Ok... who remembers this: Up, Up, Down, Down, Left, Right, Left, Left, B, A, Start? The hard-core (old-school) gamers should instantly spot the typographical error in this classic Contra cheat code. Many legal commentators believe section 365 of the United States Bankruptcy Code contains such a mistake, as well, which could have significant ramifications on intellectual property licenses entered into between developers and publishers.
Section 365 permits bankrupt companies to (i) assume contracts (meaning to retain the benefits and obligations as if the bankruptcy never occurred); (ii) assume and assign contracts to third parties or (iii) reject most types of contracts. The ability to pick and chose which contracts to keep, which to sell, and which to dismiss is a critical element of most successful reorganizations.
A potential problem arises with Section 365 with respect to contracts that are not assignable under non-bankruptcy law (and one major category of such types of contracts are certain intellectual property licenses that would be commonly entered into between developers and publishers).
Because those types of contracts are not assignable under non-bankruptcy law, the Bankruptcy Code provides that a bankrupt company cannot assign such contracts.
However, the exact language of Bankruptcy Code states that the bankrupt company cannot “assume or assign” such contracts. Reading this provision literally, several courts (including a few federal Circuit Courts of Appeal) have held that the bankrupt company is not only prohibited from assigning the contract... but also prohibited from retaining the contract for itself. Other courts and some legal commentators suggest that inclusion of the phrase “assume or” is an unintentional mistake by Congress that should be ignored because it is illogical to prevent a bankrupt company from assuming a contract when it does not intend to assign it and may prohibit bankrupt companies that rely heavily on intellectual property licenses from reorganizing.
Last week, the United States Supreme court denied certiorari in a case in which this issue might have been clarified once and for all. However, in a statement accompanying the denial of cert, Justices Kennedy and Breyer recognized the split of authority and the importance of the resolution of this problem.
As game publishers, who rely heavily on intellectual property licenses from developers, consider bankruptcy as a means of reorganizing and attempting to regain their footing, it will be important to watch this issue.
Friday, March 27, 2009
Tip: Bankruptcy -- The Economy Says You Can't Ignore It
Thursday, March 26, 2009
And like that... poof. It's gone.
The governer of Utah decided that the Utah HB governing the sale of age-rated games (see my earlier post) was a violation of the U.S. Constitution. Thus, the governor vetoed the bill.
Wednesday, March 25, 2009
ADC v. Microsoft Update
ADC Technology, based in Nagoya, Japan, launched a patent infringement suit in October, 2008, against Sony, Microsoft, and Nintendo, accusing them of infringing five ADC patents relating to interactive communication in video games. The U.S. District Court for the Western District of Washington on Monday granted ADC’s voluntary motion to dismiss Sony, leaving only Microsoft and Nintendo as the remaining defendants. ADC alleges that the Xbox 360 video game console (with Xbox Live) violates five, and the Wii, three, of the patents at issue.
ADC is asserting Patent Numbers 6,193,520, 6,488,508, 6,702,585 and 6,875,021, all titled “Interactive communication system for communicating video game and karaoke software”; and Patent Number 5,775,995 titled, “Interactive communication system for communicating video.”
The patents describe a remote distribution system that allows customers to download software for use on devices and charges those players a fee for using the downloaded software. The case is still in its early stages and it will be interesting to see how each of the parties argue how the patents should be interpreted and what they end up covering. We'll keep you updated as things unfold.
Patent Re-Exams
While I can't go into specifics, I can say that we (Haynes and Boone) are one of the most prolific filers of patent re-examinations in the country. For those of you that haven't dealt with patents much, a patent re-examination is a filing with the U.S. Patent Office to request that they take a second look at the validity a particular patent.
In recent years this has become a highly successful strategic tactic in patent disputes.
As we've mentioned in the past, (in this blog post and in this paper) patent lawsuits are exploding across the video game arena. With this rise of lawsuits, I would also expect the desire for re-exams to increase, as well. When considering filing a re-exam, there are numerous aspects to contemplate, but an important one is timing. The timing for filing impacts the ability for you, as the (potential) defendant, to halt the litigation while the patent is being re-examined. Judges are more likely to consider halting the trial if your re-exam is filed earlier, rather than later, in the litigation process.
For additional information about re-exams and re-examination strategies, here are some links to some informative discussions:
Patent Reexamination With Litigation, Strategies and Practice Tips
The New Role of Reexamination in Patent Litigation
Friday, March 20, 2009
Utah Gaming Bill HB0353
Another video game law is poised to come into being. Utah's State House and Senate have approved HB0353 and submitted it to the governer for signature (or veto). If the governor signs it, then the law will go into effect January 1, 2010.
Here's a quick summary of the bill:
HB0353 amends Utah's Truth-In-Advertising statute, which enumerates the different acts that can constitute a deceptive trade practice. HB0353 adds that a deceptive trade practice occurs when, in the course of a person's business, vocation, or occupation that person (i) advertises that the person will not sell a good or service labeled with an age restriction or recommendation to a person under the age restriction or recommendation; and (ii) sells that good or service to a person under the age restriction or recommendation.
In other words, it sounds like the bill is attempting to go after retailers and movie theaters that don't ID purchasers when the product is labeled with a certain age range.
It is not clear, though, how a retailer should advertise that they will not sell a good with an age restriction. It is not black and white to me if the mere existence of an age restriction label is sufficient to trigger this statute, or if the advertiser needs to do more.
Thursday, March 19, 2009
"Bilski!"
For all you Seinfeld fans out there, whenever I refer to the Bilski case, I say it as Seinfeld would say "Newman!" (and yes, I also do it with a clenched fist). Bilski!
In re Bilski is a fairly recent case in the patent world that the patent examiners, the Board of Patent Appeals and Interferences, and Federal Circuit are using to reject/invalidate software patents left and right. Its like a giant scythe sweeping across the software patent grainfield.
As other posts have shown, patent litigation in the video game arena has seen a marked rise, but I have to believe that the post-Bilski rulings are going to start having an impact on the patent litigation in the video game world.
Patents involving online worlds, in-game interactions, and networking may all face extra strutiny in the face of Bilski. Because of this, focus and care should be paid to the initial drafting and filing of software-related patents. At least, though, new applications will have the benefit of a several year wait before the Patent Office reviews the application -- hopefully, the post-Bilski cases will have settled down by then. On the other hand, for patent applications currently undergoing prosecution in the Patent Office, there are a frightening number of cases coming out of the Patent Office rejecting claims previously considered patentable subject matter. Even more disconcerting is that each subsequent decision seems to further narrow the subject matter permitted to be patentable, leaving the patentee in an uncomfortable position of "even if I get some claims allowed... will the next case from the Patent Board invalidate me anyway?"
There is no indication that this slippery slope of invalidity will stop anytime soon. Until then, monitor the new cases as they come out and bob-and-weave as the Patent Office throws haymakers. Oh... and don't forget to join me in a cry of "BILSKI!".
Wednesday, March 18, 2009
Tip: Spinning out of Control
As companies consider spinning off subsidiaries or divisions (read: developers), generally in an effort to get a cash infusion or to sell off an underperforming portion of its business, it is important to remember that this transaction is not the equivalent of wrapping a red ribbon around a box and handing it off to a buyer.
One of the most important issues to consider when separating two companies (whether sister entities, parent-child, or just a division) is to determine "what stays" vs. "what goes." A classic example: who owns the development tools? Often, the development tools are used by both the parent and the division -- do they both get to use the tools after the separation? What about the source code of the development tools? Are there development libraries, stock animation or photographs, or sound effects? "What stays" vs. "what goes" often turns into "who owns" and "who gets a license".
The issues themselves generally are not complicated, but if you don't address them on the front-end, it can cause things to get really complicated down the road.
Friday, March 13, 2009
Tip: File Early. File Often?
Want to be the first to hear about a new game? Just monitor the filings at the U.S. Trademark Office. Smart game companies know that it’s important to apply to register the IP associated with a new game even though the game itself is still in secret development. Otherwise these companies risk unpleasant surprises down the road, such as someone else filing the trademark or registering the domain name. Failing to take appropriate steps to protect IP early enough can result in costly changes late in the development and marketing stages of a new game.
So, who's filing these early applications? Well, Activision-Blizzard, the publisher behind Guitar Hero, has just filed a trademark application for “Sing Hero” for "interactive video game programs."
Or, check out the newest application for “Your Game Here” from Take-Two Interactive, publisher of the Grand Theft Auto series. Their new trademark for “Your Game Here” is intended to cover, among other things, “computer game programs for video game consoles” and “on-line computer games.”
And, Microsoft has begun the process of registering a trademark for “Astuto” in the field of “providing an on-line magazine and web site featuring information in the field of computer games.”
Lastly, a word of caution about reading too much into these filings. Just because a publisher applies for a trademark doesn’t mean a new game is hitting store shelves any time soon. For example, Activision-Blizzard also applied for the marks “Drum Hero” and “Keyboard Hero” back in April of 2006, and there has been no additional word of an actual game since then.
Monday, March 9, 2009
Fight for your Rights
In my last post, I talked about the value of protecting the intellectual property in your characters. In this post, I want to talk about the other side of the negotiating table: where you are asking for permission to use someone else's intellectual property.
When you are becoming a licensee of someone else's intellectual property, a common mistake is to negotiate only for the rights you think you need today. With the rate at which technology changes, getting a limited license today ends up meaning that you are re-negotiating tomorrow. And, re-negotiating generally translates into "pay more money."
So, make sure that you think about rights to do DLC, expansion packs, sequels, spin-offs, movies, toy lines, DVDs, machinima, books and merchandising (and more). If you don't ask for it and get it, chances are you'll have to, ahem, re-negotiate.
Wednesday, March 4, 2009
Master Chief is Back! (Sort of...)
Ok. I admit... the headline is over the top. No one has announced a Halo 4 (yet?), although The Halo franchise development director Frank O'Connor was quoted as saying "I doubt we have seen the last of Master Chief."
So, why do I bring that up?
I want to highlight a different facet of intellectual property protection. The name "Master Chief" resonates with consumers, as well as pictures of the iconic character, and both the name and photographs are available for intellectual property protection. In fact, if you search the Copyright Office web site and the Trademark Office web site, you'll find filings for each by Microsoft.
Sometimes the focus on protection is on the guts of a game (e.g., the code, the trade secrets) while losing sight of protecting the intellectual property that faces your customers. Filing for copyright and trademark protection on elements of the game may be a far more valuable exercise than obtaining protection on the code itself. For example, protecting your characters can help prevent theft of your intellectual property and facilitate licensing arrangements.
Don't get me wrong, though... obtaining protection for the code is also important and should not be overlooked, either.
