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Sitting here, composing a profile for a blog on creativity and the law, I can’t help but recognize the irony of my overwhelming writer’s block. But, here we go…Although I wish I could say my path to the law was the result of a lifelong dream or calling, it was more the result mere curiosity and an affinity for leather-bound books. My gravitation towards intellectual property law, specifically, was probably less accidental, given the immeasurable impact of being a college student during the Napster® era. I’m the product of a modest, small-town Minnesota upbringing combined with some polish from a diverse educational background. I received my engineering degree from the University of North Dakota and then, on a whim, moved to North Carolina to attend law school at Duke University. The drastic temperature swing was certainly not the only difference between the two locales, and come to think about it, the only real similarity is probably the word “North.”

An engineer by training, I appreciate both quantitative and qualitative valuation. These two concepts collide head-on in IP law, creating what is, in my humble opinion, the most entertaining and exciting area of law. As we move towards an information-based economy, the laws which govern the incentivization, protection and distribution of information will only become more important.  I see IP law as the front line.

When I’m not focusing on the law, I can typically be found (WARNING: stereotype coming) on the golf course. I also enjoy skiing (downhill and water). Unfortunately, as is the case with most hobbies, my skill level has not yet caught up to my enthusiasm. Perhaps when I retire...

This post is a follow-up to my post a couple weeks ago regarding the Zenimax v. Oculus case.  As expected, Zenimax filed its motion for an injunction on February 23.  The motion itself pulls no punches.  It directly and angrily argues that Oculus’s entire business was built on Zenimax’s intellectual property.  At the same time, Zenimax also filed its motion to have judgment entered on the jury verdict, which as I mentioned in my earlier post is a first step in transforming the jury verdict into something that Zenimax can attempt to collect on.  Both documents provide interesting insights into the case.  Some highlights:

1.  While the requested injunction covers a lot of different things, the real nuclear component of the requested injunction is stated as follows:

Defendant Oculus is permanently enjoined, on a worldwide basis, from using, marketing, selling, distributing, modifying, servicing, copying, or offering for sale or license any products, in whole or in part, that utilize in any form or for any purpose any of the Copyrighted Materials, including but not limited to (i) system software for Oculus PC (including the Oculus PC SDK); (ii) system software for Oculus Mobile (including the Oculus Mobile SDK); (iii) Oculus integration with the Epic Games Unreal Engine; and (iv) Oculus integration with theUnity Technologies Unity Game Engine.

This is really the teeth of the injunction, as it would basically put Oculus’s entire business on hold.  It will also be the most difficult thing for Zenimax to obtain.  Perhaps realizing his, Zenimax requested a 20% royalty on all future sales for ten years in the event the Court did not believe an injunction should be issued.

2.  Zenimax is seeking prejudgment interest on a variety of different parts of the money judgment.  This interest is substantial.  According to Zenimax’s calculations, if judgment were entered today, the prejudgment interest should be approximately $78,797,000.  Post judgment interest would also accrue during the pendency of the appeal, although the post-judgment interest rate for federal court judgments currently sits at a paltry .83%.

3.  Zenimax is also requesting an award of its attorneys’ fees, which it estimates at $40,000,000.

Thus, as you can see, the financial and existential stakes for Oculus are only getting higher.

 

Many of you interested in the video game and media industry have undoubtedly heard that Oculus recently lost a jury trial to Zenimax which resulted in a $500 million jury verdict.  However, what many (or at least some) of you don’t know is that a jury trial really is only a first step in the world of high stakes civil litigation.  Here’s what’s going to happen next.

1.  Additional fencing in the district court

While its not the same in every case, a jury verdict is usually recorded in something called the Court’s Charge to the Jury, or a Verdict Form.  In this case, for example, the jury returned its verdict in a “Charge to the Jury” form which included a series of instructions from the Court about the law, and some questions which were then filled out by the jury.  A copy of the 90 page form with the handwritten jury responses is here for those who are interested in seeing what it looks like.  Now that the jury has returned the verdict, the parties will likely end up filing a variety of “post-trial motions” which will argue about things like whether the evidence presented at trial actually supports the jury’s verdict, and whether the court should have let in or excluded particular evidence over the course of the trial.  Oculus may even claim it is entitled to a new trial.  Not until after all of these issues are resolved will there be an actual judgment for the $500 million which Zenimax can try to collect on.

2.  The likely appeal

Even after the district court enters its judgment, the parties will still have the right to appeal to the United States Court of Appeals for the Fifth Circuit.  The arguments that will be made here will very likely be similar to arguments made in the post-trial phase before the district court (i.e. the evidence didn’t support the verdict, there were improper decisions made about which evidence the jury could see and hear, or the court instructed the jury improperly on the law).  Depending on how the appellate court views the matter, possible outcomes include a new trial or an alteration to the damages amount.  If the parties are unhappy with the Fifth Circuit’s decision, they can ask the United States Supreme Court to review it, although it would be very unlikely that the Supreme Court would take the case.

3.  The post-trial  posturing

Even after a trial, there are still likely to be discussions between the parties about how to resolve the matter without further litigation.  Each party is also likely considering various legal and strategic options to improve its position in the marketplace.  By way of example, Zenimax has stated it intends to seek an injunction which, in this case, would be a Court order prohibiting the sale of Oculus headsets.  Zenimax could theoretically seek a “permanent” injunction, which would bar sale of the headsets for a substantial period of time, or it could at least seek an injunction pending the resolution of any appeals.  Depending on Zenimax’s success with this motion, it could substantially damage Oculus’s business.  This might lead Oculus to pay the $500 million judgment (and more) to get the matter resolved immediately.  It might also damage Oculus to the point that it has no reasonable alternative but to sell its business to Zenimax.  Interestingly, one of the defense arguments during the trial was that Zenimax brought the lawsuit because it was embarrassed about its prior decision to pass on an opportunity to acquire Oculus.  With an injunction hanging over Oculus’s head, Zenimax could realistically get a second chance to acquire Oculus at a very reasonable price.

As we often say in the legal profession, litigation is a process not an event.  This case is a perfect example of that cliché playing out.  Now that the trial has concluded, the real fun is about to begin.

The cause and effect relationship between art and culture has been a long-debated topic.  Does art depict what actually exists in our culture, or does the art dictate what exists.  It’s a classic chicken/egg debate.   And this ongoing debate occasionally rears its head in the video game space in the form of criticisms, and even lawsuits, suggesting that violence in video games begets violence in real life.  There are loud voices on either side of this debate.

Perhaps the most famous video game violence lawsuit came after the Columbine school shooting tragedy.  In that case survivors of a teacher that was shot and killed by Dylan Klebold and Eric Harris sued a bunch of media sources, including video game companies Acclaim Entertainment, Activision, Apogee Software, Atari, Capcom Entertainment, Eidos Interactive, ID Software, Nintendo, Sega, and Sony claiming that they were liable for having manufactured and supplied violent video games which included Mortal Kombat, Wolfenstien, Mech Warrior, Nightmare Creatures, Doom, Resident Evil, Final Fantasy, and Quake.  According to the Complaint, these games “made violence pleasurable and attractive and disconnected the violence from the natural consequences thereof, thereby causing Harris and Klebold to act out the violence… and trained them how to point and shoot a gun effectively without teaching either of them any of the constraints, responsibilities, or consequences necessary to inhibit such an extremely dangerous killing capacity.”  Interestingly, the lawsuit sought $5 billion in damages, while the families of the victims had reached a $2.5 million settlement with those responsible for providing the real life guns used.  The Court dismissed the claims after concluding, among other things, that “there is no basis for determining that violence would be considered the likely consequence of exposure to video games or movies” and “imposing liability would “burden these Defendants’ First Amendment rights to freedom of expression.”  See Sanders v. Acclaim Entertainment, Inc., 188 F. Supp. 2d 1264 (D. Colo. 2002).  The Sanders lawsuit was filed in 2001 and was actually the second lawsuit that accused video game manufacturers of being responsible for school shootings.  The first was filed in 1997 and related to the Heath School Shooting in Kentucky. Since those lawsuits, there have been other various legal skirmishes arising primarily from efforts to limit access to such games.  Those efforts have generally resulted in the laws being found unconstitutional.

There have been various studies over the years concluding that violence in video games or other media do not cause real world violence.  Erik Kain at Mother Jones has done a fairly exhaustive summary of the science.  However, as with a lot of issues in our society, science doesn’t necessarily end the debate.  Notably, according to the Kain article, President-elect Trump previously tweeted that “Video game violence & glorification must be stopped–it’s creating monsters!”  We can reasonably expect that video games will be part of the debate anytime people are looking for reasons behind an incomprehensible tragedy.  That may ultimately result in a misguided effort to regulate the gaming industry, but for now, the science and the courts are against this.

In 2014, the United States Supreme Court issued its decision in Alice Corp. v. CLS Bank, Inc.  While the decision is long and convoluted, the Alice decision effectively narrowed the scope of patentable subject matter by holding that algorithms, computational methods, and other mathematical principles are not eligible for patent protection where the purported invention essentially equates to instructing an existing generic computer to implement those abstract ideas.

Since the Alice decision came out, scores of software related patents have been invalidated based on Alice.  One author researched and concluded that 286 out of 345 patents that had appeared in front of Courts had been invalidated by June, 19, 2015–just one year after the Alice decision.  This represented an invalidation rate of 82.9% which, if applied across the full range of the approximately 240,000 patents that rely on computer implementation, suggests that only about 41,000 of those patents likely remain valid.

The video game industry is likely to see significant changes as a result of the Alice decision.  Two relatively recent and notable cases include Acceleration Bay LLC v. Activision Blizzard Inc. and White Knuckle Gaming v. Electronic Arts.  In the first case, Activision recently filed a motion to invalidate patents covering technology that allow players to connect and communicate inside the game.  The second case is currently being appealed to the Federal Circuit, but EA successfully convinced the district court that a patent relating to updating sports information in video games with real time states was invalid under Alice.

The lessons for game developers are two-fold.  First, don’t expect to obtain patent protection unless you are also developing specialized hardware which may be patentable.  And two, have your attorneys take a long hard look at any patents that are threatened against you or which are otherwise causing you concern.  There may be a good possibility that the patent is unlikely to survive  an Alice-based challenge.

Credit: NintendoUnless you’ve been living under a Geodude this past month, you’ve no doubt been exposed (either willingly or unwillingly) to some part of the current social media/mobile gaming sensation, Pokemon GO.  Niantic’s new “catch ’em all” treasure hunting mobile game is lighting up Charmander tails across the globe with approximately 75 million downloads and roughly 25 million daily active users.

Since I’m an attorney that loves video games, and since people seem to like lists, I figured I’d take some time to set out my “Top 5” list of potential legal issues arising in connection with Pokemon GO.

1.  When you click “I Agree” before downloading the app, you are likely creating a binding contract containing the Pokemon GO Terms of Service.

If you’re like most people, whenever you download any sort of software program or app, you quickly breeze through the download and install screens, indiscriminately agreeing to whatever is necessary to start the download and install.  You should know that by doing this, you are actually agreeing to a legally binding contract.  These contracts are called “Click Wrap Agreements,” and they are generally enforceable.  Thus far, it is not a valid defense to say “Nobody reads those things.”  The only real defense to a properly deployed click wrap agreement is to claim that the terms are unconscionable, and that’s a very difficult row to hoe

2.  You are potentially letting Niantic into your bedroom, literally.

Similar to a lot of apps, the Terms of Use for Pokemon GO give the developer a great deal of access to your information.  In addition to the GPS and other location data used to play the game (which Niantic has broad authority to log, store, and use), the Terms of Service provide Niantic with:

a nonexclusive, perpetual, irrevocable, transferable, sublicensable, worldwide, royalty-free license to use, copy, modify, create derivative works based upon, publicly display, publicly perform, and distribute your User Content in connection with operating and providing the Services and Content to you and to other Account holders.

Accordingly, when you’re suffering from insomnia and happen to capture a Clefairy while waiting to capture some Z’s, the image that is generated through your phone’s camera can likely be used by Niantic.

3.  It doesn’t matter if Pikachu is hanging out in your neighbor’s backyard.  If you go on his or her property without permission, you are trespassing.

Under the law of most states, entry onto private land without the permission of the property owner is both criminal and civil trespass.  Most states also allow a defense of justification if the trespass were necessary to avoid some greater harm from occurring.  (Think taking shelter from a life threatening storm.)  However, the presence of a moderately rare, or even incredibly rare Pokemon has never been, and will likely never be, a valid justification.  It’s also important to note that permission to be on property can be conditional and is revocable; I could allow people on my property to bird watch, but I could kick them out if they tried to steal my Dragonite.

4.  Although it’s tried to effectively disclaim liability for any conceivable harm suffered by its gamers, Niantic could be liable under certain circumstances.

As with many contracts, the Niantic Terms of Service contain expansive liability waivers intended to insulate it from any and all lawsuits or damages claims arising if someone dies or is dismembered playing the game.  However, California law (which governs the Terms of Service) doesn’t generally allow the disclaimer of reckless or willful conduct.  Thus, if Niantic had reason to know that gamers were likely to walk off a cliff while playing the game, but still allowed Pokemon to spawn 5 feet past a significant precipice, they could potentially be liable for harm that results.

5.  Unless you were paying attention and opted-out of the arbitration agreement found in the Niantic Terms of Service, you have likely waived your right to ever sue Niantic in court or participate in a class action lawsuit.

This is probably the most boring topic of the Top 5, but perhaps the most important.  The Niantic Terms of Service, like many click wrap agreements, contain a mandatory arbitration provision for any disputes you may have with the company.  While arbitration is not inherently worse than court proceedings, most people like to at least preserve the option to sue in a court of law if it becomes necessary.  To preserve that right in connection with Pokemon GO, a written notice had to be submitted to Niantic pursuant to its Terms of Use within 30 days of downloading the app.  If you snoozed, you lose.

While I could go on, it’s getting late and I’ve got monsters to catch and demons to slay.

Video games have been an existing and growing component of popular culture for my entire life.  I literally cut my teeth on the Atari 2600 while I was still a toddler.  From there I spread into bowling alley arcades, Nintendo, PC Games, Playstation, Nintendo 64, Playstation 2, Playstation 3, and Playstation 4.  Over that time, the gaming industry grew in popularity, volume, and innovation.

Over the past several years and over the following few years, there have been and are likely to be significant new developments that are going to expand the gaming industry even further.  Simply put, its an exciting time to be alive for a “gamer.”  So called eSports appear to be gaining a significant foothold such that they will be regularly broadcast on TBS on Friday nights.  Vegas is “looking to video games” to bring in a new crowd of gamblers.  And it appears that hardware and software capabilities are almost finally to the point where VR games are something people will actually want to play.

The rise of the games is also an exciting time for the legal profession.  Each of these new avenues of gaming promise to provide new and interesting legal issues.  For example, top gaming talent is likely to end up working with agents similar to sports stars.  The gambling angle is likely to raise tricky legal issues regarding whether the games are “games of skill” or “games of chance.”  And one can only start to imagine the issues that will begin to arise in an entirely virtual world.  (“Virtual infringement,” anyone?)

Being both a gamer and an attorney, I’m excited for the possibilities, and I’d love to hear from any readers with thoughts on what they think the future may hold.

Tomita Technologies USA, LLC was handed a devastating loss earlier this week in its long-enduring battle with Nintendo over stereoscopic (i.e. 3D) image technology.  Back in 2013, Nintendo lost a patent infringement jury trial in the Southern District of New York and was ordered to pay $30.2 million in damages to Seijiro Tomita, the inventor of United States Patent No. 7,164,664.  Roughly speaking, the ‘664 Patent provides a way to display 3D images without the need for 3D glasses.  Tomita had accused Nintendo’s 3DS system of infringing the patent.

Nintendo appealed the original jury verdict to the United States Court of Appeals for the Federal Circuit.  The Federal Circuit then reversed the construction of a critical claim term underlying the original judgment, which required a new trial in the district court.  The district court concluded in the new trial that Nintendo did not infringe the patent because the means by which the 3DS accomplished its stereoscopic image was different (and frankly, more sophisticated) than the means disclosed and claimed in the ‘664 patent.

Ultimately, Tomita lost in this case as a result of something known in patent law as “means-plus-function” claiming.  Dennis Crouch over at Patently-O previously did a nice summary of the what “means-plus-function” claiming is, and why such claiming is starting to fall out of favor with patent applicants.  When you draft a patent claim that identifies a functional attribute of your invention, the protection of the patent is generally limited to the particular structure you have used and disclosed to accomplish this function.  Tomita’s invention depended primarily on hardware components to accomplish the image offset function, whereas Nintendo relied primarily on software algorithms.

Aside from resulting in a bad day for Tomita, this lawsuit highlights again the difficulties that we are currently facing with regards to intellectual property protection for functions that are accomplishable with software.  As it currently sits, the United States does not have any clear protection scheme for protecting software rights.  Rather, software is “protected” through a mishmash of patent, copyright, trademark, and trade secret law, none of which were truly designed to work for software.  (See here.)

Our intellectual property regime also has problems with trying to protect inventions in a world where technological capabilities are expanding at break-neck speed.  Often times, important inventions from the “analog” world can be replicated through software or digital means and in the case of a “means-plus-function” patent, that will frequently be sufficient to avoid infringement.  At some point, we need to make a policy decision as to whether we think this is okay.

To be clear, I’m not suggesting that the differences between the Nintendo and Tomita functions were merely one using software while the other used hardware; there appeared to be additional differences as well.   However, I think a case like this presents a good opportunity to ask the questions about how intellectual property rights should be considered in our environment of constantly evolving technological capability.  We need to find a new balance between incentivizing invention without creating undue obstacles to innovation.

Recent developments have brought to the forefront the ongoing debate about what rights, if any, gamers should have or own in their online personas or in the contributions that they make to games through their gameplay contributions (i.e. is the participation by the player an act of “authorship”)?

On April 7, 2016, Mike Futter at Game Informer reported that Blizzard had sent cease and desist letters to the ISP of an unauthorized World of Warcraft server that allows users to “capture older game states.”  He concluded (probably soundly) that:

The Nostalrius petition essentially asks Blizzard to forego revenue related to its brand and products so that people can circumvent subscriptions. The document admits that there might be copyright issues while the group also claims it didn’t see itself as a threat to the publisher. I don’t expect Blizzard to budge on this, nor should it for the sake of protecting its brand.

In January of this year, Patrick Klepek at Kotaku noted that Nintendo had been deleting Mario Maker Stages that were created by players, without advising as to the reason.

In both cases, its likely that the dry, fun-hating intellectual property attorneys (*sarcasm*) representing the game developers adequately zipped up the situation in the terms of service or terms of use accompanying the games.  For example, it appears that the terms of service for World of Warcraft specifically precluded unauthorized servers, and it appears Nintendo effectively gave itself complete control over any courses uploaded by players.  But while Nintendo and Blizzard both likely have the law on their side in these instances, its reasonable to debate whether that should be the case.  As I’ve mentioned previously, video games and other media are moving beyond passive consumptions.  In many cases,  consumers or gamers are making real contributions to the popularity and value of the games.  As a video gaming community, should such people have rights to their contributions, notwithstanding the fact that the contribution was enabled by someone else?

Fans of the Metal Gear Solid franchise received disappointing news earlier this week when Project “Shadow Moses”–an ambitious fan reboot of the original game using Unreal Engine 4–was canceled.  A trailer showing the progress of the project prior to its termination is below:

This would have represented a significant improvement from the 1998 original Metal Gear Solid.

While disappointing, this wasn’t a terribly shocking development from the perspective of an intellectual property lawyer.  The developers of Shadow Moses made no secret of the fact that they were undertaking the development without formal permission from Konami, and given the importance of intellectual property rights to content companies, I would suggest that the eventual icing of this project was a foregone conclusion. Simply put, intellectual property rights can be incredibly valuable, but they also require incredible diligence.  Failure to vigorously protect those rights can result in signficant erosion of value over time, potentially culminating in an entire loss.  It was simply unreasonable to expect that a large multinational corporation like Konami would let a project like this continue.

While I think Konami’s position and actions were correct from the perspective of our current laws, I don’t necessarily agree with them from a cultural perspective or from the perspective of what I wish the law actually was.  As I’ve written on other occasions, the current state of our “sharing” society requires a soul-searching reexamination of what we want our intellectual property laws to be, and what we want them to do.  In the United States, our intellectual property laws are based on the constitutional prerogative “To promote the Progress of Science and useful Arts.”  Stated differently, our intellectual property laws are supposed to provide sufficient incentives for people to create.  Our current laws have pursued promotion through a profit motive and structure.

This structure, however, has largely become obsolete in many contexts.  Incentives for creation have changed and the costs and burdens associated with creation and distribution have shrunk enormously. Content is not just being consumed, its being reused and repackaged for individual self-expression.  Music, movies, and video games are no longer just forms of entertainment.  They are common languages that can create quick and lasting connections.  In such an environment, intellectual property laws can just as easily serve as an obstacle to progress as they can an incentive.  Our laws need to adapt to appropriately reflect and enhance our shared culture.

 

Those of you who occasionally read my posts may have noticed that video games are a hobby and interest of mine.  I have posted on issues involving video games several times. See Executing Noriega, Flash in the Panama, Calling All Gamers.  And as I look back on it now, it appears that I, for a long time, had an unhealthy addiction to Call of Duty. (Never fear.  I’ve moved on.)  But despite my general gaming interest, I’ve never taken the time to sit down and post about some of the incredibly important and interesting intellectual property issues that accompany video game development and distribution.

There are very few industries that so intricately intertwine the multiple pillars of intellectual property as do video games.  Indeed, its difficult to identify any other industries that depend so heavily upon copyright and patent and trademark and trade secret law.  Video game development involves artistry, technological innovation, and an entrepreneurial spirit; and it requires large doses of each. Mobile gaming brought along an explosion of development and distribution.  In an ever crowding field, I believe clearly defining and protecting the intellectual property rights associated with game development is going to be an increasingly important activity.  It will be an important strategy issue for developers, and it will be an important issue for elected representatives and regulators in attempting to set the proper incentives for creation and access.

In a lot of ways, the game is just beginning.