In the two cases, plaintiffs Open Mind Solutions, Inc. and Boy Racer Inc. issued the subpoenas to a number of Internet Service Providers (“ISPs”).  Although the John Does are alleged to have infringed the plaintiffs’ copyrights in motion pictures through file sharing, rendering jurisdiction exclusive in federal court, the cases were filed in state court under a procedure called a “pure bill of discovery.”  One judge noted in dismissing the suit filed by OpenMind Solutions without prejudice that OpenMind Solutions could amend the suit if it named the ISPs from which it sought discovery as parties (to allow the ISPs to assert available defenses) and alleged that any specific John Doe actually committed a tortious act in Florida.

Many state courts, including Texas, have procedures for filing suits against unnamed John Doe defendants for purposes of obtaining discovery to reveal the identities of the John Does.  Such suits have become prevalent in the Internet Age to discover the identities of anonymous posters of online content.  Once the suits are filed, subpoenas are often issued to ISPs, requesting that they reveal the identities, if known, or at least the IP addresses of those posting defamatory, infringing, or otherwise unlawful content on their sites.

While the Digital Millenium Copyright Act and Communications Decency Act provide substantial protections to ISPs, ISPs do not generally have a legal privilege to shield the identities of offending posters in response to a valid subpoena.  Some ISPs, such as Yahoo!, will traditionally notify posters targeted by a subpoena of the request and give them an opportunity to move to quash before releasing identifying information.  Others will simply comply with the subpoena.

While the recent rulings out of Florida are specific to Florida law, it is possible that other state courts could follow suit and place restrictions on the ability of Plaintiff’s to use John Doe lawsuits to obtain the identities of anonymous online actors.

MDY appealed the case to the Ninth Circuit Court of Appeals, which recently issued its own decision. The Ninth Circuit overturned the District Court’s finding of copyright infringement, but nevertheless held MDY liable for breach of the EULA on a different ground – violation of the Digital Millennium Copyright Act (DMCA).

The Ninth Circuit held that using Glider while playing World of Warcraft in violation of the EULA did not amount to copyright infringement. The Ninth Circuit categorized the EULA term that forbade the use of bots as a “covenant” (i.e. a promise not to do something), rather than a “condition” (i.e. a limit on the scope of the copyright license). And, while a violation of a covenant might be a breach of the EULA, such a breach does not trigger copyright infringement.

In upholding the DMCA verdict against MDY, the Ninth Circuit held that Section 1201(a)(1) & (2) of the DMCA created a right of “anti-circumvention” — the right to prevent circumvention of measures designed to control access to a copyrighted work. The most significant aspect of this holding is that no actual infringement of the copyrighted work needs to actually occur. The Ninth Circuit acknowledged that this new right created a split with the Court of Appeals for the Federal Circuit, which requires actual infringement before holding a defendant liable for a DMCA violation. It’s possible that this split may trigger a Supreme Court review of the issue.

The Ninth Circuit’s ruling appears to make it easier for copyright owners to attack products and software designed to circumvent access controls, encryption, or other digital rights management in video games and other digital works. Without the need to prove infringement of the work itself, courts (at least within the Ninth Circuit) will likely find it easier to remove or impound devices, software, or access keys designed to facilitate cheating, hacking, decryption, or pirating of video games or consoles. It is unclear whether or not a defendant would have any fair use defenses to a claim based on this new right of “anti-circumvention”.

Miller’s complaint accused Yeo of direct copyright infringement, claiming he improperly accessed the source code for Miller’s game Boomshine to create ChainRxn. Facebook had argued that Miller didn’t adequately plead direct infringement by Yeo, because Miller’s bare complaint that ChainRxn “looks and feels” identical to Boomshine is insufficient to allege that Yeo had copied the game source code.

The Judge disagreed with Facebook, noting that a plaintiff can rarely examine a defendant’s source code before the discovery stage of litigation, Therefore, it would be unreasonable for Miller to know with detail how Yeo may have copied the source code at the initial complaint stage.

According to the suit, when Miller asked Facebook and Yeo to remove the infringing game, Yeo responded by blocking Miller and all of his Facebook friends from playing ChainRxn.

Miller has filed a complaint in the Northern District of California, accusing the creator of a copycat game, known as ChainRxn, Yao Wei Yeo, and Facebook of copyright infringement, and improperly allowing the game to remain posted even after being notified of the alleged infringement.

In both Boomshine and ChainRxn, the game begins with a set of multicolored dots bouncing around a black background. The player’s only interaction with the game is a single click to create an initial white circle, which causes any of the dots that collide with it to expand into additional colored circles. The colored circles then collide with additional dots in a chain reaction. A screenshot from both games is shown after the jump.

According to the suit, Miller has been granted a copyright on his game by the U.S. Copyright Office. When considering a claim for copyright infringement, it’s important to remember that the “idea” for a game cannot be protected by copyright. Neither can the name of the game or the method of play. And nothing in copyright law prevents others from developing another game based on similar principles. Copyright protects only an author’s specific “expression” of the game. Therefore, only the non-functional game elements, like the selection of graphics and sounds, may be protectable under copyright.

According to the suit, Miller asked Facebook and Yao Wei Yeo to remove ChainRxn, but they refused to do so. “ChainRxn copies the look and feel of Boomshine by incorporating almost every visual element of the game,” the suit said. Miller claims Facebook is also liable with Yao Wei Yeo for infringement because it “induced and encouraged” infringement by refusing to remove the game.

In response to the suit, Facebook argues that it is merely a passive conduit for Yao Wei Yeo to publish his game. Facebook said it had no involvement in Yeo’s activity and should not be dragged into the dispute. Facebook took a similar stance when Hasbro initially tried to shut down Scrabulous, an early Facebook application that copied the board game Scrabble.

The Software Freedom Conservancy, the non-profit corporate home of the open-source Linux application BusyBox, and Erik Andersen, one of the program’s principal developers, recently filed suit against a number of technology manufacturers and retailers, including Samsung and Best Buy. The suit accuses the defendants of infringing the copyright for Busybox by using the program in consumer products such as DVD players and HDTVs in violation of the terms of its license (the GNU General Public License, version 2).

The complaint, filed the U.S. District Court for the Southern District of New York, claims that the defendants were advised that the terms of the GNU General Public License version 2 only allowed zero-cost use of the software as long as the licensee provided a means to distribute the source code to customers, which the defendants did not provide. Before launching the suit, the complaint claims the plaintiffs alerted the defendants to the alleged non-compliant use, but the defendants ignored or refused to respond to the notices.

In an interesting twist, another early principal developer of Busybox has stated that he is offering a “waiver” of his copyright interest to the affected companies “where appropriate.” He states that the lawsuit is being undertaken without his consent, even though he still holds a copyright interest in the version of BusyBox disputed in the lawsuit. It is unclear what effect, if any, this will have on the lawsuit.

The takeaway here is that companies, including those in the gaming world, should not ignore compliance notices related to open source software. The common misconception (that can lead to a lawsuit) is that open source software is “free.” The reality is most open-source software can be used without paying a license fee, but only if some basic procedures are put in place to remain in compliance with the applicable license. Should you fail to comply, your retailers will not be happy when they are named as co-defendants.

Prices for filing copyrights will be changing on August 1. The new prices will be $35 for filing an electronic application, $50 to file the scannable CO form, and the traditional paper filing will now be $65.

Remember, though, whenever you are filing the copyright application (electronic or otherwise), to be very careful about your deposit materials. I have seen many copyright infringement cases go awry because of mistakes made with the deposit materials … but I’ll save that for another post.

When filing a copyright registration for a book, it is generally pretty easy to decide when to register (when the book is finished) and what to register (the book). However, software (and games, in particular) is a much more fluid situation. When is a game truly ever finished? And, if we don’t know when the game is finished, what exactly do you decide to register with the Copyright Office?

More importantly…

…the Copyright Office requires that “each separately published version of a computer program that contains new, copyrightable authorship must be registered separately, with a new appliation and fee.” (Circular 61)

So, now the question becomes, how are defining a separately published version of your game? If you release a “beta” version to test multi-player, then send version 1.0 out to the retailers, then offer a downloadable patch that upgrades it to version 1.1, and then a small patch to version 1.1.1, how are you handling the protection for your code. Then, you issue a free expansion pack that adds a few levels, and, then six months later, you send out a paid expansion pack. (Don’t forget the different versions for each language). On top of the different versions, you may have different employees and contractors working on the different versions, so there may not be a common set of authors.

The moral of the story is, don’t assume that by submitting a copyright application that you are fully protecting your code.

Many people believe that “if Company A paid for Person B to develop The Thing, then Company A owns The Thing”… like all things lawyer, the answer is “maybe.” If Person B was an employee of Company A and it was part of Person’s B to develop The Thing, then The thing is a work made for hire.

There is a second concept for work made for hire…

…that is spelled out in the statute, but it requires many other extra hoops for The Thing to qualify as a work made for hire. However, as you can see, not every instance qualifies as a work made for hire. And, if The Thing does not qualify as a work made for hire, then Company A will have paid it, but won’t have any rights to it.

So, if you are Company A, you cannot afford to assume that everything is a work made for hire. Make sure that your form employee (and contractor) agreements have a full-blown assignment to the company. Make sure that the assignment is a present (as opposed to future) assignment… but I’ll blog on that another day.

What I did not see in any of the news reports, though, was whether an injunction was being issued. Normally, I would say it will be interesting to see what happens next, but I think I can already guess. I’m sure that there are already contenders to take The Pirate Bay’s place as a facilitators for BitTorrents.

The quest to slay the piracy dragon will surely continue.

As you may recall, the case went to a bench trial on the issue of damages, and the Court awarded $6.5 million to Blizzard back in January, along with a permanent injunction on the sale of Glider. After trial, Blizzard argued that under the DMCA, it was entitled to between $200 and $2,500 for each violation, so MDY should be liable for at least $24 million. MDY countered that the $6.5 million judgment should be decreased based on the “innocent violators” provision under the DMCA.

Well, last Wednesday, the District Court rejected both contentions, and upheld the initial $6.5 million in damages. We’re getting closer to seeing this matter come to a close, but we’ll keep everyone posted in the event that an appeal is filed.

For a recap of the case, please follow the jump.

The company MDY (which appears to be just one person, Michael Donnelly) makes a program called “Glider” for World of Warcraft players. Rather than spend hundreds of hours of playtime to level-up an avatar, some World of Warcraft players instead pay twenty-five dollars for Glider, which essentially plays the game on autopilot.

Blizzard Entertainment was apparently not happy with players running Glider, resulting in a suit in the Arizona District Court. Blizzard contended that the use of Glider alienates legitimate players who think Glider players are cheaters and also reduces Blizzard’s revenue by allowing Glider players to more quickly level-up their avatars and acquire rare assets. MDY responded that the Glider software actually enhances the player’s experience by removing the tedium, and encourages more casual gamers to purchase World of Warcraft without fear they would never be able to complete with more dedicated players.

The license language in the World of Warcraft End User License Agreement (“EULA”) prohibits the use of bot software running simultaneously with Blizzard’s software. Blizzard made a direct copyright infringement claim that relied heavily on an earlier Ninth Circuit holding that copyright infringement may be proved in software cases by showing an unauthorized reproduction of a copyrighted software program in a player’s RAM. Blizzard claimed that this license to copy its software into RAM is expressly conditioned on compliance with the contractual restriction prohibiting bot software. Blizzard argued that, because the EULA did not permit a RAM copy of the World of Warcraft software when Glider was also running on the same computer, Glider players were infringing Blizzard’s copyright in the World of Warcraft software by copying it without a license. Blizzard then could sue MDY on a theory of secondary liability for Glider players’ direct copyright infringement, since MDY induced those players to create the unlicensed RAM copies of the World of Warcraft software.

After considering the arguments, the Arizona District Court agreed with Blizzard. The Court found that because use of the World of Warcraft software in conjunction with Glider falls outside the scope of EULA, Glider players therefore infringe Blizzard’s copyright. The Court accordingly granted summary judgment in favor of Blizzard with respect to liability on its secondary infringement claims against the MDY. Following a bench trial on the issue of damages, the Court awarded a $6.5 million judgment to Blizzard back in January, along with a permanent injunction on the sale of Glider.

So, why do I bring that up?

I want to highlight a different facet of intellectual property protection. The name “Master Chief” resonates with consumers, as well as pictures of the iconic character, and both the name and photographs are available for intellectual property protection. In fact, if you search the Copyright Office web site and the Trademark Office web site, you’ll find filings for each by Microsoft.

Sometimes the focus on protection is on the guts of a game (e.g., the code, the trade secrets) while losing sight of protecting the intellectual property that faces your customers. Filing for copyright and trademark protection on elements of the game may be a far more valuable exercise than obtaining protection on the code itself. For example, protecting your characters can help prevent theft of your intellectual property and facilitate licensing arrangements.

Don’t get me wrong, though… obtaining protection for the code is also important and should not be overlooked, either.

And, what routinely happens is that the less actions that the seller has taken up to the point of the potential acquisition, the more downward price pressure that the buyer is able to exert.

And I know I’m not saying anything earthshattering, but the value of a video game company generally comes down to two things: (i) the intellectual property assets and (ii) the people. So, to all of those fledgling game developers out there, please consider getting your house in order sooner rather than later. Prevention is the best medicine here, folks. You do not want to be scrambling to try and get one of your former software developers (who left angry two years ago) to sign a document to make your buyer happy.

And, for all of the buyers out there, make sure you are asking the correct questions about the seller’s assets. Open source software is always a fun issue that is occasionally overlooked, but which could have significant ramifications if not addressed. As always, make sure that the level of due diligence is appropriate for the deal — sending a 10 page due diligence request out for a $1 million dollar deal is not necessarily the most cost-effective mechanism.