Microsoft chairman Bill Gates has hinted that the company is considering licensing the software underlying the Xbox games console to outside companies, in a bid to expand its market share.

Read the full story on Gamasutra.

I would be remiss for not mentioning it.

Read the opinion here.

I. Background

In late 1980, Konami Industry Co., Ltd. developed a video game titled “Scramble,” to which, in early 1981, Stern Electronics, Inc., a video game equipment manufacturer, obtained the exclusive right to distribute in North and South America. Stern quickly met with success after the start of sales on March 17, 1981, selling approximately 10,000 units and generating about $20 million in revenue within two months. In April 1981, the United States Copyright Office granted a copyright to Konami for the audiovisual work “Scramble,” based on video tape recordings of the game submitted by Konami.

Scramble:


Also in late 1980, Omni Video Games, Inc. developed and began marketing a video game product, which allowed for playing different games on the same unit. The program for each game could be transferred to a programmable read only memory (PROM), such that playing a particular game on a unit merely required substituting in the PROM containing that game’s program. Prior to March 17, 1981, Omni ordered ten silk screen nameplates, and sold five video game units, bearing the name “Scramble.” In April 1981, Omni began selling a video game unit bearing the name “Scramble,” in which the game was virtually identical to Stern’s Scramble game, i.e., Omni’s game was a “knock-off.”

Stern brought suit against Omni, and the trial court granted a preliminary injunction enjoining Omni from infringing the Stern’s copyright in “Scramble” and from using the trademark “SCRAMBLE” in connection with video games. Omni appealed, arguing that the sights and sounds of a video game should not be afforded copyright protection because the work is neither “fixed in any tangible medium of expression” nor “original” within the meaning of 17 U.S.C. § 102(a) because the sequence of images and sounds vary depending on the actions taken by the player during each time the game is played.

II. Issue

The primary issue before the United States Court of Appeals for the Second Circuit was whether copyright protection extended to the visual images electronically displayed by a video game. The Second Circuit also considered whether Omni was entitled to use the trademark “SCRAMBLE.”

III. Analysis

1. The Copyright Issue

The Second Circuit noted that, without player participation, the display of the video game would undoubtedly be eligible for copyright protection because the display would clearly be an original “audiovisual work” and the memory devices would constitute a “copy” in which the work is “fixed.” The court concluded that “the player’s participation does not withdraw the audiovisual work from copyright eligibility.” Even though the player affects the sights and sounds of the video game, many of the sights and sounds stay the same, such as, in the case of “Scramble,” the appearance of the spaceships, enemy crafts, ground missile bases and fuel depots and the sounds of destroying enemy crafts and dropping bombs. Therefore, the court held that “[t]he repetitive sequence of a substantial portion of the sights and sounds of the game qualifies for copyright protection as an audiovisual work.”

2. The Trademark Issue

Regarding the trademark issue, the Second Circuit upheld the district court’s finding that Omni’s prior use was not bona fide, but instead a “bad faith attempt to reserve a mark.” The Second Circuit reasoned that it was too remarkable of a coincidence that Omni independently thought of the name “Scramble” only to develop a few months later a game virtually identical to Stern’s “Scramble.” The court thought it more likely that Omni appropriated the trademark with the expectation of imitating the audiovisual display. The court also determined the equities justified an injunction because Stern had made a substantial investment and achieved commercial success using the “Scramble” mark, whereas Omni had only placed the “Scramble” mark on five units that were not “Scramble” game “knock-offs.”

The Second Circuit therefore affirmed the district court’s preliminary injunction enjoining Omni from infringing Stern’s copyright and using the trademark “SCRAMBLE.”

Thanks to Brandon Rash for his assistance in the preparation of this case summary.

Want to play massively multiplayer online games, but don't want to spend time building up your character's stats? A new service, GamePal.com, gives anyone the ability to bypass the countless hours it can take to advance deep into online games like World of Warcraft by renting the use of such characters by the month.

Read more here.

From today's Washington Post Express:

"GAMERS: In an apparent first, the Kansas City T-Bones and Schaumburg Flyers will let the results of two people's X-Box [sic] baseball game count for the first two innings of a July 18 game. Then the minor league teams will take the firld in the third."

A friend of ours forwarded us this link to "A Gamer's Manifesto." It's an interesting read, and I agree with some of it's "20 things gamers want from the seventh generation of game consoles." Item 15 includes commentary on "Short-Sighted Business Bull$%!&" and refers to patenting video games.

(Warning: foul-language is used generously throughout the article like an episode of Penn & Teller's Showtime show. The authors might be taken more seriously if they approached the issue with a little more decorum, as many of their points are valid... although not number 15.)

CNN is running a story with some interesting speculation regarding the future of gamemaker Atari.

Midway, the creator of the games Pac-Man, Rally-X, and Galaxian, sued Omni for copyright infringement of these games. During the course of this suit, Midway filed a motion for an ex parte hearing seeking to impound any infringing items in Omni’s possession. A single machine, holding an allegedly infringing version of Pac-Man, was seized from Omni and impounded. However, several days later, the District Court vacated this impound order and not only returned the potentially infringing machine to Omni, but also suppressed this machine from evidence admissible at trial and ordered Midway to pay the attorney’s fees incurred by Omni as they sought return of this machine.

Illustrative authentic Pac-Man units (not the allegedly infringing version):


Midway immediately appealed to the 1st Circuit Court of Appeals, requesting reversal of the decision disallowing impoundment of the machine, suppressing it as evidence, and the award of attorney’s fees. However, Midway’s brief and oral arguments failed to address the main legal issue of this case, appellate court jurisdicion under the “collateral order” doctrine.

Under the “collateral order” doctrine, an interlocutory appeal, or an appeal to a higher court before the lower court has issued a final judgment, is rarely allowable. Such an appeal is proper only when (1) the order being appealed is a final order on an issue of law, rather than judicial discretion, (2) the issue is separable from the other issues to be presented at trial, and (3) that the appeal cannot wait until after the final judgment of the court, because irreparable harm would be probable.

Thus, the question in this case was not whether Midway’s arguments had merit, but whether Midway could appeal while its trial was still in progress. The Court of Appeals held that Midway could not appeal the orders of the District Court until after final judgment of the case.

The Court reasoned that the interlocutory appeal was improper because no irreparable damage would be done if Midway was forced to wait until after trial to appeal. At this time, Midway appeared likely to find more evidence of copyright infringement during discovery, therefore the appeal might ultimately be unnecessary. Further, even if Midway were to lose at final judgment, and Omni’s allegedly infringing machine had since disappeared, Midway could still rely on the accounts of the individuals involved in the seizure. These individual accounts, in lieu of the machine itself, would be credible evidence because they were from the neutral agents of the court who had performed the seizure. These agents had also been accompanied by a Midway engineer who could verify the technical details of the machine.

The Court further noted that under 17 U.S.C. s 503(a), the statute authorizing impoundment, a judge “may” order impoundment if he deems it reasonable. The Court interpreted this statute to establish discretionary power on the trial judge to order an impoundment, which would make an interlocutory appeal improper on this issue. Similarly, the Court reasoned that the order to suppress the machine from admissibility at trial, and the award of attorney’s fees to Omni were discretionary and reparable decisions of the District Court. Therefore, the Court denied Midway’s interlocutory appeal, and allowed the trial to resume in District Court.

Thanks to Brian Brisnehan for his assistance in the preparation of this case summary.

The 8th Circuit Court of Appeals in St. Louis will hear arguments at 9 a.m. today in this case that may decide how the Digital Millennium Copyright Act, or DMCA, applies to computer software and the important practice of reverse engineering. As you may recall, the charges center on "bnetd," free software developed to allow individuals to run servers for hosting online versions of popular Blizzard games such as "Diablo II" and "StarCraft." Blizzard runs its own online service, Battle.net, for those games, but many people have claimed the service is erratic, buggy, and riddled with players who cheat.

Read more here.

Ok, so I've started a new category, dubbed "Ponderous," to indicate posts that are neither a Case summary, case Update, or News. Ponderous posts represent interesting legal topics of discussion that we find interesting.

This initial post is an extension of the News item regarding the Chinese gamer who got the suspended death sentence for killing a fellow gamer over a virtual sword in Legend of Mir III, and the announcement by Microsoft that Xbox Live, upon launch of the Xbox 360, will have a marketplace feature. Microsoft has indicated that you will be able to purchase game content via the marketplace, but thus far has remained silent as to whether one gamer can sell directly to another.

In any event, I created this skin for my Audi TT in Forza Motorsport:

Is it obvious I'm a Georgia Tech grad? Think it would fetch anything? I hear there's a market on eBay, but it doesn't appear to be thriving for Forza yet.

Thanks to Erin Mehlos, of Gamasutra.com, who drew the single frame comic at right. The
comic is (c) 2005 Gamasutra.com

Gamasutra has posted the responses to their Question of the Week, which they posed in conjunction with our article "It's Just A Game Right? Top Mythconceptions On Patent Protection Of Video Games." The responses ranged from the mildy supportive to the outright negative. Steve and I also sent a letter to the Editor of Gamasutra. Our kudos, however, go to Erin Mehlos, who drew the following cartoon to run with the Question of the Week Responses:

A chinese gamer who killed a fellow gamer, in real life, over a virtual item from the game has been sentenced to life in prison, with the possibilty of parole in 15 years. The sentence is actually a suspended death sentence under Chinese law.

The story goes like this: Mr. Qui lent Mr. Zhu a Dragon Sabre won in the game Legend of Mir 3. Mr. Zhu subsequently sold the sword for 7,200 Chinese Yan. Mr. Qui subsequently broke into Mr. Zhu's house and stabbed Mr. Zhu to death.

Admittedly this is a regrettable incident, but it does raise the issue of whether in game property is personal property, or merely data bits stored on someone else's computer.

Read more here.

As you may recall, the Department of Justice coordinated a raid in early December, 2004, on three Pandora's Cube stores in the Washington, DC, suburbs where the stores were selling -- in plain view -- Xbox videogame consoles that had been modified to use pirated software. Well the employees that were arrested as a result of the raid have apparently pled guilty in the ordeal, as reported on the Gamasutra web site:

"A group of retailers in Maryland have pleaded guilty to selling modified Xboxes, called "Super Xboxes" by the group, thereby violating the Digital Millennium Copyright Act. The four retailers were owners and employees of Pandora's Cube, a shop with two locations in Maryland and one in Virginia."

Read complete article here.

I always look forward to reading a video game case that starts with “Plaintiff Philip Ahn is a fourth degree black belt in Tae Kwon Do and has practiced martial arts for approximately twenty years. Plaintiff Elizabeth Malecki holds a degree in ballet and modern dance and is a professional dancer, actress, and aerobics instructor. Plaintiff Katalin Zamiar is a first degree black belt in Karate and has twelve years of experience.” (emphasis added) This is also an interesting case in that it is one of the few that deals with preemption of state law by the federal Copyright Act of 1976 (here, state law rights of publicity get preempted).

The games at issue are Mortal Kombat (MK) and Mortal Kombat II (MKII), and the defendants are Midway (copyright owner in MK and MKII), Williams Electronics (makes the coin-operated versions of MK and MKII), Acclaim Entertainment (developed version of MK and MKII for Nintendo and Sega game consoles), Nintendo of America (game console mfr and game publisher), and Sega of America (then a game console mfr and game publisher), each of which is well known in the industry.

Mortal Kombat:


Each plaintiff alleges that, on separate occasions between 1992 and 1993, they were approached by Midway's agents about the possibility of using their images, names and performances for various characters in the coin-operated arcade format of MK and MKII. Plaintiff Malecki modeled the character Sonja Blade for MK (see above screenshot). Plaintiff Ahn modeled the character Shang Tsung in the coin-operated version of MKII, while plaintiff Zamiar modeled for three characters, Kitana, Mileena, and Jade, all of whom appeared in MKII. Midway videotaped each plaintiff’s movements, digitized the images, and incorporated the digitization into the coin-operated arcade games. The games were successful, and Sega and Nintendo soon released game console versions of MK and MKII.

Mortal Kombat (Elizabeth Malecki as Sonya Blade):


Mortal Kombat II (Katalin Zamiar as Kitana):


As is generally the case, each plaintiff signed a release form with Midway at the time of the videotaping. This agreement authorized Midway to film each plaintiff in a martial arts performance in order to use that plaintiff's name or likeness in connection with the manufacture, design, advertising, promotion, sale, and use of the coin-operated video games. The agreement also made Midway the sole and exclusive owner of all of plaintiffs' copyrightable expression, defining any such expression as "works for hire," and permitted Midway, at its sole discretion, to use plaintiffs' likeness in any copyright obtained in connection with the coin-operated arcade games.

At this juncture in the case, the remaining issues are common law right of publicity, copyright infringement, and common law quantum meruit. The court initially dealt with the common law right of publicity, finding that the right of publicity claim was preempted by federal copyright law. A state law is preempted when 1) the work in which the right is asserted is fixed in a tangible form and falls within the subject matter of copyright under § 102 of the Copyright Act, and 2) the right asserted is equivalent to any of the rights specified in § 106 of the Copyright Act. In this case, plaintiffs' images were videotaped and, as a result, became fixed in a tangible form (because plaintiffs' consented to the videotaping, the definition of 'fixed' is satisfied). Further, the choreographic works were all original works of authorship, and choreographic works fall within the subject matter of copyright. Finally, applying the § 106 test, the right of publicity is equivalent to one of the rights in § 106 because it is infringed by the act of distributing, performing or preparing derivative works. The right of publicity claim was therefore preempted.

The crux of the plaintiffs’ argument with respect to copyright infringement was that each plaintiff was a joint author of both MK and MKII, and defendants therefore owed an accounting to each plaintiff. Under 17 U.S.C. § 104, a joint work is defined as “a work prepared by two or more authors with the intention that their contribution be merged into inseparable or interdependent parts of the unitary whole.” However, There was never any intent for the plaintiffs to be joint authors, as evidenced by the “work make for hire” clause in the contract, and Midway at all times had control and final authority over what was used in MK and MKII. In addition, the court applied the copyrightable subject matter test, where in addition to the presence of intent, a collaborative contribution will not produce a joint work, and a contribution will not obtain a co-ownership interest, unless the contribution represents original expression that could stand on its own as the subject matter of copyright.

In analyzing the plaintiffs contributions, the court stated that “it is apparent to the court, in viewing videotapes of the actual games, that the superhuman gyrations and leaps high into the air of the characters, including plaintiffs' characters, are fanciful products of the imaginations of the creators of the source codes.” Thus, while the plaintiffs contributed their images and movements to the creation of the games, it was Midway alone that translated the ideas into a fixed, tangible expression entitled to copyright protection. The court thus denied the claim of copyright infringement.

Lastly, the court swept aside the remaining quantum meruit claim, noting that in Illinois a claim for quantum meruit cannot succeed where there is a valid, enforceable agreement between the parties, which there was in this case.