Originally published in Law360.
The computer game industry is a significant and growing market. The 2016 global market exceeded $100 billion and projections show this amount growing significantly in the future.[1] Game companies in this market come in all sizes, from enormous multinational companies to small indie startups with only a few, or even one, employee. No matter the scale of the company, many aspects of games can be subject to intellectual property protection and copyrights, trademarks and even patents have been important issues that companies in this market have addressed for some time. As the recent examples below illustrate, IP continues to play an important role. As the rapid development of the industry attracts new companies and spurs competition among incumbents, taking the right steps to protect company IP can provide valuable corporate assets that can be used to help build a competitive advantage. Likewise, failing to address IP issues can create problems which could undermine years of marketing, raise issues which could require taking a game off of the market or implementing major rewrites, and expose the company large financial penalties and costly legal fees.
Copyright
Copyright protects original works of authorships and can apply to multiple game features, including graphic designs and game characters, music, storylines and underlying software. A company will generally own the copyrights in new software and other content generated by its employees and (assuming properly drafted consulting or work agreements[2]) consultants. A risky infringement scenario can arise when a developer doing work for one company moves on to do very similar work for someone else. This situation is occurring more frequently as the “gig economy” grows and more game developers are working as short-term independent contractors.
Barring evidence of actual copying, copyright infringement can be shown by the combination of (1) access to the protected work and (2) substantial similarity of the protectable elements in the copyrighted work relative to the accused one. A former contractor, no doubt, had access to their earlier work and so the analysis turns to substantiality similarity. A flag signaling potential copyright infringement can easily be raised and investigated when visible (or audible) content from a developer is similar to work they did previously for another company. Copyright infringement involving the underlying software itself, however, can be more difficult to assess and also more difficult to undo.
Software copyrights protect both the literal source and the object code itself as well as aspects of the structure, sequence and organization of the software, such as the general program flow and relationship between various software modules. It is complicated to precisely determine the boundary of copyright protection for software since many aspects are not protectable. A detailed analysis is beyond the scope fo this article but a software copyright is strongest in areas where a programmer can exercise their creativity to choose from a large number of design options rather than being bound by conventional practice or industry standards. Once a programmer writes a piece of software to provide game feature X, there is a risk that if they are coding that functionality for someone else, they will use a similar methodology giving rise to the potential for copyright infringement (even if unintentional). This risk is present with companies of all sizes. A recent high profile example can be seen in the ongoing dispute between ZeniMax Media and Facebook about the technology used in the Oculus Rift VR system.
John Carmack, a cofounder of id Software (purchased by ZeniMax in 2009), is a world renowned programmer known for innovations in 3D graphics used in trail-blazing first person shooter games such as Doom and Quake. While working at ZeniMax, Carmack developed software for an early prototype of the Rift VR headset from Oculus and that let it be used with games, such as Doom 3, that he modified to work with the headset. Carmack and other ZeniMax employees later left to join Oculus VR LLC and the team worked on developing VR hardware and software there. Oculus was subsequently purchased by Facebook. ZeniMax sued Facebook, raising a number of claims including that the Oculus Rift software infringed ZeniMax copyrights. Carmack testified that he did not copy or use ZeniMax code in his work for Oculus but instead rewrote the software. Nonetheless, after hearing testimony from experts who analyzed and compared the copyrighted software and the accused software written by Carmack and others, the jury concluded that the Oculus software was at least substantially similar to the protectable aspects of the copyrighted ZeniMax software and awarded $50 million from Oculus in infringement damages. The infringement was not due to copying of the technology used in the software. Indeed, copyrights do not cover ideas but only the expression of those ideas and the jury found that ZeniMax did not prove that any trade secrets had been misappropriated. Rather, the copyright infringement was based on the similarity between the creative design choices made in the original ZeniMax software relative to the VR software rewritten at Oculus.
It can be tempting for developers of games and game systems to hire a programmer who has already solved the problems being faced but done so for someone else. Careful consideration should be given in these cases to the scope of the work being done to reduce the chance of even unintentional copying of protected elements which could give rise to a claim of copyright infringement. If there is infringement, the infringing company can face money damages and an injunction barring further sales until the code is rewritten to remove the copyrighted content. While conventional and standard programming techniques can be used, assurances should be sought that specialty code written for someone else will not be reused. In an extreme case, a programming ‘clean room’ can be established in which the programmer can provide high level technical guidance about the software design but leave the details, where copyright is more likely to attach, to others. (In addition to copyright concerns, care should be taken to identify and avoid potential violations of nondisclosure and noncompete clauses to which the programmer may also be subject.)
There are other copyright issues relevant to software and to many other aspects of a game. A full discussion is beyond the scope of this article. Overall, when using third party content it is important to make sure to have the appropriate rights for the use. Various organizations provide free access or limited licenses and there is nothing improper about using these materials. Many types of software are available under open source licenses and a wide variety of music is available for free under Creative Commons licenses. Even if the material is free, to avoid unintended consequences it is important for developers track the materials they use and review the licenses to ensure that the use is consistent with the license terms. For example, some Creative Commons licenses are limited to noncommercial uses or require music mixes to be shared. Likewise, accidentally incorporating software subject to a “copy left” open source agreement (such as the GNU General Public License) could impose an obligation to disclose your own source code. Finally, by keeping track of where rights to use the various aspects of a game come from, other issues can also be avoided. It is not unusual for a company with a game that has become very successful to discover when it later tries to sell the game or the company that some of the material used is unlicensed and copyrights are owned by a third party.
Trademark
Trademarks designate the source of products and can be used to protect the names and logos associated with a game, its characters, and its name. A common source of trademark friction in the gaming industry arises with the names of the games themselves. The name of a successful game can be a particularly valuable asset. Often it is carried over to many sequels and can extend to cross-market platforms, such as merchandise, audio tracks and even books and movies. Likewise, movies and other media often spawn related games.
Trademark infringement requires that the accused and protected mark be similar enough that there is a likelihood of confusion as to the source of the product. To protect exclusivity and avoid source confusion, game companies frequently use trademark rights to keep similarly named games off the market. Even a threat of trademark infringement can be sufficient to force a name change to avoid a costly legal dispute. One recent example involves No Matter LLC. This company is developing an adventure game originally called “Prey for the Gods”. As No Matter explained in a recent newsletter, Bethesda Software (through its parent ZeniMax) alleged that “Prey for the Gods” could be an infringement the trademarked title of its own game PREY. ZeniMax also opposed No Matter’s trademark application for “Prey for the Gods”. To avoid the expense of fighting this out in court and in the trademark office, No Matter changed the name of its game to “Præy for the Gods”. A similar scenario played out with Devdan Games and its new game Alien Wasteland. InXile Entertainment has a trademark on its own game, “Wasteland,” and raised trademark infringement issues. Devdan ultimately changed the game’s name to Action Alien to avoid this problem.
While many trademark issues are resolved without a lawsuit, much of the initial buzz about a game can occur in the months (if not years) before the game is released. Having to change the game’s name late in the process can significantly undermine earlier marketing efforts. It is prudent for game developers to obtain advice from a trademark attorney early in the process to avoid potential infringement issues, especially if the game’s name overlaps even in part with other games on the market. Once a name is selected, it is beneficial to take active steps to register it as a trademark. While trademark rights accrue by using the mark commercially, federal trademark registration is relatively inexpensive and an ‘Intent to Use’ application can be filed years before the game’s ultimate release. Filing for a trademark as soon as the game’s name is chosen and the game starts to be publicized can make it easier to prevent others who may select similar names later on to capitalize on your own publicity efforts or who otherwise use the mark in an unapproved way.
Another area where trademark issues are a concern is when third-party trademarks are depicted within the game content itself. Games are generally treated as works of creative expression and, as such, are given strong protection under the First Amendment. Many courts apply the “Rodgers test” to determine if a trademark use is permitted.[3] Under this test, courts first determine if a trademark has “no artistic relevance to the underlying work”. This is a relatively low bar and can be met if the trademark is used as part of the overall game’s story and environment. If there is some artistic relevance, the court then considers if the trademark is used in a way that is explicitly misleading about the source or content of the work, such as by suggesting that the game is produced or sponsored by the trademark owner. As an example, Mil-Spec Monkey, a military clothing designer, sued Activision Blizzard in 2014 alleging that showing Mil-Spec’s “angry monkey” patch on characters in the Call of Duty: Ghosts video game confused the public about sponsorship and infringed its registered trademark. The California court applied the Rogers test because the game was an expressive work, found that the ‘angry monkey’ patches shown in the game were relevant to the underlying realistic military theme of the game, and found no evidence that the mark explicitly mislead customers into thinking that Mil-Spec endorsed the game or that Activision had some other relationship with Mil-Spec.[4]
While the Rogers test gives game developers relatively broad leeway, it is not uniformly applied throughout the country. If possible, it is better for a game designer to obtain third party approval before incorporating their trademark into a game. Disclaimers of sponsorship are also useful in helping to prevent use of the trademark from being viewed as misleading. Similar issues arise in the context of rights of publicity where game characters represent real-life people.
Trademark issues were also significant in the ZeniMax / Oculus dispute. Oculus’ and its founders used trademarked logos for ZeniMax software, such as Doom 3, Skyrim and Rage, in promotional materials to attract investors, employees and customers. The company and one of its two founders, each personally named in the lawsuit, were found liable for trademark infringement. (Interestingly, the jury awarded no damages for trademark infringement itself. However, the company and both founders in the lawsuit were also found liable for false designation of origin relating to development of Oculus’s VR technology and the jury awarded actual damages on the false designation claim of $50 million from Oculus, and $50 million and $150 million from the two Oculus founders individually.) The lesson from this is simple — if you are going to use someone else’s trademark to market your own product, make sure that they have either given their approval or check with a trademark attorney to make sure the use is permitted, such as in a comparative advertising context.
Patents
Patent issues are encountered less frequently than copyright and trademark issues but can be very significant when they do arise. Patents can apply to the underlying technology used in the software engines and tool kits on which games are built, to gaming hardware and to distribution platforms. Patents on these areas can thus be applied to across multiple products from multiple companies if each uses the patented infrastructure. And, unlike copyright, which requires access to a protected work, a patent can be infringed without knowing about the patent. A typical patent infringement scenario involves a game that includes a software engine that is alleged to infringe. A patent can be infringed by anyone who makes, uses or sells a product that is covered by the patent. Therefore, a game developer can be liable for patent infringement even if they have no control over how the software works internally or even access to those details (such as when it is a third party product provided only in unreadable object code).
Although recent court decisions have impacted the patentability of various types of software, this has a more limited effect on software that solves technical problems. One recent example involves patents owned by McRo, Inc. (dba Planet Blue) covering a method to synchronize the motion of an animated face to audio dialog. In 2014, McRo sued dozens of major companies in the gaming industry for patent infringement. Although the companies scored an early victory by obtaining a court decision that the patents were invalid because they were directed to an unpatentable abstract idea, this decision was reversed on appeal late last year.[5] Many of those companies are now back in court arguing technical details about the actual scope of the patents versus the functionality in the accused software.
As gaming expands to use new technologies, patent infringement lawsuits follow. The new gaming technology on the block is virtual reality (“VR”) and many companies are releasing or working to release their own systems. The combination of sophisticated hardware and software opens the door for new inventions to be made and patented. However, people have been wrestling with the related technical problems for years and patenting their solutions. Now that VR has become commercially viable and products are on the market, these patents are starting to be identified and enforced. So, for example, in April and May, 2017, Techno View IP filed lawsuits accusing Oculus VR and Sony Entertainment of infringing two patents covering methods for displaying the left and right perspective views needed to provide a 3D image for VR video game systems.[6] The asserted patents[7] are based on an application filed in 2003 and Techno View asserts that one of those patent is an essential to the 3D encoding section of the MPEG-4 standard, meaning that complying with the standard would necessarily infringe the patent.
Securing against the risk of patent infringement can be difficult. Even for large companies, which have the resources to investigate potential problem patents and to fight in court, resolving a patent infringement can be expensive. For small companies, it can be prohibitive. A focused lawsuit involving one patent and simple technology can cost several hundred thousand dollars to get to the point where a court decides the substantive issues of patent infringement and validity. Often companies find it cheaper to just settle. To the extent possible, a game developer that incorporates third party gaming engines or other platform components (which would be most developers) should weigh the risks and at least consider building on platforms from companies that have the ability, resources and commercial incentive to indemnify or at least provide support in the event use of their technology gives rise to a patent infringement claim. Free third party software is an attractive option for indie developers with limited budgets but if there is a lawsuit, there may be no recourse from the supplier.
Conclusion
The gaming industry is a dynamic and growing area expected to generate hundreds of billions of dollars in revenue. With this much as stake, companies will fight to protect their market and one way to do this is by protecting and enforcing their IP through copyrights, trademarks and patents. Companies that protect their IP and are active in avoiding potential issues can position themselves well to take advantage of this growth. Companies pay little attention to their IP and those of others do so at their peril.
[2] While copyright ownership for certain types of work automatically vests in the hiring company as a ‘work for hire’, there are many exceptions. Software is a significant one. Without an express assignment, the contractor will own the copyright in the software they create.
[3] Rogers v. Grimaldi, 875 F.2d 994 (2d Cir. 1989)
[4] Mil-Spec Monkey Inc. v. Activision Blizzard Inc., 74 F. Supp. 3d 1134 (N.D. Calif. 2014)
[5] McRO Inc. v. Bandai Namco Games Am. Inc., 837 F.3d 1299 (Fed. Cir. 2016)
[6] Techno View IP Inc. v Oculus VR LLC et al. (No. 1-17-cv-00386, D.DE); Techno View IP Inc. V. Sony Interactive Entertainment (No. 1-17-cv-00569 D. DE)
[7] Patent No. 7,666,096 for a “Method for generating the left and right perspectives in a 3D videogame” and No. 8,206,218 for a “3D videogame system.”