to monitor the financial performance of a company and, if it is apparent that the company is or may become insolvent in the near future (i.e. it is no longer able to meet its debts as they fall due and/or its liabilities are greater than its assets) then the directors should think very seriously about stopping trading altogether.  It is a criminal offence for directors to permit the company to keep trading when there is no realistic prospect of the company recovering on its own, or to continue trading where they know that the company cannot recover.  If the directors breach any of those duties, then in principle they could face both civil and criminal legal action against them personally, including demands to pay monies back to the company.

Of course, all that just deals with the relationship between the director and his/her company.  What about shareholders?  This is a more difficult question, because as a very general rule shareholders’ direct relationship is with the company in which they own shares, not its directors.  However, there may be some ways around this.  For a start, it may be possible (depending on the laws of the jurisdiction in question) for the shareholders to step into the shoes of the company for the purpose of asserting a claim against the directors (called a ‘derivative claim’).  Or it may be possible for the shareholders to fund the company to make a claim itself against the directors.  Or the shareholders may able to argue some direct relationship between them and the directors which entitles them to assert a direct action against the directors.

Whatever the precise legal form of the shareholders’ claim, any such claim would face the usual problems with litigation: it is costly, risky and time-consuming and – far more often than not – there is no guarantee of success however strong one’s case may seem at the outset.  In some jurisdictions, difficult claims may be easier to bring than others – in England and Wales for example the loser generally has to pay the winner’s legal costs, which can be a significant disincentive to bring a speculative claim.  Other jurisdictions can be more ‘claimant-friendly’. 

Anyway, a few practical points to sum up:
(i) when a business goes under, people who lose out can be very inventive in deciding who to go after.

(ii) directors are particular targets and should consider taking legal advice about their duties and responsibilities as soon as it becomes possible that the company may be entering a difficult financial condition or even insolvency.  This advice need not be expensive, but it may help them to avoid personal liability if things get really bad…

[Image source: Wikipedia – http://en.wikipedia.org/wiki/File:MKDL.PNG]

News: Interplay vs Bethesda (Part 2)

We previously blogged about Interplay’s lawsuit against Bethesda regarding the Fallout series of games.  Now read on for another update in the ongoing litigation…

To recap, Interplay sold the Fallout IP to Bethesda in 2007 having retained certain rights, including the rights to develop a Fallout MMO.  Bethesda has now commenced this (US) 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.

The position now seems to be (courtesy of Game Politics) that Interplay has counterclaimed for Bethesda’s repudiatory breach of their agreement, apparently to the extent of claiming that the Fallout IP has reverted to Interplay and Bethesda now sub-licences the IP from Interplay (a complete reversal of the current position). 

It’s worth taking all of this with a heavy dose of salt since (as far as we are aware) the relevant court documents have not yet been published on the net and therefore there is no way of being sure of the accuracy of any of this (unless one of Interplay or Bethesda make a press statement on this anytime soon).

That said, defending an action against you for breach of an agreement by counterclaiming yourself for breach of the same agreement is a standard litigation tactic, which it seems clear Interplay has decided to adopt in this case.  Of course, the devil is in the detail: in order to substantiate a claim for breach of contract Interplay’s lawyers will need to set out in detail how the contract operated and exactly which provisions of that contract have been breached by Bethesda. 

Of course, the main question from all this is what will eventually happen to the Fallout IP.  If Game Politic’s report is accurate, then Interplay is not just arguing for damages for breach of contract, but a version of the Fallout IP back to it in some way – which is by no means impossible in theory, but it will be interesting to see how they play that argument out.  Keep watching this space…

Analysis: Can you sue someone through a game?

Using “web 2.0” means to sue people is a recent phenomenon. Most recently, a blogger has used an English High Court order served over Twitter to stop a rogue tweeter impersonating him.  Just before that, a New Zealand Court permitted service of proceedings through Facebook, as was first permitted in Australia.The question we’ve been thinking about today is this: can you sue someone through a game?

Let’s say for example that you’re defamed or harassed by person X in an online game (e.g. an MMO) and you want to do something about it. What can you do about it?
Well, what you probably can’t do is sue X in the game itself (although this will be the subject of another post later this week – watch this space!) You can of course make complaints to the devs under their complaints procedure. But that may not be enough for you for whatever reason. You may want to know who X is and to stop him in the real world. What then?
Could you sue the wrongdoer in the real world?
In principle, yes – but it would not be straightforward. You would need to establish: (i) a legal cause of action; (ii) the proper jurisdiction in which to bring that action; and (iii) the real-world identity of the wrongdoer.
The first two are of course questions of law, which themselves may raise serious issues that cannot easily be resolved. For example, is conduct which in the real world would constitute harassment still harassment when it occurs in the online world? We’re not sure that they are the same. For a start, there is at least an argument that gamers are more enured to conduct that would otherwise be considered harassment – for example, if you were flamed in the street by a stranger you are likely to be rather more aggrieved/scared than if you were flamed by a stranger in a Call of Duty multiplayer session.
Anyway, let’s assume you have an arguable legal cause of action. Where will you bring that action? This will depend on a range of factors, in particular the applicable jurisdiction laws of your home country. It may be that you can sue in your own country, or it may be that you have to sue in the country of the wrongdoer or possibly even in the country where the harm was suffered (although good luck working that out for a game).
This gives rise to a difficult practical issue: how do you identify the real-world identity of the wrongdoer? Answer: it can in principle be done through the Courts (because no-one will willingly give you private information about someone else without a Court order), but it is expensive and time-consuming. One way of doing it would be to seek a Court order against the game devs/publisher seeking disclosure of details regarding X’s online details, e.g. his avatar details, country of residence and IP address (in England and Wales this is known legally as a Norwich Pharmacal order). Assuming you obtain that information, you would then need to carry out further investigation (and quite possibly seek further Court orders) in order to ascertain the X’s ISP and then, from that ISP, obtain the personal details of X himself. At that point, you would be in a position to commence legal proceedings against X directly.
Sounds a bit torturous? It has been done before (sort of). In Applause Store Productions Limited & Matthew Firsht v Grant Raphael (a 2008 English case – in which Olswang acted for the claimant as it happens!), Matthew Firsht discovered that an unknown person had created a false and defamatory profile of him on Facebook. After a long series of enquiries, Mr Firsht was eventually able to ascertain that the wrongdoer (Grant Raphael) was an old schoolmate of his. The matter went to trial and ultimately Raphael was found liable for defamation.
Could you sue the game publisher?
Assume that we can establish a cause of action and the proper jurisdiction in which to bring the claim, but either person X cannot be identified, or it is not worth identifying him, or that your real goal is not to punish the wrongdoer but to get rid of the damaging material which he posted somewhere in-game (e.g. on a bulletin board). In that case, in principle you may be able to sue the game publisher for defamation on the basis that it has “published” the defamatory material by permitting it to be publicly accessible in-game.
Defamation law is pretty complicated and there would be a range of responses/defences available to the publisher. However, the most likely route it would take would be to rely upon a defence under e-commerce legislation under which it will avoid liability it can show that it is simply hosting the information and that it acted quickly to remove said information upon receipt of any complaint. Of course, if other persons have since copied and replicated the damaging material in the meantime (as is often the case), a single take-down may be of limited value. Taking this kind of action, especially where gamers are concerned, can also give rise to problems (e.g. the Streisand effect).
This is all a bit academic, isn’t it?
Well, only in the sense that no-one has tried it yet. But, sooner or later, it seems to us pretty likely that someone will try to sue someone else through a game. After all, a game is among other things a method of communication between people just like letters, emails or telephone conversations. Maybe it will be a principled individual or corporation seeking to protect his/her/its reputation, or maybe it will just be the biggest flamer you’ve ever seen on a unprecedented power-trip. We’ll have to wait and see…

News: Interplay vs Bethesda

Bethesda has commenced Court proceedings in the USA against Interplay over the Fallout series of games (story first covered by Gamasutra). 

The facts seems to be: Interplay sold the Fallout IP to Bethesda in 2007, as part of which they agreed that Interplay would retain certain license rights, including the right to develop a Fallout MMO.  Bethesda now alleges that Interplay is in breach of that agreement and has infringed Bethesdra’s trademark rights in the Fallout series.

So, a straightforward piece of commercial and IP litigation then, which is likely to be of interest to the industry, given Bethesda’s current (and Interplay’s historic) importance as publishers, but also of interest to gamers at large for the impact it may have on Fallout itself.  In particular, if this case continues there will eventually have to be disclosure about what exactly Interplay has been doing (or should have been doing) with the Fallout MMO.

In the meantime, a spirited discussion is fully underway at Gamasutra.  One really very interesting point which has already emerged from that discussion is the potential PR impact of all this – does this claim risk Bethesda alienating its customerbase, even if legally the Court eventually rules in its favour?  This is of course always an issue when a high-profile company decides whether to bring high-profile litigation and no doubt Bethesda will have carefully weighed up its option before deciding to act.  Either way, we will be keeping an eye on this one…