Social Media & Games Law Blog

A weekly wrap up of interesting news about virtual worlds, virtual goods and other social media.

Viximo's Game Service Reaches 100M Users

Facebook may dominate the social game market, but it isn't the only show in town. Viximo has made a good business out of providing games to dozens of smaller social networks. The company is announcing today that it reaches more than 100 million users.

OpenFeint Tries Group Buying for Mobile Games With Game Channel

Game Channel's headline feature is called "Fire Sale", an attempt to spin the Groupon model of advertising a deal and to attract the attention of a sizable group of people. Once enough people have joined the deal, the price drops to a set point and the purchases of the group go ahead.

Nexon Selects PlaySpan's Monetization Platform for Nexon Cash

Nexon America, the North American publishing arm of Nexon Corp., announced today a new partnership with PlaySpan, the global leader in monetization solutions for online games, virtual worlds, and social networks, and video games. Under the agreement, Nexon will leverage PlaySpan's Monetization-As-A-Service platform to expand purchasing capabilities to millions of gamers and provide comprehensive credit card processing and fraud risk management services to cover sales of "NX," the publisher's virtual currency.

Virtualizing Your Reality: 10 Questions With Mark Egan

In its May 2010 research note on x86 server virtualization infrastructure, Gartner opens with the assertion that "...the market has a number of viable choices." But its Magic Quadrant shows that VMware has stretched out its lead like Usain Bolt into the top-right corner of the top-right quadrant (combination of execution and vision), with the rest of the quadrant noticeably vacant.

Facebook Beats Yahoo and Google to Become the Fastest Company to Post $2 Billion in Revenue

Facebook's primary source of income is from advertisements and virtual currencies. According to Bloomberg, Facebook founded in 2004, will be the fastest company to reach the $2-billion mark compared to Google, founded in 1998, hit $1.5 billion in 2003 while Yahoo founded in 1994 posted $1.6 billion in revenues in 2003.

Social Networking Grows Unevenly Around the Globe

Use of social networking services has blown up globally, but some countries are more into it than others, according to a new Pew Global Attitudes study. Poland, Britain and South Korea rival the U.S. in usage, but Facebook and its ilk may have a Germany/Japan problem.

Electronic Arts Tries to Launch a Preemptive Strike on Social Network Gaming

Video game publisher Electronic Arts, which has been slumming in its battle against primary rival Activision on the console and personal computer fronts, has been tirelessly expanding into the next frontier of social networking games. With the purchase of Facebook game maker Playfish last November, the company has added a strong brand to its casual game portfolio, which complements its purchase of Chillingo, the U.K. publisher of the i

Onlive announced that it was awarded a patent that it alleges is a "fundamental cloud gaming patent." The patent, USP 7,849,491, is entitled "Apparatus and method for wireless video gaming" was filed in 2002 but just issued in December 2010 after an 8 year battle with the Patent Office. According to a company press release:

Cloud gaming is a breakthrough technology where video games run on remote servers, and users simply connect an Internet-connected device--be it a TV, PC/Mac®, iPad™, Android™ tablet, smartphone--and instantly are able to play the highest performance, new-release games with no discs, no downloads and no upgrades. OnLive's patented and patent-pending technology makes the games almost instantly responsive, providing a gaming experience comparable to the games being played locally, even though they may actually be running on servers 1000 miles away.

As often is the case with seemingly fundamental patents, there has been quite a bit of stir in the press.  Many non-patent attorneys have commented and opined on the patent which has fanned the fires. Not all of the commentary has been factually based.

A review of the file from the Patent Office reveals some interesting facts. The original patent had claims that focused mostly on a set-top box. For example, original claim 1 recited:

1. A set-top box comprising:
a slot with an interface that connects to a game card providing a platform to run a software video game, the game card outputting video game data through the interface; a unit to process the video game data for output to a display device; a wireless transceiver to receive the software video game via a wireless local area network (WLAN).

It also included a method claim as follows.

15. A method of operating a video game box comprising:
inserting a game card into a slot of the video game box;
downloading a software video game via a wireless transceiver;
running the software video game on the game card, video game data being output through an interface of the slot;
processing the video game data for output to a display device.

However, the claims that were granted by the Patent Office were different. For example, claim 1 of the issued patent recites:

1. A method of operating a video game box comprising: downloading a software video game to a storage device via a wireless transceiver, the software video game being compliant with a game platform standard; running the software video game on a game card coupled to the video game box via an interface, the game card including a processor, a memory and a graphics engine, the game card providing a game platform compliant with the game platform standard, high twitch-action video game data being output through the interface; processing the high twitch-action video game data for output to a display device; compressing the high twitch-action video game data with a latency of less than approximately 80 ms, but greater than about 5 ms; wirelessly transmitting the compressed high twitch-action video game data to a remote player via the wireless transceiver during interactive play of the software video game, the remote player being located a distance beyond a transmission distance of the wireless transceiver.

The patent includes other claims as well, which differ from those for which Onlive originally applied. In order to properly assess the scope of this (or any other) patent it is necessary to analyze the claims that were actually awarded. In many cases, awarded claims are not necessarily as broad as those a company originally pursued. Yet, commentators often overlook this, creating misconceptions about the scope of a given patent.

At least one of Onlive's competitors says it is not concerned about the patent. Dave Perry, CEO of Gaikai, reportedly says his company isn't worried about the fallout, because its service operates in a different way. Both services do game rendering on the server-side and then stream the images to the client, but Gaikai remains confident moving forward.

If you have questions about the legal scope of a patent, it is advisable to consult with a knowledgeable patent attorney. 

 

 

The Court of Appeals for the 9th Circuit ruled on the Blizzard v. MDY case, largely affirming the district court's finding that MDY's bot ("Glider") for playing World of Warcraft (WOW) violates the WOW Terms of Use and violates anti-circumvention provisions of the DMCA. However, the 9th Circuit found that the violation was breach of a contractual covenant not a breach of a condition of the license and applied a somewhat different analysis to the DMCA claims. The net result still largely favors Blizzard and a permanent injunction was affirmed.

We previously prepared an advisory on the District Court decision.

The Court found that the use of Glider violated the Terms of Use prohibition on bots. However, unlike the district court, the 9th Circuit ruled that this was a breach of a contractual covenant not a breach of a condition of the license. One significance of this is the different remedies available for breach of contract and copyright infringement.
 
The DMCA claims related to whether Glider violates DMCA sections 1201(a)(2) and (b)(1) by circumventing WOW's Warden, which is intended to detect bots. The Court ruled in Blizzard's favor with respect to "dynamic non-literal elements" of WOW.
 
In reaching its decision, the Court refused to follow a Federal Circuit decision (in the Chamberlain case) interpreting the DMCA. The 9th Circuit ruled that Section 1201 (a) creates a new anti-circumvention right distinct from copyright infringement while section (b) strengthens the traditional prohibition against copyright infringement.  In contrast, the Federal Circuit in Chamberlain found that the DMCA coverage is limited to a copyright owner's rights under Section 106 of the Copyright Act, and required a "nexus" to infringement. The 9th Circuit refused to adopt any requirement for an infringement nexus. The tension between these appeals courts may set up a show down in the Supreme Court.

The Court went on to find that MDY did violate Section 1202 (a)(2) of the DMCA with respect to the dynamic non-literal elements of WOW.  But the Court found that Glider does not violate DMCA Section 1201(a)(2) with respect to WOW's literal and individual non-literal elements, because Warden does not effectively control access to these WOW elements.

The Court also found that the tortious interference with contract claims were not preempted by the Copyright Act, but that factual issues prevented a proper summary judgment finding. As a result, it vacated the district court's summary judgment ruling on this issue and remanded the issue of personal liability for MDY's CEO.

Perhaps serendipitously, the decision was handed down just days after Blizzard's release of Cataclysm the third expansion of WOW. More than 3.3 million copies as of Cataclysm were sold in the first 24 hours of release, which according to Blizzard, makes it the fastest-selling PC game of all time.

Here is a copy of the 9th Circuit decision.


 

Brightkite has announced that it is rolling out a new business model focusing on group text and abandoning its check-in model. According to the Brightkite blog posting, its new  Android application can be your "default text messaging app, handling ALL your messaging from one app, saving you money with free texting while giving you many more capabilities than regular texting." It goes on to state that this will include Groups, Photos, Location sharing and more.

As for the stated reason behind this pivot, Brightkite said:

These features were the defining element to our company 2 and 3 years ago, but we no longer believe they are sufficiently unique or defining to be our focus, so we are dropping them.

The changes are expected to start taking place December 17. It is offering users an option to back up old posts and check-ins by Dec 31.

A weekly wrap up of interesting news about virtual worlds, virtual goods and other social media.

6 Reasons Why Social Games Are the Next Advertising Frontier

Ad spending on social gaming increased 60% since 2009, according to eMarketer. No doubt advertisers have noticed that 56 million Americans are playing social games and that the branded virtual goods market is booming. But more than just social gaming's growing popularity has gotten attention from advertisers. Social games also represent an environment that is largely conducive to advertising.

Singer Files $250-Million Lawsuite Over Video Game

A backup singer with the Cypress Hill rap group has hit the makers of the "Grand Theft Auto" video game series with a 250-million-dollar lawsuit. According to documents obtained by Courthouse News, Michael "Shagg" Washington claims a friend introduced him to the developers of "Grand Theft Auto" in 2003, who asked him about his life on the streets.

Renren, China's Social Network Giant Gears up for IPO

Renren, China's largest social networking site is gearing up for an initial public offering (IPO) in the United States in the first half of 2011, the Reuter reported. Oak Pacific Interactive, Renren's parent company had hired Credit Suisse and Deutsche bank to underwrite the IPO.

How to Price Your Virtual Currency

One of the key early decisions to game design or creating a virtual currency platform is designing the price and exchange rate of virtual currency. Unfortunately after it's been released, it's also one of the most difficult to change, because the change impacts the userbase and economy of the system as a whole. So if you're starting out, how do you decide how to price your virtual currency?

Winklevoss Twins Launce Another Lawsuit Against Facebook

Even though the first lawsuit ended with a $65 million settlement, the Winklevosses now claim that Zuckerberg lied to them about the value of Facebook and is guilty of securities fraud, demanding an unspecified amount of (extra) money.

Legal 'like': Ohio judges can friend via Facebook

The Ohio Supreme Court said Wednesday that judges on Facebook can be a "friend" to lawyers appearing before them but must be careful not to violate ethics rules. The opinion issued by the court's Board of Commissioners on Grievances and Discipline says that following its guidelines for social networking "will require a judge's constant vigil."

First Screenshot of Google's Social Network, Google +1, Leaks

Google's ultra-secret social project is slowly becoming less and less secret. Last week, a Quora posting revealed a new internal codename for the social initiative, as well as the affirmation that it's being tested. Yesterday, TechCrunch got its hands on a screenshot exposing a "share" button and also reaffirmed a possible new name, Google +1.

Viacom is appealing the decision of the New York Federal Court which granted Google's (YouTube) motion for summary judgment that it was protected against claims of copyright infringement for videos uploaded to YouTube by the Digital Millennium Copyright Act's safe harbor provisions. Viacom believes that Google is not entitled to the safe harbor shield due to Google's so-called "intentional exploitation" of thousands of Viacom's copyrighted works. Google believes that it is entitled to the safe harbor since it took down the copyrighted files when properly notified of their unauthorized postings. Interestingly, Viacom has apparently hired Ted Olson, of Bush v. Gore and the challenge to California's Proposition 8 fame, to represent it on appeal.

Motorola Mobility Inc. recently brought an action before the U.S. International Trade Commission ("ITC") against Microsoft Corp. relating to the importation of the Xbox 360 console.  At the center of the controversy is the potential infringement of five patents covering digital video coding and transmission.  The case is In re: Certain Gaming and Entertainment Consoles, Related Software and Components Thereof, case number 337-2770.

Motorola has requested that the ITC institute a Section 337 investigation with allegations that various Microsoft consoles (specifically the 4GB Xbox 360S and 250GB Xbox 360S) infringe U.S. Patent Numbers 5,319,712; 5,357,571; 6,069,896; 6,980,596; and 7,162,094.

Motorola's '712, '571 and '896 patents describe methods for protecting data streams and securing point-to-point communications in wireless communication and establishing connections between devices in a wireless peer-to-peer network.  The '596 and '094 patents describe frequency scanning paths for transform-based decoding of digital content as well as digital coding inventions that facilitate higher levels of compression of digital video content.

Motorola is seeking a permanent exclusion order to stop Microsoft from importing the allegedly infringing consoles, as well as an order barring their advertisement and warehousing.