Bungie obtains restraining order and civil judgment against a West Virginia man who terrorized a Bungie community manager and his wife.

Judgment Summary

Judgment Creditor: Bungie, Inc.

Judgment Debtor: Jesse James Comer

Principal Judgment Amount: $405,189.22

Attorney Fees: $83,806.30

Costs: $240

RCW 4.84.080 Fees: $200

Total Judgment: $489,435.52

Post-judgment Interest: 12% per annum until paid in full

Protecting your Employees from Harassers: Priceless

Default Judgment and Order

To promote Destiny 2, Bungie employs community managers to serve as a bridge between Bungie and its players. One of these community managers referred to as “D. Doe” (to preserve as much anonymity as possible to protect against further harassment) promoted the artwork of UhMaayyze, a talented Black fan and creator of Destiny 2 fan art. This irritated Comer, who started a “campaign of racist, stochastic terrorism against the Does and Bungie.”

The Campaign of Terror

Comer’s first act was to add a new phone number to his TextNow VOIP service, which allows anonymous calling. He then immediately proceeded to call D. Doe’s personal cell phone and left a “hideous, bigoted voicemail.” (Complaint) He then left several more voicemails and repeatedly asked the Does to convince Bungie to create options in Destiny 2 in which only persons of color would be killed. Mr. Comer next threatened D. Doe’s wife, K. Doe, by leaving even more racist voicemails and texts for her. In these messages, he referred to himself as “Clay Bramston.” Comer spent hours carpet bombing the Does with more racist voicemails and texts.

To rachet things up even further, Comer decided to show the Does that he knew where they lived and could assault them there. Using an anonymous number, he placed a cash-on-delivery order with Domino’s Pizza for a “virtually inedible odiferous pizza.” (Complaint) Comer instructed the pizza delivery driver to “knock at least five times” on the Does’ door because he would be “wearing headphones” and so would need loud, insistent banging on the door to hear anything. Comer used Domino’s online order tracking system to confirm that the Does had received his “pizza-shaped threat” then left K. Doe another voicemail telling her to “enjoy the pizza.”

Comer bragged about all of this terrorism to the “terr0rgang” group on Steam. This lovely group apparently maintains a set of sound files and noises labeled as “ear rape” for use in terror campaigns. Comer followed up with yet another voicemail with one of these “ear rape” sounds played at high volume.

Bungie’s Actions

Within one hour of the “pizza attack,” Bungie sent out executive protection to the Does and called the police. Bungie then engaged investigators and outside counsel to track Comer down. It then brought a legal action in West Virginia, Mr. Comer’s home state, to get a restraining order against him. Finally, Bungie retained round-the-clock security for the Does and commenced a civil action in Washington State to pursue damages against Mr. Comer.

In its Washington State court action, the court found that (1) Comer interfered with Bungie’s contractual relations, (2) his behavior constituted a nuisance, (3) he violated Washington’s Consumer Protection Act; (4) he invaded the Does’ privacy and intruded on their seclusion; and (5) Bungie was entitled to injunctive relief as well as money damages.

Enforcing the Judgment

It’s important to remember that just because Bungie won a default judgment doesn’t mean that Comer will actually pay anything. Bungie will now have the often unenviable task of trying to enforce this judgment. Bungie may well encounter difficulties in actually enforcing against Mr. Comer in West Virginia. For example, people like this are often judgment proof because of inability to pay, or they aren’t deterred by having arrest warrants issued against them, etc. Nevertheless, obtaining this civil judgment sends an important message to both Bungie employees and other, would-be harassers, that this kind of racist terrorism won’t be tolerated.

In this post, we’ll briefly review some of the interesting legal cases going on in the world of video games.

Trials

Gree v. Supercell

While we decided at the start of this year that we (at least mostly) wouldn’t be covering patent cases going forward, we’ll make an exception here to continue a bit of coverage on Gree v. Supercell. Back in September 2020, a Texas jury found that Supercell had willfully infringed a number of Gree’s patents and awarded $8.5 million in damages. (Case 2:19-cv-00070-JRG-RSP). This year, on May 7, 2021, another Texas jury found that Supercell had willfully infringed a number of different Gree patents and awarded $92,176,058 in damages. (Case 2:19-cv-00200-JRG-RSP) While both of these verdicts made the news, they weren’t the whole story.

On November 19, 2020, the Federal Circuit issued an opinion affirming the invalidity of certain claims in Gree’s U.S. Patent No. 9,597,594, including claim 2, which was the only claim of the ‘594 patent asserted at trial (there were other patents asserted, as well). Then, on May 10, 2021, the Federal Circuit affirmed a PTAB decision invalidating claims 1-20 of Gree’s U.S. Patent Number 9,897,799 (not directly at issue in either trial). During the post-trial motion phase, Judge Gilstrap ordered the parties to mediate and the parties settled.

If you want to study the cases at issue, the dockets include:

• 2:19-cv-00070-JRG-RSP

• 2:19-cv-00071-JRG-RSP

• 2:19-cv-00072-JRG-RSP

• 2:19-cv-00200-JRG-RSP

• 2:19-cv-00237-JRG-RSP

• 2:19-cv-00310-JRG-RSP

• 2:19-cv-00311-JRG-RSP

• 2:19-cv-00413-JRG-RSP

• 2:20-cv-00113-JRG-RSP

Overall, these cases continue to remind us of the perils of defending patent cases in Texas (or, at least, in the Eastern and Western districts).

Huffman v. Activision-Blizzard et al.

Activision successfully defeated Booker T. Huffman after a jury trial in Texas over the alleged copying of his “G.I. Bro” wrestling/comic book character persona. Back in July, when covering the denial of Activision’s MSJ, I commented that having a jury trial would be “[a] ridiculous waste of time and resources for what’s clearly an erroneous decision,” so I was pleased to learn that a jury agreed with me on the merits and sided 100% with Activision. Simply put: there was no copying of any original elements from Booker Huffman’s work. The judge has set a schedule for post-trial briefing with opening briefs due on August 16, 2021. Let’s hope Huffman throws in the towel soon.

Valve Loses Patent Trial -- Jury Awards $4,029,533.93

In keeping with our general rule against covering patent cases, we’re just going to leave this citation here for review since the verdict was not insignificant: Ironburg Inventions Ltd. v. Valve Corp., No. C17-1182 TSZ, 2021 WL 2137868 (W.D. Wash. May 26, 2021).

Civil Procedure

Wargaming.net Dismisses Apple Suit

Earlier this year, we discussed three different mobile game clone cases brought by foreign game developers in U.S. district courts in California. All three were eventually dismissed on personal jurisdiction grounds, including Wargaming.net Ltd. v. Blitzteam, LLC, Case No.: CV 20-02763-CJC. After getting dismissed in the initial suit against Blitzteam, Wargaming then filed a suit against Apple for distributing Blitzteam’s allegedly infringing game. 

On April 12, however, Wargaming and Apple stipulated to a dismissal of the case without prejudice. (Case 2:21-cv-01066-JVS-JPR). This is the second time in two years we’ve seen Apple get sued for allegedly distributing an infringing clone game followed by a quick voluntary dismissal, indicating some behind-the-scenes negotiation and/or settlement. It will be interesting to see if this becomes a trend.

“Cranking” Dance Step Case Transferred to Northern District of Georgia

Remember the “Cranking” Dance Step Case? We first covered it more than a year ago, where I mused about personal jurisdiction and thought this would be an easy win for Take-Two. A year later, though, while the court decided that the case was justiciable under the Declaratory Judgment Act since Mr. Sims had sent a demand letter to Take-Two claiming he owned the dance step used in Take-Two’s NBA2K game, the court also decided that venue in California was improper since all Sims did to establish contact with California was send Take-Two a letter there. The court acknowledged that “in some instances” sending a cease-and-desist letter may provide a basis for personal jurisdiction, but here, it didn’t find sufficient supporting facts aside from that, so transferred the case to Georgia to die there instead. Take-Two Interactive Software, Inc. v. Sims, 2021 WL 2417002 (N.D. Cal. June 14, 2021).

Antitrust

Pistacchio v. Apple

On October 8, 2020, less than a month after Epic Games sued Apple, this fast-follow, class-action lawsuit was filed against Apple for allegedly monopolizing “the market for iOS subscription-based mobile gaming services.” On March 11, 2021, Judge Rogers granted Apple’s motion to dismiss the complaint with leave to amend. Rogers ruled that “Pistacchio’s antitrust claims must be dismissed because such claims rest on an insufficiently pled narrow product market.” A few weeks later, the plaintiffs’ firm threw in the towel and voluntarily dismissed. Pistacchio v. Apple, (N.D. Cal. Case No. 4:20-cv-07034-YGR). This case is really only interesting insofar as you’re trying to read the tea leaves and predict how Judge Rogers might rule in the Epic Games v. Apple case. 

Epic Games v. Apple

The biggest antitrust story of the year has been the Epic Games lawsuit against Apple, which we’ve covered a few times already. While the parties have already tried the case, Judge Rogers has yet to issue a ruling. She is expected to rule within the next few months.

State AGs Sue Google

On July 7, 2021, three dozen state attorneys general joined the big tech piñata party and sued Google for allegedly taking “steps to close the ecosystem from competition and insert itself as the middleman between app developers and consumers.” The complaint makes very similar allegations as Epic’s complaint against Apple and bemoans the up to 30% commission that Google charges app developers on purchases. Google responded, in a blog post, by saying that “[t]his complaint mimics a similarly meritless lawsuit filed by the large app developer Epic Games, which has benefitted from Android’s openness by distributing its Fortnite app outside of Google Play.”

Wolfire Games, LLC v. Valve Corp.

On April 27, 2021, a small indie game studio, Wolfire Games, sued Valve for allegedly monopolizing distribution of PC games via the “Steam Store.” The complaint alleges, similar to the Apple and Google lawsuits, that “Valve is able to extract such high fees because it actively suppresses competition to protect its market dominance.” WOLFIRE GAMES, LLC v. VALVE CORPORATION, 2021 WL 1658403 (W.D.Wash.) Valve has filed a motion to dismiss, currently calendared for hearing on September 17, 2021. Wolfire Games is represented by Quinn Emmanuel. Based on the complaint, and similarly peculiar market definition, I expect this case to meet a similar fate as Pistacchio.

Anti-Cheat

In January 2021, the fine attorneys at Mitchell Silberberg & Knupp represented Riot and Bungie in a garden variety lawsuit against a reseller of cheating software over VALORANT and Destiny 2 cheating tools. After that case settled, Bungie then teamed up with Ubisoft to go after another cheat distributor to “put an immediate stop the the unlawful, for-profit sale and distribution of malicious software products designed to enable members of the public to gain unfair competitive advantages (i.e., to cheat)” in Rainbow Six: Siege and Destiny 2. Bungie v. Thorpe a/k/a Krypto, (N.D. Cal. Case No. 3:21-cv- 5677). Ubisoft and Bungie obtained a default judgment. While these are ordinary cases, they are perhaps somewhat unique in that they involve developers teaming up to fight cheating.

Employment

DFEH v. Activision-Blizzard

The DFEH’s enforcement action, filed on July 20, 2021, seeks to “remedy, prevent, and deter unlawful harassment, retaliation, and discrimination.” Specifically, the DFEH pleads “claims for sex discrimination in terms and condition of employment (including compensation, assignment, promotion, constructive discharge, termination); unlawful sexual harassment; retaliation; failure to prevent discrimination, harassment, and retaliation; and unequal pay.” Department of Fair Employment and Housing v. Activision-Blizzard, 2021 WL 3109804 (Cal.Super.).

Contracts

You Still Gotta Pay the Caterer for Your Esports Event

In March 2020, a catering company called Marbled and a U.K. gaming company, Overlord, entered into a contract in which Marbled agreed to provide catering services to Overlord for the FLASHPOINT CS-GO Global Qualifier, including for competitors and Overlord's staff, tables, chairs, food for lunch and dinner, servers and food warmers, in return for payment of $93,963.15. Because of the pandemic, though, the event couldn’t happen in-person as planned. Instead, Marbled alleges that the parties entered into a new, oral contract, whereby the catering would be delivered to the competitors’ houses in Los Angeles and to Overlord’s staff in its LA office during the 5-week competition. Marbled alleges that it ended up supplying food and services totaling $201,544.01, but that Overlord only paid $130,543.33 leaving an unpaid balance of $71,000.68. Medz Ventures, Inc. v. Overlord Media, Ltd., 2021 WL 3075378 (Cal.Super.).

O'Donnell/Salvatori Inc. v. Microsoft Corp.

A company called ODS sued Microsoft alleging that Microsoft still owes it payments for use of the Halo music or derivative works and for internal uses of the music for promotional and marketing purposes. Microsoft moved for partial judgment on the pleadings. The court granted the motion as to some of the claims, but denied it as to others, including the primary claim for breach of contract and the duty of good faith and fair dealing, so the case goes on. O'Donnell/Salvatori Inc. v. Microsoft Corp., No. C20-882-MLP, 2021 WL 535128 (W.D. Wash. Feb. 12, 2021).

Loot boxes & Monetization

Coffee v. Google

Back in February, we wrote about an order granting Google’s motion to dismiss with leave to amend in the Coffee loot box case. The plaintiff filed a First Amended Complaint. Google filed a new motion to dismiss and the hearing is set for October 21, 2021 at 9:00 am. In the FAC, the plaintiffs allege more of the same, including: (1) that “loot boxes are gambling devices” under California law; and (2) that Google’s conduct “violates established public policies and is immoral, unethical, and unscrupulous” in violation of the Unfair Competition Law. Both of these theories continue to have little chance of succeeding.

Ramirez v. Electronic Arts

Back in February, we also wrote about the Ramirez v. EA case. On March 5, 2021, the court granted EA’s motion to compel arbitration. This is great news for EA; and, also, it provides an argument for keeping arbitration and class-action waivers in terms of service. (Compare this approach with Amazon’s recent decision to ditch arbitration altogether in its user agreement in an attempt to avoid mass arbitration filings.)

Zanca v. Epic Games

The court in Zanca v. Epic Games, Inc., No. 21-CVS-534 (N.C. Sup. Ct.,Wake County) has yet to grant or deny final approval of the proposed settlement. A similar case filed in California, K.W. v. Epic Games, No. 3:21-cv-00976-CRB (N.D. Cal.), is stayed, pending the outcome.

Automatic Renewal Case filed against Zenimax

On July 22, 2021, a class-action complaint was filed against Zenimax for allegedly “engaging in an illegal ‘automatic renewal’ scheme” with respect to its subscription plans for Elder Scrolls Online (ESO) Plus-branded products and services that are available exclusively to consumers who enroll in Zenimax’s auto-renewal membership programs. Armstrong v. Zenimax Media, Inc., 2021 WL 3123974 (Cal.Super.). This complaint follows similarly-themed legislative news: On July 6, 2021, Senators Schatz (D-Hawai’i), Thune (R-S.D.), Warnock (D-Ga) and Kennedy (R-La) introduced new legislation to “stop deceptive subscription business practices.” You can read the text of the bill here.

Roblox Sued for Allegedly Deleting Purchased Content

On May 25, 2021, Roblox got sued in a class-action for allegedly unfairly deleting purchased content without issuing a refund. The complaint alleges:

Defendant’s decision to sell first and “moderate” later has obvious monetary benefit for Roblox. By the time Defendant has deleted items from the Avatar Shop and users' inventories, it has already taken its 30% commission from the sale. Roblox retains all monetary benefit after deleting items from its platform while its players are left with nothing. 

Doe v. Roblox Corp., 2021 WL 2143926 (N.D.Cal.). While this seems like a fun final exam hypothetical, it seems unlikely that Roblox actually engages in this behavior. On June 10, 2021, however, Roblox filed a notice that the parties are “evaluating a potential resolution of this action,” so perhaps we’ll never know.

There has been a ton of class-action activity related to loot boxes in the past 12 months, not to mention increased regulatory interest. (In December, I wrote about the Italian Antitrust Authority’s recent actions.) Below, I’ve attempted to update our previous loot box litigation update post from August 2020. 

For some of the cases, I’ve made additional notes on areas of interest, such as a San Diego Superior Court denying Blizzard’s motion to compel arbitration based on its view that Blizzard’s user agreement didn’t fairly put players on notice of the arbitration provision. The biggest news, of course, is the Epic Games loot box settlement. In addition to a $26 million proposed fee cap, there is some maneuvering going on with plaintiffs’ counsel and an interesting backstory about a partner from One, LLP who left to join the Devlin law firm.

TRACKER

• Zanca v. Epic Games, Inc.

  • Date filed: February 15, 2019

  • Jurisdiction: Originally, Illinois state court, now North Carolina state court (Wake County)

  • Plaintiff’s firm: Whitfield Bryson LLP, McGuire Law, P.C., the Devlin Law Firm, and McMorrow Law., P.C.

  • History: 

    • The plaintiffs first filed this case in Cook County Illinois (Case No. 2019CH02032). 

    • On April 8, 2019, Epic removed the lawsuit to the N.D. Illinois (docket no. 1:19-cv-2353) and then obtained a transfer to E.D. Nor. Carolina (5:19-cv-173-BO). 

    • On October 1, 2019, the court dismissed the action without prejudice for lack of federal subject matter jurisdiction. so it could be re-filed in state court. 

    • In November and December 2020, the parties attended a JAMS mediation and reached a settlement.

    • In January 2021, the plaintiffs filed a new lawsuit in North Carolina “with the intention that the Action would be resolved pursuant to [the Settlement Agreement].” 

  • Disposition: 

    • The parties entered into a settlement agreement and the court issued a preliminary approval order on February 26, 2021. 

    • The settlement funds cap was set at $26,500,000.00 which includes $11,300,000.00 in attorney fees. 

    • A final hearing -- where any objections will be heard -- will be held on May 6, 2021. This settlement purports to resolve all claims nationwide.

• C.W. v. Epic Games,  Inc., (N.D.Cal. 4:19-CV-03629) a/k/a White v. Epic Games, Inc., No. 4:19-cv-3629-YGR (N.D. Cal.)

  • Date filed: July 21, 2019

  • Jurisdiction: N.D. Cal.

  • Plaintiff’s Firm: Previously, One LLP; Now, the Devlin Law Firm. Interestingly, in the recently filed K.W. case, the court makes the following observation about counsel: “Although One LLP represented the named plaintiff in the Prior Action [i.e., the C.W. case], it played no part in the decision to voluntarily dismiss it. That decision was made by the named plaintiff after a former partner of One LLP joined a different firm [i.e., the Devlin Law firm] and the named plaintiff became represented by that firm.”

  • History: Read our previous discussion of these cases here.

  • Disposition:

    • On January 12, 2021, the plaintiffs voluntarily dismissed the case in accordance with the settlement agreement reached by the same firm, discussed above.

• R.A. v. Epic Games, Inc., No. CV 19-1488-GW-EX, 2019 WL 6792801, at *1 (C.D. Cal. July 30, 2019)

  • Date filed: July 30, 2019

  • Plaintiff’s Firm: Pearson Simon and Warshaw, LLP

  • History:

    • Plaintiff filed a class-action complaint on July 30, 2019 alleging: (1) violation of the Consumer Legal Remedies Act, Cal Civ. Code §§ 1750 et seq. (“CLRA”); (2) unjust enrichment; and (3) violation of California's False Advertising Law, Cal. Bus. & Prof. Code §§ 17500, et seq. Plaintiff sought to represent a class consisting of: “All persons in California who, within the applicable statute of limitations, purchased a  Llama with V-Bucks that they bought with money in Fortnite Save the World.”

  • Disposition: 

    • The N.D. transferred the case to North Carolina. The case was then dismissed. The District Court in North Carolina reasoned: “By  voiding the in-game purchases, plaintiff erases the entire basis for his claims. Plaintiff cannot void the transactions with defendant and  receive his refund while simultaneously maintaining causes of action  that arise solely from those transactions. Because plaintiff’s  disaffirmance wipes out the entire basis for his claims, his amended  complaint must be dismissed.” R.A. by & through Altes v. Epic Games, Inc., No. 5:19-CV-325-BO, 2020 WL 865420, at *2 (E.D.N.C. Feb. 20, 2020)

• Crawford v. Sony Interactive Entertainment, LLC, 2020 WL 1190708 (N.D.Cal.)

  • Date filed: March 11, 2020

  • Plaintiff’s Firm: Excolo Law

  • History: We wrote about it previously, here.

  • Disposition:

    • Motion to compel arbitration hearing was set for September 24, 2020 at 10:00 AM.

    • On September 21, 2020, the court found the motion to compel suitable for decision without oral argument and took the matter under submission. There has been nothing further on the docket since.

• B.D. v. Activision-Blizzard

  • Date filed: March 16, 2020

  • Jurisdiction: California state court (San Diego)

  • Plaintiff’s firm: Blood Hurst & O’Reardon, LLP and Law Offices of Andrew J. Brown

  • History: 

    • Plaintiffs filed a Complaint in San Diego superior court (Case No. 37-2020-00020000-CU-BT-CTL) alleging Overwatch loot box issues.

  • Disposition: 

    • Activision-Blizzard brought a motion to compel arbitration. The court held a hearing on December 18, 2020 and denied the motion. On January 15, 2021, Activision-Blizzard filed a notice of appeal and notice of stay of proceedings.

Highlights from the court’s ruling:

In its order denying Blizzard’s motion to compel arbitration, the court found that there was “no evidence that [the plaintiff or his father] had actual notice of the arbitration agreement.” The court decided that the issue was thus “whether a reasonably prudent user would be on inquiry notice of the terms of the arbitration agreement.”

In evaluating this question, the court looked at several items: (1) the 2016 “Create an Account” page; (2) a 2017 pop-up that indicated that the agreement had been updated; and (3) a 2018 pop-up also indicating that an update had been made. 

For the 2016 page, the court found that a user had to scroll to page 15 before learning about the dispute resolution information and that it referred to -- but did not hyperlink to -- a separate dispute resolution policy. 

For the 2017 pop-up, the court found that a user could click “agree” without reviewing the license agreement and access the game; and that furthermore, a user would have to scroll to page 11 before coming to the dispute resolution section (although now there was a hyperlink to the dispute resolution policy).

For the 2018 pop-up, the court again faulted Blizzard for allowing users to click “continue” without reviewing the license agreement. 

Overall, the court found that “[t]he evidence demonstrates that a user is not required to review the License Agreement, let alone the arbitration agreement, in order to create an account and access the game.” Instead, “[t]he user is only required to click the ‘I accept’ button.” The court seems to fault Blizzard for keeping the arbitration agreement in a separate document that is hyperlinked rather than included in full in the main user agreement -- or at least that’s what the opinion seems to be saying. The court confusingly says that Blizzard doesn’t have a dispute resolution section, but then later talks about the dispute resolution section to criticize it. The court then faults Blizzard for not having a separate acknowledgement under the “continue” button for the arbitration agreement.

While it’s a no-brainer for Blizzard to appeal this decision, it is nevertheless a good reminder that every effort should be made to assiduously attend to user agreement UX flow details. More specifically, the best practice is to (a) tell users upfront that there is an arbitration provision and class-action waiver; (b) contain the full dispute resolution provision in the user agreement (not in a separate policy); and (c) require users to read the agreement before accepting it.

• Taylor v. Apple, Inc. (N.D. Cal. 3:20-cv-03906-RS) and Coffee et al. v. Google LLC (N.D. Cal. 5:20-cv-03901)

  • Date filed: June 12, 2020

  • Jurisdiction: N.D. Cal.

  • Plaintiff’s firm: Blood Hurst & O’Reardon, LLP and Law Offices of Andrew J. Brown

  • History: 

    • Read our previous discussion of these cases here. It’s a lot of the same allegations as in the EA case (discussed above). 

    • One additional note is that on October 13, 2020, the court denied Supercell’s administrative motion to relate the Coffee case to the Mai case (discussed below). Supercell also attempted to relate the Mai case to the Taylor case. 

  • Disposition: 

    • On February 10, 2021, the court dismissed the complaint against Google with leave to amend. 

    • On February 11, 2021, Apple filed a “notice of recent decision in support of its motion to dismiss.” The Taylor court has been sitting on Apple’s motion to dismiss since its December 17, 2020 hearing. There is a case management conference set for April 1, 2021, so there may be an order on the MTD on or before that date.

• Mai et al v. Supercell Oy, Case No. 20-cv-5573, N.D. Cal. 

  • Date filed August 11, 2020

  • Jurisdiction: N.D. Cal.

  • History: 

    • This is the same basic complaint filed against EA (discussed below) by the Blood Hurst & O’Reardon firm, except it obviously discusses Supercell’s games, Clash Royale and Brawl Stars.

  • Disposition:

    • Motion to dismiss pending. The court took the matter under submission on February 24, 2021 and has yet to rule.

• Ramirez v. Electronic Arts, Inc., (N.D. Cal 5:20-CV-05672)

  • Date filed: August 13, 2020

  • Jurisdiction: N.D. Cal. 

  • Plaintiff’s Firm: Blood Hurst & O’Reardon, LLP and Law Offices of Andrew J. Brown

  • History:

    • Plaintiff complains that EA’s “Ultimate Team Packs” in its sports franchise games are gambling. The complaint recycles a lot of its allegations from another lawsuit against Apple over loot boxes and once again draws a pretty ridiculous comparison to “Big Tobacco’s ‘Joe Camel’ advertising campaign.” The complaint also seeks to tie a “gray market” of third party websites where players can sell their items and accounts for real money as a basis for establishing a violation of California’s gambling law (California Penal Code § 330(b)(d). To further make the case, the plaintiff relies on the Belgium government’s examination of loot boxes, comments from British MP Damian Collins, and selected “psychologists” with negative opinions. What I find interesting about this complaint is that it dives into detail on the purchase flow and criticizes very detailed things like how EA discloses loot box odds.

  • Disposition:

    • EA filed a 12(b)(6) motion to dismiss and a motion to compel arbitration. The court heard oral argument on February 25, 2021 and took the matter under submission.

• K.W. v. Epic Games, Inc., Case No. 3:21-cv-00976 N.D. Cal.

  • Date filed: Feb. 8, 2021

  • Jurisdiction: N.D. Cal.

  • History:

    • On February 16, 2021, the plaintiffs filed an administrative motion to relate the case to the now-closed White v. Epic Games case (discussed above). 

    • On February 22, 2021, Epic filed an opposition to the motion to relate the case to the now-closed C.W. case. In its opposition, Epic argued that all of K.W.’s claims “will be resolved by a class action settlement that received preliminary approval” in the Zanca case -- “a settlement joined in and supported by the attorneys who had been lead counsel in White.” Epic notes that this case was filed by One LLP after the firm learned of the impending settlement and after it had served an “attorneys’ lien” for fees allegedly owing related to the White case. Epic contends that “[t]his new K.W. case is a blatant and knowing attempt to interfere with the Zanca settlement.” Epic talks about One LLP’s former attorney, Deepali Brahmbhatt, her transition to the Devlin law firm to be class counsel there, and alleges that One LLP’s filing of the K.W. suit is “nothing more than an attempt to gain leverage in a fee dispute among plaintiffs’ counsel.”

    • Disposition:

      • The court has not yet ruled on the motion to consider whether cases should be related. 

On December 31, 2020, the Epic v. Apple dispute we’ve discussed previously continued with the magistrate judge ruling that Apple did not need to produce documents that only involve Apple’s activities outside the U.S. The magistrate found “extraterritorial conduct not directed at the U.S. cannot be a basis for liability,” even though Epic is alleging that Apple has a monopoly on a global market. It seems that during the briefing and hearing on the matter Epic was less than convincing on the question of relevance. From the order:

For a lot of the RFPs at issue, the Court can on its own dream up theories of how foreign conduct might indeed be relevant to claims and defenses under U.S. or California law. But the Court is concerned that the Court is the one dreaming up those theories of relevance.

…

In the adversarial system, we normally leave it to the litigants to advocate for themselves rather than helping one side or the other. Here, where Epic has done nothing more than gesture at a big pile of RFPs and say the word “global,” for the Court to determine that foreign documents responsive to any particular RFP are relevant to claims and defenses under U.S. domestic law would require the Court to write the motion to compel that Epic didn’t write. That doesn’t seem like something the Court ought to do.

Not a ringing endorsement of Epic’s advocacy.

Apple did not come out of the order unscathed either. Epic had requested “Documents sufficient to show actual and projected revenue, costs, expenses, investments (Including research and development) and profits, by year, incurred by, earned by and/or attributed to, Apple’s IAP.” Apparently, Apple stated that it needed time to calculate those amounts, but had already produced some documents showing that Apple already tracks that information. The magistrate was fairly frustrated:

Apple is losing credibility by continuing to assert that it does not have data in the teeth of documents proving that it does. What’s more remarkable is how this is playing out. It’s not the case that Apple makes an incautious statement to the Court and then the Plaintiffs rummage through Apple’s document production to try to find a document that undermines Apple’s representation. Rather, in both this and the prior filing, Apple denied the existence of information in the very same joint discovery letter brief in which the opposing party cited by Bates number a document proving that Apple does have the requested information.

TAPJOY/FTC SETTLEMENT

On January 7, 2021, the FTC reached a settlement with the mobile advertising platform, Tapjoy. Tapjoy serves up offers for users to perform some action in order to receive rewards like in-game currency on behalf of third party mobile game publishers. For example, a user may sign up for an email list and receive game currency. However, many players never received the benefits. Even after hundreds of thousands of complaints, Tapjoy didn’t correct the issues. Although it appears that it was Tapjoy’s partners failing to provide the rewards, the FTC considered Tapjoy’s amplification of the offers and failure to take action when notified to be a violation of unfair and deceptive practices. The settlement requires Tapjoy to “implement screening and testing procedures to weed out advertisers that cheat gamers and developers,” but makes no mention of any sort of monetary damages.

One interesting note is that FTC took the time to warn about the abuse of Apple and Google in the mobile game market, who had almost nothing to do with Tapjoy issue. They stated:

Tapjoy is not the only platform squeezing developers. In fact, the firm is a minnow next to the gatekeeping giants of the mobile gaming industry, Apple and Google. By controlling the dominant app stores, these firms enjoy vast power to impose taxes and regulations on the mobile gaming industry, which was generating nearly $70 billion annually even before the pandemic

We should all be concerned that gatekeepers can harm developers and squelch innovation. The clearest example is rent extraction: Apple and Google charge mobile app developers on their platforms up to 30 percent of sales, and even bar developers from trying to avoid this tax through offering alternative payment systems. While larger gaming companies are pursuing legal action against these practices, developers and small businesses risk severe retaliation for speaking up, including outright suspension from app stores – an effective death sentence.

This settlement statement is an odd platform for FTC to make such a strong statement.

BLIZZARD SUED FOR WIRETAPPING

We missed this case in 2020, but in November a putative class action was filed against Blizzard for Blizzard’s use of a mouse tracking tool on its website (Sacco v. Blizzard and Mouseflow, No. 20-at-1155, E.D. Cal. ). In essence, the plaintiff claims that Blizzard’s practice of tracking user movements on its website (via Mouseflow software) amounts to wiretapping in violation of the California Invasion of Privacy Act. This is one of a number of similar cases filed by the plaintiffs’ firm Bursor & Fisher. One hurdle for plaintiffs will be that Blizzard’s Online Privacy Policy (at least as of October 22, 2020) identifies the presence of tracking technology and lists Mouseflow specifically in the listed marketing partners linked below:

Blizzard and our partners, such as marketing partners and analytics providers (listed here), may use tracking technologies such as cookies, beacons, tags and scripts. These technologies are used in analyzing trends, administering the websites, tracking users’ movements around the websites, and to gather demographic information about our user base. We may receive reports based on the use of these technologies by these companies on an individual and aggregated basis.

(emphasis added).

[h/t to Rick Zou for bringing this case to our attention]

GAME PUBLISHERS FINED IN EU

On January 20, the European Commission fined Valve, Bandai Namco, Campcom, Focus Home, Koch Media, and ZeniMax € 7.8 million for their practices of restricting cross-border sales of video games within the European Economic Area (EEA). The main issue is that Steam allowed publishers to set different pricing within the EEA, for example, lower pricing in Romania than in Ireland, and then to block users from the more expensive regions from purchasing and activating the lower-priced versions. We’ll see where prices end up across the EEA (i.e. closer to Romania’s or closer to Ireland’s), but regardless I imagine there will be pricing parity going forward.

ANOTHER CD PROJEKT CLASS ACTION

We previously discussed a class action filed against CD Projekt for allegedly misleading statements made prior to the release of Cyberpunk 2077. On January 14, a separate but similar suit was filed against CD Projekt, also in the Central District of California (Hain v. CD Projekt SA, 21-cv-00354 (C.D. Cal.)). I’d imagine that these cases will end up consolidated, but we’ll be keeping an eye on them going forward.

VALVE CLASS ACTION

And to round out the month, a new class action lawsuit was filed against Valve and five video game publishers, CD Projekt (not a great couple months for CD Projekt and class action lawsuits), Ubisoft, kChamp Games, Rust, and Devolver. Colvin et al. v. Valve et al., 21-cv-00801 (C.D. Cal.). Plaintiffs allege that Valve, in concert with the video game companies, abuses its power to keep video game prices high in violation of antitrust law. In particular, plaintiffs argue that Valve requiring game publishers to agree to a most favored nations clause (which means that game publishers can’t offer better terms such as lower prices to other platforms) in order to publish games on Steam is an abuse of power.

In this Year-in-Review blog post, we’ll highlight the U.S. legal decisions (and one foreign one) this year that we found most interesting or significant to the video game industry. Since it’s quite lengthy, we’ve divided the post into sections including: 

• Game Development

• Esports and Streaming

• Clones

• Modders

• Patents

• Monetization

• User agreements

• Privacy

• Miscellaneous

• 2021

Big picture, this year we saw a major increase in loot box class-actions filed against game publishers; two horrible copyright decisions (that both involved wrestling); a split between the northern and central districts of California on an important personal jurisdiction issue in cases involving game clones; a blistering campaign by Epic Games against Apple and Google; and, of course, more patent troll litigation. 

GAME DEVELOPMENT

In 2020, we continued to see numerous assertions of intellectual property and related rights (chiefly, the right of publicity) against game developers and publishers. Most of the decisions we saw came out correctly, with two notable law and motion exceptions in Huffman and Alexander, where the judges really wrestled with understanding the law.

The Two Tattoo Cases

The first tattoo decision in 2020 comes from a case brought by a holding company against 2K Games and Take-Two Interactive Software over the inclusion of tattoos on basketball players in NBA2k. The court held, on an MSJ, that 2K and Take-Two’s use of the tattoos was de minimis, covered by an implied license, and fair use. Solid Oak Sketches, LLC v. 2K Games, Inc., 449 F. Supp. 3d 333, 338 (S.D.N.Y. 2020). In a second tattoo case, a former tattoo artist sued 2K and Take-Two for the inclusion of her tattoos on professional wrestlers featured in WWE 2K, a realistic wrestling game. The court denied Take-Two’s MSJ (which was made on all the same bases as the successful MSJ filed in the Solid Oak Sketches case) with some truly inexplicable reasoning. Alexander v. Take-Two Interactive Software, Inc., No. 18-CV-966-SMY, 2020 WL 5752158 (S.D. Ill. Sept. 26, 2020). As one copyright expert, Aaron Moss, opined: “...it’s hard to overstate how misguided the court’s decision in Alexander really is.” A trial has been set for next year.

The Humvee / Call of Duty Case

Activision-Blizzard won its dispute with A.M. General over the inclusion of realistic Humvees in Call of Duty. The district court granted Activision’s MSJ, finding that all of A.M. General’s trademark and related claims failed under the Rogers test. While this was clearly the right result, the court’s incorporation of the Polaroid factors into its Rogers analysis to essentially create a balancing test between artistic relevance and consumer confusion is highly troubling. As Professor Eric Goldman observed, “this balancing test (if followed by other courts) will become a hotbed of misunderstanding and bad advocacy.”

More Dance Step Copyright Cases Fail

Two more dance step lawsuits went down in flames this year, both filed against Epic Games. The first case involved a Fortnite emote called “Phone It In,’” allegedly identical to the saxophone-playing plaintiffs’ “signature move.” Pellegrino v. Epic Games, Inc., 451 F. Supp. 3d 373, 378 (E.D. Pa. 2020). The court granted Epic’s motion to dismiss seven of the eight causes of action, including claims for misappropriation of the plaintiff’s likeness and trademark (i.e., his signature move), permitting the plaintiff to proceed solely on a “false endorsement theory.” Less than two months later, Epic prevailed again, this time for a “Running Man” dance step incorporated into yet another Fortnite emote. Brantley v. Epic Games, Inc., 463 F. Supp. 3d 616 (D. Md. 2020). The court, here, observed that the plaintiff sought “to place the same square peg into eight round holes in search of a cause of action against Epic Games for its use of the Running Man dance in its game Fortnite.” Not only did the court dismiss the copyright and trademark claims, but it also found that the right of publicity, unfair competition and unjust enrichment claims were all preempted under the Copyright Act. Finally, Take-Two filed a notable declaratory relief complaint to establish that it’s “Soul Jah Boi” dance emote in NBA2K doesn’t infringe a dance step performed by a Georgia man, Brandon Sims. No final result on that case yet, but things don’t look very good for Mr. Sims.

Two Professional Wrestlers Sue with Different Results

In our first case brought by a professional wrestler, Lenwood “Skip” Hamilton sued Microsoft, Epic, and others, over a Gears of War character that looked like him. The district court held that the First Amendment protected the game developers and, this year, the Third Circuit appeals court affirmed. Hamilton v. Speight, 827 F. App'x 238 (3d Cir. 2020). 

In another case brought by a professional wrestler, Booker T. Huffman sued Activision last year for copyright infringement alleging that Activision copied his “G.I. Bro.” character to create the character “Prophet” in Call of Duty: Black Ops 4. Huffman v. Activision Publ'g, Inc., No. 219CV00050RWSRSP, 2020 WL 2557079 (E.D. Tex. May 20, 2020). The allegedly infringing content was actually just a single marketing poster that featured a military man with dreadlocks holding a gun, looking tough. This is obviously just a concept and isn’t protected by copyright law. However, Huffman survived Activision’s attempts this year to dismiss the case because the district court failed to apply a fundamental rule of copyright law: i.e., that copying is only legally actionable if the defendant took original constituent elements from the plaintiff’s work. A jury trial has been set for next year.

Famous Racer Sues Ubisoft for Using his Famous Airplane and Name

A famous airplane racer, Bill Destefani, sued Ubisoft and Ivory Tower for including his famous airplane (which includes his name on the side) in their racing game, The Crew 2. While the trademark claims seem destined to fail, the right of publicity claim poses more of a danger to the defendants, so we’ll be keeping a close eye on this one in 2021.

ESPORTS AND STREAMING

There weren’t any major legal developments in the esports space in 2020. The TFue v. Faze Clan dispute we wrote about in April and again in June could have been an interesting look at whether esports organizations were operating as talent agencies under California’s Talent Agency Act. The case ended in settlement so unfortunately the issue was not resolved, but the case probably spurred some changes in the esports industry. 

On the streaming front, music licensing on streaming platforms became a major issue towards the end of the year. First, Twitch signed a music licensing deal to allow streamers to use licensed music. Shortly thereafter, Twitch issued a wave of DMCA notices to streamers for the use of unlicensed music in streams. However, Twitch failed to identify the content with any specificity or to allow for counter-notification (in contravention with Twitch’s own stated procedures), leaving streamers struggling to figure it out for themselves. Twitch ultimately apologized for the approach, but not for the ultimate warning against using unlicensed music. In related matters, at year’s end, fairly large changes to copyright law passed in the COVID-19 relief bill. The first piece of new legislation is the Protect Lawful Streaming Act (PLSA), which makes large-scale streaming of unlicensed material a felony. While the PLSA doesn’t apply to individuals, streaming services like Twitch are probably going to further tighten up copyright procedures. Second, the Copyright Alternative in Small-Claims Enforcement Act (CASE Act) creates a small-claims like court system within the Copyright Office. The CASE Act’s goal is to allow smaller copyright owners to avoid having to go through full litigation to assert their rights. The CASE Act’s new courts allow copyright owners to pursue claims up to $30,000. 

CLONES

What would video game law be without clone cases?

The most unique thing we saw this year in clone cases was Ubisoft including Apple and Google as named defendants in a lawsuit against Alibaba subsidiary, Ejoy.com -- something that isn’t seen very often from major publishers. The case quickly settled, though, so we didn’t get any fireworks on novel issues such as DMCA safe harbor protection (or lack thereof) for platforms distributing games.

The most aggravating thing that happened this year was diametrically opposing CivPro results in some very similar clone cases. In the first case, a N.D. Cal. district court, announcing that it is not the world’s “international court of internet law,” dismissed a clone case on personal jurisdiction grounds between a Turkish company, Good Job Games, and Belorusian company, SayGames, even though the allegedly infringing game was distributed in the U.S. on the Apple App Store and on Google Play, and U.S. citizens received ads on Facebook. Good Job Games Bilism Yazilim Ve Pazarlama A.S. v. SayGames LLC, 458 F. Supp. 3d 1202, 1214 (N.D. Cal. 2020). The court held that “passively” publishing on the App Store wasn’t sufficient to create jurisdiction in California without “something more,” but in my opinion, took an unduly narrow view of how the apps and advertising targeted California citizens. Shortly thereafter, a similar N.D. Cal. district court result was reached on a motion to dismiss for lack of personal jurisdiction in a dispute brought by a French company, Voodoo SAS against the same Belorusian defendant. Voodoo SAS v. SayGames LLC, No. 19-CV-07480-BLF, 2020 WL 3791657 (N.D. Cal. July 7, 2020). 

With appeals on those cases pending, we saw a third decision come down involving Wargaming.net, a Cyprus company, against Blitzteam, which also just so happens to be a Belorusian company. In the Wargaming.net case, though, which was filed in C.D. Cal., the court reached the exact opposite conclusion about what’s relevant to decide the issue of personal jurisdiction question. Although the Wargaming.net court didn’t decide the issue of jurisdiction, it did agree that jurisdictional discovery was warranted and granted Wargaming.net’s request to take that discovery. Wargaming.net Ltd. v. Blitzteam, LLC, Case No.: CV 20-02763-CJC (MRWx) (C.D. Cal. Oct. 20, 2020). Hopefully, the court of appeal can clear up the confusion soon.

Moving on to a more run-of-the-mill clone case outcome, last year, Blizzard sued Joyfun, ZRoad, and others over “Glorious Saga,” which shamelessly stole famous Blizzard characters such as Illidan Stormrage, Gul’dan and Malfurion. Blizzard Entm't, Inc. v. Joyfun Inc Co., Ltd., 2019 WL 8113807 (C.D. Cal. Nov. 7, 2019). This year, the defendants stipulated to a judgment and permanent injunction, permanently shutting down the infringing clone game.

Finally, we briefly saw a return of the PUBG dispute with NetEase -- or as we called it, “The Rural Aqueduct Returns!” Although the case settled last year, PUBG’s lawyers did not get the district court to retain jurisdiction over the settlement agreement, so the district court dismissed the second action. This decision was a good reminder that if you want a federal court to retain jurisdiction to enforce a settlement agreement, you have to clearly ask for and obtain that.

MODDERS

In 2020, we saw Nintendo continue to fight against console modding through the Nintendo v. Anxchip.com, et al. and Nintendo v. Dilts and Uberchips cases, where Nintendo sued and ultimately prevailed against Nintendo modchip resellers. Relatedly, at the end of the year the U.S. Department of Justice announced charges against three members of Team Xecuter, the group behind the creation of the modchips. We’ll be keeping an eye on those cases, but due to the international nature of the modchip scene -- and the money involved -- Nintendo is probably just playing a game of whack-a-mole.

PATENTS

Patent jurisprudence evolves glacially. As such, 2020 didn’t hold a lot in the way of video game patent law changes. The video game patent cases that were litigated in 2020 were, as usual, dominated by suits against game companies by non-practicing entities (aka patent trolls). [NOTE: We’ll only be discussing cases we’ve already covered and, going forward, we’re going to stop covering new patent cases in the video game space.]

Gamevice v. Nintendo

This case was probably the most interesting from a patent litigation strategy standpoint. Gamevice produced a line of controllers that would attach to a base device like a mobile phone. In 2017, Gamevice sued Nintendo for the Switch controller functionality. Gamevice found little success in the initial suit (Gamevice, Inc. v. Nintendo Co., Ltd. et al, Case No. 2:17-cv-05923) (or two), but what was most notable was Gamevice’s strategy of tailoring a still-under-prosecution patent family to overcome prior art and indefiniteness arguments used in earlier cases. In a 2020 suit, Gamevice sued Nintendo using these “corrected” patents. This case was also notable because Nintendo asserted its own patents against another company for the first time. Unfortunately for Nintendo, it essentially had its entire damages case thrown out due to the insufficiency of its damages expert’s report and ultimately dropped its patent infringement case entirely. This case is still ongoing, but we’ll be keeping an eye on it to see how it ends up. 

Gree v. SuperCell

There are too many Gree v. SuperCell cases to try and list them all. The short of it is that Gree has decided to wage war against SuperCell and has taken the tried and true approach of litigating a counterparty into submission by filing wave after wave of patent cases until the counterparty takes a license. These cases are generally still ongoing, with Gree finding some initial success in court.

General Patent Troll Cases

As mentioned, most patent litigation in video games and in general industry are patent trolls against operating companies. We had Riot Games and Valve winning over Paltalk (which had successfully extracted tens of millions of dollars out of several gaming companies on invalid patents) in the Federal Circuit (Paltalk v. Riot Games, No. 19-2035 (Fed. Cir. 2020) (Non-Precedential)). Sony won over Bot M8, when a district court judge found the troll’s patent nonpatentable subject matter in Bot M8 LLC v. Sony Corporation Of America, No. 19-cv-07027 (N.D. Cal.). Bot M8 appealed this case to the Federal Circuit, so we’ll see what happens in 2021. Finally, an eight-year patent suit may have finally come to a conclusion in McRO, Inc. dba Planet Blue v. Bandai Namco Games America Inc., et al., No. 2019-1577 (Fed. Cir. May 20, 2020) where the Federal Circuit overturned the district court’s holding that McRo’s facial animation patents were invalid, but found that the defendant game developers did not infringe. There’s still a path for McRo to assert the patents against new games, but I would think the Federal Circuit’s ruling will put an end to those patents.

MONETIZATION

Plaintiffs’ firms suing video game companies keep arguing that loot boxes should be considered gambling. Conversely, defense counsel representing actual gambling companies keep arguing that online casino games should be considered legitimate video games and not gambling. So far, neither argument made much headway. We’ll start with the loot box cases.

Loot Box Litigation

We saw a staggering increase in the amount of loot box litigation this year. 

In March, we wrote about a class-action lawsuit against Sony Interactive Entertainment related to allegedly unfair and deceptive Fortnite in-game purchases. Crawford v. Sony Interactive Entertainment, LLC, 2020 WL 1190708 (N.D.Cal.). In September, the court heard Sony’s motion to compel arbitration and took the matter under submission without oral argument. However, more than three months later, the court still hasn’t issued a decision.

In June, we wrote about a pair of lawsuits against Apple and Google. Taylor v. Apple, Inc. (N.D. Cal. 3:20-cv-03906) and Coffee et al. v. Google LLC (N.D. Cal. 5:20-cv-03901). These class-actions both contend that loot boxes are gambling and that Apple and Google should be held liable as distributors (i.e., even though they aren’t the publishers). Both cases recently had motion to dismiss hearings, but neither case has a publicly available decision yet.

In July, Epic was hit with another class-action. C.W. v. Epic Games, Inc., 2020 WL 1650496 (N.D.Cal.) f/k/a Doe v. Epic Games, Inc., 435 F. Supp. 3d 1024 (N.D. Cal. 2020). Despite my prediction that it was “hard to see Epic losing this one,” Epic was unable to dismiss this case or send it to arbitration (see further discussion below in our User Agreements section). Epic had more success later in July, however, in R.A. v. Epic Games, Inc., No. CV 19-1488-GW-EX, 2019 WL 6792801 (C.D. Cal. July 30, 2019). In that case, Epic successfully transferred the case to North Carolina where it was then dismissed. R.A. by & through Altes v. Epic Games, Inc., No. 5:19-CV-325-BO, 2020 WL 865420 (E.D.N.C. Feb. 20, 2020).

In August, Electronic Arts was sued in a class-action claiming that EA’s “Ultimate Team Packs” in its sports franchise games are illegal gambling. The complaint recycles a lot of its allegations from another lawsuit against Apple over loot boxes and once again draws a pretty ridiculous comparison to “Big Tobacco’s ‘Joe Camel’ advertising campaign.” EA filed a motion to dismiss. The hearing is set for February 25, 2021. Ramirez v. Electronic Arts, Inc. No. 5:2020cv05672 (N.D. Cal. August 13, 2020).

Also in August, roughly a fortnight after the House Judiciary Committee heard testimony from Apple and Google’s CEOs on whether their business practices amount to anticompetitive monopolies, Epic Games began a blistering antitrust campaign against Apple and Google over allegedly unfair app store practices. In the Apple case, the district court considered Epic’s preliminary relief request and decided to deny Epic’s request to force Apple to reinstate Fornite on the Apple App Store, but grant Epic’s request to force Apple to continue providing support for the Unreal Engine. Epic Games, Inc. v. Apple Inc., No. 4:20-CV-05640-YGR, 2020 WL 5993222 (N.D. Cal. Oct. 9, 2020). Apple has answered Epic’s complaint and made counterclaims. In the Google case, Epic did not seek similar preliminary relief. Google filed a motion to dismiss. The hearing is set for January 28, 2021. Epic Games, Inc. v. Google LLC, 3:20-cv-05671-JD (N.D. Cal.).

Finally, in December, we covered an Italian regulatory authority’s decision concerning loot box practices in Activision-Blizzard’s games, Overwatch and Hearthstone. The regulator required that Activision-Blizzard make some changes to its disclosures and notices about in-game purchases both in the games and on the game websites.

Traditional Gambling Cases

A federal district court in Washington State issued several important gambling rulings this year, many of which came from repeated attempts to certify gambling questions to the Washington State supreme court. Three of these are worth highlighting.

First, the court denied such a request in April from High 5 Games in Wilson v. PTT, LLC, No. 3:18-CV-05275-RBL, 2020 WL 1674151 (W.D. Wash. Apr. 6, 2020). Second, in May, another casino game app-producing company, Playtika, made a similar request. This too was denied. Wilson v. Playtika Ltd., No. 3:18-CV-05277-RBL, 2020 WL 2512905 (W.D. Wash. May 15, 2020). Finally, in August, a company called Double Down tried to argue that it’s casino-gaming app that did not award money prizes couldn’t be illegal gambling under Washington law. Citing Kater v. Churchill Downs as precedent, the district court essentially found that gambling games involve betting and normal video games don’t. Benson v. Double Down Interactive, LLC, No. 2:18-CV-00525-RBL, 2020 WL 4607566, at *1 (W.D. Wash. Aug. 11, 2020). This decision (as well as the others) came as a welcome relief to the broader video game industry which was watching anxiously at these casino game operators’ attempts to muddy the line between gambling games that involve betting and regular games with microtransactions.

USER AGREEMENTS

Requiring players to affirmatively accept the user agreement has always been an obvious “must” for game companies. Using “browsewrap,” especially when you bury the terms of service at the bottom of a website where it’s only accessible after scrolling past multiple screens and images that a user need not view to download the game/platform, is a very bad idea. It was for this reason that the Ninth Circuit affirmed a district court order denying Double Down’s motion to compel arbitration in a putative class action filed against it. Benson v. Double Down Interactive, LLC, 798 F. App'x 117 (9th Cir. 2020). This ruling is in keeping with “courts' traditional reluctance to enforce browsewrap agreements against individual consumers” and (at least most of the time) requiring “affirmative action to demonstrate assent.” Nguyen v. Barnes & Noble Inc., 763 F.3d 1171, 1178 (9th Cir. 2014).

Several plaintiffs this year attempted to avoid arbitration and class-action waiver provisions in Epic Games’ EULA. In one case, a Missouri resident unsuccessfully argued that he shouldn’t be bound by Epic Games’ EULA because it was his minor child who accepted the EULA, not the parent. Heidbreder v. Epic Games, Inc., 438 F. Supp. 3d 591, 596 (E.D.N.C. 2020). In Heidbreder, the court rejected this argument, ruling that the child acted with “actual and apparent authority” when accepting Epic’s EULA. The court also rejected plaintiff’s unconscionability argument on both the procedural and substantive prongs. Notably, the court observed that the EULA contained many “user-friendly terms, including the opt-out right, choice of venue, defendant pays arbitration costs, and defendant waives the right to seek fees and costs.”

In another case, however, Epic moved to compel arbitration and the minor plaintiff opposed by arguing that, as a minor, he disaffirmed the EULA prior to filing suit. The court agreed and denied Epic’s motion to compel arbitration (as well as its motion to transfer venue). Doe v. Epic Games, Inc., 435 F. Supp. 3d 1024, 1038 (N.D. Cal. 2020).

Subsequently, Epic was unable to dismiss all of the claims in the first amended complaint, including a negligent misrepresentation claim and a similar unfair competition claim. The court first rejected three of plaintiffs’ misrepresentation theories, including: “(i) the frequently introduction of new content, rendering older content stale; (ii) the alleged failure to provide receipts or purchase history; and (iii) the practice of marketing items as ‘non-refundable’ without an explicit disclaimer that minors have rights under state law to disaffirm contracts.” This part was good news.

However, the court then accepted, as plausible, the plaintiffs’ theory of misrepresentations and omissions regarding the refundability of certain content, including a “Battle Pass.” In the first amended complaint, the plaintiffs alleged, in addition to saying that Fortnite lacks parental controls, that Epic sought to induce frequent purchases from minors and concealed the terms of in-App purchases at the time of purchase by “not displaying non-refundability or by displaying non-refundability in very small font.” Plaintiffs further alleged that minors “are not buyers who would look for refund policy options at the time of purchase,” and thus by not including “visibly cautionary language at the time of promoting in-App purchases,” Epic’s conduct was misleading. C.W. v. Epic Games, Inc., No. 19-CV-03629-YGR, 2020 WL 5257572, at *4 (N.D. Cal. Sept. 3, 2020), motion to certify appeal denied, No. 19-CV-03629-YGR, 2020 WL 6064422 (N.D. Cal. Oct. 14, 2020). Needless to say, we’ll be watching to see how this plays out in 2021.

PRIVACY

On the privacy front, we’re now a couple years in since GDPR implementation, and California’s CCPA came into enforcement this year. We haven’t seen any enforcement actions on either in the video game space, but there have been a couple general privacy suits.

Early in the year, the Eastern District of North Carolina moved a putative class action filed against Epic Games for a data breach to arbitration in Heidbreder v. Epic Games, 438 F.Supp.3d 591 (E.D.N.C. 2020).

In a similar case, upset players filed a putative class action against Zynga for a late 2019 data breach (I.C., et. al. v. Zynga, Inc., Case No. 3:20-cv-01539). Other cases related to the same breach were also filed, and were all consolidated into Rosiak v. Zynga Inc., 4:20-cv-05674, N.D. Cal. There has been no substantive movement in the cases so we’ll be tracking this in 2021.

MISCELLANEOUS

In what feels like a fitting close to 2020, one of the year’s biggest and most anticipated games, Cyberpunk 2077 was the subject of a putative class action filed against CD Projekt S.A. and individual CD Projekt executives on behalf of investors (Trampe v. CD Projekt S.A. et al., No. 2:20-cv-11627 (C.D.Cal.)). Cyberpunk 2077 received a torrent of criticism due to poor performance on older gaming systems and a host of bugs at release. The class action claims that CD Prjojekt made false and misleading statements about the state of the game in violation of federal securities law, specifically the Securities Exchange Act of 1934. Interestingly, this isn’t a class action on behalf of purchasers (as refunds have been fairly generous), but instead on behalf of investors. We’ll be keeping an eye on this one in 2021 (and probably beyond). 

2021

There are a number of issues and cases we’ll be following into 2021. In particular, we’re interested in seeing how new copyright legislation will affect the gaming space, how continued loot box/gambling litigation will change business practices, and how Epic’s antitrust fight against Apple and Google changes the mobile games marketplace.

APPLE’S ARGUMENTS

IRREPARABLE HARM

First, Apple argues that this is all a self-created emergency. Apple observes that TROs exist to deal with irreparable harm, “not easily reparable self-inflicted wounds.” Apple contends that Epic created this emergency as part of a “carefully orchestrated, multi-faceted campaign, complete with a parody video, merchandise, hashtag, belligerent tweets and now a pre-packaged TRO.” Apple then argues that if Epic really wanted to prevent irreparable harm, it would simply cure its breaches and re-submit a compliant version of Fortnite so that the parties can go back to business as usual.

In its explanation of the appropriate legal standard, Apple distinguishes between prohibitory injunctions, which preserve the status quo, and mandatory injunctions, which mandate a party to alter the status quo. (Status quo means the “last uncontested status” between the parties.) As we recently discussed while reviewing the Atari v. RageOn case, this distinction matters a great deal because for prohibitory injunctions, a plaintiff only need show likelihood of success. The standard for mandatory injunctions, however, is “doubly demanding” and the facts and law must “clearly favor” the moving party.

Apple contends that Epic isn’t asking for a return to the status quo. Instead, Epic “wants Fortnite back in the App Store, but it wants that privilege under a set of new terms and conditions that were never a product of the parties’ negotiations and that have never been provided to other developers.” Apple goes on to say that it “has offered that Epic submit a version of Fortnite that conforms to [Apple’s] Guidelines” but that Epic has declined.

This is Apple’s strongest argument and I think it could be a winner. Judges love to deny TROs when there’s no real emergency, i.e., when it’s a manufactured emergency. This lets judges avoid actually ruling on the merits, which is especially attractive in a case like this where the claims are very complicated. What Apple is basically telling the court is that Epic has the power — right now — to return to the status quo, while still pursuing its antitrust claim against Apple on a non-emergency basis. In response to Epic’s argument that hundreds of developers could be affected by Epic losing access to Apple’s SDKs and APIs needed to keep developing the Unreal Engine, Apple counters that granting Epic’s TRO could lead to disruption of economic activity for the 1.7 million apps and their developers using the iOS platform, when those developers all decide they too can breach their contracts with Apple, like Epic has.

LIKELIHOOD OF SUCCESS ON THE MERITS

Second, Apple argues that Epic hasn’t shown a likelihood of success on the merits. Apple relies on a very recent Ninth Circuit opinion involving the FTC’s antitrust action against Qualcomm in which the Ninth Circuit overturned a Northern District of California District Court judgment in the FTC’s favor and order enjoining Qualcomm’s core business practices. The Ninth Circuit stated that novel business practices—especially in technology markets—should not be “conclusively presumed to be unreasonable and therefore illegal without elaborate inquiry as to the precise harm they have caused or the business excuse for their use.” Apple argues Epic has not undertaken any “elaborate inquiry” in its motion and, for example, doesn’t enlist any economist to support its position. Apple also argues that logically, Epic’s position would mean that Microsoft, Sony and Nintendo would also be illegal monopolists because of their respective console platform prohibitions and practices.

Query, however, whether there are really “novel business practices” here. On one hand, the Supreme Court did caution lower courts about finding antitrust violations where no similar precedents or parallels exist—particularly in new tech cases where the courts may not understand the market very well. On the other hand, the as Apple admits in its brief, the App Store has been around doing the same thing for over a decade and this isn’t the first antitrust case of this kind. There is very little novelty or mystery about the practices themselves. It’s also not clear that the console manufacturer analogy works quite as well as Apple suggests. Most people probably view their smartphone as an “essential” device in their daily lives, but wouldn’t similarly conclude that their gaming consoles are essential. There’s a pretty big practical difference in console game platforms and an iPhone. Apple does adeptly criticize the “essential facility” doctrine, but Epic’s argument remains at least facially compelling.

While Apple makes some strong arguments about likelihood of success on the merits, there is definitely some room for Epic to continue attacking here.

THE PUBLIC INTEREST AND BALANCE OF HARDSHIPS

Third, Apple makes some good arguments about the harm to its ecosystem if the court were to grant the TRO. Apple contends that “an injunction would set off a flood of additional requests for ‘emergency’ relief and threaten the entire App Store ecosystem as developers see they can breach their agreements, jeopardize the security of the App Store, and circumvent payments to Apple, all without consequence.” This fits in nicely with Apple’s first argument, warning that a mandatory injunction may invite similar requests to the court. And as I mentioned above, courts really don’t like inviting more judicial activity. Instead, they prefer to find ways to reduce the burdens on the judicial system, especially if markets can figure things out themselves. (This is not a criticism either.)

CONCLUSION

On one hand, Epic has made a powerful argument about what will happen to the hundreds of developers who rely on the Unreal Engine for iOS, not to mention the iOS Fortnite players who soon won’t be able to play with players on other platforms if there’s no resolution here.

On the other hand, Apple persuasively argues that, even if Apple is monopolist, this TRO isn’t a true emergency, as evidenced by Epic’s highly orchestrated attack on Apple.

Regardless of whether you find Epic’s substantive claims sympathetic or pre-textual, I am skeptical that Judge Rogers will see this as an emergency and she very well may deny the TRO (or a good chunk of it).

While searching for new video game cases this week, I came across a case that mentions “video game” only once and really has nothing to do with video games. Nevertheless, it seems timely to write about it, in light of our national discourse. This case arose in the town of West Terre Haute, a town with only a couple thousand people in Vigo County Indiana, on the western side of the Wabash River. The Town appealed a trial court’s grant of a petition for judicial review filed by an African American man named Jonathan Stevens. The trial court reversed the Town’s decision to fire Stevens from his employment as a police officer because the Town’s “Safety Board,” which made the decision, included a man who had previously made racial slurs against Stevens — the Town’s only black police officer. The appellate court affirmed.

THE ISSUE

The Town’s appeal involved a single issue: Whether the trial court properly granted Stevens’ petition for judicial review thereby reversing the Town’s decision terminating from his employment as a police officer.

THE FACTS

In 2013, the Town hired Stevens as a police officer.

On October 31, 2017, Stevens was arrested and charged with felony domestic battery and a misdemeanor for disorderly conduct. Prior to these charges, Stevens had never been reprimanded or disciplined for any violations and had been promoted to a supervisory role in the police department.

On January 8, 2018, the police department placed Stevens on administrative leave, pending the final resolution of the criminal charges.

Sometime in 2018, prior to deciding how to proceed in his criminal case, Stevens talked to the police chief, who told him Stevens would be able to keep his job if he was only convicted for the disorderly conduct.

After about a week, the chief told Stevens that he had spoken to the Town Safety Board — a three-person legislative body for the Town that deals with police discipline — and that two members of the Safety Board had advised the chief that they would also support Stevens if he was able to avoid the felony domestic battery conviction. To be extra safe, Stevens’ wife Heather called one of the Safety Board members — Chuck Stranahan — who called her back and, with both Stevens and Heather on speaker phone, told them that Stevens could keep his job as long as Stevens was only convicted for the disorderly conduct and not felony domestic battery.

After receiving this reassurance from both the police chief and Mr. Stranahan, Stevens pleaded guilty to the misdemeanor disorderly conduct charge and the prosecutor agreed to drop the domestic battery felony charge. That same day, the police chief met with the Town’s Safety Board and recommended that, in light of Stevens’ plea, he be reinstated as a full-time officer with one week of unpaid leave.

However, the Town Safety Board reneged.

On November 26, 2018, with Stevens and Heather in attendance at the Safety Board meeting, the Safety Board voted to terminate Stevens based on his disorderly conduct conviction. After the vote, Heather stood up and accused Stranahan of lying to her about voting to retain Stevens. Stranahan nodded his head and admitted to the accusation, saying, “Yes. Yes, I did.” The same day, Stevens was fired.

Stevens timely filed a hearing request to dispute his termination and, on December 19, 2018, a hearing was held. At the hearing, both the current police chief and former chief testified that they had discretion to recommend a candidate to be hired even if they had a misdemeanor conviction. The current chief further testified that he thought Stevens was a very competent police officer who had never been disciplined for any prior violations.

EVIDENCE OF RACIST COMMENTS, INCLUDING WHILE PLAYING A VIDEO GAME

At the hearing, Stevens presented evidence that Stranahan was racially biased against him, including evidence that in February 2018, while serving as a member of the Safety Board, Stranahan made a racial comment in the presence of the then-present police chief about how Stranahan killed a “whole village of n******s” while playing a video game. When the police chief admonished Stranahan for the disparaging racial remark, Stranahan looked at him and stated that he was running for Town Council/Safety Board in the next election and he knew how he was going to win. Stranahan explained that he would “pitch” his campaign by telling everyone in town that he would “fire the fucking n*****” that worked for the chief. At the time, Stevens was the only African American officer on active duty.

Stevens presented evidence that Stranahan was disciplined on March 11, 2013 and required to offer an apology letter to Stevens, including assurances that his conduct/behavior would not occur again. Following the incident, Stranahan was elected to the Town Council.

Based on this evidence, Stevens argued that having Stranaham vote on Stevens’ employment status would deny Stevens due process of law because of Stranahan’s racial bias against him.

THE SAFETY BOARD VOTES AGAINST STEVENS

On January 9, 2019, the Town’s attorney denied Stevens’ motion to disqualify Stranahan, finding that Stranahan’s racial slur and refusal to apologize to Stevens or the Town “bore no relation to the events associated with Stevens’ disciplinary action.” The Safety Board then voted 2-1 (including a vote from Stranahan) to terminate Stevens.

Stevens sought judicial review of the Town’s decision and the trial court reversed the Safety Board’s decision, leading the Town to appeal.

APPELLATE COURT AFFIRMS

The appellate court affirmed the trial court’s finding, observing that:

“Under an objective standard, the probability of actual bias is too high to allow the decision of the Safety Board to stand….Due process in administrative hearings requires that all hearings be conducted before an impartial body….When a biased board member participates in a decision, the decision will be vacated.”

It’s no guarantee that another racist won’t simply take Stranahan’s place in making the decision next time around — and it’s both telling and depressing that the Town even appealed the trial court’s order in the first place. Still, at least in this case, we can see the judicial system working as intended as we attempt, albeit at a faltering, lugubrious pace, to move forward as a country in our treatment of our fellow citizens.

Within days of Ubisoft filing its complaint, Ejoy announced an immediate “service closure” of Area F2 (AF2). The announcement, which claims that AF2 reached the top 3 of App Store free-to-play game rankings in some regions, does not mention the lawsuit. Instead, it focuses on the developers’ purported unwillingness to “accept an experience that we cannot deliver smoothly to as many players as we can.” The announcement coyly mentions that some “in-depth adjustments” may be necessary, including “perhaps even a complete overhaul of the design….”

While this is obviously an important victory for Ubisoft, it would have been interesting to see what defense tactics the defense counsel (Quinn Emanuel) came up with this time and, more importantly, how Apple and Google would have handled the safe harbor question. I was particularly interested in this case —and the safe harbor issue — after receiving the U.S. Copyright Office’s Section 512 report. Among other things, the report observed:

Based on the information obtained during the course of the Study, the Office notes that the mechanisms and requirements for submission of takedown notices, adopted in recent years by many of the larger OSPs, are no longer in sync with these provisions.  Two developments in particular have reshaped a rightsholder’s experience of submitting a takedown notice under section 512:  (i) the adoption of additional notification requirements by many OSPs, and (ii) the increasing reliance on web-based submission forms with friction deliberately built into the process.

In fairness to the platforms, they do receive tons of request. How many exactly? The Copyright Office’s report notes that “[i]n 2017, Google received notices identifying about 882 million URLs, and has processed requests to delist more than 4.6 billion URLs for copyright violations to date.”

CEO OF RENEGADES ESPORTS FRANCHISE CONSENTS TO FINRA DISCIPLINE

In 2002, Christopher Roumayeh, the CEO of the Renegades esports organization, entered the securities industry. In October 2008, he became associated with Merrill Lynch as a general securities representative, and although he is no longer associated with any FINRA-regulated broker-dealers, he remains subject to FINRA’s jurisdiction.

From 2014 to 2019, Roumayeh engaged in two business activities without providing prior written notice to Merrill Lynch. First, he and his “firm customer” purchased the Renegades franchise. Roumayeh managed the day-to-day operations as the Renegades’ manager and formed five different corporate entities, while soliciting prospective investors for the Renegades franchise. In addition, Roumayeh formed and managed a separate LLC through which he purchased commercial real estate. According to FINRA, by engaging in these business activities without providing prior notice to Merrill Lynch, Roumayeh violated FINRA Rules 3270 and 2010. Finally, in March 2019, Roumayeh participated in a private securities transaction by soliciting a publicly traded company to invest approximately $5.5 million in exchange for Renegades shares — again, without notifying Merrill Lynch of this outside business activity.

Roumayeh agreed to a $15,000 fine and a 21-month suspension from association with any FINRA member.

GUANGDONG HIGH COURT RELEASES TRIAL GUIDELINES FOR ONLINE GAME-RELATED IP DISPUTES

Tracey Tang, a partner at Broad & Bright, has written a LinkedIn post about the April 2020 trial guidelines issued by the Guangdong province’s High Court for online game-related IP civil disputes in an attempt to guide and unify proceedings. Ms. Tang writes that “[w]hile not binding on other courts in China, the Trial Guidelines are likely to be influential throughout China.” You can read her full write-up here.

ACTIVISION WINS MOTION TO COMPEL IN E.D. TEX. COPYRIGHT CASE

Normally, when we think of the Eastern District of Texas, we immediately think of patent cases. In Huffman v. Activision Publishing Inc., et al., however, we have an ongoing copyright case brought by WWE wrestler, Booker T. Huffman, alleging that Activision copied one of his ring-name personas, “G.I. Bro,” to create the character “Prophet” in Call of Duty: Black Ops 4.

Activision filed a motion to compel Huffman to produce responsive documents related to works involving the G.I. Bro character, including: (1) documents related to his licensing of his own likeness for other video games; and (2) QuickBooks files related to his revenues and profits from selling G.I. Bro comic books and posters. Activision advanced three arguments in support of its motion to compel.

The court ordered Huffman to produce the documents related to licensing his own likeness for other video games, but bought his argument that he didn’t have any documents in the second category and so granted the motion only as to the first category.

A group of guys who met playing video games allegedly steal millions in cryptocurrency, launder it, and then brag about it. Aside from the allegation about the group playing video games together, it has absolutely nothing to do with video games. But it’s still a fun read.

THE PLAYERS

On May 7, 2020, Michael Terpin, an LA-based, high-profile cryptocurrency pioneer, filed a complaint in the Southern District of New York, alleging a sophisticated cybercrime spree masterminded by a then 15 year-old high school student named Ellis Pinsky, to steal nearly $24 million worth of Terpin’s crytpocurrency. The complaint alleges that Pinsky, who still lives with his mom, recently turned 18 and is about to graduate from a suburban high school in New York. Terpin claims that “a group of young video game players [including Pinsky]—with participants in the United States and Great Britain—formed a user group called ‘Original Gangsters’ or ‘OGUsers.’” The complaint doesn’t explain how this makes the gang “video game players” since OGUsers is a digital marketplace for connecting buyers and sellers of virtual products — but there you have it.

THE ALLEGED SIM-SWAP, CRYPTOCURRENCY HEIST

Terpin claims that in January of 2018, Pinsky was working with a non-party accomplice, Nicholas Truglia (who “is currently out on bail for charges in the California state court system and a federal indictment in the Southern District of New York involving the theft of Plaintiff's $24 million cryptocurrency”). Pinsky, Truglia, and a “dozen or more gangsters in the Pinsky Gang” supposedly had “assigned roles, including identifying the victims, obtaining their cell phone and passcode numbers, forging identity cards, conning or bribing the mobile phone carrier employee into giving the imposter a new SIM card, handing off the personal identity information to Pinsky who with the assistance of his cohorts executed the hack and laundered the cryptocurrency holdings into Bitcoins or fiat money.”

Terpin claims that the gang obtained Terpin’s SIM card and took over his cell phone with his AT&T wireless number, causing his phone to go dead and, for all intents and purposes, his identity to be hijacked. The gang then allegedly used two-factor authentication messages to gain control of Terpin’s accounts and stole nearly $24 million in Triggers, Skycoin and Steem. On the date of the Terpin SIM swap, the complaint alleges that Truglia boasted that “today my life changed forever,” and he offered to hire “porn star escorts” and take his friends to the Super Bowl.

MONEY LAUNDERING

Terpin claims that “[l]ike drug cartel money, stolen cryptocurrency holdings are dirty, give rise to suspicion, and may be very difficult to spend if they are not either washed or converted to other forms of readily-spendable currency.” To launder the money, the Pinsky gang allegedly moved the coins into their own accounts, converted them to more common coins like Bitcoins, then withdrew them with “stolen or forged passports” to get around banks’ Know-Your-Customer protocols.

THE ALLEGED ADMISSIONS

The complaint paints Pinsky as a spoiled rich kid who boasted to his friends that he has hundreds of thousands in cash stored in his bedroom in his mother’s home and that, in 2019, he used some of the cash to repay Terpin a portion of what had been stolen. Terpin claims that the “brash egoist” Pinsky texted:

“You think I'm fucking dumb … I'm not fucking stupid … I threw out all my shit [computers] … Fuck that attorney [Terpin's lawyer]. They don't have shit on me…You think I'm dumb enough to keep all my money in America … [Truglia] is a dumb ass … and got caught.”

The complaint goes on to claim that Truglia implicated Pinsky in several conversations recorded by a friend, in September 2018. According to the declaration of the “friend,” Truglia implicates Pinsky with numerous statements by saying:

• How Pinsky and he hacked Terpin to steal his $24 million worth of Cryptocurrency holdings;

• How Pinsky and he laundered cryptocurrency holdings out of the blockchain into cash;

• Truglia has an account at the Gemini exchange and took out $ 1,200,000;

• Truglia committed tax fraud;

• Truglia saw records indicating that in December 2017, Pinsky had $70 million;

• One of their victims, Plaintiff, is too “dumb” to be able to figure out what happened and trace the laundered cryptocurrency holdings.

• He will never be caught hacking/stealing because he is so good at it— literally, “how are they going to prove that my story [his defense] wrong?”;

• “Nobody can get me in trouble. Nobody can put me in jail. I would bet my life on it, actually”;

• As of September 2018, Truglia had $60 million of Bitcoin.

• He told the police that he had $60 million when they came to his apartment;

• He had stolen all his money and had not legitimately accumulated his wealth;

• He was a computer hacker and stole his victims' cryptocurrency holdings and that this was thrilling for him—“the thrill of the game”—which he would never stop doing—even if there were no money involved; it was all “a mind game”;

• His partner was named Ellis Pinsky, and Pinsky had stolen between $70 and $80 million through hacking;

• He, Truglia, is a “Robin Hood” who robs from the rich but does not give to the poor;

• Pinsky and he do hacking and SIM swapping by Truglia locating the victims through social engineering and Pinsky intercepting 2FA messages to find out information about accounts;

• Truglia's “biggest” SIM swap was Plaintiff Michael Terpin for $24 million, and Pinsky was his partner; and

• Pinsky took proceeds from the $24 million.

It’s not clear, however, how any of this will be admissible evidence against Pinsky, since Truglia (who, like Terpin, is a California resident) is not a party to the case. But it sure makes for a spicy complaint.

TAKEAWAYS

Watch your SIM card. And be careful when investing in cryptocurrency.

Versus Evil, LLC is an indie game publisher currently litigating against its bank, PNC Bank, for failing to exercise ordinary care when an “unknown person” started forging and cashing fake checks. PNC tried to transfer and dismiss the case and failed on both fronts. Versus Evil gets to continue fighting (alleged) evil.

THE ALLEGED EVIL

Versus Evil LLC, a company based in Maryland, is an indie game publisher best known for publishing The Banner Saga franchise, Guild of Dungeoneering, and Armikrog.

Versus Evil banks with PNC Bank, which was founded in 1804 and has 2,310 branches in 22 states with most of its branches located in Pennsylvania, Ohio, New Jersey, Maryland and Florida.

On February 25, 2019, Versus Evil alleges that “an unknown person or persons” created a fake check drawn on its checking account at PNC bank in the amount of $4,770.97 with a forged signature. Versus Evil alleges that someone obtained a real check with a “dog ear” wrinkle, photographed and scanned it, and deposited it using the mobile phone deposit system. After that check cleared, more checks were deposited from March 6 to March 12, 2019, totaling $188,569.58. Versus Evil then claims it promptly contacted PNC to let the bank know the checks were unauthorized forgeries and that the bank must dishonor the checks and reimburse Versus Evil for the full amounts. When PNC declined to reimburse or dishonor the checks, Versus Evil sued.

CLAIMS

Versus Evil sued PNC Bank for failure to exercise ordinary care under Maryland’s version of the UCC and common law negligence. Versus Evil sued in state court, but PNC removed on a diversity of citizenship basis.

MOTIONS AND THE COURT’S MAY 5, 2020 ORDER

PNC filed a motion to transfer venue to the W.D. of Pennsylvania and a motion to dismiss both claims.

On the transfer motion, PNC argued it had a “Treasury Management Services Comprehensive Agreement” with Versus Evil that contained a valid forum selection clause. However, PNC failed to establish a valid clause because the agreement attached to its motion was “undated, unsigned, and incomplete.”

The court went on to say, though, that even if PNC did have a valid agreement with a forum selection clause, the court still wouldn’t grant the motion because it would be “inappropriate” under 28 U.S.C. § 1404(a). Other than the forum selection clause, nothing else supported a transfer to Pennsylvania. The court observed that Versus Evil is headquartered in Baltimore, PNC has branches in Baltimore, and PNC didn’t submit any affidavits or other evidence to show that proposed transfer would “better and more conveniently serve the interests of the parties and witnesses and better promote the interests of justice.” A good reminder that you can’t just rely on a forum selection clause, alone.

On the motion to dismiss, the court agreed with Versus Evil that Maryland’s UCC provides for a cause of action against a party who fails to exercise ordinary care in paying or taking a check. The court did dismiss the negligence cause of action because it only applies “in the absence of an adequate remedy under the UCC” (which, again, the court found existed here).

Despite some plaintiffs seeing potential benefits in bringing filing mass arbitrations, plaintiffs are still trying to attack terms of service to maintain class actions.

THE SETUP

On March 3, 2020, a putative class action was filed in the Northern District of California (I.C., et. al. v. Zynga, Inc., Case No. 3:20-cv-01539) against Zynga for claims related to a data breach Zynga reported in September 2019. In December 2019, Have I Been Pwned , a data breach monitoring site, stated that over 172 million accounts had been compromised. The main allegations against Zynga are that the breach resulted from Zynga’s negligence and that Zynga failed to properly notify its users of the breach.

THE PUTATIVE CLASS AND MINORS

The complaint seeks certification of a national class of individuals who were affected by the breach with two subclasses split between adults and minors. With regards to the minors, plaintiffs allege that Zynga is well-aware that “a substantial portion of its user base has historically been, and continues to be comprised of minors, and Zynga has profited handsomely from that user base over the years.” While not mentioning the Children’s Online Privacy Protection Act (COPPA) directly, Plaintiffs assert a claim of intrusion upon seclusion for the minor subclass, much like several previous COPPA-related class actions filed against entertainment companies like Viacom, Disney, and Kiloo. Because COPPA does not provide a private cause of action, the plaintiffs in the previous cases tied the alleged COPPA violations to other privacy rights. Plaintiffs also argue that minors are disproportionately damaged by data breaches and that minors are not bound to the Zynga Terms of Service and Privacy Policies.

ARBITRATION

In arguing for a subclass for minors, Plaintiffs are presumably trying to avoid the arbitration clauses and class action waivers found in Zynga’s Terms of Service. It’s worth noting that some plaintiffs’ attorneys have taken to mass arbitration filings in response to class action waivers. Zynga’s arbitration clauses state that it will advance all filing, administrative, and arbitration costs and expenses if the relief sought is less than $10,000. If even a small fraction of the reportedly 172 million account holders were to file for arbitration over the claims, Zynga could be forced to advance millions of dollars in filing fees and those fees are only recoupable by Zynga if the arbitrator were to find the claim frivolous.