EU to Consider Video Game Regulations

It is being reported that the EU is considering stricter restrictions on the sale of “killer” video games. The restrictions would create a common set of penalties for retailers, but leave the classification of games up to the member states.

I hardly need to mention that similar laws in the United States have been repeatedly struck down. However, it’s also readily apparent to most people with even the slightest legal background that the US and the EU are very different legal animals.

The EU (as a collective body) does not guarantee free speech, as such. (For those unfamiliar with the workings of the EU, each of the member states still retains their own laws. It would be quite time consuming for me to look for a free speech mandate in each, so I am only going to speak to the EU overall.) The closest they come is Article 11 of the Charter of Fundamental Rights in the European Union, which reads:

Article 11

Freedom of expression and information

1. Everyone has the right to freedom of expression. This right shall include freedom to hold opinions and to receive and impart information and ideas without interference by public authority and regardless of frontiers.

2. The freedom and pluralism of the media shall be respected.

This does sound much like freedom of speech, but even a small amount of research into the state of affairs in the EU shows that it is not as broadly applied as the First Amendment in the US.

It will be interesting to see if these new regulations are put into force in the EU, and if the industry challenges them if they do.

[Update: It appears this issue has been abandoned for the time being. We can only hope it stays that way.]

Disclaimer
The content of this blog is not legal advice.
It only constitutes commentary on legal issues,
and is for educational and informational purposes only.
Reading this blog, replying to its posts, or any other
interaction on this site does not create an
attorney-client privilege between you and the author.
The opinions expressed on this site are the opinions of the author only and not of any other person or entity.

The Sony vs. Church of England Legal Battle, Architectural Copyright

There has been quite the hullabaloo over the Church of England’s response to the use of Manchester Cathedral in Resistance: Fall of Man.

As I don’t yet own a PS3, haven’t played Resistance, and am certainly not an expert in the laws of the United Kingdom, I will direct you to this account of the case. The Wardman Wire does a quite thorough job of explaining the UK legal issues involved.

Interestingly enough, the architectural copyright issue is becoming quite widespread in the US. Since the passage of the Architectural Works Copyright Protection Act of 1990, architects have been granted protection both for the plans and “the design of a building as embodied in any tangible medium of expression.”

What does this mean for game developers? Well, if you put an exact replica of a real building in your game, the architect could come after you for infringement. Remember, a video game, like a photo or a film, is a tangible medium of expression, even if the building in it isn’t a physical building.

Disclaimer
The content of this blog is not legal advice.
It only constitutes commentary on legal issues,
and is for educational and informational purposes only.
Reading this blog, replying to its posts, or any other
interaction on this site does not create an
attorney-client privilege between you and the author.
The opinions expressed on this site are the opinions of the author only and not of any other person or entity.

World of Warcraft Player Sues IGE

The Escapist is reporting on this suit, in which a World of Warcraft player is suing IGE. For those unfamiliar, IGE is a major seller of in game gold for a number of high profile games.

The suit essentially alleges that through their business activities, IGE is diluting the player experience. These allegations are made through a combination of consumer protection laws and interference with the contract of a third party.

The claim is in one way novel and in another way analogous to many other consumer protection claims. However, it will still stand to face the noticeable issue that Blizzard has elected not to pursue legal action in this matter. Arguably, Blizzard, as the purveyor of World of Warcraft, is in the better position to pursue IGE for selling gold as violations of the Terms of Service and License Agreement.

The outcome of this could also be critical to the virtual world, as it may clearly define who really has the power to sue over in-game activities, the game company or the player.

Disclaimer
The content of this blog is not legal advice.
It only constitutes commentary on legal issues,
and is for educational and informational purposes only.
Reading this blog, replying to its posts, or any other
interaction on this site does not create an
attorney-client privilege between you and the author.
The opinions expressed on this site are the opinions of the author only and not of any other person or entity.

Bill Proposed to Exempt Skill Games from the UIGEA

PlayNoEvil.com is reporting that Rep. Robert Wexler of Florida is going to introduce a bill to exempt “games of skill” from the Unlawful Internet Gambling Enforcement Act (“UIGEA“).

What does it all mean, though?

Well, games of skill may or may not have been covered by the original act, which cites “games subject to chance.” Largely, such a bill would clarify what is and isn’t covered by the UIGEA. The major implication is that poker would be carved out of the law’s coverage, but other games like chess, mahjong, and bridge would also be removed.

And so would video games…

…or at least it seems reasonable to assume that most, if not all, would also be carved out.

Of course, it seems likely some significant opposition will arise, as online poker (and the debt people have incurred as a result of online poker) was a major driving force behind the UIGEA in the first place.

However, returning to the video game issue, the vast majority of games are clearly within the realm of “games of skill.” Games of chance are like lotteries, roulette, and slot machines. Most video games employ significantly more skill.

Theoretically (depending on the text of the bill, of course), this would mean a company that allowed players to bet round by round on games of, say, Quake 4 or Halo 3 would be legal, and the payments to and from this system would not fall in the jurisdiction of the UIGEA.

The flip side, however, is that casinos in Second Life would still be problematic if they ran slot machines, roulette, lotteries, or other games of chance.

I want to re-iterate, this bill has yet to be introduced, much less passed or signed into law. We’re still a ways off from what I’ve described, but if you want to be able to place bets on your skills in the next big FPS, you should consider supporting this bill.

Disclaimer
The content of this blog is not legal advice.
It only constitutes commentary on legal issues,
and is for educational and informational purposes only.
Reading this blog, replying to its posts, or any other
interaction on this site does not create an
attorney-client privilege between you and the author.
The opinions expressed on this site are the opinions of the author only and not of any other person or entity.

Bragg v. Linden: Your Virtual Future May Rest On This Case

It’s not often that a critical case can be seen coming before it is decided. However, Bragg v. Linden in federal court in Pennsylvania stands to be possible the landmark case in MMORPG law or virtual law or whatever you would like to call it.

For those who haven’t been following, the basic facts are that Mr. Bragg was a Second Life real estate developer. He bought some land (“Taessot”) for $300. Second Life contacted him soon after saying the land was acquired with an exploit, reclaimed the land, and banned his account.

The court has officially denied Linden’s motion to dismiss and their motion to compel arbitration, negating a portion of the TOS. This means, more than likely, the issue will go to trial. What is the issue? As the court put it:

Ultimately at issue in this case are the novel questions of what rights and obligations grow out of the relationship between the owner and creator of a virtual world and its resident-customers.

So what does this mean to you?

If you are a gamer, you should be paying attention because someone may finally stand to define your rights in the game, the virtual world, or at a minimum in Second Life.

If you are a developer, there are a number of reasons to be paying attention:
1. If you make statements like Linden has about rights in game, how will those assertions operate with your EULA?
2. What rights can players assert regardless of the EULA?
3. How far can a government intervene in your virtual world?
4. If you have an arbitration clause in your TOS, will it suffer the same fate as Linden’s?

I have my own theories on what the answers to these questions might and perhaps should be, but I will save that for a future post. Keep checking back with Law of the Game for more on the Bragg case as it develops.

Disclaimer
The content of this blog is not legal advice.
It only constitutes commentary on legal issues,
and is for educational and informational purposes only.
Reading this blog, replying to its posts, or any other
interaction on this site does not create an
attorney-client privilege between you and the author.
The opinions expressed on this site are the opinions of the author only and not of any other person or entity.

Copyright: What Every Gamer, Developer, and Aspiring Game Developer Needs to Know

A recent UK court decision brought to mind a recurring problem out in the world:A broad misunderstanding of Intellectual Property. As such, I will be posting four articles in the coming weeks, covering Copyright, Trademark, Trade Secret, and Patent. Hopefully, it will help everyone understand what these four very different concepts embody.

The Basics of Copyright

At the most basic level, a copyright is the protection of an expression, not an idea. The famous case of Baker v. Selden solidified that point. In Selden, a series of accounting books had been copyrighted, and the author contended that the copyright protected the accounting system because the books containing the system were copyrighted. The court explained the distinction between copyright and patent, which is simply that copyright protects expression, and patent protects ideas.

The Right of Copyright

Copyright originated in England with the printed word. Today, copyright protects expressions from the written word to the audio recording to the motion picture to software. Copyright itself boils down to a bundle of rights, often compared to a bundle of sticks. These rights include: the right to create copies of the work, the right to distribute copies of the work, the right to create derivative works, and the right to public display/performance. For example, if I wrote a book, I would have the right to grant permission for the publication of that book, or if someone wished to write a continuation using some of the characters, I would be able to allow or stop that work as a derivative.

To get protection, there are typically two requirements: authorship and a work fixed in a tangible medium. In plain English, you have to create something, and that thing has to be a finished product in the real world. A book, a painting, a sculpture, and a movie are all fixed in a tangible medium before release.

Copyright and Video Games

So what does this mean for gaming? Copyright’s application to software is still a relatively young field (compared to the printed word), but on the basic level the rule is the same: Copyright protects the expression, not the idea. This is probably more easily explained through a series of short examples, which will all be video game specific, rather than explain the law word for word. This list is not exhaustive, but it covers many of the bigger issues. Of course, these are all hypothetical examples, and specific facts may have a different result.

1. Making an unauthorized copy of a game and selling it is, quite clearly, infringement. For example, if I burned a copy of Doom II on CD and sold it to you, I would be infringing on id’s copyright.

2. Making a backup copy of a game you own a license to is not infringement. For example, if I made a copy of my Half-Life 2 DVD and put it in my safe, that would be acceptable.

3. Making a backup copy of a game you own a license to and distributing it is infringement, no matter what. For example, if I made a backup copy of Magic of Scheherazade and put that ROM online for others to download, it is infringement even though the game is no longer in production (and a bit hard to find).

4. Copying significant elements of the source code of the game would be infringement, even if the game looked completely different. For example, if Gears of War wasn’t authorized to use the Unreal 3 engine, that would be infringement.

5. Taking a major character from a series and making your own series is infringement, and this includes machinima. For example, if I made “Halo 0: The Cortana Story” to tell the backstory ofCortana, I would be infringing whether that was a video game, movie, book, machinima series, etc. because it is a derivative.

5. A Game Genie (or Action Replay or Game Shark) is not infringement, but a card that plugs into an arcade machine to speed up play is. (It’s a bit confusing, but those are the actual cases.)

6. Copying major element of the GUI (the “look and feel“) may be infringement, but so far, it hasn’t been (although it arguably could have been, were it not for the Windows 1.0 license). This is, unfortunately, a very complicated area that hasn’t been as well defined as other areas. For example, Microsoft Word and Corel WordPerfect both have menus that have File, Edit, etc. This is not infringement. But if I were to make a game that had an identical in game menu and GUI system as World of Warcraft, down to the smallest detail, it would likely be infringement.

7. Example: Reverse engineering Diablo to play on an open source alternative to Battle.net is infringement.

8. Making a game that re-uses a general game idea that is already copyrighted is not infringement. For example, if I were to go make a new golf video game, EA couldn’t claim infringement simply because they already make a golf video game.

Conclusion

As you can see, the concept of copyright is far more narrow than many people think. In the software realm, it is also not as well defined as with other media. It is still important to protect your game, however, with copyright. In fact, it is now even possible to preregister for copyright protection before the work is done. On the other end, as a gamer, it is important to not actively infringe on the copyright of the developer. After all, they put a lot of time and money into creating the game you’re enjoying.

Keep watching Law of the Game for the upcoming basics of Trademark, Trade Secret, and Patent articles.

Disclaimer
The content of this blog is not legal advice.
It only constitutes commentary on legal issues,
and is for educational and informational purposes only.
Reading this blog, replying to its posts, or any other
interaction on this site does not create an
attorney-client privilege between you and the author.
The opinions expressed on this site are the opinions of the author only and not of any other person or entity.

Reminder – Upcoming Event – Dallas IGDA Legal Roundtable

Just a reminder to anyone who may be an International Game Developers Association member in the Dallas area, I will be participating in a legal panel on Wednesday, June 6, 2007.

The panelist biographies are available here.

The event details are available here and reposted below:

Video Games Law Panel
WHEN: Wednesday, June 6 @ 7:00PM
WHERE: HUNTON & WILLIAMS LLP – FOUNTAIN PLACE BUILDING
WHAT: Video game lawyers give insight and answer questions. Free beer!

If you read Law of the Game, please come up and let me know. I am always interested to hear what readers have to say about the site.

Disclaimer
The content of this blog is not legal advice.
It only constitutes commentary on legal issues,
and is for educational and informational purposes only.
Reading this blog, replying to its posts, or any other
interaction on this site does not create an
attorney-client privilege between you and the author.
The opinions expressed on this site are the opinions of the author only and not of any other person or entity.

3 Games and You’ve Got 25 to Life

Making game sales a felony is the latest idea out of a New York legislature so bent on wasting time that they’ve authored dozens of anti-video game bills in the last month. The Constitutional issues have been brought up in other reports, but New York GameStop employees (among others) should really be paying attention. Why?

New York has a “3 Strikes” rule, which was upheld in 2005.

While the law does give some leeway for the sentencing court, it theoretically allows a judge to put someone away for life for selling a copy of, say, Gears of War to a 16 year old who looks 18. Yes, selling a game could come with a life sentence under the new law.

As I have stated before, this is just poor governance. However, to go as far as to make it a felony borders on lunacy. It would only further contribute to prison overcrowding, among other things. Moreover, providing alcohol or tobacco to a minor is generally a misdemeanor and a fine in most states, and there is no penalty for selling a copy of Saw or Hostel to a minor. In any event, the game developer and game retailer attorneys will likely be busy in New York in the coming months considering the determination the New York legislature is showing on this non-issue.

[Update: A reader apprised me of a very recent federal district court decision that may, for the time being, put the New York 3 Strikes rule on hold. However, that doesn’t mean this hypothetical is any less relevant. (And after all, it is merely a hypothetical as the game regulation bill hasn’t yet passed.)
1. The part of the law the district court has issue with could be removed from or modified in the law rather easily by the legislature or an activist judiciary. This would make all twice convicted felony offenders “persistent felony offenders” and eligible for the heightened third strike penalty (rather than allowing the judicial discretion).
2. The district court could be overturned on appeal.
3. The New York legislature could simply pass a new 3 strikes rule modeled on California’s rule, which has already been upheld by the US Supreme Court.

So, while the issue may be (hypothetically) muted for the time being, it is by no means dead.]

Disclaimer
The content of this blog is not legal advice.
It only constitutes commentary on legal issues,
and is for educational and informational purposes only.
Reading this blog, replying to its posts, or any other
interaction on this site does not create an
attorney-client privilege between you and the author.
The opinions expressed on this site are the opinions of the author only and not of any other person or entity.

The Sony Station Exchange Model and Licensing

In my previous article, I outlined the basics of the World of Warcraft and Second Life licensing models, along with a business plan that could be applied in the way Sony has implemented Station Exchange for EverQuest II. This article will take a look at the Sony model and explain an alternative model .

Sony Station Exchange

The Sony model is a basic re-sale of license model. Looking at the Station Exchange Service Agreement (which is incorporated in whole in the EverQuest II EULA), (Emphasis added)

You agree that you do not and will not own anything. You agree that, as between you and SOE, SOE owns all copyrights, trademarks and other intellectual property rights in game characters, items and coin (characters, items and coin are, collectively, “Virtual Goods”). SOE hereby grants you the limited right to transfer and receive the licensed right to use Virtual Goods, in return for real money, solely through the Station Exchange and solely in accordance with this Agreement. AS USED IN THIS EXCHANGE AGREEMENT, THE GAME AND ON THE STATION EXCHANGE SITE, TO “SELL” MEANS “TO TRANSFER TO ANOTHER PERSON THE LICENSED RIGHT TO USE VIRTUAL GOODS IN ACCORDANCE WITH THIS EXCHANGE AGREEMENT;” TO “BUY” MEANS “TO RECEIVE FROM ANOTHER PERSON THE LICENSED RIGHT TO USE VIRTUAL GOODS IN ACCORDANCE WITH THIS EXCHANGE AGREEMENT.” Accordingly, regardless of SOE’s shorthand use of the words “buy” and “sell,” whether in this Exchange Agreement, any game, any message board, on the Station Exchange site or elsewhere, SOE has not granted, is not granting and will not grant you ownership of any Virtual Goods.

“Licensed use” and “licensed right,” among other things, means that your game play, acquisition and use of Virtual Goods — and the transactions you engage in through Station Exchange – are all governed by the provisions of this Exchange Agreement and the Underlying License Agreement and Rules. You agree, therefore, that if you violate any of the provisions of this Exchange Agreement, or any of the provisions of the Underlying License Agreement and Rules, SOE can take any action which it believes is appropriate, including but not limited to terminating your participation in Station Exchange, deleting Virtual Goods associated with any of your accounts, and/or suspending or terminating your accounts entirely.

In short, you still own nothing, but you are allowed to transfer your license in the item for money. You are more or less an intellectual property broker with an odd way of acquiring what you’re “selling.”

Station Exchange and Income Tax

The only other peculiarity of the Sony system is income tax. If you are selling on Station Exchange, this should be the part you pay attention to. As eBayers have discovered, money from auctions is income, and a PayPal account is a real bank account. The difficulty is determining a starting value for the items being sold. I would contend that the correct base value on all items is $0, and as such all money made from them is reportable, taxable income to the IRS. Under this model, you would only have taxable income if and when you sold an item, but selling any item (or character) would generate taxable income, and taxable income must be reported to the IRS.

Alternatives

Solving the Tax Problem

The whole taxable income problem has two solutions a developer could implement, one which seems more likely than the other. The unlikely solution would be automatic withholding on transactions. This, however, puts quite a burden on the developer, not to mention potential liability for tax fraud. The alternative would be to generate quarterly and annual sales reports for each user. This would help the user file correctly without unduly entangling the developer with the IRS.

Alternative License Structuring

The alternative license structure is one I mentioned in my last article. Basically, rather than allowing the player to re-sell licenses, it is to designate the items, characters, etc. as representations of player effort. The player is then re-selling their “time” and “effort” rather than the license to the object. It operates almost like contract labor. Rather than buying the item, I’m retroactively paying you for the time it took you to get the item, as if I hired you to find it to begin with. The only difficulty would be structuring around the general contract principle that you cannot contract for past performance. If this could be solved, then an alternative to the license resale model can exist.

Conclusion

There’s an old saying about there being more than one way to skin a cat. While I’m not a fan of animal cruelty, I do agree that there are usually multiple solutions to any given problem. Here, there may even be more than the two I’ve suggested, these just happen to be the two that most readily came to my mind. As the MMO genre moves more to this economy, more models are always likely to emerge.

Disclaimer
The content of this blog is not legal advice.
It only constitutes commentary on legal issues,
and is for educational and informational purposes only.
Reading this blog, replying to its posts, or any other
interaction on this site does not create an
attorney-client privilege between you and the author.
The opinions expressed on this site are the opinions of the author only and not of any other person or entity.

Alternative IP and Economic Structuring for MMORPGs

Out in the grand expanses of the world wide web, there are really two competing models of IP licensing in the MMO world. The first is followed by the vast majority of games, including the ever-popular World of Warcraft. The other is a more recent development employed by Second Life. After explaining these two in brief, I would like to propose an alternative “middle ground” which could significantly alter the MMO landscape. This IP model is accompanied by a brief discussion of a relevant business model which is closely related.

The World of Warcraft Model

I term this the “World of Warcraft” model, but it historically begins more in the Ultima Online age. The model is basically as follows: The developer provides all content, which is licensed to the user. The user has, basically, no rights under this model. In short, no matter what it took for you to get that Blackfury, the item is merely “on loan” to you from the developer. You can never truly own it. This model is the most popular because it protects the assets of the developer, specifically all the intellectual property that went into the game you’re playing. After years of development, most developers don’t want to chance anyone walking away with even part of their intellectual property.

The Second Life Model

The Second Life model is much different. In short, the developer provides the basics of the world, but it is up to the user to fill in the rest. The upshot to this model is the user owns their IP. The downside, on the other hand, is that to get a truly enveloping storyline like WoW, it takes a user developing one, not to mention the play mechanics to accompany it. For those seeking profit, this model is ideal. For those looking for an adventure, elsewhere would probably be a better choice.

An Alternative?

So, where does that leave the player? If they want an adventure, the WoW model is the choice, but they never truly have any interest in what they’ve accomplished. On the flip side, the SL model gives unlimited ownership, but no pre-written storyline to speak of. The alternative rests in an argument eBayers made for years while selling vitrual goods they did not truly own.

The alternative boils down to drafting a license in such a manner that the player does not own the item he has acquired, rather his effort to acquire it salable. In terms of drafting, there are two likely ways to create this system:
1. Establish a license that acknowledges player effort and allows the sale of player “effort” vis a vis the sale of items.
2. Draft the license in such a way that each individual game property is granted based on a license that is transferable only between players.

Of course, to continue to exert proper intellectual property controls over these licenses, the developer would have to implement something else. Specifically, an integrated real money auction system. Let’s be perfectly honest: People are willing to pay money for characters and items in MMORPGs. Moreover, while the eBay ban has slowed the market, it has by no means shut it down. So, what is a developer to do? Police the market at a high cost?

The alternative here, of course, is to create your own auction. The business model is simple enough: Allow players to list, buy and sell items and characters. Provide for integrated exchange tools in the game. Use an online payment system to automate the process. Put in feedback. Then charge a transaction fee and you’re making an even bigger profit off your MMO monster than your were before. While the coding may be difficult, the reward could be enormous. And such a system would not further entangle your development company with the IRS, in case that was a concern. (Players would be on their own to report MMO profits to Uncle Sam, unless a regulatory change moves all MMO income from ordinary income to gambling winnings.)

Conclusion

In short, it is not beyond the realm of possibility for a developer to legitimize real money trades in games where they wish to retain the majority of the rights to the IP. It would take a concerted effort and more work than the creation of a typical MMO, but the potential profit from such a system seems limitless. Of course, a new, carefully drafted license as noted above would be an absolute must to be sure that the developer’s rights are protected.

[Update: It would seem Joystiq is reading my mind today. In fact, Sony’s StationExchange operates on a similar model to what I’ve suggested here. Check back in the near future for a more in-depth analysis of the Sony model.]

Disclaimer
The content of this blog is not legal advice.
It only constitutes commentary on legal issues,
and is for educational and informational purposes only.
Reading this blog, replying to its posts, or any other
interaction on this site does not create an
attorney-client privilege between you and the author.
The opinions expressed on this site are the opinions of the author only and not of any other person or entity.