A download of some of the most interesting issues we have seen recently in the world of gaming and esports from both the legal sector and beyond. Read issue 1 here.
This month, as well as an update on how the industry is coping with COVID-19, we look at Nintendo’s recent data breach, regulatory updates surrounding ‘paid random items’ and some interesting case law coming out of the U.S.
The ongoing impact of COVID-19 - industry roundup
In our last issue of the Download, we saw that gaming and esports have not been immune to the negative impacts of COVID-19 and global lockdown. Aga Slobodzian provides an update.
Since lockdown began many flagship gaming events, including E3, GDC and Gamescom, have been cancelled or postponed, leaving the most vulnerable indie studios without a means by which to showcase their work and gain financial backing. The esports sector has also seen many leagues cancelled, with arena matches moving back to where the esports phenomenon all began: the gamers’ homes. Home working has left publishers with limited tools and capacities, and so the release of many games has either been delayed or will take place without key elements like voiceovers.
The recently increased demand for gaming services has propelled the Italian government to approve a €4m funding scheme specifically targeting games developers as part of efforts to reinvigorate the nation's economy. However, there have been issues with the increased demand. Google was asked to lower Stadia’s default streaming quality to reduce internet bandwidth strain and console manufacturers (Nintendo, Microsoft and Sony) are expecting or already experiencing issues with low console stocks, worrying news given the upcoming launch of the new generation consoles later this year.
Despite this, the gaming community had a tremendously positive response to combating the virus, with many gaming companies making sizeable donations to COVID-19 related causes and helping to manufacture personal protective equipment for health authorities. Players across the world have also participated in numerous fundraisers and donated their unused computational power to help researchers better understand the virus. The representatives of the global games industry have also united through the #PlayApartTogether initiative to promote the World Health Organisation’s social distancing guidelines during the pandemic, and the UK government in particular has joined forces with leading UK video games companies to help get essential health messaging into more UK homes.
Lockdown has also seen the gaming sector coming to the rescue in many creative ways. After the cancellation of the last week’s Met Gala, various prominent fashion designers have been spotted exhibiting their latest designs in Nintendo’s record-breaking new release, Animal Crossing: New Horizons, with Danny Trejo, Elijah Wood and Greg Grunberg set for a virtual talk show in the game. Musicians, such as rapper Travis Scott and EMD artists, Dillon Francis, Steve Aoki and Deadmau5, partnered with Epic Games to deliver interactive concert experiences in Fortnite which attracted millions of players to their screens. Games are also being used as a home-schooling tool: Microsoft has brought free educational content to Minecraft and the Polish government launched a games development course for quarantined kids and lecturers are coming up with unconventional methods of delivering classes, for example, through use of functional whiteboards in Valve’s new VR game, Half Life: Alyx. It will be interesting to see whether these new initiatives and collaborations will give rise to any developments in intellectual property law or lead to an increase in supervision and regulation from the authorities.
Nintendo user accounts hacked
Last month, Japanese gaming powerhouse Nintendo revealed that 160,000 user accounts had been hacked and Nintendo Network IDs (a unique username and password used primarily for older Nintendo 3DS and Wii U consoles, which can also be linked to accounts on newer Nintendo Switch consoles) had been accessed without permission. Vishal Patel takes a closer look.
The hackers were able to see individuals’ date of birth, email addresses and country/region but, according to Nintendo, credit card information was not exposed. Nintendo apologised to its customers and promised to improve security to avoid a repeat of such an incident. They have also discontinued the use of Nintendo Network IDs and “strongly encouraged” users to activate two-step verification for their accounts. This serves as a useful reminder of the importance of cybersecurity and protecting customers’ personal data and, in particular, that cybersecurity should be regularly reviewed and challenged given hackers’ determination to their causes.
It is unclear whether Nintendo has reported this breach to data protection authorities in or outside Japan. It is interesting, however, that this incident came only a few weeks after the Cabinet of Japan approved a bill to amend the Act on the Protection of Personal Information. The bill introduces a mandatory obligation to report data breaches to the Personal Information Protection Commission (PPC) and notify affected individuals whose rights and interests are likely to have been infringed. Thresholds for mandatory reporting and exceptions are yet to be determined but it is already clear that this represents a significant change to Japan’s current reporting obligations whereby businesses need only make an effort to notify the PPC of data breaches. The National Diet of Japan is expected to approve the bill by 17 June 2020, but it is unclear when the amendments will take effect.
We will be monitoring the introduction of the bill, and any further fallout of the Nintendo data breach, with interest.
PEGI and ESRB introduce notice to inform about presence of paid random items
Aga Slobodzian reports on Pan European Game Information’s (PEGI) (the European video game content rating system organisation) announcement that publishers will now need to provide additional information on the nature of any in-game transactions that include paid random items, such as loot boxes or card packs.
The information must be brought to the attention of consumers through the inclusion of a ‘Includes Paid Random Items’ notice on physical packaging and digital storefronts. PEGI explained that the requirement will apply to optional in-game purchases of digital goods or premiums where players do not know exactly what they will get prior to the purchase. The items may be cosmetic (outfits, appearance upgrades) or have functional value enabling players to progress in the game (new skills, tools and weapons, extra levels or performance upgrades). It will apply to items purchased either directly with real currency, or with in-game currency that has been purchased by the user.
Publishers of games that do not include paid random items but do contain other offers, such as additional levels, cosmetic items, DLCs or expansions, will still need to include the “In-game purchases” descriptor that was introduced by PEGI in 2018.
At the same time, the Entertainment Software Rating Board (ESRB), PEGI’s American counterpart, has imposed a similar obligation on North American publishers, announcing that it will begin assigning a new Interactive Element: In-Game Purchases (Includes Random Items).
IP rights wins for video games publishers in the USA
Gabriella Simon and James Cherry consider two recent US cases which represent high-profile wins for publishers in their use of third-party IP in games.
These cases may disincentivise potential claimants and in turn encourage developers and publishers’ to be bolder in their use of third-party IP without fear of infringement, at least in the US. It will be interesting to see whether they have any wider application, particularly as similar actions may be difficult to bring in the UK where personality rights and unfair competition do not apply.
AM General LLC v. Activision Blizzard, Inc., 1:17-cv-08644-GBD-JLC (S.D.N.Y. March 31, 2020)
Activision Blizzard has successfully defended a New York lawsuit brought by AM General, who claimed that the use of its Humvees vehicles in the Call of Duty franchise amounted to trademark infringement, unfair competition and false advertising, and that Activision was taking advantage of the goodwill and reputation of the “Humvee” and “HMMWV” marks by featuring them prominently in the game and associated merchandise. Activision relied upon its First Amendment rights, submitting that the Humvee vehicles were essential to create a realistic simulation of modern warfare and that the Humvees were of ‘artistic relevance to the game’.
The Judge balanced artistic relevance against the likelihood that consumers would misattribute the true owners of the Humvee vehicles. AM General failed to provide sufficient evidence that consumers were ‘explicitly mislead’: only 16% were confused as to AM General’s association with Call of Duty. Overall, Activision’s First Amendment rights therefore took precedence.
Publishers have historically faced criticism for appearing to promote violence in their games. However, this ruling provides both legal justification for the depiction firearms without infringing on third-party IP rights, and also an artistic rationale for their inclusion to create realistic games without promoting violence or endorsing the firearms industry.
Pellegrino v. Epic Games, Inc., 2:19-cv-01806-JP (E.D. Pa. March 31, 2020)
Leo Pellegrino, a professional saxophone player, sued Epic Games for allegedly lifting his dance moves for a Fortnite emote (a cosmetic enhancement that allows characters to move in certain ways) called “Phone It In” in which avatars play the sax and mimic Pellegrino’s signature dance move. Pellegrino sued on numerous grounds relating to misappropriating his likeness, unjust enrichment, unfair competition, false designation of origin, infringing state trademarks and diluting trademarks.
The Judge found in favour of Epic Games in all but one of Pellegrino’s claim, holding that its use of the likeness of a musical performer in a battle royale scenario was “sufficiently transformative” so as to not infringe Pellegrino’s rights. In so doing, the judge also held that dance moves are copyrightable material, which shut down any potential trademark claims.
Pellegrino was successful in his claim for false endorsement as Epic’s intentional development of an emote mimicing him, whilst not capable of causing confusion over the origin of his signature moves, did create the impression that he endorsed Fortnite. However, commentators argue that this may be difficult for Pellegrino to prove at the next stage of litigation, especially in proving that consumers would think that he endorses the game. Arguably many Fortnite players will not even know who Pellegrino is. (Do you?)
Pellegrino is just one of a several celebrities who have unsuccessfully sued Epic for the use of their signature dance moves for Fortnite emotes. Russell Horing (the ‘floss’ dance move) and Alfonso Ribeiro (the ‘Carlton dance’) also sued Epic for copyright infringement in 2018/2019. Both suits were withdrawn after the US Supreme Court held that such claims could not be brought unless the claimant's copyright in the dance move had been properly registered.
If you have any questions about the topics covered in this article, or are interested to discuss legal issues arising in the gaming and esports sector more generally, we have a dedicated sector team that will be happy to help. Please contact Caroline Henzell or Elia Kim for further details.
See our coronavirus (COVID-19) feature for more information generally on the possible legal implications of COVID-19.
