Copyright, Cryptocurrency and Video Games

Originally published by Susan Ross (US).

Video games, such as Grand Theft Auto®, remain popular around the globe, and two recent matters made headlines on two different aspects of the games: copyright and cryptocurrency.

Copyright

On August 16, 2018, the federal trial court in Manhattan issued a ruling in a case involving the video game “Grand Theft Auto V” (“GTAV”) and two software programs that allowed players to cheat. (Take-Two Interactive Software, Inc. v. Zipperer, No. 1:18-cv-02608-LLS (S.D.N.Y. Aug. 16, 2018). Take-Two had moved for a preliminary injunction against the creator of the two programs, and the defendant had moved to dismiss the complaint.

According to the opinion, the defendant’s programs “create an alternative version of GTAV which is based on Take-Two’s GTAV but with added elements that allow its users to use features not available in the original version of GTAV.” The software allegedly permitted users “to perform unauthorized actions including advantage themselves and interfere with and ‘grief’ the game play of other players.”

Take-Two filed a complaint in federal court, with five causes of action:

(1) copyright infringement;

(2) contributory copyright infringement;

(3) breach of contract;

(4) tortious interference with contract; and

(5) unfair competition.

Note that the U.S. copyright law defines a “derivative work” as

A work based upon one or more preexisting works, such as a translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgement, condensation, or any other form in which a work may be recast, transformed, or adapted. A work consisting of editorial revisions, annotations, elaborations, or other modifications, which, as a whole, represent an original work of authorship, is a “derivative work.”

17 U.S.C. § 101.

The right to make a derivative work is one of the exclusive rights granted to the owner under the copyright law. 17 U.S.C. § 106(2). Take-Two had registered its copyright in GATV with the U.S. Copyright Office. Therefore, the court easily found that, because the defendant created an alternate version of GATV, Take-Two established a likelihood of success on the copyright infringement count. In addition, because the defendant licensed his software to others, the court found a likelihood of success on the contributory infringement claim.

With respect to the breach of contract and tortious interference claims, the court reviewed the GTAV license agreement to which users must affirmatively assent before installing a copy of GTAV. Among other terms, the license agreement prohibited users from (a) creating derivative works, (b) restricting or inhibiting other uses from using and enjoying the game, and (c) cheating or using unauthorized programs in connection with any administrative functions. The court found that Take-Two would likely succeed on its breach of contract claim. In addition, Take-Two alleged that other players breached their license agreements by using the “cheat” programs, and that the defendant induced players to breach those agreements. The court agreed.

In contrast, the court ruled that Take-Two’s state law unfair competition claim was pre-empted by the federal copyright claims. The court found no “extra element” under state law that is required to bring such a claim: “To the extent that Mr. Zipperer’s conduct is independently illegal, it is so because it violates the Copyright Act, a claim for which the complaint already seeks relief.”

With respect to the preliminary injunction of element of showing irreparable harm in the absence of an injunction, Take-Two alleged that it would suffer three types of harm:

(1)        The programs caused Take-Two “to lose control over its carefully orchestrated plan for how GTAV’s multiplayer feature GTAO is designed to be played”;

(2)        The programs harmed Take-Two’s reputation “for maintaining integrity of its gawming environment, which discourages users from purchasing and playing Take-Two’s video games”; and

(3)        The programs reduced Take-Two’s price point for the game.

The defendant did not contest this point, and the court granted the preliminary injunction.

Cryptocurrency

Moving from GTAV to Electronic Arts’ “FIFA” soccer video game franchise, an Italian resident was accused of stealing approximately $342,000 of digital goods. He allegedly created software that provided access to EA’s systems, permitting him to alter databases related to granting tens of thousands of people free online access to “FIFA18” and its related digital content.

He was arrested at the San Francisco airport, and charged by the U.S. Department of Justice for infiltrating EA’s systems.

The cryptocurrency issue arose when the defendant attempted to post a $750,000 bond using some lesser-known cryptocurrencies. (Most of our readers know that cryptocurrencies can be very volatile and exist only in electronic form.) The nature of cryptocurrency meant that “the FBI could not take possession of the cryptocurrency even though part of it would be used for restitution to Electronic Arts, due to liability issues,” the Assistant U.S. Attorney stated.

Instead, the FBI suggested that the defendant sell $750,000 worth of the cryptocurrencies. Unfortunately, because he held lesser-known and thinly traded cryptocurrencies, such a large sale would “tank” the market—destroying the value of the cryptocurrencies. The parties eventually settled on his selling $200,000 in the cryptocurrencies in order to post his bond. If convicted, he faces up to 5 years in federal prison and a $250,000 fine.

Takeaways

Video game owners have a variety of tools available to deal with individuals who go beyond permitted use of this valuable intellectual property. Of course, more remedies are available to owners who register their trademarks and copyrights.

The post Copyright, Cryptocurrency and Video Games appeared first on The Brand Protection Blog.

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