Tag Archive for MMORPG

Virtual Worlds vs. NCSoft Patent Infringement Suit—Legal Theorycrafting

January 2, 2009 Litigation No comments

    On Christmas Eve 2008, Virtual Worlds filed a patent claim against NCSoft for infringing on patent no. 7,181,690. The claims included in the patent pertain to online 3D environments where "[a] plurality of users can interact in the three-dimensional, computer-generated graphical space where each user executes a client process to view a virtual world from the perspective of that user." In other words, the technology arguably applies to every MMO in existence. According to counsel for Virtual Worlds, the patent (granted in 2007 and filed in 2000) was continued from an earlier patent filed in 1996 (patent no. 6,219,045).

    This is an interesting case and it could create problems for MMO developers and publishers. The duration of a patent is 20 years from the date of filing, so provided that this is a "typical" case and no extensions apply, the patent is valid until 2020. If Virtual Worlds sees any success against NCSoft, there is little doubt that they will pursue other infringers, including Blizzard Activision's World of Warcraft, Linden Lab's Second Life, and others. Nothing in the current press suggests anyone has yet purchased a license from Virtual Worlds for this technology, and it seems as though this litigation may set the benchmark for price– provided the case survives preliminary motions.

    Virtual Worlds may try to avoid non-merit based arguments such as the doctrine of laches by relying on the fact that the patent wasn't granted until 2007. This is where things may get a bit tricky, because the 1996 patent upon which the 2000 patent is based was issued in 2001. This suggests that Virtual Worlds has had a valid patent in the relevant technology for almost eight years. The time is important here, because Virtual Worlds would have to rely at least in part on the '045 patent when arguing the validity of its patent. If the '045 patent is ignored, then the earliest Virtual Worlds can claim this technology is 2000. Under U.S. Patent Law, an invention cannot be patented if: "(a) the invention was known or used by others in this country, or patented or described in a printed publication in this or a foreign country, before the invention thereof by the applicant for patent," or "(b) the invention was patented or described in a printed publication in this or a foreign country or in public use or on sale in this country more than one year prior to the application for patent in the United States . . ." If the case goes to the merits, NCSoft may defend by asserting that the '690 patent is invalid because the patent failed to meet the novelty standard under the Patent law. NCSoft has been in business and making MMOs since 1997 and Everquest came into existence in 1999, which means that prior arts using the technology were already in existence and likely generally known and described at the time the Virtual Worlds '690 patent was filed. This isn't a simple issue and the Court could rule to validate the '690 patent, but relying solely on the '690 patent certainly makes it harder for Virtual Worlds to meet the novelty and non-obvious standards.

    If Virtual Worlds relies on the 2001 patent by introducing it as evidence in support of a valid patent claim, however, a new set of problems arise. While the statute of limitations argument can be avoided because, as is the case with most infringement cases, the infringement is ongoing, plaintiffs still have an obligation to file within a reasonable time period. The doctrine of laches states, in relevant part:

    "laches may be imputed to a plaintiff who, with knowledge of infringement, stands by for many years and permits the alleged infringer to build up, at great expense, a large business, which will be worthless if plaintiff's complaint shall succeed, and who by inaction permits many thousands of other persons to become liable as constructive infringers from the fact of the use of an infringing device. Of course, laches does not depend on mere lapse of time. It is probably true that mere failure to sue for any but the latest act of infringement, which took place, perhaps, only the day before the suit was filed, would not of itself bar an action, on the ground either of laches or because of any statute of limitations, provided the action be brought during the life of the patent."
Temco Mfg. Co. v. National Electric Ticket Register Co., 33 F.2d 777 (D. Mo. 1928)

     Virtual Worlds has had ample time to bring a lawsuit, provided they felt that they could safely rely on the '045 patent. If you're using a prior patent to argue that your new patent is valid and is only a continuation of the old patent, there is much to suggest that you have a lot of faith in that old patent. Why wait, except to allow companies like NCSoft and Blizzard to "build up, at great expense, a large business, which will be worthless if plaintiff's complaint shall succeed…"?

    From an academic standpoint it would be interesting to see where this could go if it proceeds through discovery and litigation. The expert testimony and legal breakdown of the Virtual Worlds patent would be fascinating, but it could also prove damaging to developers of future technology in light of the complexity of the issue. Practically speaking, if it survives preliminary motions there is little chance that it will escape settlement, thus setting Virtual Worlds up for a substantial payday from not only NCSoft, but from dozens of other major publishers in the MMO market. For another perspective, check out the Massively analysis. And for a quick laugh, head over to Penny Arcade.

Rolling the Dice: Online Gambling Law and Policy

October 16, 2008 Games 2 comments

    Online gambling is a fairly lucrative business—it was pulling down $5.9 billion in 2005, and had an estimated 23 million playing around the same time. Many developers may find this particular area of game development promising. However, there are a lot of legal issues that arise when contemplating this particular game type. Many people are at least marginally aware of the risks, but there is also a lot of ignorance and a general lack of understanding about how the law functions with regard to gaming laws generally. For instance, many know that online gambling in the U.S. is a no-no. Yet many do not know the extent to which the U.S. can claim jurisdiction over off-shore companies who operate gambling sites with U.S. subscribers. This entry will try to cover some of the general theories and policies surrounding online gambling games.

    Gambling laws can be broken down into two categories: U.S. and U.S.-like laws, and the rest of the world. This isn’t as clear cut as it sounds—U.S. gambling laws differ from state to state. However, with regard to federal law’s treatment of online gambling, for purposes of this article, this is as straightforward as it gets.

    A caveat on what I mean by online gambling—generally speaking, this means any game of chance or casino game that requires a monetary investment in exchange for a chance at a prize or sum of money. “Bets and wagers” typically means betting on the outcome of any competition or game of chance (although the Wire Act has a limited definition). Mini-games within your game and gambling in MMORPGs (something I might cover at a later date) are not within the scope of this discussion. Furthermore, competitions (i.e. eSports) are not of any real concern here, unless you’re betting on them or operating a site or game that permits betting on the outcome of those competitions.

    U.S. Gambling Laws

    As stated above, state laws vary. Some states license particular operators and collect taxes based on revenue from gambling enterprises (i.e., Nevada), while others only allow for state lotteries. Some define gambling vaguely (i.e., “all games of chance”), while others specify game types that constitute illegal gambling (craps, poker, roulette, game or race betting, etc.). This does have some effect on federal law. One of the reasons online gambling is so heavily regulated now is at least in part a result of licensed brick and mortar Casino operators lobbying Congress to regulate the online industry.

    The current state of federal law is interesting to say the least. Although each state can control gambling within its state lines, Federal Law prohibits use of “wire communication facilities” (i.e., internet, phone, etc.) to “engage in the business” of unlawful betting and wagering. 18 U.S.C. 1084. The use of the Wire Act (Title 18) to prohibit online gambling isn’t always reliable—for instance, 1084 only concerns “sporting events and contests”, so it wouldn’t penalize the operator of a poker site. Under federal law, any business or enterprise engaged in unlawful gambling can be subject to a fine or imprisonment. There not much under federal law that directly penalizes individuals who gamble online, and the Department of Justice seems disinclined to support or enforce any such law. Those laws are typically governed by the states (for instance, both Hawaii and Utah have outright bans on online gambling).

    Because the Wire Act isn’t always reliable and could rarely be used to shut down operators, the government implemented another Act that specifically concerns online gambling. The Unlawful Internet Gambling Enforcement Act of 2006 (UIEGA) makes it illegal for even licensed operators to accept “restricted” transactions. It also forces banks and financial institutions to implement policies and regulations that identify and block “restricted” transactions between account holders and online gambling operators. UIEGA ss. 5364. Restricted transactions include money transfers to unlawful online gambling operators, as well as transactions between lawful, licensed online operators and individuals who can’t legally gamble within their state or territory. The law is fairly ambiguous, potentially full of holes, and pretty quirky in its application. For instance, most state laws are silent or uncertain concerning online gambling—therefore it can’t always be determined whether online gambling is “unlawful” under state law. As stated before, the Wire Act only addresses betting and wagering on sporting events and competitions, so the types of gambling typically found online may still technically be “lawful” under Federal Law.

    It sounds a bit like I’m contradicting myself, but that’s actually more or less how the law is drafted. Keep in mind that gambling in the U.S. is always conditioned on licensure—almost any operator of a gambling enterprise (virtual or brick and mortar) requires a license from the state where it is based before it can accept bets and wagers.

    In short, you can’t feasibly operate an online gambling site in the U.S. until a state starts granting licenses to online operators. This hasn’t happened yet. Even then, according to the UIEGA, the site or game would probably have to be wholly intrastate, blocking interstate users.

    The Rest of the World

    Many countries have laws similar to the U.S.; that is, they have laws that ban or otherwise prohibit online gambling. Other nations and regions, such as the Isle of Man, license online gambling sites. Still others, such as the Caribbean, have laws so friendly that they are breeding grounds for offshore online operators. So what happens when an online operator that can legally operate within its territory caters or otherwise appeals to U.S. subscribers?

    In this way, the U.S. has managed to have an effect on international gambling. By forcing financial institutions to regulate online gambling transactions, the law resolves many of the jurisdictional issues we’ll discuss below. However, new methods have arose to work around those issues—a user can transfer money from their bank account or credit card into an offshore eWallet, which can then finance gambling. While the law has shut down plenty of operators who relied primarily on transactions through major financial institutions, other operators have implemented or rely on financial transfer methods that are entirely legal under the loopholes of the UIEGA.

    U.S. Jurisdiction and Enforcement of Judgments

    To be liable under U.S. law, a U.S. Court has to be able to exercise personal jurisdiction over the defendant operator. This can happen through the use of one of two analyses—the “effect” test establishes personal jurisdiction by asserting that the operator’s activity within the U.S. has a substantial effect within the U.S. The Zippo test examines the extent of the interactivity between U.S. users and the operator.

    In other words, getting personal jurisdiction isn’t terribly difficult. The problem is enforcing a judgment against the offshore or foreign operator.

    The U.S. can’t just go into a foreign country and seize property or individuals (at least in matters concerning the Judiciary). To enforce a judgment, the foreign country has to acknowledge the U.S. Court’s jurisdiction. Furthermore, it has to accept the ruling. Sometimes this happens through Comity—countries will acknowledge U.S. jurisdiction and judgments so that the same treatment will be extended to them by the U.S. Sometimes this happens through treaties. Sometimes this doesn’t happen at all. In those cases, unless the operator has property in the U.S., there is typically nothing the Court can do against that operator.

    There is very little that is certain in this area of the law—Courts and lawmakers must constantly balance the laws of those countries and states that permit or otherwise license gambling against the moral and social pitfalls that gambling allegedly creates. As a result, the legal landscape on this issue is constantly changing. As with any uncertain terrain, it is important to tread carefully and look ahead.

The Warhammer NDA

March 21, 2008 Game Development One comment

One thing I didn’t really discuss in my last entry is using NDAs in a Beta test setting. This is because I consider this tactic counter-intuitive and generally just a bad idea.

Let me explain.

When a game primes for release it enters Beta testing. Beta testing is usually a stress test. It’s a great way to get a broader range of player feedback. You can also work out bugs and get an idea of the game’s probable success in the marketplace. Warhammer: Age of Reckoning Online is currently in Beta testing. As with many Beta tests, the testing pool is selective—individuals and/or guilds register with the website and hope to get a registration key in their e-mail boxes in the following months. Once you are accepted as a Beta tester, you’re required to accept the terms of a NDA. You are not allowed to discuss the game with third parties. If you do talk about the game, there’s a chance your Beta account will be subject to a permanent ban.

This isn’t entirely unreasonable. It just isn’t very smart, and it’s about as effective as a bouquet of fine smelling lilies in the hands of a Choppa.

Warhammer has been in Beta for a fairly long time. This is probably for the best. The leaks on the game don’t exactly indicate glowing reviews. The fact that there are leaks in the first place is the primary indicator of why NDAs in a Beta test are ineffective. The only people talking about the game are doing so anonymously and are therefore at liberty to trash-talk it endlessly, or are people who don’t like the game enough to want to keep their beta accounts. People who actually like the game and who probably would defend it are unable to do so because they don’t want to lose their Beta account. The only "press" WAR is getting is bad press. While this hopefully means that the development team is working REALLY hard to improve what could very well be a decent game, the only impression the outsiders are getting is a bad one.

Beta testing is an absolutely excellent opportunity for MMOs to market their product prior to going live. It’s a way of getting people hooked before you start charging them. If MMOs were heroin, Beta Testing would be the free sample. It’s a way of figuring out what you need to fix, what your community wants, and rounding out the core values of the game in a way that is fun and engaging. It’s also a great way to get brand loyalty, because Beta testing is typically when developers are able to interact with a smaller group of players via forums. Those players would ordinarily be the best marketing tool available—if they weren’t subject to an NDA.

Let’s assume, for a moment, that the trash-talkers are correct. Maybe WAR really is broken at this point. WAR already put a halt to one Beta test because they admitted that the game wasn’t much fun and they wanted to take it in another direction. The game is already suffering severe backlash from that, and many of the Beta testers left the game because it just wasn’t enjoyable. Most will not go back to it and will continue to trash talk the game freely.

The new Beta testers are still covered by the NDA and therefore can’t say one way or another whether the game’s gone in a better direction. This puts WAR in a very difficult situation—the number of critics is increasing, the press is still bad, and they’re trying to recover from a major snafu. Whether the NDA’s long term effect will be positive has yet to be seen. As far as I can tell, unless the only press they anticipate is bad press from the player base, keeping the NDA in place looks a great deal like self-inflicted sabotage.

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