In October of 2009, Blizzard brought suit against Alyson Reeves for operating a private server for the popular MMORPG, "World of Warcraft."  Usually, a player buys the WoW game software and pays a monthly subscription fee to use the service.  The copyrighted software, or "game client," allows the user to access the game and will only connect to authorized servers.  Likewise, the server software is copyrighted by Blizzard and will only recognize authorized game clients.  Before being able to access the game, users must also agree to Blizzard's End User's License Agreement and Terms of Use. After agreeing to both contracts, the user must finally pass Blizzard's anti-piracy system that authenticates the user's game client before allowing access to the game content.

In its complaint, Blizzard alleged that Reeves had violated its copyrights, circumvented copyright protection systems, and engaged in unfair competition among other claims.  Blizzard alleged that Reeves violated its copyrights through the operation of a website called "scapegaming."  Users of scapegaming's services did not have to pay a subscription fee and the service allowed users to access unauthorized servers that emulated Blizzard's own. Furthermore, scapegaming allowed pirated or unauthorized game clients to access its servers since it did not use an anti-piracy system.  Blizzard alleged that scapegaming achieved this by reverse engineering code taken from Blizzard's game client and servers.  Users were able to access WoW content through these servers and could make donations to scapegaming to keep its servers operational.  Between July 22, 2007, and September 26, 2009, Reeves received approximately $3,052,339 from donations and transactions through Paypal's "shopping cart."

After the initiation of this lawsuit, Reeves failed to appear and did not respond to the complaint.  Blizzard filed a motion for default judgement that was granted on August 10, 2010.  Blizzard was awarded  $88,594,539 in damages:  $3,052,339 in disgorged profits, $85,478,600 in statutory damages, and $63,600 in attorneys fees.  The statutory damages appear suspect, and could be overturned on appeal, but in view of the default judgment it doesn't appeal likely that will happen.

Walker Digital, LLC, a self-professed “invention” company who claims to hold over 500 patents, has filed suit against Activision, Inc., Activision Blizzard, Inc. and Zynga, Inc. In the complaint, Walker Digital alleges that the defendants’ games infringe upon U.S. Patent No. 6,425,828, entitled “Database Driven Online Distributed Tournament System.” The patent claims priority to 1998, and its first claim reads as follows:

1. A method of conducting a distributed electronic tournament for a plurality of players, comprising:

exchanging information between a central controller and a player located remotely from the central controller, the information (i) being exchanged while the player plays a game in the tournament and (ii) influencing game play; and

storing in a database player information associated with the player, the stored player information being available for use in a subsequent tournament to influence game play of the subsequent tournament while the player is playing a subsequent game in the subsequent tournament.

The complaint alleges infringement by a litany of games, including (among others) Activision Blizzard’s Call of Duty: Black Ops, Call of Duty: Modern Warfare (1 and 2), Call of Duty: World at War, Blur, DJ Hero 2, Cabela’s North American Adventures, and World of Warcraft (and its expansions packs), and Zynga’s Mafia Wars, Vampire Wars, Fashion Wars and Street Racing.

We’ll keep you posted on this one. The case caption is Walker Digital, LLC v. Activision et al., No. 1:11-cv-00004 (D. Del. filed Jan. 3, 2011).

A panel of the 9th Circuit on Tuesday upheld a lower court’s 2009 injunction barring the distribution of the Glider computer program that automatically plays the lower levels of World of Warcraft. Read more about it here.

There's an interesting article on Law360 today:

Virtual-World Conflicts Lead To Real-World Suits.

Here's an excerpt from the article:

Law360, New York (June 08, 2010) -- As the market for online games expands and the debate over who has the right to control the virtual content heats up, website operators, their users and third parties could find themselves locked in real-world legal battles.

Disputes stemming from ownership of virtual property and operators’ terms of service agreements are starting to pop up more often, leading intellectual property experts to speculate that they may become the next hot-button issues to be played out in the courts.

The complete article can be found here.

The Patent Arcade is pleased to announce that a new book co-edited by our own Ross Dannenberg (i.e., me), and partly authored by our own Steve Chang, is now available for purchase from the ABA website:

BUY YOUR COPY TODAY!!! (the authors do not receive any royalties for this book--all proceeds benefit the American Bar Association's IP Section)

Hernandez v. Internet Gaming Entertainment, LTD.
United States District Court for S.D. Fla.
Case No. 1:07-CIV-21403-JIC, Filed May 31, 2007, Settled August 26, 2008

Much like Blizzard v. In Game Dollar, this case was about virtual property transfer in the MMORPG World of Warcraft (WoW) for real-world money. The main difference is that this suit was filed by an individual player rather than the owner/operator of the game, as was the case in Blizzard.

Hernandez, an avid player of WoW, filed suit on May 31, 2007 against Internet Gaming Entertainment, LTD. (a Hong Kong-based company) and IGE U.S. LLC., both of which were companies “engaged in the business of generating and selling virtual assets.” IGE, LTD. was later dropped because it couldn’t be served with the lawsuit in time, leaving IGE U.S. as the sole defendant. Hernandez filed a class action suit on the behalf of U.S. WoW subscribers, which he estimated could be as high as 2 million people, seeking an injunction and monetary damages.
The amended complaint alleged that "IGE’s calculated decision to reap substantial profits by knowingly interfering with and substantially impairing the intended use and enjoyment" of WoW through its gold-farming, camping spawns and spamming chat violated WoW’s Terms of Use and End User License Agreement and led to lost time, competitive disadvantage, and diminished experience for honest game subscribers. The complaint alleges that the plaintiffs were intended third party beneficiaries of the ToU and EULA between IGE U.S. and Blizzard and suffered harm as a result of IGE U.S.’s breach of these agreements.

The complaint named 7 causes of action:

1. Violation of Florida’s Deceptive and Unfair Trade Practices Act


2. Violation of Consumer Protection Statutes of Remaining 49 States, District of Columbia and Puerto Rico


3. Unfair Trade Practices Act Conspiracy


4. Breach of Third-Party Beneficiary Contract


5. Breach of Third-Party Beneficiary Conspiracy


6. Tortuous Interference with Business Relationship


7. Tortuous Interference with Business Relationship Conspiracy

Hernandez filed for class certification on May 19, 2008, but the parties settled before certification occurred. On August 26, 2008, Hernandez and IGE U.S. filed a joint stipulation of settlement in which IGE U.S. denied any wrongdoing but agreed to refrain from selling WoW virtual property for five years. It's unlikely that this agreement will impact IGE.com’s business (WoW gold is still being sold on the site) because IGE U.S. doesn’t actually operate IGE.com. Apparently IGE U.S. had sold all its assets to Atlas Technology Group six days before the lawsuit was first filed, so IGE U.S. was probably the wrong party to sue in the first place, but since IGE, LTD. was dropped early on and the changes to IGE U.S.’s corporate structure weren’t clear at the time, this outcome was probably the best possible based on the factual background they were faced with.

In a previous motion, Hernandez had asked the settlement to be filed under seal. In the order enforcing the settlement, the court denied the seal, saying the public interest must be considered. Courts are cautious about allowing a settlement under seal when class certification is still pending because courts don’t want one party to settle for a high amount that leaves the rest of the injured potential parties without remedy/damages. This court stated the settlement should be under seal only under extraordinary circumstances and said the parties could submit briefs to attempt to prove such circumstances.

As a last note, the class was never certified so the agreement – and the case being dismissed with prejudice – only holds for IGE U.S. and Hernandez. Any other WoW subscriber can file a suit against IGE (or perhaps Atlas or whoever is the operator of IGE.com) and attempt to take the case further than Hernandez did. Although both this case and Blizzard ended with settlements, it seems the door is still wide open for future litigation on illicit virtual property sales in WoW.

For more analysis over the life of the case, see Virtually Blind.

1. Violation of the Computer Fraud & Abuse Act



2. Violation of the California Computer Data Access & Fraud Act



3. Intentional Interference with Contract



4. Trespass to Chattels



5. Unjust Enrichment



6. Unfair Competition

The creator of a software bot designed to allow users of Blizzard Entertainment Inc.'s World of Warcraft to continue playing the online role-playing game while away from their computers remains on the hook for a $6.5 million judgment, although Blizzard's request to have MDY Industries LLC pay significantly more in damages was denied.

Judge David G. Campbell of the U.S. District Court for the District of Arizona ruled Wednesday, April 1, 2009, that the $6.5 million judgment that had been stipulated following a bench trial was the maximum damages MDY's founder Michael Donnelly would have to pay the video game giant. That decision, along with a permanent injunction on the sale of the software bot on tortious interference grounds, was reached at the end of January.

More info at Law360.

The case is MDY Industries LLC v. Blizzard Entertainment Inc. and Vivendi Games Inc., case number 2:06-cv-02555-DGC, in the U.S. District Court for the District of Arizona.

Update on October 2, 2008:

On Sept. 26, 2008, the court ruled that MDY must pay Blizzard damages in the amount of $6M, i.e, $6,000,000.00. At the next hearing, scheduled for January 2009, the judge will determine whether MDY founder Michael Donnelly is personally liable for damages and whether MDY violated the DMCA when it manipulated codes to keep Glider under WoW’s radar.

Posted on July 15, 2008:

Looks like Blizzard has won round 1 of the WoWGlider/MMOGlider lawsuit, with the District Court ruling that MDY's bot application violates Blizzard's copyrights, and also causes tortious interference with Blizzard's other paying customers.

On July 14, 2008, the U.S. District Court in Arizona issued an order granting summary judgment for Blizzard, developers of the World of Warcraft (WoW) massively-multiplayer online role-playing game, on their tortious interference, contributory copyright infringement, and vicarious copyright infringement claims against MDY, developers of a “bot” known as Glider that allows players to cheat in WoW. We had previously commented on this case when Blizzard initially filed this lawsuit against MDY.

As to its copyright infringement claims, Blizzard prevailed on the argument that while WoW users are given a license to play the game (and thus are given a license to cause digital copies of Blizzard’s copyright content to be made in RAM so that the WoW source code may be executed), the scope of this license is limited by the End User License Agreement (“EULA”) and the Terms of Use Agreement (“TOU”), such that breaching these agreements amounts to copyright infringement. In adopting Blizzard’s argument on this point, the district court rejected the argument advanced by MDY and amicus party Public Knowledge that WoW users are “owners” of copies of the software who are permitted to copy the WoW software into RAM irrespective of the restrictions in the EULA, rather than mere “licensees” who are not. Because the district court found that using MDY’s Glider constitutes a breach of WoW’s EULA and TOU, it accordingly held that users of MDY’s Glider were committing direct copyright infringement. However, this lawsuit was not against individual users of Glider—rather, Blizzard was trying to stop the problem at its source namely, MDY. Since it was MDY that was facilitating this direct copyright infringement (which is the requirement for contributory copyright infringement) and MDY that derived a financial benefit from this direct copyright infringement and had the ability to stop it (which are the requirements for vicarious copyright infringement), the district court held that MDY was guilty of both contributory copyright infringement and vicarious copyright infringement.

As to their tortious interference claim (which admittedly sounds more exciting than copyright infringement), Blizzard prevailed on the argument that MDY’s development of Glider induces WoW users to breach WoW’s EULA and TOU. Unlike copyright infringement, tortious interference with contract is a question of state law rather than federal law, and in applying Arizona law, the district court found it particularly significant that MDY “actively promotes the use of Glider even though it knows that using Glider breaches the TOU.” See Order at 22. In addition, the district court noted that “MDY does not dispute that Glider consumes more Blizzard resources than any other bot because of its sophisticated anti-detection features, that Blizzard must divert resources from game development to combat Glider, and that Blizzard has received numerous complaints from WoW players regarding other players’ use of Glider.” Id. at 23. Finally, the district court found that MDY’s conduct amounted to improper interference within the meaning of Arizona law. Id. at 26. Considering all these factors together, the district court concluded that MDY’s distribution of the Glider bot indeed constituted tortious interference with Blizzard’s TOU for WoW.

But putting aside tortious interference, the real significance of this case appears to be that a district court has allowed a software developer to enforce its EULA by characterizing exceeding the scope of the EULA as an act of copyright infringement rather than a mere breach of contract. While this tactic is not new in the copyright license/copyright infringement context, this is a novel approach in the enforcement of EULAs and TOU. As the district court itself acknowledged, copyright infringement is a “more powerful claim” than breach of contract because damages for copyright infringement are typically far greater than damages for breach of contract. See Order at 6. Indeed, damages for copyright infringement account for actual damages to the copyright owner (e.g., Blizzard’s expenses in fighting Glider, lost revenue from players who stopped playing WoW because of bots, etc.) and the infringer’s profits (i.e., MDY’s revenue from selling Glider), or alternatively, may include statutory damages up to $150,000 per infringed work (if willful). Id. Thus, if courts continue to apply this rationale in future cases, copyright infringement lawsuits could become effective weapons for video game developers in their quest to enforce EULAs and thereby limit the use of their creations to their own rules. But this future is only an “if,” as this case is only the opinion of a trial court, and an appeal is sure to follow (i.e., this ruling could be reversed (or affirmed) on appeal to the Ninth Circuit). Stay tuned...

(Thanks for Rajit Kapur for his assistance with the creation of this post)

Well it looks like this case has not settled yet, and the parties have filed their summary judgment motions. MDY's Motion can be viewed here. Blizzard's filings are here, here, and here.

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