Tag Archive for patent

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.

Clearance and Chain of Title

August 13, 2008 Intellectual Property No comments

I've touched on several Intellectual Property (IP) issues in previous posts, but it's difficult to translate intellectual property into a meaningful context until you're forced to look at your own and realize why you need things in writing. This is frequently necessary in the games industry—agreements between developers and publishers, publishers and consoles, and publishers and distributors typically contain chain of title clauses and warranties. As part of complete delivery, the publisher or developer may be required to submit a chain of title report (complete with documentation) establishing ownership or valid license over all of the intellectual property in a game.

What is chain of title? It's a legal term of art used to describe the process of determining the origin and current ownership of property. Particularly, the term is used to describe whether the current alleged "rights holder" actually has a right to transfer the IP. Each link in the ownership chain must be clearly established. You can't transfer rights you don't own, so unless there's evidence that you received those rights by some assignment, license, or transfer, there is nothing to show that the transfer is valid.

To understand chain of title, you need to understand a concept that is very basic and yet sometimes easily forgotten—the only person who can give you the right to use a work is the person who owns the rights to that particular use of the work. This includes exclusive and non-exclusive use. Any use of a work without proper transfer or permission constitutes infringement, and exposes you and everyone else who distributes, reproduces, performs or displays the work to liability. This includes publishers, distributors, marketers, developers, and even the television stations that run advertisements for your product. Anyone who may be subject to liability for potential infringement may demand some assurance that the chain of title is "clear" or "unclouded", or otherwise without dispute.

In some cases, this is dealt with by indemnity. The person claiming they own the right assumes liability on behalf of the other party if the other party is sued for infringement. In some cases this is adequate—a publisher may financially be in a better position to provide indemnity to a third party marketing partner. In cases where indemnification is fairly useless (i.e., where infringement actions can create liability for millions of dollars and the developer is only barely solvent—bearing in mind that in most cases, a plaintiff can recover from any and all defendants named in a suit), the publisher or distributor may require delivery of chain of title before delivery is complete.

Below I'll cover some of the rights in a game that can and should be cleared, how they are cleared, and the documentation you should acquire to show proper clearance. Some general considerations to bear in mind:

Getting Clearance: Chain of title requires that each link in the chain of ownership be accounted for. This means that each transfer leading up to the transfer to you should be clearly determined. Furthermore, it's important to note ancillary agreements that are exclusive can create serious problems for you—here's an example. Let's say the original copyright owner of a song grants you a non-exclusive license to use that song in your game. Later, that same copyright owner (who still retains the rights, bear in mind—a license is not a transfer/assignment/change of ownership to the rights) grants an exclusive license to another game developer for use of the song. This clouds the title to your license and can create problems for you if the now exclusive license holder discovers that you're also using the song in your game. So clearance can get tedious, which is why most major companies have legal departments with people dedicated to obtaining clearance.

Documentation: You need to have everything in writing. Oral agreements are worth the paper they're written on when you're trying to show chain of title. No one and I mean no one will accept your word that someone gave you oral permission to use a work. Get it in writing. If you're getting your rights from someone other than the original owner of the intellectual property, you will also need documentation evidencing how that party obtained rights to the work, and so on and so forth as far back as necessary until you reach the owner. That's the chain in chain of title.

Note: This list in not exhaustive. At the end of the day, proper chain of title is determined by the person demanding proof of chain of title. If you do not have one, you absolutely WILL need an attorney or clearance specialist to create your proof of chain of title.

Content

How to Get Clearance

Documentation

Code (source and binary)

The owner of the code is either the company who employed the programmers/code writers, or the writers/programmers themselves. The company owns the code if the programmers/writers are employees or independent contractors subject to a work for hire clause. If you're coming up with the code yourself, you need to make sure you register your copyrights to the code. If you're licensing the code from someone else, or if you're using third parties, make sure there's an assignment, transfer, or license permitting you to use and distribute the code. Some publishers/distributors may require proprietary ownership/exclusive rights to use of the code.

Assignment/transfer/license of copyright to the code (literary work). The transfer/license should include the right to distribute, reproduce, and create derivative works of the code.

Processes/Engine

The owner of the rights to the processes/engine used in a game is the engine developer (i.e., Unreal) or, if the engine is developed in-house, the game developer. If you're licensing the engine directly from the engine developer, you can usually obtain a standardized license through the original owner.

Assignment/transfer/license of the copyright
in the code used for the engine, and license for the use of the patented processes in and to the engine.

Artwork

The owner of the rights to the artwork is either the company who employed the artists/designers or the artists/designers themselves. If the artists/designers are employees or independent contractors subject to a work for hire agreement, the company owns the rights. See also Code

Assignment/transfer/license of copyright to the code (audiovisual and/or pictorial, graphical works). The transfer/license should include the right to distribute, reproduce, and create derivative works of, and display the artwork.

Choreography

This isn't something that usually comes to mind, but choreography can be a big part of a game's creation. Martial arts games and even games that have specific dances (see WoW) all require rights to use the movements and choreographed moves in the game. The choreographer, or person who created with the particular series of movements, is the original owner of the rights to the choreographed work. Note: The choreographer isn't always the person who first used the work. Just because Britney Spears was the first to use a particular choreographed piece doesn't mean that she owns the rights to the choreography.

Assignment/transfer/license of copyright to the choreography (choreographic work). The transfer/license should include the right to distribute, reproduce, create derivative works of, display, and perform the choreography.

Script

Modern games have scripts. This includes any dialog, camera positioning, and story that is documented in the original script, storyline, or treatment of the game. The person who wrote the script, storyline or treatment owns the rights, unless they created it subject to a work for hire or employment agreement. The rights to a script/story may have also been purchased by a company or buyer.

Assignment/transfer/license of copyright to the story/script (literary work). The transfer/license should include the right to distribute, reproduce, and create derivative works of the script/story.

Music

You need two kinds of rights for music: synchronization and master use. Synchronization (Sync licensing) deals with the musical composition. The right to the musical composition is typically held by the publisher, and sometimes a percentage of the right is retained by the original songwriter. You can check with the particular performing rights organization (ASCAP, BMI) to determine ownership for a sync license. You also need the right to use the specific sound recording. This is called the Master Use license. You get this from the record label that recorded and released the music.

Assignment/transfer/license of copyright to the musical composition. The transfer/license should include the right to distribute, reproduce, create derivative works of, and publically perform the musical composition. Assignment/transfer/license of copyright to the sound recording. The transfer/license should include the right to distribute, reproduce, create derivative works of, publically perform, and digitally transmit the sound recording. Note that music licenses may contain durations, so make sure those durations don't conflict with your other agreements.

Trademarks

Any time you use the name of a product or service in a game, you need to make sure that you have the right to use that trademark from the trademark owner—namely, the company that uses the mark. If you have a coca-cola can in your game, you should probably make sure you have permission to use the trademark displayed on the can. If you have a storefront in your game, you better make sure you have permission from the store's proprietor to use their name. Some companies are VERY sensitive about having their trademarks associated with the mature games industry. Tread carefully here. If possible, be creative. Come up with fake names, but make SURE they are actually fake.

License of the trademark or service mark of a product or company. The license should include the right to use and the context of the use.

Name and Likeness

If you use the name and likeness of any famous or reasonably known public figure, you should obtain permission or license to use that person's name and/or likeness in the work. This includes any actors, regardless of current fame or status, who contribute voice work or modeling for your game.

License to use the name and likeness in the context of the game, and in any marketing, product, or derivative work of the game. This can get fairly specific, depending on the talent. Generally a catch-all "use of name and likeness for any purpose in connection with Game in any medium now known or hereafter devised," is desirable.

Clips

A "clip" is any portion of an audiovisual/video/musical work of limited duration that you may want to use in your game product. This can range anywhere from brief news broadcasts to movie clips to short snippets of audio (this list isn't exhaustive, obviously). The owner is typically the rights holder to the entire work. Particularly in film/video/news broadcasts, you'll want to make sure that the rights holder also has the name and likeness rights for anyone in the clip, as well as any other rights (musical, artwork, etc.) contained in the clip.

A clip license containing a warranty that the licensor has the right to license all IP/name and likeness in connection with the clip is usually sufficient.

The Basics of Intellectual Property

March 21, 2008 Intellectual Property No comments

    Intellectual property is intangible. It is not fungible. Intellectual property law is complex, varied, and often overwhelming. However, it is absolutely necessary that developers, publishers, and others who work with game properties understand their legal rights with relation to that property.

Basics of Intellectual Property

Intellectual property law concerns copyright, trademark, and patent law. It also addresses trade secrets, trade dress, name & likeness and right of publicity. Some state laws also protect ideas. Game developers and publishers must be aware of all of the rights associated with a game product. This isn’t limited to the code, software, and artwork contained in the game itself. This includes any storyline or script used, any film or creative property upon which the game is based, any music, any actors or models used in the creation of characters—every single aspect of a game touches on intellectual property issues. Over the weeks I’ll go into specifics about licensing, but for now we’ll just cover the basics.

***One thing to ALWAYS keep in mind. It is ALWAYS smarter to create your own work than use someone else’s. Even if your use of another person’s work toes the line of fair use, LEGAL FEES ARE EXPENSIVE, and having to pay the costs of defending yourself in an infringement action will almost always be greater than just coming up with something on your own.***

Copyright

Your copyright attaches the moment to put your work in a fixed, tangible medium. This includes but is obviously not limited to saving script to your hard drive, printing out your design document, or burning 3D character models to a CD. According to 17 U.S.C. §102, the categories protected by copyright include:

"(1) Literary Works

(2) musical works, including any accompanying words;

(3) dramatic works, including any accompanying music;

(4) pantomimes and choreographic works;

(5) pictorial, graphic, and sculptural works;

(6) motion picture and other audiovisual works;

(7) sound recordings; and

(8) architectural works."

Copyright protection does not extend to ideas, procedures, processes, systems, methods of operation, concepts, principles, or discoveries. In other words, it doesn’t protect inventions or "useful" works. Inventions and useful works are discussed in the "patent law" section, below. 

Software has been a tricky area of copyright for decades. It is undisputed that the literal elements of a computer program (i.e. the script/code, written in computer language) are protected– that is to say, all courts who have ruled on the issue (i.e the 3rd and 9th Circuits) have agreed that writing code in computer language constitutes a literary work. However, the non-literal elements are a bit more problematic—the structure, sequence, and organization of computer programs may or may not be protected by copyright. It is almost certain that some non-literal aspects of the program will not be protected because of their generality—they will possibly be categorized as abstract ideas and not actual expression.  As technology advances, we’re getting closer to a consensus, but new technology also means new intellectual property issues and disputes are popping up and may vary from jurisdiction to jurisdiction. 

As for graphical displays, images, game models, quicktime events, and the like, they may be protected as distinct graphical, audio, or audiovisual works separate from the underlying literal work (the code). see Stern Electronics, Inc. v. Kaufman, 669 F.2d 852 (2d. Cir. 1982). 

A copyright gives you an exclusive bundle of rights. Under US law, those rights are freely alienable, which means you can sell or license those rights to another person or company. There are 5 enumerated rights, each or any of which are severable. In other words, you can sell a narrowly tailored aspect of one right (for instance, exclusive right to distribute Game X in Z territory) without giving up any of your other rights, or your remainder in the right you sold. The rights include:

1) Distribution;

2) Reproduce (copy);

3) creation of derivative works;

4) publicly display;

5) publicly perform.

Giving someone an exclusive license or assignment of a right (for instance, the exclusive right to publicly display a work) will also prohibit you from displaying that work, so it’s important to pay attention to what rights you are licensing or assigning. A non-exclusive license gives someone permission to use your work in accordance with the terms of the license, but you retain the rights to the work and you have the ability to license that work to other buyers. For example, if you assign all of your rights your work to a publisher, you can’t turn around and distribute the work on your own without the publisher’s permission. However, if you grant a fully non-exclusive license to a distributor, not only can you turn around and distribute that work on your own, but you can license the same rights to other distributors.

Your copyright triggers once you publish your work. Prior to publication, that work is covered under your state’s IP laws. Therefore, registration is not required once you’ve published the work. However, registration IS required if you plan on suing for infringement, and it’s generally advisable if you ever plan on selling, licensing, or assigning your rights, as smart companies and business people will want those transfer/sales documents recorded with the Copyright Office for chain of title purposes. Copyright registrations are currently $45 a pop, so it’s worth getting registered. If registration occurs within three years from first publication, there is a presumption of copyright validity. 

Finally, it’s important to note that the Copyright Act provides a safe harbor for reverse engineering. To promote freedom in the market and interoperability, competitors are able to reverse engineer software and circumvent copyright protection software and systems (DRM) without running afoul of the Copyright Act. 

There are also matters of digital rights (under the DMCA) and the First Sale Doctrine, not to mention fair use, but for now, those are the basic principles of a copyright.

Trademark

Federal Trademark protection is granted when a brand name or logo is first used in interstate commerce. It is covered under the Lanham Act. Brand names and logos used in intrastate commerce (for instance, a law firm solely doing business in the state of California) are protected under state trademark laws. So what is a trademark? It is a brand name, identifying mark, name or logo that identifies the origin of goods in commerce. A service mark serves the same function for the sale of services in commerce. Trademarks are fairly straightforward. They must be unique, and prior to registering your trademark or even settling on a trademark, you should first make sure that you’re not infringing on someone else’s trademark. A trademark is infringing if the conflicting marks are so similar as to create a likelihood of confusion in the marketplace. While the laws concerning unfair competition and trademark infringement is rich, the basics are just that—very basic. Infringement of a trademark typically results in equitable relief in the form of an injunction. An injunction prohibits the infringer from continued use of the mark in commerce. For basic purposes, it’s just important to make sure that no one else is using your mark. Many law firms and companies will conduct trademark searches for you for a fee. Google is also an option. For federal trademark searches, check out the USPTO.

 

Patents

Software is unique in that can, to a certain extent, be protected by both patent and copyright law. There has always been some dispute as to whether or not this should be the case, but the fact remains that computer processes may be protected as a utility patent, while the underlying code can be protected by Copyright. Patents are unique from Copyright and Trademark in that they give the patent holder the right to exclude others making, using, selling, or offering to sell the patented work for a certain period of time. There are three kinds of patents: utility patents, design patents, and plant patents.

Utility Patents: Utility patents include any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof. To qualify for a utility patent, the work must be novel (new), non-obvious, and useful. A utility patent’s duration is 20 years from the date the patent application was filed. The term does not begin, however, until the patent is issued. Therefore, if a patent is issued two years after application, the duration of the patent is 18 years. The application process can take that long, and a complex patent application is next to impossible to complete without a patent attorney. I’ll go more into utility patents in later entries, when discussing new technology.

Design Patents: Protects ornamental designs of articles of manufacture. The duration of a design patent begins at issue and continues for 14 years.

Plant Patents: Protects plants that are discovered or invented and can be asexually reproduced. I seriously doubt this will have any application on the future of game development, but I’ve certainly been wrong before.

Right of Publicity/Name and Likeness

Privacy rights aren’t spelled out in the Constitution, contrary to popular belief. They are "penumbral rights", in other words a mish-mash of interpretations taken from Articles and Amendments of the Constitution, and plenty of Supreme Court Justices treat them with the utmost caution. The Right of Publicity and Name & Likeness rights are the bastard children of privacy rights and intellectual property rights. They usually come up in tort claims either at common law or under a state statute. The right of publicity laws in California are spelled out in §3344 of the California Civil Code, and protect an individual’s "name, voice, signature, photograph or likeness." In other words, you can’t use a person’s name, voice, signature, photograph, or likeness without that individual’s permission. A right of publicity arises when an (typically famous) individual’s likeness is used in association with a product or service in commerce without that person’s authority. Damages for the improper use are typically determined by the profits earned as a result of associating the individual with the product or service. Name & Likeness damages are a bit trickier, particularly if the individual in question isn’t famous or does not contribute to the profitability of the product or service. Typically damages will be equitable—in other words, the injured party can try to get an injunction to prohibit continued use or distribution of the product or service while the name and likeness are still attached to the product or service.

 

That’s IP in a nutshell. Trade secrets were discussed in an earlier entry, and for the sake of software development it’s worth reading. Otherwise, these issues will be addressed more specifically in later entries.