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Davis LLP Web Logs or "Blogs" are intended to provide general comments on developments in the law. They are not intended to be a comprehensive review nor are they intended to provide legal advice. Readers should not act on information in the blogs without seeking specific advice on the particular matter. Please contact a lawyer listed on the blog pages for additional details, or to discuss how blog information is relevant to a specific situation.

Video Game Law Blog

» October, 2006

GRANDMOTHER SCORES HIT IN GTA LAWSUIT

You may recall that some time ago, shortly after the Hot Coffee affair broke open, a NY grandmother sued Rockstar Games and Take Two for false, misleading and deceptive practices relating to the sale of GTA San Andreas under the M rating (see our initial post here ).

It seems that first blood in this lawsuit has gone to the plaintiff "? a New York judge recently denied Rockstar's and Take Two's attempt to limit the number of people who can join the class action lawsuit. The full extent of the class action suit remains to be determined.

Coverage at http://shorl.com/dymikilotuva (TechNewsWorld)

JACK THOMPSON VS THE BULLY - PART II - JUSTICE FRIEDMAN STEPS DOWN

The presiding judge in the case, Ronald M. Friedman, has recused himself and filed a complaint with the Florida bar against Thompson. Undaunted, Thompson sent an open letter to the Florida bar arguing First Amendment rights and stating that 'if you take Judge Friedman's bait, I shall reel you in."?  

For the time being Thompson seems to have avoided jail time, but I wouldn't hold my breath if I were you. The self proclaimed 'jerk"? isn't likely to back down from a fight any time soon.

Coverage at 

http://shorl.com/daridraheraste (Destructoid)

JACK THOMPSON VS THE BULLY

For weeks now, the attempt made by Jack Thompson to block the sale of the controversial 'Bully"? video game in Florida has been a hotbed of discussion and debate amongst video-gamers and lawyers alike. Jack Thompson, a Florida-based lawyer, named Wal-Mart, Gamestop and Take-Two Interactive as defendants in a suit in which he sought to have a Florida court issue an injunction estopping the release on October 17th, 2006 of the Bully video game. The judge refused to block the sale of the game, but it hasn't stopped there Thompson now faces contempt of court charges filed by Blank Rome, the Philadelphia law firm representing Take-Two Interactive. 

His reaction? 'You want to play hardball"?? You want to try to throw me in jail? You have no idea what you are unleashing in doing this. You're at the brink"?"?

There is sure to be more to come"?

Coverage at 

http://www.shorl.com/jabribrilidrapy (Gamespot)

http://www.shorl.com/bapifrastitymi (Kotaku)

http://www.shorl.com/fajafupytreno (1up)

SGI SUES ATI OVER GRAPHICS CHIP

Silicon Graphics Inc., newly escaped from Chapter 11 bankruptcy protection, has launched a patent infringement action against chip-maker ATI Technologies. SGI claims that ATI's Radeon graphics chips infringe one if SGI's US patents (patent no. 6,650,327, aptly titled 'Display system having floating point rasterization and floating point framebuffering"?) relating to enhanced graphics processing. SGI has licensed its patent to several of ATI's competitors.

The complaint seeks an injunction and unspecified damages.

SGI Press Release  http://shorl.com/boneradrubopu

Coverage at http://shorl.com/bapipotovofri

Be Prepared...to Pay Your Royalties

Finally, the Boy Scouts of Los Angeles catch up with the trials and tribulations facing your modern LA Boy Scout today!  Now, in addition to learning how to tie knots, survive in the woods overnight with nothing but a pen-knife, and other feats of 19th century survival not seen in LA since the dawn of the freeway, Boy Scouts can earn an activity patch called "Respect Copyright." To earn the patch, Boy Scouts learn all about the evils of pirating movies, games and music, and the basics of copyright law.  They learn how to identify pirated content (as if the grainy quality of some of those movies aren't a dead giveaway), and about the ways in which copyrighted works are stolen.  There is a list of activities which a Scout can choose to complete to earn the Respect Copyright Patch, which include creating their own public service announcements about illegal downloading, or touring a movie studio to personally meet the everyday joe whose job is on the line as a result of copyright infringement.  The Respect Copyright Patch curriculum has been developed by the Motion Picture Association of America.  Next up for the LA Boy Scouts the Barista patch, in which the boys intern at Starbucks to learn the difference between a half-sweet no water nonfat vanilla soy latte and a double-tall extra hot sugar free caramel macchiato, and the Paparazzi patch, in which the Scouts must chase Lindsay Lohan out of the Ivy and down Melrose on scooters, while carrying bulky camera equipment.  Be prepared!

More on this at  http://shorl.com/hobatunonesta

Details Provided Of WWE's Lawsuit Against THQ

We reported on October 19 that World Wrestling Entertainment Inc. ('WWE"?) has once again sued video game publisher THQ. Now, details of WWE's claim are available.

In essence, WWE seeks to terminate its long-term video game licensing contract on the basis that, for the last five years, THQ has been illegally sublicensing out rights it doesn't have. More specifically, WWE claims that the license agreement in question was not with THQ at all, but rather with THQ-Jakks Pacific, a separate joint venture half-owned by THQ and half by WWE's toy license-holder, Jakks Pacific.

WWE claims that THQ, without authorization, sub-licensed rights to SmackDown! franchise developer Yuke's, the Asian distributor of WWE games, and that THQ collected royalties from Yuke's that belonged to WWE.

Coverage at http://shorl.com/gypukugrokojo (Gamespot)

 

Publishers Of Dance Dance Revolution Settle Settle With Roxor

Konami, publisher of Dance Dance Revolution, has settled with Roxor, who had developed its own DDR clone, "In the Groove." Konami had filed suit against Roxor, alleging trademark and patent infringement and unfair competition. Per the terms of the settlement, Konami has acquired the intellectual property rights to "In the Groove" and Roxor has promised to "respect Konami's intellectual property rights" in the future.

For more on this visit http://shorl.com/gipostogrivyve

THQ Wrestles With Use Of WWE License

World Wrestling Entertainment Inc. ('WWE"?) has named video game publisher THQ in a lawsuit seeking, among other things, monetary damages as well as a declaration that WWE is entitled to terminate the video game license granted to THQ.

This is not the first legal wrangle between the parties WWE has previously filed a complaint against THQ alleging 'bribery and racketeering"?.

Coverage at http://shorl.com/bebystugrybobu (Gamasutra)

THE TAX MAN COMETH!

Ever had the feeling that you pay too much tax? Ever escaped to your favourite MMO to avoid the realities of everyday life? Well, a taxing reality may soon catch up with gaming worlds and their economies at least in the US.

A senior economist for the Joint Economic Committee of the U.S. Congress has been quoted as stating that they are considering whether the sale of in-game goods should be taxed and that they are at 'the preliminary stages of looking at the issue and what kind of public policy questions virtual economies raise -- taxes, barter exchanges, property and wealth"?.

The MMO Second Life is cited in the GameDaily article referenced below as an example of a large in-game economy based on the purchase of virtual items like clothing and vehicles, which generates as much as a half million dollars in sales a day.

Will Canada follow suit? Stay tuned.

coverage at http://shorl.com/gevugrabebofro (GameDaily)

For more on the importance of MMOs' economies and the interest that they have generated IRL (both in business and with the tax authorities) you should read The New York Times article at  http://shorl.com/buvelidomapru (registration required)

Need Help To Get Your Company Off The Ground

My name is Casper Bych, and I am a practicing lawyer in Vancouver, BC. I practice in the corporate finance and securities group at Davis, and am also a member of the firm's Video Games Group. I have extensive experience in advising start-ups and senior technology companies, including video games companies. 

I can advise you on how to structure your company and how to put a stock option plan in place (including advise on stock option grant sizes), and I can advise you on equity or debt financings and other corporate and finance matters. In addition, our video game law group can provide you with resources on human resource planning, creating a business plan, drafting an executive summary, protecting your intellectual property, negotiating video game development, publishing and distribution agreements, and preparing for financing and investor presentations.

If you are interested in hearing more about how we can help you build your video games company, give me a call (604.643.2951) or drop me an email ( cbych@davis.ca ), and I can break down the process that is involved for you in building your successful company.

Atari's Parent Tries Again

Atari, Inc. cannot get a break. Infogrames Entertainment, the parent of Atari, which has been struggling financially for a while (and is now reduced to a penny stock) failed to get the required 20% voter turnout at its special shareholders meeting which was set to approve the EUR 74 million refinancing of the company. This was the second attempt in getting the shareholders out and they give it another try on November 15th.

20% turnout is a very high threshold for a widely held stock and is even more difficult if the shareholders have lost faith in the management's ability to turn the company around. Typically, public companies only require two shareholders to turn out, either in person or in proxy.  Rules about shareholder turnout (or qourum) are stated in the company bylaws or governing legislation.  Infogrames is governed by the corporate laws of France.

Stay tuned for the next episode in the Atari saga.

Coverage http://shorl.com/jerovistehudi (Gamedaily)

AMD Is Getting Closer To The Finish Line

The chips have fallen and Advanced Micro Devices, Inc., also known as AMD (NYSE AMD) has cleared another hurdle in the process of its take-over ofATI Technologies Inc.(NASDAQATYT and the TSX ATY) with the 99.7% ATI shareholders approval of the merger.

Only time will tell if this deal will create the desired shareholder value and if AMD will be able to rival Intel as the number one chipmaker in the world. The merger is expected to close next week.

Coverage http://shorl.com/bubrikadokypo (Gameindustry)

AMD www.amd.com

ATI www.ati.com

CEO Says In-game Advertising Is For Your Own Good

After recent brouhaha (brouhaHA?) surrounding an ominous privacy disclaimer contained in EA's shooter game Battlefield 2142, the CEO of advertising giant IGA Worldwide has said that any incursions into gamer privacy to create targeted in-game advertising is for the good of gamers everywhere. 

IGA CEO Justin Townsend was interviewed by Gamespot on the controversial disclaimer in the game that warns players who do not want their IP addresses or "other advertising data" to be collected not to install the game on computers with internet access, or even play them at all.  Townsend made it clear that it is publishers, in this case, EA, who create the disclaimers in the first place, and that the information collected is never user-specific.  And as for collecting IP addresses, that information is never retained.  It's only to make sure that the right advertising goes to the right people, in the right language. 

Townsend also sang the praises of in-game advertising as a means of keeping the retail costs of games and consoles down for gamers

"The point I'm trying to make really is that what these gamers all want every year is lots and lots of brilliant gaming titles coming out. They want high quality and great game design. Now, a triple-A title for a previous-generation platform could cost up to $10 million to produce, and it would retail for between $50 or $60.

With the next-generation platforms--the PlayStation 3 and the Xbox 360--those development costs for triple-A games are going to go up threefold, potentially up to $30 million in development costs per game. And what I don't see happening is a threefold increase in retail prices to accommodate that. That would not be fair; that would not be realistic. If gamers are to expect a constant flow of high-quality, next-generation games to the marketplace, they have to understand that publishers need to find and develop new revenue streams. In-game advertising is one of those new revenue streams, therefore it's only good for the industry on the whole."

Read the whole interview at Gamespot  http://shorl.com/gedipehyhyje

PS3 SCALPING

Recently several listings appeared on eBay for PS3 pre-orders. The owners of the listings, who claimed they had secured PS3 pre-orders from various retailers, were offering the pre-orders for sale at inflated prices. eBay removed the listings, presumably because the listings violated eBay's requirement that the pre-ordered product be available within 30 days.

This is only the start of PS3 availability issues.  We're particularly interested in seeing how Sony handles the initial sales of its PS3s--in light of how Sony dealt with the launch of the PSP.

Sony's release of the PSP happened in selected countries, which meant the PSP wasn't initially available in some areas such as in Europe. Sony tried to preserve its scheduled launch dates by taking a hard approach against European sales.  In fact, Sony went as far as to sue several retailers who were selling imported PSPs in the UK. These unauthorized sales are called 'parallel importing"? or 'grey marketing"?, and each country deals with them differently.  We understand that EU law might actually allow manufacturers to stop any these sales if the products were originally sold in countries outside the EU.  The question is  will Sony take the same approach with the release of the PS3?     
Coverage of eBay auction here   http://www.shorl.com/fesirajipipru (Gamespot.com)

BULLY NO NUISANCE

After an unprecedented judicial review to determine if Bully was a public nuisance, some say 'a short gaming session"?, a judge has cleared it for sale next week without any restrictions.

coverage at http://shorl.com/hegrustefrydogri (GameDaily)

EDGE MAGAZINE GIVES US THE NOD

We're pleased to report that Edge Magazine selected our blog as its website of the month for November.  We're honoured!

BULLY A PUBLIC NUISANCE?

Florida's Third Court of Appeal has ordered that Take-Two's Bully be reviewed by a judge to determine if it should be deemed a 'public nuisance"?. If found to be a public nuisance, sales of Bully to minors will likely be subject to an immediate temporary ban.  Bully is scheduled to be offered for sale to the general public next week.

coverage at  http://shorl.com/fapydrivujuvi (GameDaily)

OKLAHOMA'S VIDEO GAME LAW BLOCKED

A Federal District judge has issued an injunction temporarily blocking the coming into force of Oklahoma's video game law on November 1st. 
The provisional injunction foreshadows that the law is likely to ultimately be declared unconstitutional.

 
http://shorl.com/biratestodigu (GamePolitics)

California Federal Court Awards $9M In Damages In Console Piracy Case

The defendants - U.S., Canadian and U.K. individuals and corporations - were found by the court to have violated the Digital Millenium Copyright Act (the 'DMCA"?) by trafficking mod chips and the HDLoader software application. Both the HDLoader software and mod chips violate the DMCA by allowing users to circumvent the copyright protection technology built into video game consoles. HDLoader allows users to copy video games to a console's hard drive where they can be transferred to a PC and distributed on the web.  Mod chips allow users to use a console to play illegally obtained games.

Coverage at http://shorl.com/doridonageti (GameDaily)

U.S. ATTACKS ONLINE GAMBLING

The Unlawful Internet Gambling Enforcement Act was unexpectedly passed by Congress on Saturday.  
In general, the bill prohibits banks and credit card issuers from processing payments from customers in the United States for internet gambling.  

Coverage at  http://shorl.com/duletredrufeso (CTV.CA)

KONAMI WINS EUROPEAN PATENT APPEAL

The European Patent Convention says that schemes, rules and methods for playing games, and programs for computers, cannot be patented. However, the European Patent Office has taken a broad approach to that restriction, such that certain patent claims have been allowed even though they seem to fit within the list of unpatentable material.

Most recently, the EPO's Technical Board of Appeal has allowed certain claims in a patent application by Konami relating to a guide system for identifying player-controlled characters and the direction of the nearest team-mate.

The EPO examination division originally rejected the claims because the only portion that was arguably patentable under the EPC was anticipated by prior art. The Technical Board of Appeal overturned that decision and ordered that the patent be granted.

Whether game software is patentable is a tricky question "? different jurisdictions take different approaches to whether software or business methods are patentable, and there are many philosophic debates about whether software or business methods should be patentable at all. The EPO decision gives Konami certain patent protection in Europe, and may open the door for additional game-related patent applications in Europe.

Coverage at http://shorl.com/fapifremefeku (Gamasutra)

Text of the EPO Decision http://shorl.com/fyjusumubryba