Friday, June 29, 2007

Xbox Live Originals Offers Filmmakers a "Big Break" at a Big Price, Xbox Live as a Distribution Medium

The New York TV Festival is offering a filmmaker the chance for cash, a six episode stint, and Xbox Live distribution in a contest dubbed "Xbox Live Originals." Sounds great, right? As always, there's a catch. Delving into the application, film makers are essentially giving up all rights in their work in order to enter. To quote portions of the terms:

Each entrant further acknowledges that the NYTVF and its affiliates, employees, officers, directors, licensees, assigns, and sponsors (collectively the “Designated Entities”) engage and have engaged in extensive activities in connection with developing, writing, acquiring, publishing, disseminating and broadcasting literary, artistic, and other material, including stories, ideas, themes, plots, titles, screenplays, teleplays, treatments, formats, and concepts (collectively, the “Materials”). In submitting an entry to NYTVF, each entrant acknowledges and understands that any Materials that the Designated Entities may hereinafter use or exploit may have originated with the Designated Entities themselves or may have been acquired from the Designated Entities’ employees or other parties, and that such Materials may duplicate, parallel or resemble the entrant’s entry to the Competition.

By submitting an entry, entrants acknowledge that they understand and agree that the Designated Entities’ use of Materials containing features and elements similar to or identical with those contained in their entry shall not entitle the entrant to any compensation whatsoever. As an inducement to NYTVF to accept the entrant’s entry into the Competition, each entrant hereby waives any claim or right of action against any of the Designated Entities or their successors in connection with the Designated
Entities’ use of any Materials (or any portions thereof) whether or not such materials contain any features or elements similar or identical to those contained in an entrant’s entry.

That is all in the terms that most people do not bother to read. In summary: If the "Designated Entities" use your ideas, characters, or anything else, you are not entitled to compensation. And so goes my love-hate relationship with most contests involving creative submissions. On the one hand, it can give real talent their big break. On the other hand, the entrants are more or less forced to abandon the entered works because the sponsors fear even the hint of a lawsuit over the re-use of the materials. Whether this would be an unenforceable contract of adhesion is debatable, but ultimately, the contest is optional, and I don't think such an analysis would apply.

Whether or not you agree with this particular contest, it does bring up some other issues. What might the future hold for Xbox Live as a distribution medium? I think things have been going rather well for the system, even if IPTV is a ways off from full-scale implementation. It is an easy way to get into a lot of homes with an established network, and assuming the price per episode isn't too high, many people will pay for the content. As a plus to the author, the copy protection is built into the medium, and the royalty system should be pretty straightforward on a per purchase basis. However, I think the audience would be rather limited in scope, and machinima may have more success with that audience than more traditional offerings.

However, while Xbox Live distribution might help gain some initial traction, or serve as a nice supplement as evidenced by the use of the medium by Rooster Teeth for Red vs. Blue), I doubt that Xbox Live distribution can, at present, replace more other channels, such as the internet and DVD, for start ups. That is not to say that Xbox Live distribution won't be a viable stand alone business model in the future, I just don't think it is yet. And I think the reasoning here is underscored by reports like the one on game system use as a movie player. While Microsoft and Sony may have integrated many media features, the consoles are still primarily game systems to the average consumer for the time being.

Thursday, June 28, 2007

Congratulations to Rooster Teeth

I just wanted to take a moment out of the legal commentary to give a big "Congrats!" to Burnie, Geoff, Gus, Matt, Dan, Jason, Joel, Kathleen, and everyone else over at Rooster Teeth Productions on the release of Red vs. Blue Episode 100.

When I saw the Red vs. Blue trailer posted on in the fall of 2002, I don't think I could have imagined just how far the series would go. I can only say I've been extremely fortunate to be around for the ride. I can't wait to see what Rooster Teeth has in store for us in the future.

Congrats, Rooster Teeth! Keep up the good work!

South Korea to Impose VAT on Real Money Transactions Starting July 1

While the US report is due in a little over a month, South Korea has decided to impose a Value Added Tax (VAT) on real money trading in virtual worlds starting in less than a week. Specifically, those who earn between 6 and 12 million won (about $6,500 US to $13,000 US) every half year will have the VAT applied by the middle man, and those earning over 12 million won every half year must apply for a business license and apply the tax themselves.

For those readers in countries that do not use the VAT system (such as the US), here is a quick primer on the concept. Basically, at each stage of production, the value added by the producer is taxed. It is an alternative to sales tax. Here is a simple example:

I make thingamabobs. A thingamabob takes $10 in raw materials, which I can sell to a maker of thingamajigs for $15. He can then sell the completed thingamajig at wholesale for $20. Thingamajigs retail for $25.

Under a 10% sales tax:
The consumer buys the item at retail for $25 and pays an additional $2.50 in sales tax.

Under a 10% VAT tax:

I pay $11.00 for the raw materials ($10 + $1 in VAT)
I charge $16.50 for the thingamabob ($11 + $5 profit + $0.50 in VAT on the profit)
Thingamajigs sell for $22 at wholesale ($16.50 + $5 profit + $0.50 in VAT on the profit)
Thingamajigs sell for $27.50 at retail ($22 + $5 profit + $0.50 in VAT on the profit)

Under both systems, the consumer pays $27.50, each level gets $5 profit, and the government gets its $2.50 in tax. It's more or less a sales tax alternative with some notable criticisms, including complexity in computation and collection compared to a straight sales tax.

To summarize, Korea will be taxing the value added to virtual goods. This could be exceedingly complex, as I can only imagine the argument that will arise over whom is adding value at what stage. More importantly, it is not clear how this will interplay with license agreements that maintain ownership of virtual goods in the game developer.

Wednesday, June 27, 2007

Virtual Taxation Report Due in August

It would appear the US Federal Government may finally be taking notice of virtual economies, as it is being reported that a report on the matter is due in August. Of course, an in depth dissection will appear on this site once the report is issued.

If I had to make a prediction, I assume that in-game income will be taxed as ordinary income, earned on cashing out from the system and counterbalanced against payments into the system. That would be the most logical and simple approach given the current income tax system.

Of course, just because this is the most reasonable outcome does not mean it will be the actual outcome. There are a whole host of possible classifications. Income from games could be classified as gambling winnings, which are subject to a higher tax and withholding rate than ordinary income (see IRS, forms W2G and 1040). They may even attempt to assign a tax base system to virtual property itself, much like real property gains or loses in value.

Of course, an advisory doesn't necessarily mean a regulation. Check back in August for a complete analysis once the report is made public.

Tuesday, June 26, 2007

Of Warranties and Consumer Protection: An Xbox 360 Story

Last evening, my second Xbox 360 died, approximately 7 months after it arrived. I had a launch console, which died about 8 months ago, and was replaced by the recently deceased refurbished console. I know what you are thinking, "Join the club." Or "Yep, and it seems Microsoft is never going to tell you why."

However, Law of the Game is a site about video game law, and while my second dead Xbox 360 may seem like it has nothing to do with the law portion of that description, it works as an interesting lead in to a short post on the law of warranty and the concept of consumer protection.

The concept of a warranty is simple enough: Someone selling a product assures the buyer that of something. In a typical consumer transaction, the assurance is generally that the product will work for some period of time or is free from defect. Warranties can be express (written) or implied (imposed by law on all sales). Express warranties must be available to the consumer pre-sale, according to the Magnuson-Moss Act of 1975, a Federal Law. The FTC has a fairly complete consumer guide for written warranties.

We all know what the Xbox 360 warranty says, it's right here and here. It is the second variety of warranties that are more complex, the implied warranties. Implied warranties are imposed by law, and vary from state to state in the US and country to country abroad. As a result, I could spend the next year just trying to lay out the complex worldwide warranty matrix and still not finish the task. So, instead I will briefly mention two major forms of implied warranties: Merchantability and Fitness for a Particular Purpose.

Merchantability implies that the goods are what they say they are, and they conform to the standards of trade for that item so that they can be used as expected for that item. So, when sold, an Xbox 360 is warranted to be working, packaged and assembled in a uniform way, and able to play Xbox 360 games and DVD movies.

Fitness for a Particular Purpose is more specific. A merchant in this case must know that the consumer is planning to use the item for something specific and tells the consumer that the items are fit for that purpose. Say I went into a furniture store asking for a table to support a very heavy (200+ pound) TV set. If the salesman told me that a particular table would work, and it in fact collapsed, there would be a violation of the warranty.

Neither of these implied warranties are of much use, unless your system is dead out of the box. Moreover, they typically apply to the merchant (the place you bought the item), not the manufacturer.

A related issue is the concept of a deceptive trade practices acts. Deceptive trade practices are pretty much what they sound like (an action that in some way deceives the consumer about the product), and they are also a state by state action. In fact, some states have a long list of industry specific violations in addition to the general violations. It would be a bit of a stretch to apply this as well, although some concept of a failure of represented quality might be applicable, although Microsoft has generally admitted Xbox 360 failures, which may preclude this option.

There are probably potential other causes of action related to the Xbox 360 failures, but these are the ones that seem to appear on the message boards the most.

I would also like to take a moment to point out another legal issue related to the Xbox 360 failures: Fraud. Going to Wal-Mart (or other retail store), purchasing a console, and then returning your broken console is fraud. While it may seem like an easy fix, just don't do it.

Microsoft has encountered an interesting problem with the 360. The failure rate is high, but so are sales. What is a gamer to do? Hunt for weeks, if not months, to get a Wii, which I admit I enjoy thoroughly but is a little short on software until some of the big releases later this year (Metroid Prime 3, Smash Bros. Brawl, Mario Galaxy). Buy a PS3, which is even more expensive than the 360 and has, for the time being, a weak software lineup. Or buy a 360 and play some quality games until it fails, which seems a near certainty, at which point you might be under warranty, might have to pay for a repair, or might just buy a new console. It's quite an odd problem, and one I certainly wish Microsoft would resolve. Unfortunately, sales don't seem to be suffering enough for Microsoft to really take notice. Not that I blame the consumer, since I'm just as hooked as most everyone else. This issue, though, is also one that I cannot remember happening to this degree with any other console. In fact, I have never had another console in my collection fail, including my launch PS2 (which did have a notable failure rate).

What is a consumer to do? Unfortunately, short of a product recall (which seems unlikely given that it has not happened yet and safety is not the issue) or a class action suit, the individual consumer is likely stuck. Why? The cost of an action against Microsoft would be astronomical, and more than likely, they will just settle before any court could place any actual fault on them in order to avoid future, similar suits. This speaks to the failure of consumer protection on the whole. The Xbox 360 user base is vocal and adept at using the internet, so this issue is well known and widespread. Who knows what other products may present the same result to a less technically savvy group. On the flip side, I am certain that other products that work well are being unduly burdened by consumer protection attempts. It probably balances out in the grand scheme of things, but is unfortunate in many particular instances.

And so I, like everyone else, will be once again calling 1-800-4-MY-XBOX and hoping for the best. At least this time, it is in the off season, rather than right before a major game release (my last console was being repaired during the Gears of War release).

Friday, June 22, 2007

New York Gaming Bill: What Is A Class E Felony?

Game Politics is reporting that the New York video game regulation bill is on hold, but will still have selling games listed as a class E felony. As I pointed out before, depending on the end result of some active New York litigation, that could mean selling games could trigger the three strikes law.

Today, however, I thought it would be worthwhile to share some other class E felonies under New York law, and some misdemeanors, for comparison sake.

New York Class E Felonies (All of which can be found here in the Penal Code)(This list is by no means exhaustive):

§ 120.01 Reckless assault of a child by a child day care provider.
§ 120.03 Vehicular assault in the second degree.
§ 120.30 Promoting a suicide attempt.
§ 125.10 Criminally negligent homicide.
§ 125.40 Abortion in the second degree.
§ 130.25 Rape in the third degree. ("Statutory Rape")
§ 130.40 Criminal sexual act in the third degree.
§ 135.10 Unlawful imprisonment in the first degree.
§ 150.05 Arson in the fourth degree.
§ 230.05 Patronizing a prostitute in the second degree. (A person over 18 patronizes a prostitute who is under 14.)
§ 176.15 Insurance fraud in the fourth degree.

"S.203 would create a new Class E felony when a person is convicted of a fourth violation of driving while ability impaired (DWAI). The penalty would be a fine of between $1,000 and $5,000 and/or imprisonment for a minimum of 1-3 years, and a mandatory drivers license revocation for one year." (Source)

Not a Class E Felony (lower penalty):

§ 65-a. Procuring alcoholic beverages for persons under the age of
twenty-one years.
§ 65-b. Offense for one under age of twenty-one years to purchase or
attempt to purchase an alcoholic beverage through fraudulent means.
§ 152. Sale of illicit alcoholic beverages.
§ 220.70 Criminal possession of methamphetamine manufacturing material
in the second degree.
§ 230.00 Prostitution.

Unfortunately, the New York legislative web site is riddled with an "internal server error," which has slowed this search to a crawl. I imagine, though, that these few examples paint a wonderful picture:

Selling a video game is the same as getting a fourth DWAI, committing a criminally negligent homicide, committing statutory rape, or committing fourth degree arson. Selling a video game is evidently more dangerous than selling alcohol or possessing the material to make meth, and I expect tobacco follows in a similar way.

Thursday, June 21, 2007

Manhunt 2: A Microcosm of Government Regulators

As I have watched the Manhunt 2 saga unfold, I have noticed that the issues facing Take 2 and Rockstar are really the same issues anyone dealing with governmental or pseudo-governmental groups faces. And so, I wanted to share a few general regulatory considerations with you. Keep these in mind if you ever have to deal with a regulatory agency, be it for a video game or a franchise system or an SEC filing or even just getting a passport.

1. Regulators appreciate being treated as people, and a friendly, polite tone will often go a long way.
How would you react if someone called you just to verbally berate you on the phone? Believe it or not, regulators get plenty of anger taken out on them. And, believe it or not, regulators are people, just like us, and not just some faceless mouthpiece for the greater bureaucracy. If you are polite to them, they will usually be polite to you.

2. If you have a problem with one regulator, you probably have a problem with a half dozen regulators.
Regulators among different regulatory bodies do talk to each other. Which means if you've had a regulatory problem in one place, other regulators probably already know about it, and are probably already looking into it for their jurisdiction. Just keep that in mind if you receive a compliance letter from one regulator, because a few more are probably working their way into the mail.

3. If you are a thorn in a regulator's side once, they will certainly be a thorn in your side for quite some time.
If your company is causing a big problem for a regulator, don't expect them to forget it. This doesn't mean they will actively pick on you, but it seems they might read your next document (or play your next game) a little more closely.

4. Blend into the crowd as much as possible.
This relates back to the previous. If your company blends into the crowd, it may mean you are cut a little more slack. Nothing is a sure bet, but calling attention to yourself is usually not beneficial.

5. Remember, it is their job to regulate.
And it's not personal. You may feel like all of the regulators are out to get you, but it is just their job. They are employed to find fault with what you have provided or what you are requesting. If it was just a rubber stamp approval, then it wouldn't accomplish whatever the original governmental goal is.

In conclusion, regulators are just people doing their job, and the people you talk to aren't the ones who came up with the rules they are enforcing. In fact, they may disagree with them just as much as you do. As such, a little common courtesy often goes a long way, and to a certain extent, so does a little luck.

Video Games Live

As a short interlude in my legal discussion, I'd like to take a moment to give some kudos to Video Games Live. Tommy Tallarico and Jack Wall put on a great show last night at the Meyerson Symphony Center here in Dallas. There are still quite a few shows on the schedule, so if you have a chance to go, I highly recommend it.

Wednesday, June 20, 2007

The Downside to the ARG

Alternate Reality Games (ARGs) have become quite popular as promotional tools, especially in the wake of the success of I Love Bees (the Halo 2 release ARG). However, there's a flip side to the ARG concept.

The unfortunate truth is that even in the most carefully choreographed ARG, the players can end up harassing people who aren't affiliated with the game.

Case in point: The Halo 3 ARG (starring "Adjutant Reflex") yesterday resulted in hundreds of calls to Michael VanderZand. I suppose it was lucky that he's a fan of the Halo games and Red vs. Blue.

In any case, while the annoyance may only be temporary (a few days, maybe weeks), there isn't much of a recourse for the victim. And more than likely, the cost of forcing any such payment (for time lost, annoyance, cellular phone bills, etc.) would likely exceed the amount to be recovered.

Just as a common courtesy, I really think the people who run the ARG, be that the game company or a private ARG production firm, should build in a cost to compensate people who do get temporarily steamrolled by the flood of ARG players (who, I must admit, are really into these games, and I think their dedication is quite remarkable). For example, I think it would be appropriate for the powers that be to offer to pay for the lost cell phone minutes (and/or for overages on that bill) and maybe offer a free copy of Halo 3, since Mr. VanderZand is a fan, and really took this pretty well.

It's really not asking for a lot, just a little responsibility for the ARG, since it does have an effect in the real world. I don't know for certain if this hasn't already happened (and it very well might have), but these type of situations are something to think about in planning an ARG marketing event.

Monday, June 18, 2007

Even More Second Life Gambling: Two New Issues to Consider

In the wake of a bit of a gambling scandal in Second Life, two new points of concern have been once again made very public.

1. Second Life is not an inherently secure gambling platform, and as such, both the player and the house should be exceedingly wary of the integrity of the game.
2. Linden Labs, while claiming to "ban gambling," has done nothing of the sort, and needs to start worrying that the Feds may soon come calling.

Second Life Gambling Security

Gambling, at its core, is only as valuable as the integrity of the game. If the house is cheating, the player shouldn't play. If the player is cheating, the house shouldn't be letting the player play. In either case, when the integrity is placed into question from one side or the other, the game loses. Second Life has to be one of the few places where the integrity of the game itself is questioned more often than it is validated.

Here is just a short list of reasons why Second Life is not a good place to be involved in gambling:
1. There is no oversight of the house.
2. There is no oversight of the player.
3. The security is only as good as the scripter, and often, that isn't very good.
4. There is no real grievance system.
5. There is no way to assure payout.

To be honest, a player never knows if the house is paying out what it should, when it should, and without releasing information to other parties. On the flip side, the house never knows if the player has found a way to scam the system, short of an incident like this. Imagine if FrostyFox had, rather than take $200,000 up front, taken $500 per day for a few months. Would Bob Perry have even noticed, or if he did, would he have just considered it within the acceptable margin of error? As much as everyone likes to believe in the honesty of others, this should be example enough to make some people think twice.

Linden Labs UIGEA Wake Up Call

It was not that long ago when the reports of the Feds visiting Second Life made their way into the blog-o-sphere. And for a while it seemed that maybe Linden had taken the matter seriously. But this new story just shows that Linden's efforts were far more hollow than they appeared. It is hard to fault them, as the methods described to fly under the radar, and because no companies have yet felt the wrath of the UIGEA, but Linden (and potentially other game developers) need to take notice before the Feds decide to dictate the outcome. And unfortunately for the MMO developers, the Skill Game Protection Act won't do anything for in-game slots or other games of chance, even if they are cloaked within a game of skill.

As we approach the 270 day deadline to construct the finding tracking system, we may be inching closer to the first enforcement of the UIGEA. The question remains, however, when that enforcement will spread to the MMO world. If the status quo continues, the answer may be sooner than you think.

Friday, June 15, 2007

H.R. 2610 - The Skill Game Protection Act

Law of the Game noted rumors of a proposal to exempt games of skill from the Unlawful Internet Gambling Enforcement Act last week. That bill has materialized as H.R. 2610 "The Skill Game Protection Act." As the text is now available, some analysis can proceed. The relevant portion of the bill reads:

(f) As used in this section, the term `bets or wagers' does not include operating, or participation in, poker, chess, bridge, mahjong or any other game where success is predominantly determined by a player's skill, to the extent that--
      `(1) the game provides for competition only between and among participants, and not against the person operating the game; and
      `(2) the operator is in compliance with regulations issued pursuant to section 5368 of title 31, United States Code.'.

There are three critical points in this act in terms of inclusion:
1. success is predominantly determined by a player's skill
2. competition only between and among participants
3. [competition] not against the person operating the game

In the simplest terms, it has to be a game won by skill, bet on by players, and the house must not have a seat at the table.

As I often like to do, I'm going to set forth some examples of what is and isn't allowed under this proposed legislation.

1. A system where players could wager on the outcome of the next round of, say, Halo.
2. A system where players paid to enter a tournament, with the winner or top few spots taking the money paid in.
3. A system that allowed people to wager on the results of PvP combat in an MMORPG (round or tournament), so long as the betters were all combatants.
4. A system that let people bet on the result of a a race in, for example, Forza 2.
5. Wagering on the outcome of a round of Mario Party you are participating in. (This is the most questionable, as there are so many chance elements in Mario Party. However, I believe that the game is more skill than chance, so I think application would work here.)

Not Allowed:
1. Betting on the outcome of a game you're not playing. For example, I couldn't put cash on a player to win the next round of Halo as an observer.
2. Betting on someone else to win when you're playing. (This is a traditional gambling issue. If you're playing poker, you can't put money on the guy 2 seats down the table. It would eliminate the integrity of the game.)
3. Betting on the outcome of a Player vs. Computer match, i.e. betting as to whether a player character could beat a high level creature in a coliseum.
4. It does not legitimize gold farming or other MMORPG profiteering, as those are generated in a player vs. computer (environment) model.
5. Betting on anything primarily determined by chance, i.e. blackjack within an MMORPG.

Of course, this is just revision one of the bill, and all of this may change, or they bill may never pass at all. However, it does pose some interesting possibilities.

Wednesday, June 13, 2007

EU to Consider Video Game Regulations

It is being reported that the EU is considering stricter restrictions on the sale of "killer" video games. The restrictions would create a common set of penalties for retailers, but leave the classification of games up to the member states.

I hardly need to mention that similar laws in the United States have been repeatedly struck down. However, it's also readily apparent to most people with even the slightest legal background that the US and the EU are very different legal animals.

The EU (as a collective body) does not guarantee free speech, as such. (For those unfamiliar with the workings of the EU, each of the member states still retains their own laws. It would be quite time consuming for me to look for a free speech mandate in each, so I am only going to speak to the EU overall.) The closest they come is Article 11 of the Charter of Fundamental Rights in the European Union, which reads:

Article 11

Freedom of expression and information

1. Everyone has the right to freedom of expression. This right shall include freedom to hold opinions and to receive and impart information and ideas without interference by public authority and regardless of frontiers.

2. The freedom and pluralism of the media shall be respected.

This does sound much like freedom of speech, but even a small amount of research into the state of affairs in the EU shows that it is not as broadly applied as the First Amendment in the US.

It will be interesting to see if these new regulations are put into force in the EU, and if the industry challenges them if they do.

[Update: It appears this issue has been abandoned for the time being. We can only hope it stays that way.]

Tuesday, June 12, 2007

The Sony vs. Church of England Legal Battle, Architectural Copyright

There has been quite the hullabaloo over the Church of England's response to the use of Manchester Cathedral in Resistance: Fall of Man.

As I don't yet own a PS3, haven't played Resistance, and am certainly not an expert in the laws of the United Kingdom, I will direct you to this account of the case. The Wardman Wire does a quite thorough job of explaining the UK legal issues involved.

Interestingly enough, the architectural copyright issue is becoming quite widespread in the US. Since the passage of the Architectural Works Copyright Protection Act of 1990, architects have been granted protection both for the plans and "the design of a building as embodied in any tangible medium of expression."

What does this mean for game developers? Well, if you put an exact replica of a real building in your game, the architect could come after you for infringement. Remember, a video game, like a photo or a film, is a tangible medium of expression, even if the building in it isn't a physical building.

Friday, June 8, 2007

World of Warcraft Player Sues IGE

The Escapist is reporting on this suit, in which a World of Warcraft player is suing IGE. For those unfamiliar, IGE is a major seller of in game gold for a number of high profile games.

The suit essentially alleges that through their business activities, IGE is diluting the player experience. These allegations are made through a combination of consumer protection laws and interference with the contract of a third party.

The claim is in one way novel and in another way analogous to many other consumer protection claims. However, it will still stand to face the noticeable issue that Blizzard has elected not to pursue legal action in this matter. Arguably, Blizzard, as the purveyor of World of Warcraft, is in the better position to pursue IGE for selling gold as violations of the Terms of Service and License Agreement.

The outcome of this could also be critical to the virtual world, as it may clearly define who really has the power to sue over in-game activities, the game company or the player.

Thursday, June 7, 2007

Bill Proposed to Exempt Skill Games from the UIGEA is reporting that Rep. Robert Wexler of Florida is going to introduce a bill to exempt "games of skill" from the Unlawful Internet Gambling Enforcement Act ("UIGEA").

What does it all mean, though?

Well, games of skill may or may not have been covered by the original act, which cites "games subject to chance." Largely, such a bill would clarify what is and isn't covered by the UIGEA. The major implication is that poker would be carved out of the law's coverage, but other games like chess, mahjong, and bridge would also be removed.

And so would video games...

...or at least it seems reasonable to assume that most, if not all, would also be carved out.

Of course, it seems likely some significant opposition will arise, as online poker (and the debt people have incurred as a result of online poker) was a major driving force behind the UIGEA in the first place.

However, returning to the video game issue, the vast majority of games are clearly within the realm of "games of skill." Games of chance are like lotteries, roulette, and slot machines. Most video games employ significantly more skill.

Theoretically (depending on the text of the bill, of course), this would mean a company that allowed players to bet round by round on games of, say, Quake 4 or Halo 3 would be legal, and the payments to and from this system would not fall in the jurisdiction of the UIGEA.

The flip side, however, is that casinos in Second Life would still be problematic if they ran slot machines, roulette, lotteries, or other games of chance.

I want to re-iterate, this bill has yet to be introduced, much less passed or signed into law. We're still a ways off from what I've described, but if you want to be able to place bets on your skills in the next big FPS, you should consider supporting this bill.

Bragg v. Linden: Your Virtual Future May Rest On This Case

It's not often that a critical case can be seen coming before it is decided. However, Bragg v. Linden in federal court in Pennsylvania stands to be possible the landmark case in MMORPG law or virtual law or whatever you would like to call it.

For those who haven't been following, the basic facts are that Mr. Bragg was a Second Life real estate developer. He bought some land ("Taessot") for $300. Second Life contacted him soon after saying the land was acquired with an exploit, reclaimed the land, and banned his account.

The court has officially denied Linden's motion to dismiss and their motion to compel arbitration, negating a portion of the TOS. This means, more than likely, the issue will go to trial. What is the issue? As the court put it:

Ultimately at issue in this case are the novel questions of what rights and obligations grow out of the relationship between the owner and creator of a virtual world and its resident-customers.

So what does this mean to you?

If you are a gamer, you should be paying attention because someone may finally stand to define your rights in the game, the virtual world, or at a minimum in Second Life.

If you are a developer, there are a number of reasons to be paying attention:
1. If you make statements like Linden has about rights in game, how will those assertions operate with your EULA?
2. What rights can players assert regardless of the EULA?
3. How far can a government intervene in your virtual world?
4. If you have an arbitration clause in your TOS, will it suffer the same fate as Linden's?

I have my own theories on what the answers to these questions might and perhaps should be, but I will save that for a future post. Keep checking back with Law of the Game for more on the Bragg case as it develops.

Wednesday, June 6, 2007

Copyright: What Every Gamer, Developer, and Aspiring Game Developer Needs to Know

A recent UK court decision brought to mind a recurring problem out in the world:A broad misunderstanding of Intellectual Property. As such, I will be posting four articles in the coming weeks, covering Copyright, Trademark, Trade Secret, and Patent. Hopefully, it will help everyone understand what these four very different concepts embody.

The Basics of Copyright

At the most basic level, a copyright is the protection of an expression, not an idea. The famous case of Baker v. Selden solidified that point. In Selden, a series of accounting books had been copyrighted, and the author contended that the copyright protected the accounting system because the books containing the system were copyrighted. The court explained the distinction between copyright and patent, which is simply that copyright protects expression, and patent protects ideas.

The Right of Copyright

Copyright originated in England with the printed word. Today, copyright protects expressions from the written word to the audio recording to the motion picture to software. Copyright itself boils down to a bundle of rights, often compared to a bundle of sticks. These rights include: the right to create copies of the work, the right to distribute copies of the work, the right to create derivative works, and the right to public display/performance. For example, if I wrote a book, I would have the right to grant permission for the publication of that book, or if someone wished to write a continuation using some of the characters, I would be able to allow or stop that work as a derivative.

To get protection, there are typically two requirements: authorship and a work fixed in a tangible medium. In plain English, you have to create something, and that thing has to be a finished product in the real world. A book, a painting, a sculpture, and a movie are all fixed in a tangible medium before release.

Copyright and Video Games

So what does this mean for gaming? Copyright's application to software is still a relatively young field (compared to the printed word), but on the basic level the rule is the same: Copyright protects the expression, not the idea. This is probably more easily explained through a series of short examples, which will all be video game specific, rather than explain the law word for word. This list is not exhaustive, but it covers many of the bigger issues. Of course, these are all hypothetical examples, and specific facts may have a different result.

1. Making an unauthorized copy of a game and selling it is, quite clearly, infringement. For example, if I burned a copy of Doom II on CD and sold it to you, I would be infringing on id's copyright.

2. Making a backup copy of a game you own a license to is not infringement. For example, if I made a copy of my Half-Life 2 DVD and put it in my safe, that would be acceptable.

3. Making a backup copy of a game you own a license to and distributing it is infringement, no matter what. For example, if I made a backup copy of Magic of Scheherazade and put that ROM online for others to download, it is infringement even though the game is no longer in production (and a bit hard to find).

4. Copying significant elements of the source code of the game would be infringement, even if the game looked completely different. For example, if Gears of War wasn't authorized to use the Unreal 3 engine, that would be infringement.

5. Taking a major character from a series and making your own series is infringement, and this includes machinima. For example, if I made "Halo 0: The Cortana Story" to tell the backstory ofCortana, I would be infringing whether that was a video game, movie, book, machinima series, etc. because it is a derivative.

5. A Game Genie (or Action Replay or Game Shark) is not infringement, but a card that plugs into an arcade machine to speed up play is. (It's a bit confusing, but those are the actual cases.)

6. Copying major element of the GUI (the "look and feel") may be infringement, but so far, it hasn't been (although it arguably could have been, were it not for the Windows 1.0 license). This is, unfortunately, a very complicated area that hasn't been as well defined as other areas. For example, Microsoft Word and Corel WordPerfect both have menus that have File, Edit, etc. This is not infringement. But if I were to make a game that had an identical in game menu and GUI system as World of Warcraft, down to the smallest detail, it would likely be infringement.

7. Example: Reverse engineering Diablo to play on an open source alternative to is infringement.

8. Making a game that re-uses a general game idea that is already copyrighted is not infringement. For example, if I were to go make a new golf video game, EA couldn't claim infringement simply because they already make a golf video game.


As you can see, the concept of copyright is far more narrow than many people think. In the software realm, it is also not as well defined as with other media. It is still important to protect your game, however, with copyright. In fact, it is now even possible to preregister for copyright protection before the work is done. On the other end, as a gamer, it is important to not actively infringe on the copyright of the developer. After all, they put a lot of time and money into creating the game you're enjoying.

Keep watching Law of the Game for the upcoming basics of Trademark, Trade Secret, and Patent articles.

Tuesday, June 5, 2007

Reminder - Upcoming Event - Dallas IGDA Legal Roundtable

Just a reminder to anyone who may be an International Game Developers Association member in the Dallas area, I will be participating in a legal panel on Wednesday, June 6, 2007.

The panelist biographies are available here.

The event details are available here and reposted below:

Video Games Law Panel
WHEN: Wednesday, June 6 @ 7:00PM
WHAT: Video game lawyers give insight and answer questions. Free beer!

If you read Law of the Game, please come up and let me know. I am always interested to hear what readers have to say about the site.