Virtual World Law Blog

In one of the most closely followed cases involving the  digital millennium copyright act (DMCA), an appeals court punted one of the key issues back to the lower court. The key issue left open relates to what constitutes actual knowledge for purposes of the DMCA. In light of this decision there are some interim steps companies should take in the event that the lower court rules in favor of the copyright owner.  

On April 5th, 2012 the U.S. Court of Appeals for the Second Circuit issued an order in the ongoing case Viacom International Inc. et al. v. YouTube Inc. et al., vacating a lower court's summary judgment in YouTube's favor and remanding the matter back to the district court for consideration of whether YouTube had actual knowledge of the infringement alleged by Viacom.  The underlying ruling by the district court in June of 2010 had granted summary judgment and found that YouTube was not liable to Viacom for copyright infringement relating to various videos that were available on its site due to the safe harbor language in the Digital Millennium Copyright Act.

The current opinion by the Second Circuit based its decision in part on and referenced an internal YouTube report noting that clips of certain Viacom shows were available on the site, and that such content was "blatantly illegal".  The Second Circuit's opinion stated that "[o]n these facts, a reasonable juror could conclude that YouTube had actual knowledge of specific infringing activity, or was at least aware of facts or circumstances from which specific infringing activity was apparent".

Moreover, while the Second Circuit agreed with underlying district court's decision that only actual knowledge of specific and identifiable infringements bars a service provider from protection under the DMCA's safe harbor, it felt that the lower court erred by not addressing whether YouTube had engaged in "willful blindness".  The ruling directed the district court to consider if YouTube (1) made a "deliberate effort to avoid guilty knowledge," (2) had the ability to control the infringing activity, and (3) received a financial benefit from the infringing activity.

Ultimately, the Second Circuit opined that "we hold that summary judgment to YouTube on all clips-in-suit, especially in the absence of any detailed examination of the extensive record on summary judgment, was premature."  Given the online technology industry-wide reliance on the protections available under the DMCA, this case will continue to be one to watch.  Its impact could be far-reaching whichever way it is finally decided.   

Given the uncertainty regarding how this case will ultimately be decided, companies hosting user posted content should take reasonable steps to minimize any liability in the event the decision ultimately favors copyright owners. Contact us for more insights on how to do this.

As a general rule, the name, image or likeness of a living person--not necessarily just a celebrity--cannot be used for commercial purpose without his/her written consent. Some jurisdictions have extended the coverage to provide additional protection to such elements as signature, voice, mannerisms or even expressions. Unauthorized use of an individual's name, likeness or image may violate his/her right of publicity, which is currently recognized by statute, common law, or a combination of both in 31 states.1

However, as each state's law evolved separately, there are often significant differences in the coverage provided. Specifically, New York and California, the key states for rights of publicity due to their many celebrity residents, protect different rights and are diametrically opposed on whether these rights extend beyond death.

In the past few years we have seen a paradigm shift in the technology used to create video games. The current video game iterations allow for nearly photo-realistic imagery and, in some cases, use this to allegedly depict real people in the games. However, not all of these video games have entered into licensing arrangements with the parties allegedly depicted. From this we have witnessed the commencement of a new body of case law involving right of publicity claims against video game makers. The video game companies have countered the claims by alleging, among other things, that video games are creative works and protected by the First Amendment.

To learn more about this emerging issue, please click HERE.

Pinterest is one of the fastest growing social media sites. Pinterest enables users
to "pin" interesting things to a virtual pinboard to share with others. A pinboard is largely a collection of images organized by topic (home decorating, wedding planning, etc.).

A recent article calls into question the potential risks that users face by "pinning" third party content. As pointed out in the article:

The number of lawsuits alleging copying of games continues to increase. In one of the latest such lawsuits, Seattle-based game developer Spry Fox filed a copyright infringement lawsuit against 6waves Lolapps over Spry Fox's Triple Town game. What exacerbated the issues here is that, apparently, Spry Fox shared information about the game under an NDA, prior to release of the game, when the parties were considering a business relationship.

Even giants like Zynga have been accused of liberally borrowing ideas for its games. NimbleBit, developer of the popular iOS game Tiny Tower, has pointed out the many similarities between their hit and Zynga's upcoming Dream Heights game. NimbleBit recently sent an open letter addressed to all of Zynga's 2,789 employees that points out the numerous similarities in the games, offering eight screen shots that show virtually identical features with only slight graphical differences.

These, and other suits that follow these fact patterns, highlight the need for game developers to take certain steps to protect their IP and minimize the need for lawsuits while maximizing the chances of prevailing if they must sue:

• Consistently use NDAs that prevent the disclosure or use of confidential information that you disclose to third parties, and try to include a provision that gives you ownership of any IP derived from the confidential information. Many NDAs do not include this.
  
• Maximize your IP protection with a comprehensive IP strategy that includes patents, trademarks and copyrights. Many game developers have misconceptions about what is protectable and therefore inadvertently forgo certain protection to which they might otherwise be entitled.
  

For additional information on IP Protection Strategies for games see Pillsbury's Advisory on IP Protection for Games.
 

On December 6, 2011 Zynga settled its copyright suits against Vostu USA Inc. and others.  The first suit, case number 5:11-cv-02959, filed in the U.S. District Court for the Northern District of California back in June, alleged that several of Vostu's games infringed Zynga's copyrights.  Specifically, Zynga had alleged, that Vostu's MegaCity, Cafe Mania, Pet Mania, Vostu Poker and MiniRazenda games are merely clones of Zynga's popular titles.  Zynga followed this suit with another one in Brazil claiming copyright infringement and unfair competition.  Vostu initially responded to the suits asserting that its games were non-infringing but has ultimately agreed to settle the US and Brazilian matters by compensating Zynga and altering some of its games.

The parties have issued a joint statement that "Zynga and Vostu have settled the copyright lawsuits and counterclaims against each other in the United States and Brazil".  Additionally, "[a]s part of the settlement, Vostu made a monetary payment to Zynga and made some changes to four of its games" but the parties did not elaborate on the amount of the payment or the nature of the changes.

This settlement followed (and may have been prompted by) some early success in the cases by Zynga.  Zynga was able to obtain a preliminary injunction from the Brazilian court ordering Vostu to cease making the challenged games available.  In response Vostu initially convinced a U.S. District Judge to grant a temporary restraining order prohibiting Zynga from enforcing the Brazilian court's order; however this TRO was quickly dissolved.  The Brazilian order was stayed by the appeals court pending Vostu's appeal.

This settlement is a good example of how IP rights can be used to protect a video game from being cloned.  There is a history of successful games being the subject of imitation which goes back to the earliest days of the industry.  Many companies have come to believe that cloning is just part of business and there is nothing that can be done to stop it.  However, this is not entirety true.  Copyright, trademark, trade secrets and patent rights can all provide differing levels of protection for games.  Copyright can protect a game from literal duplication or use of its protected images, code, literary elements, music, etc.  Trademark can protect the actual name, logo or certain other identifying elements from a competitor's potentially confusing use in a game (or elsewhere).  Additionally, trade secrets can be used to protect a company or game's "secret sauce" from being co-opted.  Finally, patents may be used to protect features and functions of a game, including game mechanics, business methods and other functionality and processes. 

Game companies should consult with IP attorneys who understand the IP strategies and patentable aspects for games. For an overview of some of the IP protection available for games, see here.

The Supreme Court has validated the ability of software developers to prevent customers from owning the copy of software they acquire. Because software developers can limit the customers rights to a mere license, they can impose restrictions that can prevent the customer from reselling the software. This is a huge win for software companies as it limits the resale market, which cuts into sales of new software. This ruling may also benefit the virtual goods industry which also commonly uses a licensing vs. sale model. However, it is important to note that in order to get the benefits of this decision, the software distributor must carefully craft their End User License Agreement.

On October 3, 2011, the U.S. Supreme Court declined the petition for certiorari regarding the Ninth Circuit Court of Appeals decision in Vernor v. Autodesk, Inc. As we outlined in a previous post, the Vernor decision held that software developers can grant mere licenses and that doing so does not violate the First Sale Doctrine," which states:

"[T]he owner of a particular copy...lawfully made under this title...is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy..."

This doctrine applies if the initial distribution is a sale. As the Ninth Circuit held in Vernor, software developers can legally prevent customers from owning (and distributing) the copies of software that they purchase. This is accomplished by drafting software purchase agreements (e.g., End User License Agreements) in a way to avoid the first-sale doctrine, such as by structuring the agreement as a license or placing valid restrictions on the customer's use of the software. Under such an agreement, software developers can retain ownership in the copies they distribute and customers merely have a license to use the software.

Extending the Vernor holding to virtual goods and currency, this ruling seems to provide additional ammunition for the validity of merely licensing virtual items to users instead of selling the items. This approach is commonly used with virtual item models.  In light of Vernor, it is clear that the "license" which is included in the terms of service must be carefully drafted.  But if done properly, this can help prevent unauthorized resale of virtual items via secondary markets or otherwise.

For more information on the legal issues with virtual goods, click here.

Who:
Pillsbury's Cydney Tune and Mark Litvack

What:
PLI's Technology and Entertainment Convergence 2011: Hot Business and Legal Issues in "Technotainment"

When:
September 9, 2011 (New York) & September 21, 2011 (San Francisco)

Links:
New York - http://www.pli.edu/re.aspx?pk=29651&t=HCF1_1TECH
San Francisco - http://www.pli.edu/re.aspx?pk=29652&t=HCF1_1TECH

Details:
PLI has completely revised this year's program to include today's major legal and business issues in the convergence of entertainment and technology.  The program brings together a faculty of experienced in-house lawyers, law firm attorneys and senior business executives on the cutting edge of this burgeoning practice.

Cydney Tune, Chair of this year's program, will be speaking on a panel titled "Licensing Film and Television Content for New Media and Platforms." In this presentation, the points of view of various stakeholders in the digital film and television content industry (content owners, distributors, platform providers) will be discussed. The panel will also address various digital video distribution models (e.g., transactional video-on-demand, subscription video-on-demand, free/ad-supported video-on-demand, and electronic sell-through) and the careful attention to deal structuring necessary to achieve an integrated, cross-platform model of sales and distribution that maximizes exploitation across all possible avenues.

Mark Litvack will be speaking on a panel titled "An Update On Social Media and Copyright - Is Anyone Winning This Race?" Social media (also known as participatory media, or user generated content) presents challenges for platform provider, copyright owners, brand holders, and users alike. In this presentation, the panel will address the legal obligations on these stakeholders, trends and practices in DMCA notice-and-takedown and Terms of Service enforcement and attempt to answer the question are content owners simply continuing to play a must-lose game of "Whack-a-Mole." The panel will also cover some of the innovative, voluntary efforts that build atop these obligations, including Content ID on YouTube including its "Copyright School" and Google's recent antipiracy initiatives and discuss the balance of the question about what the social media sites have done against what more they have left to do.

The Digital Millennium Copyright Act, 17 U.S.C. § 512 provides many benefits to copyright holders. Add one more to the list. In Xcentric Ventures LLC v. Karsen Limited et al (2011), the court refused the let the Russian Defendant play hide-and-seek to avoid service of process and authorized the Plaintiff to effect service by email due to a provision in the DMCA.

Plaintiff XCENTRIC VENTURES is the operator of a consumer complaint website. It discovered that a website owned and operated by defendant allegedly contains certain copyrighted material. Pursuant to the DMCA, it sent a series of DMCA take-down notices to non-party Google, Inc. to remove the infringing content from its search index and inform defendant that it is infringing on plaintiff's copyrights. Google complied. Pursuant to the DMCA, defendant responded by serving a counter-notice on Google to contest the accuracy of the initial notice. To be effective, the counter-notice must contain certain things including: "the subscriber's name, address, and telephone number, and a statement that the subscriber consents to the jurisdiction of the Federal District Court . . . and that the subscriber will accept service of process from the person who provided notification under subsection (c)(1)(C) or an agent of such person." § 512(g)(3)(D).

Plaintiff filed a suit alleging copyright and trademark infringement. See § 512(g)(2)(C) (stating that unless a party files an action seeking a court order to prohibit the infringing activity, the service provider can restore the removed material). Plaintiff attempted to serve defendant a copy of the summons and complaint via Federal Express delivery to the address provided in St. Petersburg, Russia and via email. Delivery at the Russian address was unsuccessful because the address was "incorrect" according to FedEx. On June 13, 2011, defendant emailed plaintiff in response to plaintiff's emailed service of process. Defendant generally objected to the lawsuit and included a response, which it asked plaintiff to file with the court. In a later email correspondence, defendant argued that it never waived service of process and any service must be in compliance with the Hague Service Convention.

Plaintiff moved for an order determining whether it has effectively accomplished service of process on defendant Karsen or for leave to perform alternative service. Defendants did not respond or otherwise appear in the case.

The court found:

It is clear to the court that defendant has notice of the lawsuit and is evading service of process. By filing the counter-notice, defendant expressly agreed to accept service of process at its Russian address. Plaintiff attempted to perform service there but was unsuccessful. Defendant also purports not to understand the English language or the American court system, yet it corresponds sufficiently in English and appears capable of drafting a responsive pleading, as evidenced by the response it emailed plaintiff. Plaintiff has made other diligent, but unsuccessful, efforts to locate an alternative mailing address. In the absence of a correct address, plaintiff cannot personally serve defendant in Russia. It seems the only medium effective at reaching defendant is email.

We cannot, however, find that plaintiff has already accomplished service of process. While defendant did agree to accept service of process when it filed the counter-notice, plaintiff was unsuccessful in serving defendant by conventional means at its Russian address. [*3] Service by alternative methods, such as email, is only effective after court approval. See Rio Props., Inc. v. Rio Int'l. Interlink, 284 F.3d 1007, 1018 (9th Cir. 2002) (stating that email service is not available absent a Fed R. Civ. P. 4(f)(3) court decree); see also Fed.R.Civ.P. 4(h)(2) (authorizing service of process on a foreign business in the manner prescribed by Rule 4(f)).

The court granted plaintiffs leave to serve defendant via email, stating "Service by email in circumstances where the defendant is evading service of process and it is the only method reasonably calculated to appraise defendant of the pendency of the action is permissible. See Rio Props., 284 F.3d at 1017 (approving an order granting leave to serve by email under similar circumstances); see also Liberty Media Holdings, LLC v. Vingay.com, No. CV-11-0280-PHX-LOA, 2011 WL 810250 (D. Ariz. March 3, 2011) (permitting service by email). Moreover, alternative methods of service in Russia, even those not required under the Hague Service Convention, are permissible, since Russia unilaterally suspended all judicial cooperation with the United States in 2003. See Nuance Commc'ns., Inc. v. Abby Software, 626 F.3d 1222, 1237-38 (9th Cir. 2010) (holding that a district court erred in requiring service upon a Russian corporation to be in compliance with the Hague Service Convention). As the Ninth Circuit stated, "when faced with an international e-business scofflaw, playing hide-and-seek with the federal court, email may be the only means of effecting service of process." Rio Props., 284 F.3d at 1018.

A recent lawsuit by SocialApps LLC (d/b/a take(5) social and playSocial) accuses Zynga of copyright infringement, theft of trade secret and various other acts concerning Farmville. Farmville is one of the most widely played and profitable social games, with around 80 million users and was released in June 2009. SocialApps allegedly developed and released "myFarm" in November 2008.

Did Zynga independently create Farmville or, as SocialApps alleges, did Zynga approach SocialApps using a ruse of due diligence in an attempt to acquire the IP rights and source code to get access to the details of myFarm? Perhaps we will learn the answer as the suit progresses.

If SocialApps did indeed invent the game earlier, did they do all they could to protect the IP? Many companies in the online social game space do not. For an overview of some of the ways that social game companies can protect their IP, see our advisory on "Intellectual Property for Games" as well as our previous post entitled "What You Don't Know About IP Protection For Social Games Can Hurt You".

Copying within the games industry is prevalent. Some people attribute this to the fact that this is just the way it is and has always been within the industry. This is often premised on the notion that the "idea" for a game is not protectable. But as the game market grows, so to do the losses from copying suffered by the game innovators.

One of the biggest factors contributing to this is that many game developers do not develop comprehensive strategies for protecting the valuable intellectual property that they create. This is generally due to several reasons. One is that historically, intellectual property has just not been a big focus for many in the industry. The other is that many people are not aware of the range of options available for protecting IP in the game space and what aspects of games are protectable. This is often due to some common misunderstandings about intellectual property, particularly with respect to the patentability of game features.

While it is true that one can not protect the "idea" for a game, this does not end the inquiry. Many aspects of games are protectable by patents, copyright and trademarks. Of these, patents are probably the most overlooked and least understood. While this applies to all types of games, there are particularly compelling opportunities to patent many of the innovative aspects of social and online games. This is due in part to the many recent developments in the relevant technology and business models for these games. Prudent developers and publishers will seize these opportunities to develop a comprehensive IP protection strategy.

Check out our recently released "Intellectual Property for Games" brochure that summarizes some common patent misconceptions and the importance of a strong IP Protection Strategy.

Many nonprofits are using social media to create awareness of their cause, raise funds, develop closer connections with existing constituents and engage with new ones.

On April 14, 2011, at The Kreeger Museum in Washington, DC, Jim Gatto delivered a compelling presentation on top social media legal issues targeted to nonprofits. His presentation explored examples of how nonprofits are using social media today, including a focus on virtual goods, virtual currencies and gamification and the associated legal issues. For a copy of his presentation, please click here.

Leveraging social media technologies and applications is critical to the success of any marketing campaign, consumer outreach program or research plan.

Social media tools can be used to shed light on your target market and consumer decision making process. These tools can also be used to engage in a two-way conversation with your consumers and allows customers to communicate your messaging on your behalf. Restaurants are ahead of the curve:  81% are currently using social media, compared with 60% in other industries. Companies in these industries cannot ignore the powerful impact of social media. Companies in this space also face a host of new legal risks and concerns from virtually all sides. The key to success is staying on top of these laws and emerging trends.

On March 22, 2011, Jim Gatto delivered an exciting webinar presentation on top social media legal issues targeted to the restaurant, food and beverage industries. For a copy of his presentation, please click RFB Legal Briefing Series.pdf.

In the fast and furious world of app development, time is of the essence. So claims the Plaintiff YoHolla in a lawsuit against an app developer Pinwheel Designs Corp. and its subcontractor Burton Design Group (BDG). Allegedly the defendants' inability to produce a bug-free app in a timely manner delayed YoHolla's launch of its social network.

This case involves a classic fact pattern of a development contract gone awry. YoHolla claims that BDG missed several deadlines for completion of an Iphone and Android app, that what BDG produced was riddled with bugs and required additional payments well beyond the initial estimates. YoHolla further alleges that the contract stated that TIME WAS OF THE ESSENCE and that these delays caused delay of YoHolla's planned launch of its social network and over $550, 000 in delay damages.

After things escalated, YoHolla went elsewhere to get the development finished and formally terminated the development contract.

BDG demanded final payments and ordered YoHolla to cease and desist from use of any source code developed by BDG, alleging that such use would constitute copyright infringement (despite an apparent assignment of all rights to YoHolla in the contract).

Where this gets more interesting is that BDG contacted Apple and alleged that YoHolla's iphone app infringes BDG's copyrights. After 3 or so rounds of "he said, she said" regarding copyright ownership, to no avail, YoHolla filed suit.

The Yohalla Complaint raises claims for declaration of ownership of copyright and non-infringement, breach of contract, tortious interference with a business relationship (for BDG's allegedly false notices to Apple), defamation and a claim for indemnification against Pinwheel.

This will be an interesting case to watch.  


 

 
 

A weekly wrap up of interesting news about virtual worlds, virtual goods and other social media.

Don't Buy and Sell Pokemon Data In Japan

Japan is going a bit copyright crazy of late. It's not cool to sell customized figures online, it's not cool to rent video games in love hotels, and now, it's apparently not cool to sell Pokémon save data.

Lessons of the NBC Agreement With Battlestar Galactica Fans

NBC / Universal has agreed to let Battlestar Galactica-themed roleplay sims continue in Second Life.   They too had been issued a cease and desist order through a DMCA (Digital Millenium Copyright Act) order.  In their case, the order was arguably even more serious - filed against Linden Lab itself, resulting in the closure of several Battlestar-themed sims and even the confiscation of content..

Wannabe Cool Kids Aim to Game the Web's New Social Scorekeepers

Today, a new generation of VIPs is cultivating coolness through the world of social media. Here, ordinary folks can become "influential" overnight depending on the number and kinds of people who follow them on Twitter or comment on their Facebook pages.

Guitar Hero Video Game Series is Axed by Activision

Activision Blizzard, which makes the Call of Duty and World of Warcraft series, says it's ditching the franchise because "the popularity of music-themed video games has faded".

Social Gaming Market Value to Approach $4 Billion by 2015

The global social gaming market's value will grow by 166 percent from $1.5 billion in 2010 to almost $4 billion by 2015, according to a recent forecast by analyst firm Business Insights.

Visa Acquires Playspan

Pushing into the virtual goods space, payments giant Visa has acquired Playspan, which powers e-commerce for hundreds of online games and virtual worlds, for $190 million.

How Location-Based Services Changed Social Games in Asia

As social gaming on mobile devices continues to grow throughout 2010, so will the number of applications offering location-based services. But will 2011 be the year that location-based social games take off in the U.S?

The Court of Appeals for the 9th Circuit ruled on the Blizzard v. MDY case, largely affirming the district court's finding that MDY's bot ("Glider") for playing World of Warcraft (WOW) violates the WOW Terms of Use and violates anti-circumvention provisions of the DMCA. However, the 9th Circuit found that the violation was breach of a contractual covenant not a breach of a condition of the license and applied a somewhat different analysis to the DMCA claims. The net result still largely favors Blizzard and a permanent injunction was affirmed.

We previously prepared an advisory on the District Court decision.

The Court found that the use of Glider violated the Terms of Use prohibition on bots. However, unlike the district court, the 9th Circuit ruled that this was a breach of a contractual covenant not a breach of a condition of the license. One significance of this is the different remedies available for breach of contract and copyright infringement.
 
The DMCA claims related to whether Glider violates DMCA sections 1201(a)(2) and (b)(1) by circumventing WOW's Warden, which is intended to detect bots. The Court ruled in Blizzard's favor with respect to "dynamic non-literal elements" of WOW.
 
In reaching its decision, the Court refused to follow a Federal Circuit decision (in the Chamberlain case) interpreting the DMCA. The 9th Circuit ruled that Section 1201 (a) creates a new anti-circumvention right distinct from copyright infringement while section (b) strengthens the traditional prohibition against copyright infringement.  In contrast, the Federal Circuit in Chamberlain found that the DMCA coverage is limited to a copyright owner's rights under Section 106 of the Copyright Act, and required a "nexus" to infringement. The 9th Circuit refused to adopt any requirement for an infringement nexus. The tension between these appeals courts may set up a show down in the Supreme Court.

The Court went on to find that MDY did violate Section 1202 (a)(2) of the DMCA with respect to the dynamic non-literal elements of WOW.  But the Court found that Glider does not violate DMCA Section 1201(a)(2) with respect to WOW's literal and individual non-literal elements, because Warden does not effectively control access to these WOW elements.

The Court also found that the tortious interference with contract claims were not preempted by the Copyright Act, but that factual issues prevented a proper summary judgment finding. As a result, it vacated the district court's summary judgment ruling on this issue and remanded the issue of personal liability for MDY's CEO.

Perhaps serendipitously, the decision was handed down just days after Blizzard's release of Cataclysm the third expansion of WOW. More than 3.3 million copies as of Cataclysm were sold in the first 24 hours of release, which according to Blizzard, makes it the fastest-selling PC game of all time.

Here is a copy of the 9th Circuit decision.


 

In a very significant decision, the 9th circuit Court of Appeals ruled that software developers can legally prevent customers from owning the copies of software that they pay for. Instead, if the software license agreement is properly drafted, the software developer retains ownership in the copies they distribute and the customers merely have a license to use the software.

This is significant for many reasons. The first is that this means the "first sale doctrine" does not apply. Under this doctrine a copyright owners rights are extinguished in a particular copy of the software after an authorized first sale. As a result, the customer can rightfully sell the software if they no longer need/want it. In contrast, with a license that restricts transfer this is not permissible.

This ruling by analogy may be applicable to virtual goods as well. Many terms of service specify that virtual goods are merely licensed and not owned by customers.

Vernor 

A California Court ruled last week in favor of Blizzard, finding that Scapegaming (a.k.a. Alyson Reeves) ran an unauthorized secondary market that handled microtransactions in violation of the World of Warcraft terms of service. Blizzard sued Scapegaming last October for copyright infringement. The court awarded about $88 million dollars, including about $64,000 in attorney's fees and over $85 million in statutory damages.

A federal court dismissed on summary judgment most of the copyright infringement claims against Google, ruling, in part, that Plaintiff's notices were not compliant with the requirements of the Digital Millennium Copyright Act ("DMCA"). As a result, the court found that Google was entitled to "safe harbor" protection under various sections of the DMCA.

This is another in a string of DMCA rulings that favor online service providers, place the burden of policing infringement on content owners and demonstrate the courts' inclination to strictly construe the DMCA requirements. We previously posted about the $1 billion damage claim that Google (and its YouTube subsidiary) avoided in its lawsuit with Viacom by reliance on the DMCA. These cases continue to highlight the business need for ensuring that companies have and comply with effective DMCA policies.

In framing some of the issues, the court stated:

In order to be eligible for any of these three safe harbors under the DMCA, a party must satisfy three threshold conditions. First, the party must be a service provider as defined under 17 U.S.C. § 512(k)(1)(B). Second, the party must have "adopted and reasonably implemented, and inform[] subscribers and account holders of the service provider's system or network of a policy that provides for the termination in appropriate circumstances of subscribers and account holders of the service provider's system or network who are repeat infringers." 17 U.S.C. § 512(i)(1). Third, the party must "accommodate[] and . . . not interfere with standard technical measures" used by copyright owners to identify or protect copyrighted works. 17 U.S.C. §§ 512(i)(1)-(2).

The court found that Perfect 10 did not dispute that Google met the first and third prongs, but rather it argued that there were issues about whether Google implemented a suitable policy for repeat infringers. But for some of the technologies at issue (e.g., Google's Web Search, Image Search and caching feature"), Google does not have account holders or subscribers. Even Perfect 10 did not contend that Google must, or even can, have a repeat infringer policy for those services. See 17 U.S.C. § 512(i)(1)(A) (requiring a repeat infringer policy for those services with "subscribers and account holders"). Thus, the court summarily found in Google's favor on these issues.

The court also addressed issues relating to the "Information Location Tools" safe harbor under Section 512(d) of the DMCA. Here the court found that Google, in many cases, did not have "actual notice" of infringement, despite receiving numerous notices from Perfect 10. The court stated:

As the Ninth Circuit explained in CCBill, "The DMCA notification procedures place the burden of policing copyright infringement--identifying the potentially infringing material and adequately documenting infringement--squarely on the owners of the copyright." CCBill, 488 F.3d at 1113. P10's Group C notices do not "identif[y] . . . the copyrighted work claimed to have been infringed . . . ." 17 U.S.C. § 512(c)(3). To refer Google to more than 15,000 images appearing on the entirety of P10's website falls far short of identifying what may have been infringed. Nor is a reference to the totality of the P10 image collection "a representative list" of "multiple copyrighted works" appearing without authorization at a single infringing site. See 17 U.S.C. § 512(c)(3). Thus, all of P10's Group C notices lack the identification of the copyrighted work required by section 512(c)(3)(A)(ii).

P10's Group C notices are additionally defective because they do not contain all ofthe required information in a single written communication.

The court also addressed the Safe Harbor for caching under Section 512(b) of the DMCA and various other issues.

The case is Perfect 10, Inc. v. Google, Inc. Here is a  copy of the Decision

On July 23, 2010, Judge William Alsup of the U.S. District Court for the Northern District of California entered an order denying Facebook Inc.'s motion to dismiss a second amended complaint alleging that Facebook is guilty of contributing to the copyright infringement of a video game. Judge Alsup denied Facebook's argument that, as the Plaintiff had failed to properly allege direct infringement by its Co-Defendant, no claim against Facebook for contributory infringement could be made. A copy of the decision can be found here: Miller v Facebook

Background

The pleadings allege that Plaintiff, Daniel Miller, created the video game Boomshine in 2007 and was granted a copyright registration by the U.S. Copyright Office. Boomshine is a game in which players click on floating circles which cause them to expand resulting in the expansion of any other circles which come into contact. Miller's second amended complaint accuses Defendant,Yao Wei Yeo, of direct infringement by arguing a similar "look and feel" between his video game, ChainRxn, and Boomshine but provides no further evidence of copying. According to the allegations in Miller's filings, "ChainRxn copies the look and feel of Boomshine by incorporating almost every visual element of the game". Moreover, the second amended complaint accuses Facebook of contributing to the infringement of the video game by allowing Yeo's game to remain on its website after being notified that it infringed the copyright of Boomshine.  Miller alleges that "[a]fter defendant Yeo published ChainRxn on defendant Facebook's website, members of the public were deceived regarding the origin of ChainRxn." For more information about the history of the case see the previous posting prepared by the Pillsbury Virtual World Team.

The Court's Denial

Facebook filed a motion for dismissal of the suit on June 21, 2010. Its argument was founded on the position that, as Miller had not properly first pled direct infringement by Yeo, he could not sustain a claim for contributory infringement by Facebook. The basis for Facebook's argument was that Miller's mere allegation that ChainRxn "looks and feels" identical to Boomshine without further proof of copying was insufficient to allege direct copyright infringement of Boomshine's source code. Moreover, Facebook argued that the copyright registration Miller had obtained for the source code was limited to its literal elements and not audiovisual elements of Boomshine. Judge Alsup denied the first element of Facebook's motion as premature noting that a "plaintiff can rarely examine the underlying source code of an accused infringing software program without resorting to discovery." Specifically, Judge Alsup said it would be "unreasonable, if not impossible" for Miller to know with "exacting detail" how Yeo copied the Boomshine source code so early in the case. Additionally, Judge Alsup denied the second portion of Facebook's motion by clarifying that the Court's earlier order "did not hold that copyright protection for source code was limited to the literal elements of the work" but rather that "plaintiff's copyright appears to be limited to the source code rather than the audiovisual aspects" and further determination is necessary to decide if the audiovisual elements of the game were also protected.

Finally, the court reminded Miller to address the disputed service of the second amended complaint on Yeo by the July 30, 2010 deadline or suffer a "potentially fatal defect" to his case.

Comments

The above action is interesting for several reasons. Platform companies like Facebook generally rely on the "safe harbor" protections the Digital Millennium Copyright Act provides when an infringement claim is made for the postings of a third-party. In fact,YouTube recently obtained a favorable decision providing it with DMCA protection in a potentially billion-dollar copyright infringement suit brought by Viacom. Moreover, while the Courts may differ on copyright protection for audiovisual "screen displays" in video games, the Copyright office's consistent position is that "a single registration is sufficient to protect the copyright in a computer program and related screen displays, including videogames, without a separate registration for the screen displays or a specific reference to them on the application for the computer program." For further discussion you can review the Copyright office's Circular 61

That said, this case continues to demonstrate that social networking platforms and other websites displaying user generated content must be ever vigilant or potentially face suits arguing various copyright theories. As technology advances (as well as the means of infringement) it is likely the pleading requirements will remain relatively low and defer the need to demonstrate the how, when and why of the alleged infringement until the completion of discovery. Since this will likely increase the cost of litigating these matters, Platform operators and creators of user generated content need to understand and avail themselves of copyright (and other IP) protection, enforcement techniques and available defenses.

On April 8, 2010, Zynga sued Playerauctions.com for operating a website that provides an unauthorized "Secondary Market" for enabling Zynga game users to post and sell "Virtual Currency" and "Virtual Goods" allegedly in violation of Zynga's Terms of Service. According to Zynga, its Terms of Service prohibits users from selling "Virtual Currency" or "Virtual Goods" for real-world money or anything of value outside of its games.

A recent version of the Zynga Terms of Service states:

The Service may include a virtual, in-game currency ("Virtual Currency") including, but not limited to coins, cash, or points, that may be purchased from Zynga for "real world" money if you are a legal adult in your country of residence. The Service may also include virtual, in-game digital items ("Virtual Goods") that may be purchased from Zynga for "real world" money or for Virtual Currency. Regardless of the terminology used, Virtual Currency and Virtual Goods may never be redeemed for "real world" money, goods or other items of monetary value from Zynga or any other party.

It further states:

Transfers of Virtual Currencies and Virtual Goods are strictly prohibited except where explicitly authorized within the Service. Outside of the game, you may not buy or sell any Virtual Currency or Virtual Goods for "real world" money or otherwise exchange items for value. Any attempt to do so is in violation of these Terms and may result in a lifetime ban from Zynga Service and possible legal action.

Zynga alleges that the Playerauctions.com has committed copyright and trademark infringement (along with false designation of origin, unfair competition and other claims) by displaying and/reproducing images and code from the games and using various Zynga trademarks with authorization.

The Complaint identifies unlawful sales in connection with Zynga's Poker, Mafia Wars and FarmVille games. A recent review of the Playerauctions.com site showed over 750 Mafia Wars related items alone available for sale ranging in unit price from 25 cents to $900 and 84 entire "accounts" for sale ranging in asking price from $30 to $5,000 with one listed at a whopping $492,000!

Interestingly, Zynga does not specifically allege impropriety with or seek to prevent the outright sale of accounts.

On April 28, 2010, a social game developer Crowdstar sued Wonderhill for copyright infringement based on similarities between Wonderhill's "Aquarium Life" and Crowdstar's "Happy Aquarium". While copyright does not protect ideas (such as the idea for a fish-based game) it does protect expression of the idea. If this case should make it to court, it will provide an interesting test case for game developers that have developed social games that have been "cloned," which tends to be quite common in the space.

Happy Aquarium is generally acknowledged as one of the first, if not the original, fish care-based social games. Happy Aquarium and Aquarium Life are not the only aquarium games. But in its complaint, Crowdstar alleges an especially high level of correspondence in the user interface, game play and other features between Happy Aquarium and Aquarium Life as being the impetus for the suit.

Starting with a relatively obscure game from 1 year old Wonderhill may increase the potential for a quick settlement. But is this a one off lawsuit or is Crowdstar chasing a minnow while it waits for a bigger fish to fry? Check back and we will keep you updated.

One interesting aspect of the complaint relates to the relief sought - or more accurately what is not sought. In the U.S., statutory damages of up to $150,000 per infringement, the potential for recovery of legal costs and attorneys' fees, and certain legal presumptions regarding ownership and validity are available to a copyright holder for works that were timely registered with the Copyright Office. These benefits are typically available for works that were registered prior to infringement or within three months of first publication. It is notable that the Crowdstar copyright registration at issue was only recently registered (registration no. TX 7-117-794, registered March 25, 2010), while Happy Aquarium itself was published in September, 2009. Perhaps as a result of this, the relief sought by Crowdstar does not include statutory damages or recovery of legal costs and attorneys' fees.

But, regardless of the result here, there can be no doubt that a game developer's leverage over a clone can be increased significantly with a timely copyright registration For more on this topic see our advisory on the benefits of timely filing copyright registrations.

On March 31, a California District Court dismissed a copyright infringement suit brought against Facebook relating to a video game made available on its social networking site. The suit was dismissed for failure to state a claim upon which relief can be granted. However, the court provided the Plaintiff, Daniel Miller, an opportunity to file an amended complaint, within 14 days, to cure the deficiencies of the dismissed complaint. On April 14, Miller filed a motion for leave to amend, along with a second amended complaint.

Background

According to the pleadings, Miller authored Boomshine, a game using Adobe Flash technology, and made it available on his Web site K2xl.com starting in March 2007. In the game, players click on a floating circle, causing the clicked circle to expand and causing other floating circles it contacts to expand in a chain reaction. The parties do not dispute Miller's ownership of Boomshine, for which he was granted a copyright registration by the U.S. Copyright Office.

Co-defendant Yeo allegedly first published ChainRxn on Facebook's site around April 2009. According to the complaint, "ChainRxn copies the look and feel of Boomshine by incorporating almost every visual element of the game" and Yeo's publication of ChainRxn on Facebook's site resulted in "members of the public [being] deceived regarding the origin of ChainRxn." Miller alleges that he sent letters to Facebook and Yeo in May 2009 demanding that ChainRxn be removed from the Facebook site because it violates his copyright in Boomshine. Yet they refused to do so. Miller also claims that Yeo then modified ChainRxn to prevent Miller and all of his Facebook friends from accessing ChainRxn.

The Court's Dismissal

The dismissed complaint claimed Facebook violated Miller's copyright in Boomshine by allowing ChainRxn to remain on Facebook's site, even after it was notified of the infringement. Miller also named the creator of ChainRxn, Yao Wei Yeo, as a defendant.

Judge Alsup wrote in his Order dismissing the suit that the complaint was unclear as to whether it was attempting to allege direct or indirect copyright infringement, but he addressed both allegations in his ruling. In holding that no allegation of direct infringement was sufficiently pled, the Judge stated: "If plaintiff wishes to proceed with his direct copyright infringement claim, he must include sufficient factual allegations that explain how defendant Facebook copied, displayed or distributed infringing copies of Boomshine. Mere legal conclusions disguised as factual allegations will not suffice."

Likewise, the Judge held that the complaint failed to allege sufficient facts to demonstrate indirect infringement, either on contributory or vicarious infringement grounds, adding "To state a claim for contributory infringement, plaintiff must allege facts showing that defendant Facebook induced, caused or materially contributed to the infringing product. No such factual allegations are included in the complaint." The judge continued: "Because plaintiff's explanation for how defendant Facebook induced and encouraged infringement is flawed, his assertion that defendant Facebook 'induced and encouraged' stands alone as merely a legal conclusion without factual support."

As with contributory infringement, the judge wrote that the complaint lacks sufficient factual allegations to state a claim for vicarious infringement and that "[t]o state a claim for vicarious copyright infringement, a plaintiff must allege that the defendant has ... the right and ability to supervise the infringing conduct ... ." However, the judge explained, the complaint's "allegations do not demonstrate that defendant Facebook has the right and ability to supervise the infringing conduct because it is unclear what infringing material was published on defendant Facebook's website. This information is crucial and without this information, any analysis of defendant Facebook's actions or inactions is mere speculation."

Miller's Second Amended Complaint

On April 14, Miller moved the court for leave to file a second amended complaint, which purportedly addresses each of the deficiencies of the earlier complaint. Narrowing his claims against Facebook, Miller's second amended complaint only asserts a claim of contributory infringement against Facebook because it had knowledge of Yeo's infringement and materially contributed to this infringement by not removing access to the infringing content or disabling Yeo's account. Miller asserts that these acts by Facebook assisted Yeo in distributing the ChainRxn game to Facebook users around the world.

Comments

As this case demonstrates, the rapid emergence of social networking platforms and user generated content (applications, goods, etc.) has increased the number of copyright issues. Now more than ever it is important for both site operators allowing third party content to be posted and creators who post content to such sites to understand and avail themselves of copyright (and other IP) protection and enforcement techniques. Some of the advantages of timely filing copyright protection are addressed in an advisory prepared by Pillsbury's Virtual World team.

Another option often available to content creators is to leverage the "take down" provisions of the Digital Millennium Copyright Act (DMCA). If done right, it is often an effective tool to promptly cause infringing content to be removed from social networking sites. Under one part of the DMCA, online service providers can minimize liability for contributory infringement for content posted to their sites, if upon receipt of a proper "take down" notice, they timely take down the allegedly infringing content.