We've previously discussed here on the blog the increasing interplay between virtual assets and real-world money. In the coming years, the waves of government regulation and legal action will continue to build amplitude as the virtual assets created within virtual worlds become more easily and profitably converted to real world money. With virtual worlds growing in size and the online gaming player population booming, the development of the law in this area will have wide-reaching ramifications.
The Supreme Court of Korea marked its involvement on Sunday, ruling that virtual currency used in online games may be exchanged for real-world cash.
The ruling was the result of the acquittal of two gamers, who were originally charged with violating a Korean law targeted at online gambling, which banned the exchange of virtual currency for hard currency. The gamers were accused under the law with selling virtual currency know as "Aden" from a game known as Lineage. The Korean Supreme Court held that trading virtual currency for cash should be punished only in cases where it is obtained by online gambling, such as poker or a lottery.
The decision to allow the trading of virtual assets for cash raises the scepter of government regulation of virtual currency exchanges, and of increased scrutiny for the game developers and third party facilitators that run these exchanges. A Korean court ruled in September of last year that profits from the trading of virtual assets should be subject to 10 percent value added tax. As the legal landscape around virtual assets and real world money continues to take shape, don't be surprised if, in the near future, gamers will be considering the legality and tax implications of buying or selling their extra loot.
Wednesday, January 20, 2010
Korea Inches Closer to Virtual Currency
Wednesday, December 30, 2009
Don't Ignore Open Source License Terms
If you embed open source software in a retail game or in gaming hardware, you should be diligent about compliance with the open source license terms. Otherwise, both you and your retailer may be in for an unpleasant surprise.
The Software Freedom Conservancy, the non-profit corporate home of the open-source Linux application BusyBox, and Erik Andersen, one of the program's principal developers, recently filed suit against a number of technology manufacturers and retailers, including Samsung and Best Buy. The suit accuses the defendants of infringing the copyright for Busybox by using the program in consumer products such as DVD players and HDTVs in violation of the terms of its license (the GNU General Public License, version 2).
The complaint, filed the U.S. District Court for the Southern District of New York, claims that the defendants were advised that the terms of the GNU General Public License version 2 only allowed zero-cost use of the software as long as the licensee provided a means to distribute the source code to customers, which the defendants did not provide. Before launching the suit, the complaint claims the plaintiffs alerted the defendants to the alleged non-compliant use, but the defendants ignored or refused to respond to the notices.
In an interesting twist, another early principal developer of Busybox has stated that he is offering a “waiver” of his copyright interest to the affected companies “where appropriate.” He states that the lawsuit is being undertaken without his consent, even though he still holds a copyright interest in the version of BusyBox disputed in the lawsuit. It is unclear what effect, if any, this will have on the lawsuit.
The takeaway here is that companies, including those in the gaming world, should not ignore compliance notices related to open source software. The common misconception (that can lead to a lawsuit) is that open source software is “free.” The reality is most open-source software can be used without paying a license fee, but only if some basic procedures are put in place to remain in compliance with the applicable license. Should you fail to comply, your retailers will not be happy when they are named as co-defendants.
Friday, December 18, 2009
Hasbro and Atari Duel over a Licensing Spat
Hasbro, the owner of the venerable Dungeons & Dragons intellectual property has brought suit against Atari, seeking to terminate Atari's rights to develop video games based on Dungeons & Dragons.
According to Hasbro, the license agreement contained (i) a confidentiality provision that prohibited Atari from disclosing non-public information about Dungeons & Dragons video games to third parties and (ii) provisions outlining minimum customer support requirements.
As outlined in Hasbro's complaint, Atari spun off divisions and went through multiple leadership changes, and then had a subsidiary of Namco Bandai (a key Hasbro competitor) take the reigns of certain Dungeons and Dragons games in certain European countries (thereby disclosing Hasbro confidential information to its competitor). Hasbro also includes in the complaint that it went country-by-country to assess Atari's customer support of Dungeons & Dragons games and found the support lacking.
Hasbro is seeking to terminate the license agreement and also brought claims for fraud and intentional misrepresentation. The complaint was filed in the U.S. District Court of Rhode Island.
Tuesday, November 17, 2009
Court rules Apple software is only licensed on Apple hardware
As we have been covering, Apple brought a suit asserting copyright infringement stemming from PsyStar's sales of non-Apple-Labeled computers with Apple's operating system. This case presents interesting questions about hardware restrictions placed into EULAs and the viability of a copyright misuse defense based on those restrictions.
Last Friday, a Northern District of California court put forth its attempt to answer some of these questions, ruling that Apple could restrict its license of Apple Software through its EULA to only allow installation on Apple-Labeled computers. The court believed the EULA language was a permissible restriction on the use copyrighted software itself, and not an impermissible tying restriction on a good or service outside of the monopoly granted by copyright. The court indicated that Apple could control the use of its copyrighted software through its EULA as long as consumers were not prohibited from using third-party operating systems or buying third-party hardware.
In this regard, the court seems to have taken a fairly limited view of the copyright misuse defense. It is true that the EULA restriction applies to the Apple Software itself, but the restriction also drives certain consumers to buy Apple-Labeled computers who may have otherwise preferred to buy a PsyStar (or another "Hackintosh") in the absence of such a restriction. So, Apple appears to be exerting some measure of control on hardware sales, an area outside the copyright.
There are also antitrust considerations and a public policy in favor of the ability to modify software for purposes of interoperability that arguably could have been considered by the court, but ended up left on the table.
Incidentally, this case bolters Apple's argument that jailbreaking an iPhone results in an infringing act of software copying.
Friday, November 13, 2009
Chinese Agencies Feud Over Regulation of WoW
As Chinese fans of World of Warcraft (WoW) lament the series of shutdowns ordered by the Chinese government, rival agencies continue to squabble over regulatory control of Activision Blizzard's online gaming juggernaut.
The Chinese government's carefully crafted, buttoned-down facade belies the bureaucratic turf war currently being waged by its Ministry of Culture and its General Administration of Press and Publication (GAPP). The two agencies have been vying for control of online gaming oversight since June 2009, and there doesn't appear to be any end in sight.
World of Warcraft was launched in mainland China in 2005 and began steadily building momentum among China's notoriously hard-to-crack gaming community. (Of the top ten online games in China, World of Warcraft is one of only three not produced in China and is the only U.S.-produced game.) Despite the steady accumulation of users (WoW China now boasts a roster of over 50 million individual accounts), Blizzard flew under the radar and operated relatively free of censorship or restriction from Chinese Authorities.
That all changed in June 2009 when Activision Blizzard partnered with provider Netease in order to increase Activision Blizzard's royalties from Chinese revenues. When Netease submitted an application to the Chinese government for permission to relaunch WoW, the Ministry of Culture quickly approved the game while the GAPP dragged its heels. After the Chinese State Council issued a statement supporting the Ministry of Culture's claim of regulatory authority, Netease relaunched the game in September. Predictably taking the Ministry's end-run as a slap in the face, the GAPP subjected WoW to increased scrutiny and ordered Netease to shut the game down on November 2 pending further revision of the game's content.
Historically, the GAPP has enjoyed oversight of publications such as books, DVDs and online games. The Ministry of Culture, on the other hand, has typically scrutinized the performing arts, including audiovisual works. The State Council recognized the potential for administrative overlap with respect to online games and attempted to revise the roles of the agencies in 2008. The GAPP was given authority over pre-release approval of online games, while the Ministry of Culture was assigned the task of policing the games once they went online. The technical issue currently appears to be the appropriate classification of WoW as an existing or new game, in light of the previous changes in content and the switch to a new hosting service.
The GAPP and the Ministry have continuously exchanged fire in the press since the most recent shutdown of WoW, each claiming that the other has overstepped its bounds. As the conflict drags on, it becomes more apparent that each agency sees WoW not so much as an actual violation of China's content regulations, but more as an opportunity to expand that agency's sphere of influence.
Thursday, November 12, 2009
Storm8 and the Hazards of Gathering Personal Information from Gamers
If not done properly, gathering personal data from gamers can bring game developers into the legal crosshairs. For instance, an iPhone game player recently sued game developer Storm8 for allegedly collecting phone numbers without permission from players who downloaded Storm8’s games from the iTunes app store. The complaint alleges the game software automatically collects and transmits the iPhone telephone number of each player back to Storm8, in violation of the Computer Fraud and Abuse Act and California state laws.
Back in August, reports surfaced that Storm8's games transmitted players' wireless numbers back to the company's servers. Storm8 responded that previous versions of the game software had a bug - that has since been fixed.
The lawsuit’s objective appears to be an injunction barring Storm8 from collecting phone numbers in the future. However, even if Storm8 engaged in some unauthorized data gathering, the player still may not have a legally recognizable claim. The Computer Fraud and Abuse Act would require that the player demonstrate how the unauthorized acquisition of the phone number caused damage. In addition, phone numbers alone are generally not considered protectable personally identifiable information under state laws (including California state law), unlike social security numbers or bank account numbers.
Friday, November 6, 2009
Activision Sued by Rock Band No Doubt Over In-Game Avatars
Having only recently rid itself of Gibson Guitar Corp.'s Guitar Hero-based patent infringement lawsuit, Activision probably expected to be able to put away the aspirin for a while. Instead, the game development and distribution giant is facing another headache-inducing suit, this one filed by established pop/rock band No Doubt, which was none-too-pleased to discover that their likenesses are available for use as playable character avatars throughout Activision's new release, Band Hero.
The band's complaint, filed November 4, claims damages for breach of contract, fraudulent inducement and infringement of right of publicity, as well as violations of California's Business and Professions Code, in connection with No Doubt's license agreement with Activision. (Case No. BC425268, in the Superior Court of the State of California for the County of Los Angeles.) According to the band, No Doubt entered into a limited license agreement with Activision in May 2009 with the understanding that the likenesses of the band's members would be used only in connection with gamers' performance of the three No Doubt songs featured in the Band Hero game. Upon the game's release on November 3, it was discovered that each of the band members' likenesses could be used by a player in the performance of any song in the game's catalog.
No Doubt alleges that Activision intentionally withheld this detail of Band Hero's gameplay in order to secure the necessary likeness rights. The band also claims that the universal availability of the avatars within the game is undermining the band's credibility and public image, since that feature allows portrayals of its members engaging in performances that do not reflect No Doubt's artistic style and character.
Activision has stated that, while it has the technical ability to disable or modify the avatar feature, the company feels that it has acted within its contractual rights and will not remove or restrict use of the band's likenesses. (Not surpisingly, Activision's president has also cited a desire to avoid jeopardizing revenue as a factor in the company's stance.)
Likeness rights disputes are a recurring theme for Activision, which is also currently tussling with rocker Courtney Love over the inclusion of late husband Kurt Cobain as a playable avatar in Guitar Hero 5. (Nirvana bandmates Dave Grohl and Krist Novoselic have also weighed in, condemning what they feel is a disrespectful exploitation of Cobain's memory.) And although the company ultimately engaged in a rare show of deference, Activision previously feuded extensively with the estate of Jimi Hendrix over use of the guitar legend's likeness.
We previously addressed right of publicity issues in connection with the video game industry, highlighting the increasing use of celebrity involvement to generate interest in gaming titles. As Activision begins to ruffle feathers more frequently with respect to likeness rights, however, one has to wonder whether the company is in danger of killing a proverbial golden goose. If developers continue the recent trend of making controversial use of celebrity likenesses, at what point will the consequences of the backlash outstrip the revenues generated by those uses?
