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2020 Year in Review
A Year in Review
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:
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.
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.
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.
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.
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.
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.
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.
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.
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).
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.