Commentary: The Life and Times of Erik Estavillo

Consider Erik Estavillo, a man with a dream.  What dream?  A dream to sue many, many games companies.  And not just sue them, no!  He wants to sue them in the most high-profile way possible!  Below is a summary of what Erik has got up to, and what you could do to ensure you don’t find yourself a target of something similar.

Example the first: Erik takes on Sony

In July 2009, Erik sues Sony Computer Entertainment America (SCEA) in California following SCEA’s banning of his Playstation Network account over comments he allegedly made on a SCEA forum and which appeared in some way to relate to the PS3 game “Resistance: Fall of Man”.  Among other things, Erik bravely claimed his freedom of expression was protected by the US First Amendment and therefore his account should not have been banned.  Also, he claimed $55,000 punitive damages and an injunction against SCEA banning further players in the same way.

In September 2009, the California court threw Erik claim out following a summary judgment application by SCEA, which argued that the First Amendment did not apply to PSN.  The Judge, he say yes.

In October 2009, not to be deterred, Erik filed an appeal against the court’s previous judgment. (Which seemed a bit ambitious, given that Erik was unrepresented and generally appellate courts will only consider genuine uncertainty in the law and will not simply hear a rehash of the previous case – appeals are not meant to be a second bite at the cherry).  As to that appeal, no word has reached the interwebs so far.

Example the second: Erik turns to Microsoft and Nintendo of America

In November 2009, Erik commenced a separate claim against Microsoft over the well-known ‘red rings of death’ problem.  In a nutshell (and without having seen the detailed court documents), it appears that he argued that Microsoft should pay the cost of fixing this hardware error, since Erik himself is disabled.  Erik also commenced a claim against Nintendo over its actions which allegedly led to certain of his characters in Mario Kart Wii becoming locked unless he bought Super Mario Galaxy.

Relatively little seems to be have been said about legal niceties such as establishing an arguable cause of action.  (For example: it is difficult to see why Microsoft should be forced to bear liability in respect of the ‘red rings of death’ beyond its (quite generous) warranty coverage – however ill or disadvantaged any of its players may be).

Example the third: Erik battles Activision-Blizzard

More hot legal actions a-coming.  Also in November 2009, Erik sues Activision-Blizzard over certain aspects of WoW.  This claim attracts the most publicity, because Erik claimed that he would sub-poena (i.e. witness summons) individuals including Winona Ryder and some chap from Depeche Mode (the reasons for which we will not waste time typing about).   Once again, relatively little (i.e. nothing) seems to be said about the precise details about Erik’s legal case.

What do we think? Vexatious litigation

Many people have commented across the net that Erik Estavillo must be a vexatious litigant.  Whether or not that is the case will no doubt be decided out in court in due course.

But let’s think about this in more general terms.  All games companies have the hypothetical risk that one of their players could after them (or many of them) with legal claims at any time.  In the usual course, the merits of that claim will be determined in Court. 

But sometimes people can use court claims tactically, to try to obtain quick commercial settlements on the basis that the claim is not worth fighting to trial either financially or for other (e.g. PR) reasons.  Or, sometimes, a person may have a perceived grudge with a company or another person and may pursue court claims as a way of ‘getting back’ at them.

What can you do about this?  Here are some quick tips/thinking points:

  • Think about the applicable law in the countries in which you operate and which govern your contracts (in particular, end user agreements such as EULAs).  What steps can you take to reduce the litigatio risk?  Bear in mind some legal systems are more ‘litigation friendly’ than others.  For example, it is sometime said that the US is (in very general terms) more claimant friendly than the UK because the US has no ‘loser pays the winner’s legal costs rule’ – which in the UK can be a big disincentive to legal action
  • If you do find yourself being pursued by a vexatious litigant, what steps can you take?  Depending on the laws of the jurisdiction, you may be able to take your own court action – for example, seeking an injunction against him/her.  If you have to fight a Court claim, discuss with your lawyers what aggressive actions you can take to knock the claim down (for example, you may be able to ‘strike out’ the claim if it has no realistic prospects of success).  And there is always the costs-hammer with which you can try to hit the claimant (see above)
  • Leave aside the legals and consider what other risk management strategies you should have in place.  What potential pitfalls are coming on the horizon and how are you dealing with them?  What is your customer-base happy or not so happy about? 

In the meantime, we will of course continue to keep an eye on Erik and his litigation machine…

[thanks for many links to GamesPolitics!]

Australia turns banhammer on Modern Warfare 2?

We’ve previously blogged about South Australia’s (ultimately successful) attempt to cut everything popular out of Left 4 Dead 2 – bye bye gore, violence and (presumably) the more offensive zombies, on the basis that Austalia’s game classification system only goes up to 15 and L4D2 as a game goes well beyond that rating.  The obvious solution would be to introduce an 18 rating (in common with many other countries), but the Austalian response ultimately was simply to refuse to admit the game into the country as it  was presently constituted.  So, instead, EA/Valve had to release a special Australia-only toned down version (with which some sources appear to have been less than impressed).

Now, it seems that a certain South Australian may have set his sights on Modern Warfare 2 (which, by the way, is doing rather well elsewhere in the world).  MW2 at present has a 15 rating, but the South Australia Attorney General, Michael Atkinson, is set to appeal that rating – which, if successful, it seems likely would effectively mean blocking the game in Australia.  L4D2 down, MW2 in the gunsights – good going so far. 

But why MW2?  We would wager it may have something to do with the global political outrage regarding that mission.  This seems to be borne out by a quote from the man himself (thanks, GI.biz): “I worry about any game that encourages gamers to perpetrate extreme violence and cruelty on screen, but this game allows players to be virtual terrorists and gain points by massacring civilians. Expecting game designers to be responsible by not glorifying terrorism will always lead to disappointment.”

Our suggestion: perhaps Mr Atkinson should team up with the UK’s Keith Vaz (Labour MP and no fan of allegedly ‘violent’ games) and combine their individual powers to ban all games other than (i) The Sims (provided each Sim is confined to his/her house); and (ii) Flight Simulator (provided the plane does not actually leave the ground).  It could happen…

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).

News: Australia conclusively pwns L4D2

The ongoing saga as to whether or not Australia will permit the full version of Left 4 Dead 2 in all its zombie-mowing-down glory (see here and here for previous instalments) appears finally to be come to an end.

Gamesindustry.biz reports that the Australian Classification Review Board has turned down publisher EA’s appeal against a previous decision of the Classification Board that L4D2 could not be given a 15+ rating, being the highest rating that Australia has.  In effect, if a game does not meet the criteria of a ’15’ game, it cannot be admitted into Australia.  So, Valve will instead have to sell a toned-down version of the game in Oz, which version does not contain “depictions of decapitation, dismemberment, wound detail or piles of dead bodies lying about the environment”.  So that’s alright then.

As we’ve previously noted on this blog, this seems a clear case of the law simply not being up to date and certainly not up to speed with modern gaming.  The practical consequences of this decision are likely to be: (i) consumer dissatisfication; (ii) relatively lower revenues for Valve; (iii) massive piracy of  the full version of the game; and (iv) to a lesser extent, legally dubious parallel imports of the full version of the game into Oz.  None of which stands exactly to the credit of the local of federal governments of Australia.

[Image source: Wikipedia – http://en.wikipedia.org/wiki/File:Left_4_dead_2.jpg]

Commentary: Oxygen Games in administration

Just a quick one: Oxygen Games, a UK publisher of predominantly sports titles, last week controversially entered administration – specifically, a pre-pack administration.  The full story is at Gamesindustry.biz (articles here).  Now creditors are beginning to ask questions about exactly what is going on.  The latter article carries a quote from our own Jas Purewal (reproduced below):

” ‘Pre-packs can be very [divise]. The commercial logic is sound. But there’s this idea that pre-packs are seen as a done deal that leave creditors out in the cold,” Jas Purewal, an associate of legal firm Olswang told GamesIndustry.biz.”In circumstances where it wasn’t for the pre-pack [the company] would be broken up then pre-packs are becoming more and more common.’

‘It’s worth noting that pre-packs are also under increasing amounts of scrutiny as well because there can be situations where a pre-pack is done in controversial circumstances and creditors may be willing to fund legal challenges against it.’ “

News: Australia vs L4D2: Part 2

Another twist in the battle between Valve, Australia’s game classification board and the countless thousands of zombies which comprise Left 4 Dead 2 (see our first blog entry on this farce here; thanks for the update on this story are due to Slashdot).
It seems that Valve has prepared a “compromise” version of L4D2 with which the Australian game classification board feel happy enough to award it a “15+” rating.  Exatly how is this a “compromise”?  The most popular quote from the board’s report is that:
“The board notes that the game no longer contains depictions of decapitation, dismemberment, wound detail or piles of dead bodies lying about the environment.”

We can’t help but wonder what this compromise version will look like – flowers and daisies will replace all the dead zombies (a la Serious Sam) ?  Possibly the Tellytubbies or Bob the Builder might make an appearance? 

Apparently, Valve is still pushing ahead for its full version to be accepted – a hearing is scheduled for later in the month.  Let’s assume that that hearing decides the “compromise” version must be released.  It seems to us that that decision may well lead to an increase in (i) downloads (or attempts to download) the non-Australian version of L4D2; and/or (ii) considerable attempts to crack the Australian version; and/or (iii) an increase in parallel imports of non-Australian versions.  All of which would no doubt be in breach of several Australian laws.  We will leave readers to draw their own conclusions as to whether the board’s rating decision should still stand in those circumstances…

News: Australia and Germany pwn L4D2 and Wolfenstein respectively

An eventful week in the ongoing battle between national regulators and the games industry.

Australia vs Left 4 Dead 2

Australia has banned Left 4 Dead 2 on the basis that it is, well, just too violent. Apparently the Australia game classification system simply does not contain an 18+ rating and, L4D2 being what is is, they decided it was not appropriate to rate it as 15+.  Therefore, they felt they had no choice but to ban it. 

Of course, one has to wonder whether, if that kind of logic was evenly applied across games and other media products entering Australia, just how much entertainment would be able to enter Australia.  More generally, query whether this was really an appropriate response  – isn’t the real issue that there needs to be some modernisation of the classification system there?

[30/09/09: UPDATE: Gamesindustry.biz has a follow-up piece here, which confirms that (at least in South Australia) the Attorney-General continues to oppose implementing an 18+ rating in Australia’s rating system.]

Germany finds out Wolfenstein apparently contains some Nazi symbols (shock!  horror!)


Gamesindustry.biz reports that Activision has removed all copies of the new Wolfenstein game from Germany after it was discovered that one small Nazi flag had been left in the game.  It is, of course, culturally very insensitive to display or in any way glorify the Swastika in Germany.  Perhaps more relevant for Activision though is the fact that it is also an offence to display the Swastika in Germany (other than in a historical/artistic context).  Presumably Activision decided not to plead the historic/artistic exception, so the game had to go.

Again though, was this the appropriate response?  Presumably Activision was comfortable with the fact that, looking past the flag matter, there are no legal issues raised by publishing in Germany a game which consists of blasting away Nazis in Nazi strongholds which are literally dripping with with Nazi iconography (and blood).  Does that not raise issues in and of itself?

Commentary: EVE player tries to corner market, doesn’t work

A high-profile case of insider trading was uncovered yesterday in the MMO Eve Online (thanks to Massively for writing about this first).

Some background: two of Eve’s most impressive features are that, firstly, by and large it has an (almost) completely unregulated economy which is effectively run by and for players in a kind of huge free trade free for all (I’m quite proud of just inventing that phrase); and, secondly, that the devs behind Eve, CCP Games, actively seek their players’ opinions through consultations with a player-elected “Council of Stellar Management” (CSM).

As part of that consultation process, CCP provides CSM members with highly sensitive information which, if made public, would very likely have a material impact on the Eve economy. Basically, they are provided with what in the real world is known legally as ‘price sensitive information’ (PSI): for example, you find out secretly from your mate who works at the world’s biggest producer of sheep dip that the price of sheep dip is going to treble tomorrow, so you try to corner the market by buying all the sheep dip now with a view to making a financial killing tomorrow. To guard against this kind of thing, CSM members have to provide their personal details to CCP and sign a Non-Disclosure Agreement – just as they would in the real world.

You can see where this is going, already. Yes, one of the CSM Council members found out some (still unknown but presumably juicy) information about CCP’s future plans for Eve and could not resist taking advantage. It appears that he carried out trades worth 2.5 billion Interstellar Kredits (the currency of Eve) in certain Eve products, with a view presumably to selling them at a massive profit when whatever these big proposed changes in Eve took place. Except that CCP got wise to his game pretty quickly and, within a week of making those trades, they blocked all of his accounts – tantamount to a death sentence in Eve, since it means that player is unable to play the game anymore.

Now, the value of this naughtyness is not massive: 2.5bn ISK is, in Eve terms, a substantial but not massive sum which, based on Eve’s official Real Money Trading scheme, could be purchased for about [US$400 or rather less on the black market – TBC] in the real world.  There has been more financially damaging crime in Eve’s past – for example, the famous Guiding Hand Social Club heist in 2005. The really interesting thing here is not so much the financial harm caused but rather that this kind of misconduct is possible in a game and will certainly be committed again in the future (in fact, Eve is no stranger to scandals: [insert a couple of links here].

Taking a step back, if this kind of misconduct was carried out by a director in a real world company, he/she would face a whole world of legal woe, including potential claims of breach of directors’ duties and market abuse as well as criminal prosecution for insider trading. In other words, enough to put you out of your job and your house and into jail. This is because insider trading is perceived as being one of the most damaging forms of economic crimes, because it reduces trust in the financial institutions and companies which form the backbone of the economy (no credit crunch jokes please, this is serious stuff).  Obviously though, CCP isn’t realistically going to try to pursue real world claims (although one day we will get around to writing an article about what might happen if they tried).

More generally, all this raises very interesting questions about the extent to which Eve, or any MMO for that matter, can and should have a more sophisticated (we would say quasi-legal) regime that first of all says that this kind of conduct is a bad thing, secondly has some sort of mechanism for impartially testing any allegations of misconduct, and thirdly sets out the proper punishment to be meted out for the misconduct.  Regarding that last point, at present, CCP’s main recourse is to ban the player from playing the game, which is of course the ultimate deterrent in the same way that capital punishment is the ultimat deterrant to criminals in the real world – but isn’t that a bit of a blunt instrument? Perhaps CCP should be thinking of a range of punishments as part of their new regime, from account-bans to public censure and financial compensation to (perhaps) lesser punishments for lesser offences. Perhaps one day someone will take this up and we may see the world’s first MMO ASBO…?

Commentary: Video Recordings Act – Epic Fail

This week saw us fascinated by news that the much-loved Video Recordings Act 1984 was never officially enacted and therefore cannot be enforced.

Passed amid a moral panic over “video nasties”, the act regulates the classification of both films and games in the UK and creates an offence where a work is sold to an individual of less than the relevant classification age.

It has now been discovered that the Act is unenforceable, on the basis that the European Commission were not notified of its existence, as required by Directive 98/34. It has also emerged that the Home Office failed to spot the oversight on two subsequent occasions, in 1993 and 1994.

Until the situation is rectified (which we understand will take 3 months) it will be legal to sell and supply unclassified films and games, although numerous retailers have already pledged to continue to observe the regulations on a voluntary basis.

In celebration of the above, we thought we’d take a moment to run down (in reverse order) our three favourite things to arise out of the media storm which followed the government’s announcement.

BBFC: One thing after another

Let’s take a moment to imagine the reaction at the British Board of Film Classification.

It’s already been a rough year at the BBFC, what with the government having announced in June that PEGI will become the sole classification system for videogames and software in the UK.

How the organisation has greeted the news that a significant slice of the work it’s been doing since 1984 has been conducted without the benefit of statutory authority we can only speculate, although we like to think that there may have been a quiver of a censorious lip somewhere along the line.

The fact that the error was spotted while the government prepared to amend the VRA to reflect the new PEGI classifications presumably did little to lift the mood and it seems a fair bet that jelly and ice cream have not been on the menu at Soho Square this week.

DCMS: Come and have a go if you think you’re hard enough

We are big fans of the Department of Culture, Media and Sport’s hurried announcement that it has received legal advice to the effect that people who have previously been found guilty under the act (1,659 of the blighters between 1995 and 2007) will be unable to seek compensation or overturn their convictions.

While we’re glad to see the DCMS fully embracing the whole “1984” spirit, the suggestion that convictions under a non-existent statute are water-tight feels a little bit undercooked to us, especially given the lack of supporting detail provided.

Of course, we won’t know for sure whether this is genuine legal advice or mere spin (heaven forbid) until someone actually challenges a conviction, but we’re definitely watching this space with interest.

Vaz: Spokesman for common sense

There could only really be one contender for top spot.

The sight of ever-vigilant friend to the games industry Keith Vaz MP riding to the rescue, and spouting common sense to boot.

“If the act has never been brought into force, prosecutions under it are void” said Mr Vaz. “You cannot prosecute someone and convict them on the basis of legislation that has never been in force”.

Wise words, we’re sure you’ll agree.

And a refreshing change of pace for a man whose most recent substantive contribution to the ongoing debate over standards of decency in games was to petition for a ban on Bully/Canis Canem Edit without (by his own admission) ever having actually played it.