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.

An entertainment licensing company has begun legal combat with bankrupt video game producer Midway Games Inc. over the licenses for movies, television shows, live action productions and other properties based on the blockbuster game "Mortal Kombat."

Threshold Entertainment Inc. filed an adversary complaint Wednesday in the U.S. Bankruptcy Court for the District of Delaware challenging Midway's proposed $33 million sale of substantially all of its assets, including all previously released titles and games based on the hit Mortal Kombat series, to Warner Bros. Entertainment Inc. That deal was announced in late May.

Threshold claims that it holds perpetual exclusive rights to develop derivative works in film and television based on Mortal Kombat as well as rights to licenses on certain characters that appear in both the video games and the films and TV series based on them.

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

Fenner Investments, Ltd. v. Microsoft et al.
United States District Court for E.D. Tex.
Filed 1/5/07, Decided 3/16/09 (Opinion issued 6/3/09)

This case revolved around Fenner Investment’s U.S. Patent No. 6,297,751, which describes a low-voltage joystick port interface.

Prior art joysticks used resistor-like devices called potentiometers to produce analog signals. These analog signals had to be transformed into digital signals to be read by a computer. An interface circuit interpreted the joystick’s analog signal to produce a responsive digital pulse which had a pulse width that corresponded to the joystick position. The computer would measure the width of the digital pulse to figure out the position.

Newly developed computer and video game systems require lower voltage (prior art joysticks and computers were electronically compatible, both operating at 5 volts), so they didn’t work with the interface circuits/joysticks anymore. Fenner’s patent solved that problem by creating an interface circuit that allowed the old, higher voltage joysticks to be used with the newer, lower voltage systems.

The “Pulse Width” Limitation
Fenner’s patent contains a limitation that requires an infringing product to produce ‘a single cycle of variation in the logical level of a signal, a width of the single cycle of variation, assessed in time or distance, represents a coordinate position of said joystick device.”

Fenner alleged that Microsoft’s Xbox controller and Nintendo’s Wii and GameCube controllers infringed on its patent. These controllers contain thumbsticks that operate by initial analog signals being translated into 8- or 10-bit digital signals (or “words”) that get sent to the console processor which interprets the digital word to calculate the corresponding thumbstick position.

Basically, Fenner’s invention works so that analog signals are represented by the width of a variation (pulse) in a digital signal, whereas defendants’ products require the full 8- or 10-bit digital word (made up of 1’s and 0’s) to give the joystick position. As an example of a digital word, “01100000” shows a two cycle “pulse” occurring toward the beginning of the 8-bit word.

Fenner argued that the defendants infringed simply because the accused products create a pulse with a width that can be measured and, based on the pulses, a joystick position can be determined. The defendants argued that the pulse widths alone are irrelevant and instead the entire digital word is necessary to determine the joystick position.

Claim Construction
The main issue here turned on the claim construction of the pulse width “representing” joystick position and whether that meant providing some information about the position (Fenner’s argument) or providing all information necessary to determine the position (Defendants’ argument). Relying on intrinsic evidence (i.e., the patent claims, specification, and its prosecution history before the United States Patent & Trademark Office), the court found that the claim required that the pulse must communicate all the necessary information to determine the specific joystick coordinate position.

Fenner also argued that “represent” meant that pulse width could be combined with other data, such as the position of the pulse in the 8- or 10-bit word, to indicate joystick position. The court rejected this argument based on the prosecution history and claim amendment language which indicated that only pulse width, not other data, was to be used to determine joystick position.

Summary Judgment – Direct Infringement
Using the above claim construction, the court found summary judgment appropriate because there was no genuine issue of material fact. Because Fenner’s patent relied on a pulse width alone to relate the joystick position, the defendants had not infringed on the patent. This is because, in the accused devices, the pulse widths alone are meaningless and say nothing about joystick position. The pulse widths simply describe the bits. It’s the 8 or 10 bits, read together, that actually give the position. A signal representing the series of two, three, or more “1's” in a row does express “a single variation of the logical level of a signal,” but it doesn’t give any position information without the accompanying “0's” that also make up the digital word.

Summary Judgment – Doctrine of Equivalents
Generally, patent protection is limited to what’s written in the patent claims. However, to ensure fair protection of patents, the doctrine of equivalents states that a patent may be protected even when another product or process does not literally infringe on the patent, as long as the infringing product or process is deemed to be equivalent. The doctrine of equivalents was formed so that copycats could not avoid patent infringement simply by making minor or trivial variations to the claims. For the doctrine to apply, the accused product must perform “substantially the same function in substantially the same way with substantially the same result” (referred to as the function-way-result, or FWR, test).

Fenner argued that the doctrine applied because the production of binary encoded numbers was equivalent to the production of pulse widths for determining joystick position. The court determined that Fenner’s interpretation wrongly wrote the “pulse limitation” out of the claim and disregarded the “way” part of the test by being so broad that it would include any digital signal no matter what “way” that it communicated position. The court further found that Fenner failed to show equivalence in the “way” the devices operate because in Fenner’s device, only the pulses, or “cycles of variation,” are used to determine joystick position whereas in the defendants’ devices the periods of no variation are just as necessary as the periods of variation (for creating an 8- or 10-bit digital word) to determine position.

The “Lower Source Voltage” Limitation
The court also faced a second issue of claim construction concerning the definition of the device parts, because certain parts of the accused products had to operate at a lower voltage in order to be infringing.

Claims 1, 9, and 14 of the ‘751 patent call for “[a]n interface between a joystick device having a first source voltage and a processor, comprising . . . an interface circuit having a second source voltage that is lower than the first source voltage. . .” The Court’s claim construction defined “interface circuit” as “a circuit that connects the joystick and the processor.”

The ‘751 patent claims required the interface circuit between the joystick and processor to operate at a lower voltage than the joystick. In the defendants’ accused products, only the processor core, or central processing unit (CPU), operates at a lower voltage than the joystick. Fenner argued that the periphery of the processor could be included in the interface circuit, while the defendants argued that the processor included the CPU and its peripherals, both separate from the interface circuit. The claim construction then turned on whether “processor” meant the entire processor chip or just the processor core. Using extrinsic definitions as well as the context of the claim, the court held that “processor” should be defined as “the CPU along with its peripheral circuitry.” Fenner had agreed that such a definition would preclude any issues of triable fact, so summary judgment was appropriate.