Hot Legal Issues In Video Games

The huge economic losses the entertainment business has sustained from unauthorized downloading by consumers has prompted a closer look at growing ancillary areas for licensing entertainment content such as mobile entertainment and video and computer games. And while the video- and computer-games industry has been hit by unauthorized trading by consumers, unlike the record industry, it has also achieved significant growth over recent years.

With this and intensified business competition has come a rise in contested legal issues. To start, music retailers have been decreasing their shelf-display space for music products and instead increasing their video-games sections. What video-game manufacturers claim on product packaging, as well as the effect of shelf placement at retail stores, were at the center of a suit filed by eGames. In an unfair-competition complaint in the U.S. District Court for the Eastern District of Pennsylvania, eGames ' which claims sales of 16 million video games and more than $160 million in income ' alleged that MPS Multimedia overstated in packaging the contents of MPS video games, such as for mahjongg and solitaire.

The district court denied eGames' summary judgment motion on a false-advertising claim. MPS didn't deny that it had made false claims (while stating it had corrected the products packaging). But the district court focused on the retail-store placement of video games, explaining: “Significantly, however, defendants have provided evidence that eGames is not likely to be injured as a result of the false claims. For example, defendants have provided evidence that eGames and defendants' competing games are not likely to be sold side by side. According to defendants, each retail outlet displays and locates games in a different fashion; there is no consistency with respect to how games are shelved. Moreover, games are often disorganized because of customers picking them up to look at the package and not putting them back where they were originally located. Thus, according to defendants, because eGames' and defendants' games are not likely to be sold side by side, the false claims on defendants' games' packaging would have no effect on eGames' games.” eGames Inc. v. MPS Multimedia Inc., 04-5463.

Copyright Infringement Claims

Game manufacturers alleging infringement of copyright face hurdles unique to video- and computer-game products. Specifically, “useful articles” and “functional elements” of a work aren't protected by copyright. These involve elements that have intrinsic utilitarian functions. This cropped up in a suit filed by Incredible Technologies (IT), the maker of the “Golden Tee” video-golf game, which, according to the court, has become more popular than such classic video games as “PAC-MAN” and “Space Invaders.” Defendant Virtual Technologies, which does business as Global VR, developed its own video-golf game by copying button layouts and instructions from the Golden Tee control panel to make Global VR's new “PGA Tour Golf” video game easily playable by Golden Tee users.

The U.S. District Court for the Northern District of Illinois denied Incredible Technologies' request for a preliminary injunction. Affirming, the U.S. Court of Appeals for the Seventh Circuit noted: “That means that the elements of our two games, which are most significant and most clearly similar, are not before us. The trackball system of operating the game is not subject to copyright protection. … In context, it seems clear that what the [district court] judge was saying is that while there arguably are more ways than one to explain how the trackball system works, the expressions on the control panel of Golden Tee are utilitarian explanations of that system and are not sufficiently original or creative to merit copyright protection.” Incredible Technologies Inc. v. Virtual Technologies Inc., 400 F.3d 1007 (7th Cir. 2005).

The appeals court further noted: “As to the instructions, we cannot say that the district judge abused his discretion in finding that the element of creativity is slight and can be protected only against identical copying, which does not exist. The element of creativity in the instructions is less than minimal. Both games use arrows to indicate the direction in which to roll the track-ball in order to obtain certain results. While it is possible that something other than an arrow could have been used to indicate direction, use of an arrow is hardly imaginative or creative in this situation. Also, the designs of the arrow surrounding the trackball differ significantly in the two games as do the graphics showing shot-shaping possibilities.”

The appeals court also found IT's copyright claim hindered by Global VR's use of scenes a faire, which are standard elements that appear in a given subject. On this, the appeals court concluded, “Given that certain items are necessary to making the game realistic, the differences in the presentation are sufficient to make IT's chances of success on the merits unlikely.”

Interactive Creation Case

The interactive capability of video and computer games may raise issues of copyright and trademark rights in pre-existing characters. In one recent case, Marvel Enterprises alleged that the NCSoft Corp. had developed and sold a computer game that enabled consumers to create characters identical to those owned by Marvel including Captain America, Phoenix, Wolverine and The Incredible Hulk. NCSoft moved to have the complaint dismissed, a motion that the U.S. District Court for the Central District of California granted in part and denied in part. Marvel Enterprises Inc. v. NCSoft Corp., 74 U.S.P.Q.2D 1303 (2005). Acknowledging that the defendants' computer game had substantial non-infringing uses, the district court nevertheless allowed Marvel to proceed with its claim contributory copyright infringement, noting: “[W]here a computer system operator is aware of specific infringing material on the computer system, and fails to remove it, the system operator contributes to infringement. A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1021 (9th Cir. 2001). Plaintiffs have alleged that 'Defendants knew or should have known' that many users were committing direct infringement of Plaintiffs copyrighted characters. … Thus, Plaintiffs have alleged that Defendants, as operators of their online computer server system, were aware of infringing material on their system and failed to remove it.”

The district court also found Marvel's vicarious infringement claim to be viable. According to the court: “Plaintiffs have alleged that Defendants 'reap a significant financial benefit by virtue of their increased revenues and increased user base, directly as a result of the ongoing infringements, as players and prospective players become aware that they can unlawfully copy Marvel Characters.' … Plaintiffs have thus clearly pled a causal connection between the alleged infringement by game users, and a financial benefit to Defendants.”

But the district court had mixed conclusions on the viability of Marvel's trademark claims. Though Marvel had registered the Captain America's name, it hadn't registered Captain America's image, which the defendants used with the name “Statesman.” So the court found no likelihood if consumer confusion on Marvel's claim of direct infringement of its registered trademark. The court went on to dismiss Marvel's contributory and vicarious trademark infringement claims because game users weren't exploiting Marvel's trademark rights through sale or advertising and thus there was no primary trademark infringement. Still, the court allowed Marvel to proceed with its claim of direct infringement of common law trademark, indicating, “Defendants are clearly aware of the character over which Plaintiffs claim a common-law trademark, as Defendants themselves refer to a depiction of the character on Plaintiffs' own website elsewhere in their motion.” The district court also found Marvel sufficiently stated a claim for intentional interference with actual and prospective economic advantage by alleging “an economic relationship with third parties Universal and Activision with existing and future benefits for Plaintiffs.”

Thus, as this article demonstrates, the legal challenges for video and computer games are resulting in a series of court rulings helping to define the parameters of the business and creative issues of this thriving entertainment-related industry.

The huge economic losses the entertainment business has sustained from unauthorized downloading by consumers has prompted a closer look at growing ancillary areas for licensing entertainment content such as mobile entertainment and video and computer games. And while the video- and computer-games industry has been hit by unauthorized trading by consumers, unlike the record industry, it has also achieved significant growth over recent years.

With this and intensified business competition has come a rise in contested legal issues. To start, music retailers have been decreasing their shelf-display space for music products and instead increasing their video-games sections. What video-game manufacturers claim on product packaging, as well as the effect of shelf placement at retail stores, were at the center of a suit filed by eGames. In an unfair-competition complaint in the U.S. District Court for the Eastern District of Pennsylvania, eGames ' which claims sales of 16 million video games and more than $160 million in income ' alleged that MPS Multimedia overstated in packaging the contents of MPS video games, such as for mahjongg and solitaire.

The district court denied eGames' summary judgment motion on a false-advertising claim. MPS didn't deny that it had made false claims (while stating it had corrected the products packaging). But the district court focused on the retail-store placement of video games, explaining: “Significantly, however, defendants have provided evidence that eGames is not likely to be injured as a result of the false claims. For example, defendants have provided evidence that eGames and defendants' competing games are not likely to be sold side by side. According to defendants, each retail outlet displays and locates games in a different fashion; there is no consistency with respect to how games are shelved. Moreover, games are often disorganized because of customers picking them up to look at the package and not putting them back where they were originally located. Thus, according to defendants, because eGames' and defendants' games are not likely to be sold side by side, the false claims on defendants' games' packaging would have no effect on eGames' games.” eGames Inc. v. MPS Multimedia Inc., 04-5463.

Copyright Infringement Claims

Game manufacturers alleging infringement of copyright face hurdles unique to video- and computer-game products. Specifically, “useful articles” and “functional elements” of a work aren't protected by copyright. These involve elements that have intrinsic utilitarian functions. This cropped up in a suit filed by Incredible Technologies (IT), the maker of the “Golden Tee” video-golf game, which, according to the court, has become more popular than such classic video games as “PAC-MAN” and “Space Invaders.” Defendant Virtual Technologies, which does business as Global VR, developed its own video-golf game by copying button layouts and instructions from the Golden Tee control panel to make Global VR's new “PGA Tour Golf” video game easily playable by Golden Tee users.

The U.S. District Court for the Northern District of Illinois denied Incredible Technologies' request for a preliminary injunction. Affirming, the U.S. Court of Appeals for the Seventh Circuit noted: “That means that the elements of our two games, which are most significant and most clearly similar, are not before us. The trackball system of operating the game is not subject to copyright protection. … In context, it seems clear that what the [district court] judge was saying is that while there arguably are more ways than one to explain how the trackball system works, the expressions on the control panel of Golden Tee are utilitarian explanations of that system and are not sufficiently original or creative to merit copyright protection.” Incredible Technologies Inc. v. Virtual Technologies Inc. , 400 F.3d 1007 (7th Cir. 2005).

The appeals court further noted: “As to the instructions, we cannot say that the district judge abused his discretion in finding that the element of creativity is slight and can be protected only against identical copying, which does not exist. The element of creativity in the instructions is less than minimal. Both games use arrows to indicate the direction in which to roll the track-ball in order to obtain certain results. While it is possible that something other than an arrow could have been used to indicate direction, use of an arrow is hardly imaginative or creative in this situation. Also, the designs of the arrow surrounding the trackball differ significantly in the two games as do the graphics showing shot-shaping possibilities.”

The appeals court also found IT's copyright claim hindered by Global VR's use of scenes a faire, which are standard elements that appear in a given subject. On this, the appeals court concluded, “Given that certain items are necessary to making the game realistic, the differences in the presentation are sufficient to make IT's chances of success on the merits unlikely.”

Interactive Creation Case

The interactive capability of video and computer games may raise issues of copyright and trademark rights in pre-existing characters. In one recent case, Marvel Enterprises alleged that the NCSoft Corp. had developed and sold a computer game that enabled consumers to create characters identical to those owned by Marvel including Captain America, Phoenix, Wolverine and The Incredible Hulk. NCSoft moved to have the complaint dismissed, a motion that the U.S. District Court for the Central District of California granted in part and denied in part. Marvel Enterprises Inc. v. NCSoft Corp. , 74 U.S.P.Q.2D 1303 (2005). Acknowledging that the defendants' computer game had substantial non-infringing uses, the district court nevertheless allowed Marvel to proceed with its claim contributory copyright infringement, noting: “[W]here a computer system operator is aware of specific infringing material on the computer system, and fails to remove it, the system operator contributes to infringement. A&M Records, Inc. v. Napster, Inc. , 239 F.3d 1004, 1021 (9th Cir. 2001). Plaintiffs have alleged that 'Defendants knew or should have known' that many users were committing direct infringement of Plaintiffs copyrighted characters. … Thus, Plaintiffs have alleged that Defendants, as operators of their online computer server system, were aware of infringing material on their system and failed to remove it.”

The district court also found Marvel's vicarious infringement claim to be viable. According to the court: “Plaintiffs have alleged that Defendants 'reap a significant financial benefit by virtue of their increased revenues and increased user base, directly as a result of the ongoing infringements, as players and prospective players become aware that they can unlawfully copy Marvel Characters.' … Plaintiffs have thus clearly pled a causal connection between the alleged infringement by game users, and a financial benefit to Defendants.”

But the district court had mixed conclusions on the viability of Marvel's trademark claims. Though Marvel had registered the Captain America's name, it hadn't registered Captain America's image, which the defendants used with the name “Statesman.” So the court found no likelihood if consumer confusion on Marvel's claim of direct infringement of its registered trademark. The court went on to dismiss Marvel's contributory and vicarious trademark infringement claims because game users weren't exploiting Marvel's trademark rights through sale or advertising and thus there was no primary trademark infringement. Still, the court allowed Marvel to proceed with its claim of direct infringement of common law trademark, indicating, “Defendants are clearly aware of the character over which Plaintiffs claim a common-law trademark, as Defendants themselves refer to a depiction of the character on Plaintiffs' own website elsewhere in their motion.” The district court also found Marvel sufficiently stated a claim for intentional interference with actual and prospective economic advantage by alleging “an economic relationship with third parties Universal and Activision with existing and future benefits for Plaintiffs.”

Thus, as this article demonstrates, the legal challenges for video and computer games are resulting in a series of court rulings helping to define the parameters of the business and creative issues of this thriving entertainment-related industry.