Lawyers in Canada: Davis LLP - Legal Advisors Since 1892

Sony discloses security breach

Sony has issued a notice to PLAYSTATION Network users that their personal information on the PLAYSTATION Store may have been compromised. The notice warns that some users’ passwords may have been changed through unauthorized access, allowing third parties to view the personal information stored on users’ accounts. The notice also states that the security problem has been resolved.

A copy of the notice is available here.

The security breach raises an interesting issue under Canadian privacy law. In Canada, there are several statutes that govern privacy, including the federal Personal Information Protection and Electronic Documents Act and various provincial statutes including British Columbia’s Personal Information Protection Act.

All of these statutes require companies (including video game publishers and developers) to maintain the security of the personal information they collect. However, few of these statutes explicitly require companies to disclose that a security breach has occurred. Therefore, when faced with a security breach, companies often need to balance the risks of non-disclosure (e.g. identity fraud that could have been prevented by disclosure) with the possible PR fall-out of making a disclosure.

Legal Battle Joined over WoW Bot

Vivendi, the parent company of Blizzard Entertainment (the creator of the popular World of Warcraft on-line multiplayer game), has sued the author of a software tool that automates certain in-game tasks such as fighting.

Vivendi and Blizzard claim that the software tool infringes its copyrights (because the tool copies game code into RAM in order to avoid cheat-prevention software) and also violates the game's end-user licence agreement.

The defendant, who claims to have sold more than 100,000 copies of his program, denies there is any copyright infringement.

Both parties have filed written submissions and are awaiting summary judgment in the case.

Coverage on the BBC and at the International Business Times.

Manhunt 2 Ready for UK Release

Despite being overturned by the High Court on a “clear error of law”, the UK Video Appeals Committee has reconsidered the ban on Manhunt 2 and once again reversed the decision not to give the game Manhunt 2 an 18-rated age certificate.

The game was originally slated for 2007, but was refused a certificate by the British Board of Film Classification because of "unremitting bleakness" and "sustained and cumulative casual sadism." The VAC overturned that decision, and the BBFC applied for judicial review. The High Court ruled that the VAC had erred in their interpretation of “harm” and sent it back for reconsideration.

In a four to three decision, the VAC allowed Rockstar’s original appeal, and without further legal recourse the BBFC must now issue the certificate. The BBFC stated that although they believe the game posed a real potential harm risk, the VAC had “exercised its independent scrutiny” and that “in the light of legal advice, the Board does not believe the VAC's judgement provides a realistic basis for further challenge to its decision and has accordingly issued an 18 certificate."

Coverage of the Manhunt 2 UK saga can be found in previous posts.
Coverage of the latest decision can also be found at Gamasutra and GameSpot.

Posted by Michael Mjanes

Court Upholds Injunction on Minnesota Violent Game Law

Another Court of Appeal has upheld an injunction against a law banning the sale or rental of violent video games to minors. Once again, the absence of proof of harm was the key factor. However, the 8th Circuit appellate court was less than enthusiastic about the evidentiary hurdle that such a standard implies. Writing for the court, Justice Wollman held:

"Whatever our intuitive (dare we say commonsense) feelings regarding the effect that extreme violence portrayed in the above-described video games may well have upon the psychological well-being of minors, [previous precedent requires] incontrovertible proof of a causal relationship between the exposure to such violence and subsequent psychological dysfunction…The requirement of such a high level of proof may reflect a refined estrangement from reality, but apply it we must.”

A copy of the ruling can be found here.
Coverage available from the Chicago Tribune.

Posted by Michael Mjanes

If At First You Don't Succeed...

Sounds like Massachusetts is getting ready to take another crack at banning violent video games, this time by defining violent games as harmful to minors in a manner that mirrors the legal standard for restricting pornography. The Bill reads:

“Matter is harmful to minors if it is obscene or, if taken as a whole, it… depicts violence in a manner patently offensive to prevailing standards in the adult community, so as to appeal predominantly to the morbid interest in violence of minors; is patently contrary to prevailing standards of adults in the county where the offense was committed… and lacks serious literary, artistic, political or scientific value for minors.”

The bill was drafted with assistance from Jack Thompson, the notorious crusader against violent video games. Similar bills, also authored with help from Thompson, were struck down as unconstitutional in Utah and Louisiana.

Coverage available at GamePolitics.com.

Posted by Michael Mjanes

EA Gets Hostile with Take-Two

The stakes have risen in Electronic Art’s (“EA”) attempt to acquire Take-Two Interactive (“Take-Two”). After having been rebuffed by the management of Take-Two, EA has now shifted its strategy to a so-called “hostile” take-over bid.

The hostile bid basically involves EA making a direct offer to the shareholders of Take-Two. EA’s offer amounts to a total purchase price of approximately $2 billion (or $26 per share).

EA’s offer is open until April 11th.

Coverage at: GameDaily

Previous coverage at: Davis Video Game Blog

Guitar Hero Suit Comes, Goes

On March 10 Harmonix Music Systems, Inc., filed a lawsuit against Activision for unpaid royalties relating to "Guitar Hero". Harmonix developed the first two "Guitar Hero" games and the "Rock Band" game, and claimed that Activision owed it more than $14 million in royalties related to "Rock Band III" and related spin-offs because Activision used Harmonix' technology.

Harmonix claimed that its agreement with the publisher Red Octane (now owned by Activision) sets a higher royalty rate if any "Guitar Hero" sequel uses or is derived from Harmonix' property, and that Activision was only paying royalties at the lower rate. Activision, not surprisingly, said in a statement that it had paid the correct royalties.

Late on March 11, Harmonix' owner Viacom announced it was withdrawing the suit because the parties were engaged in out-of-court discussions.

This episode demonstrates how filing a lawsuit can be an effective negotiating tool, or at least a way to bring both parties to the table. It's not clear whether there had been previous discussions, or whether Harmonix approached Activision with its concerns before starting the action.

Coverage at Variety and Gamasutra. Variety has a copy of the lawsuit here.

Virtual worlds ripe for real-world lawsuits

Today the Financial Post published an interesting article entitled "Virtual Worlds Ripe for Real-World Lawsuits". It discusses topical online legal issues such as IP infringement in Second Life. And it even features a few choice words from one of our resident video game and intellectual property lawyers, Chris Bennett.

Online version is available here.

Take-Two Shareholders Upset Over EA Rejection

Take-Two is facing some shareholder discontent over its handling of EA’s recent $1.9 billion buyout offer. The announcement today that two of the publisher’s largest shareholders have cut back their stakes in the company follows news of a shareholder lawsuit for refusing to explore EA's offer.

Oppenheimer Funds, Take-Two's biggest shareholder, cut its holdings from 23 percent to 11.5 percent while FMR LLC, the second-largest owner of Take-Two shares, reduced its stake from 14.7 percent to 2.75 percent. Despite Take-Two’s position that EA’s offer undervalues the company, some believe that this may damage Take-Two’s chances of holding out for a better deal from EA.

According to the New York Times, the lawsuit accuses Take-Two management of breaches of fiduciary duty, including a failure to maximize shareholder value, stemming from the rejection of the offer and the board’s decision to increase management fees and bonuses fourfold in the event the company was sold. In a statement, the company said: "We believe that the claims lack merit, and intend to defend vigorously against them."

At the time of the EA bid, Take-Two Chairman Strauss Zelnick said that the company would not entertain offers until the launch of Grand Theft Auto IV on April 29th. However, in addition to increasing management compensation in the event of takeover, Take-Two has already set up a new severance plan for its non-executive employees in the event of layoffs.

For more coverage, see LA Times, NY Times, and MarketWatch.
Submitted by Michael Mjanes

We're big rock singers and we've got golden fingers...

Dr. Hook would be proud: Davis LLP's Second Life office (and a few of our video game lawyers) just made the cover of the Canadian Lawyer magazine.

Check it out here.

Rockstar Sent to the Principal’s Office Over “Bully”

Submitted by Michael Mjanes

According to reports in the Globe and Mail, an international coalition of teachers' groups is urging retailers to refuse to sell Rockstars’ re-release of Bully. Released as Bully: Scholarship Edition for the Xbox 360 and Wii, the game follows 15-year-old Jimmy Hopkins through his days at a new boarding school. Although violence is part of the gameplay, the ESRB has given the game a “T” rating.

Groups such as the Canadian Teachers' Federation believe the game glorifies violence and works against their efforts to prevent bullying in schools. The CTF is predictably claiming a link between violent video games and aggressive behaviour in children, although there is sparse evidence to support that conclusion.

When the game was originally released for the PS2 in 2006 it attracted similar controversy. Two British retail chains said they would not stock the game. Florida lawyer and long-time Rockstar fan club member Jack Thompson unsuccessfully tried to have it banned. However, many game reviewers have noted that the level of actual violence in the game is far milder than other Rockstar games.

See the Globe and Mail article here.

Jakks Pacific-THQ Grudge Match Set to Go to Arbitration

Submitted by Michael Mjanes

The California Court of Appeals has denied a petition by Jakks Pacific Inc. to disqualify potential arbitrators in its ongoing dispute with video game publisher THQ Inc. over royalties. THQ had previously filed an action in the California Superior Court to compel arbitration over the royalty rate owed to Jakks by THQ for WWE video game sales under the THQ/Jakks Pacific joint venture. The royalties are at the center of a long-running fued between World Wrestling Entertainment, THQ and Jakks Pacific. Earlier, the WWE had sued THQ and Jakks Pacific in response to what the WWE called a "commercial bribery scheme". THQ has also launched its own royalty dispute against the toy manufacturer.

Although the main event has yet to be decided, THQ executive VP for business and legal affairs, James Kennedy, said he hoped the arbitration could now proceed expeditiously.

See coverage at gamesindustry.biz.