Games Brief » Legal

US courts find in Google’s favour of safe-harbour provisions of DMCA in Viacom case

Nicholas Lovell — Thu, 24 Jun 2010 12:59:13 +0000

Viacom and YouTube have been squaring up for a rights battle for months. At stake was more than the $1 billion of damages that Viacom was seeking: it was the very future of user-generated content.

According to a report from the Guardian, Viacom alleged that YouTube had “built itself into the world’s largest video-sharing site by promoting the unlicensed use of video taken from Viacom cable channels such as MTV, Comedy Central and Nickelodeon”.

YouTube denied the claim but, more importantly, argued that it had complied with the safe harbor (sic) provisions of the Digital Millennium Copyright Act which requires a host to take down infringing material as soon as they are notified that the material is infringing.

Judge Louis Stanton found that YouTube complied with the DMCA. Viacom spent several months compiling lists of infringements. It notified YouTube of the infringements on 2nd February 2007 and by the next business day, nearly all of the videos has been removed from YouTube.

This ruling is great news for hosts and for organisations which rely on user-generated content. Viacom was seeking to increase the burden of regulation and proof for such hosts, which had believed that provided they had robust takedown procedures, they should be safe from lawsuits such as these.

Judge Stanton’s ruling confirms the strength of the safe harbor ruling.

The fact that many of the allegedly-infringing videos were, in fact, secretly uploaded by Viacom staff as part of a their marketing activities is unlikely to have helped Viacom’s case either.

Steam is not a monopoly

Nicholas Lovell — Tue, 08 Jun 2010 08:50:00 +0000

I’ve some good (and not so good) comments on my post Five reasons why Steam will destroy PC gaming.

Peter Boivin, a US anti-trust attorney, provided a thoughtful counter-argument. It was so relevant I thought I would include it as a full post of its own.

I am a competition lawyer who deals with these kinds of questions on a daily basis. Having a large percentage of sales (a high market share) is simply one of a number of questions one must ask to determine whether a company has a monopoly or monopoly power.

Is Steam a monopoly?

There are two basic ways to look at whether a company is a monopoly. The first is pretty rare, but you look to see whether the company can control prices. I am not talking about those super Steam sales, since lower prices are always good for the consumer (unless they are below cost, but that’s another matter entirely), but rather the ability to raise prices about competitive levels. I haven’t seen any evidence of this. As far as I am aware the prices you find on Steam are consistent with the prices you’ll find in the brick & mortar stores and on the smaller digital distribution companies.

The more common way to try and define monopoly power is to define the “relevant market” and see what share of sales a specific company has. Defining the relevant market is key. For example, if you’re talking Coke and Pepsi and define the relevant market as carbonated soft drinks, these two companies would have a pretty big share. If you defined it more narrowly, cola-flavored carbonated soft drinks, an even higher share. If you were to define the market more broadly, soft drinks or, say, all drinks, then there shares plummet.

Same goes for Steam. If you’re talking simply “Digital Distribution On PCs”, its share is likely high. If you throw brick and mortar stores (like Gamestop, Best Buy, etc.) or even on-line stores (like Amazon) then that share is likely pretty low.

One way to determine whether two products are in the same market is to try and test to see how the price of one product affects the price of another. For example, how many consumers would switch from buying a PC game on Steam to buying a PC game from Best Buy if Steam raised its prices by 10%? If enough people would switch, then they are likely in the same market.

It’s about more than just market share

Market share, however, is just the beginning of the analysis. You also have to look at things like barriers to entry and alternative forms of distribution. How hard would it for another company to enter the market if Steam rose prices? Or if Steam refused to carry titles from certain publishers? Can companies effectively digitally distribute their own games without the need to use Steam?

Based on my understanding of everything and because it’s my nature, I think there are stronger arguments for the Steam is NOT a monopoly side of things than the Steam IS a monopoly. This is based on the fact that I do believe their pricing is restricted by brick and mortar stores and because of ease of entry/alternative forms of distribution. It’s not like Steam prevents you from using other digital distrubtion platforms or other digital distribution means.

Pretty much every PC game I have purchased since Dec 08 (save one game, the unfortunate “Blood Bowl”) I have bought from Steam. Most purchases were made because of price (older games) or convenience (newer games). I downloaded “Blood Bowl” from the company’s own web store because it wasn’t available on Steam. I had no problem doing so. If it turned out Steam was jacking up prices, I would either get off my ass and walk to GameStop or remain on my ass and order it off Amazon with, like, three clicks of a mouse button.

To sum, Steam doesn’t have market power and would likely be seen to compete with both on-line retailers like Amazon and brick-and mortar-retailers like Best-Buy and Gamestop in a market for the “sale and distribution of PC games.”

Acting “before it’s too late” will only stifle innovation

As for the government "acting before it’s too late". That’s not how it works. You can’t place restrictions on a company because you’re afraid they might become too powerful, unless that company is becoming too powerful through illegal means. By all accounts, Steam has reached the point it is at now – outselling everyone by a factor of 10 – because it is offering a solid product, lower prices, and is innovative. You can’t shackle companies for stuff like that. That’s only going to chill innovation. Why work hard and make a fantastic product that’s better than anything else if the government is just going to punish you for it?

There is a reason why Microsoft got dinged by the DOJ and European Commission. They were engaging in illegal activities, such a monopoly leveraging and bundling (using their legal monopoly in system operations to grant an illegal monopoly in the internet browser market). Eventually, if a company gets too big, like a Google, competitors, customers and suppliers start complaining and that’s when the door opens. Until then, you can’t just go after a company based on fear and unfounded speculation.

Peter is a antitrust attorney in the United States who has been practicing for 10 years. In addition to his training in the United States, Peter also spent three years working on European Competition matters in Brussels, Belgium.

Five reasons why Steam will destroy the PC games industry

Is criminalising someone for NOT password-protecting their WiFi so wrong?

Nicholas Lovell — Fri, 14 May 2010 10:18:04 +0000

Of course it bloody is.

Berlin’s top criminal court yesterday passed this chilling wifi password judgement:

"Private users are obligated to check whether their wireless connection is adequately secured to the danger of unauthorized third parties abusing it to commit copyright violation"

Words fail me at how wrong this is. It means that a cafe or a consumer which leaves their WiFi connection open for their friends, their customers, even for the good of society is guilty if anyone infringes any intellectual property over that connection. The fine may only be €100, but that is entirely beside the point.

It means that a WiFi connection does not benefit from the “common carrier” protection that ISPs and and telecoms companies use to prevent being prosecuted for aiding and abetting any crime that was organised by phone or email.

It puts an onus on the owner of the WiFi connection to police what happens over it.

That’s like holding a telco responsible for a terrorist attack because it was arranged by phone. Or a pub landlord responsible for a fight because it started on his premises. Or a car manufacturer responsible for a bank robbery because their car was used as a getaway vehicle.

Help me out here: I want to get the clearest, most apt analogy for how stupid this rule to use again and again with politicians and regulators in the UK to stop this kind of woolly thinking affecting judgments based on the Digital Economy Act.

So please post your suggestions below.

Thanks for helping.

YouTube’s Downfall advice: Contest the takedown

Nicholas Lovell — Fri, 23 Apr 2010 09:35:24 +0000

Following the news that Constantin Film has, in my view stupidly, issued takedowns for the many parodies using short clips of its movie Downfall, the backlash has started.

YouTube has recommended that anyone who has a video that has been taken down under their Content ID system should dispute the takedown. Mashable has the full story, but it seems that these videos may not have been taken down under the DMCA. Under YouTube’s system, if the video creator disputes the takedown, the videos will go straight back up.

The original copyright owners will then have to decide if they want to issue a DMCA notice.

“Anyone who has violated a copyright, leave the room now”

The EFF has also fought back. In a new Downfall parody, embedded below, it pokes fun at Constantin Films and points out that if the company issues improper takedown notices under the DMCA, the EFF could sue the company “for big damages”

It would be a splendid irony if Constantin Films continued in its misguided attempt to take down fair-use parodies of its film that have provided fantastic viral marketing and was itself successfully sued by the EFF for breaching different provisions of the DMCA, in particular the elements relating to “fair use”.

* * *

As an aside, I quote this comment from Jonty Lovell (yes, he’s family):

I have just figured it out. Constantin are the cleverest company in the entire world. Before they did this everyone knew the internet Hitler meme. But as of today everyone knows about the movie ‘Downfall’ from a company called ‘Constantin’ and there are even new memes about there meme: http://www.youtube.com/watch?v=PzUoWkbNLe8.

Perhaps they are smarter than we give them credit for.

Are Constantin Film the stupidest company in the entire world?

Nicholas Lovell — Wed, 21 Apr 2010 08:56:59 +0000

Constantin Film are the company behind Downfall, a reasonably successful German-language movie based on the final days of Hitler. Downfall has grossed $92 million at the box office since it was released in 2004.

It has also become one of the dominant video memes on the Internet. You’ve probably seen them – a bunch of military officers stand in front of the Fuhrer in his underground bunker. Then some of them file out (can you tell I don’t speak German?)

In the endless succession of parodies, Hitler flies into a rage, not at the loss of World War II, but at being kicked off Xbox Live (4.3 million views), or because no-one told him that Michael Jackson was dead (2.9 million views) or some other current political, social or technological topic.

They are often funny, they are well-thought through and they are the kind of viral marketing that marketers can only dream of.

So only a mind-numblingly stupid company would kill that viral activity stone-dead.

Using the DMCA on Downfall videos

Step forward Constantin Film.

According to TechCrunch, Constantin has issued notices to remove Downfall parodies under the DMCA to YouTube and other video sites.

Are they mad?

These are not pirates copying the film illegally. These are modern, clever mashups of existing footage with topical news. They make a six-year old, German-language film relevant to a US audience.

What financial loss is Constantin making from these parodies? I can’t see any.

Downfall took only 6% of its revenues in the US. These videos, created by third parties (for free) and distributed globally by YouTube (for free), had the potential to encourage people to watch the original movie on DVD or on a movie channel. It had the potential to create long-term additional revenue for Constantin.

Instead, lawyers have heavy-handedly stepped in and claimed that one of the most successful viral campaigns in movie history was, in fact, stealing.

Stupid, stupid, stupid

Can you tell how stupid I think this is? Constantin, I respect your right to protect your copyright. It is clearly up to you if you choose to stop all forms of free advertising for a movie that would be long forgotten if it weren’t the free activities of a bunch of fans.

But it shows how little respect you have for your audience; it shows how little your understand the power of the Internet to drive conversations about your movie and it shows why, in the end, the Internet will kill you.

It could have been so different

So what could they have done? It’s not rocket science:

Build a YouTube channel of Downfall videos

Encourage people to upload their parodies to a branded Downfall channel. Post a prominent link to getting the movie from Amazon, or Netflix, or wherever

Claim the YouTube revenues from Downfall parodies for yourself

If you are the copyright holder, you could claim the publisher’s share of all YouTube revenues from these parodies. you could be making money from other people’s work, legally and above board. (Did I mention that it didn’t cost you anything to get these millions of video views?)

Build a Facebook fan page for Downfall videos

Cross-link. Share. Promote. Encourage people who have never heard of your movie to watch the videos on Facebook. Use that community to promote future Constantin Films for free.

Build your own Downfall webpage

Run competitions for the best video each month and offer prizes. Get director Oliver Hirschbiegel to judge them. (Incidentally, he said that he was in favour of these videos in an interview with New York Magazine, although he added “If only I got royalties for it, then I’d be even happier”.)

“The point of the film was to kick these terrible people off the throne that made them demons, making them real and their actions into reality. I think it’s only fair if now it’s taken as part of our history, and used for whatever purposes people like” – Oliver Hirschbiegel

Give me another fifteen minutes and I could come up with a half-dozen ways to make money from these.

Your loss, Constantin

But it’s your loss, Constantin. We, the Internet, have lost a meme we had taken to heart and loved. You have lost a viral community who could have made you a ton of money.

I hope your lawyers were cheap.

A single UK games rating system – but will it get off the drawing board?

Nicholas Lovell — Thu, 03 Dec 2009 10:22:32 +0000

The Digital Economy Bill (among other things) proposes a new games classification regime in which, for the first time, the Video Standards Council would become responsible for classifying all games in the UK. While broadly the games industry has welcomed this clarity, it is unclear if the proposal will become law before the forthcoming 2010 general election, says Jas Purewal.

What you need to know about the proposed new law

The Video Standards Council would classify all games in the UK. The previous practice was that games used either or both of the BBFC classification system (which is the same as used in films – e.g. PG, 12, 15,18) and the PEGI classification system (which previously was a voluntary, industry-regulated system in the UK and which uses a series of numbers and symbols).
It would be compulsory for all games aimed at over 12s to be classified (although as a matter of practice publishers are likely still to want a child-appropriate classification given to games).
However, games which fall into one of the following two categories would be exempt from the classification requirement:
(i) games which are, taken as a whole, “designed to inform, educate or instruct” or are “concerned with sports, religion or music”; or
(ii) games which meet a list of further requirements: among other things, such games must not include “depictions of violence towards human or animal characters”, “depictions of activities involving illegal drugs, “depictions of criminal activity that are likely…to stimulate or encourage the commission of offences” or “words or images that are intended to convey a sexual message”.
It is expected that the Video Standards Council will drop BBFC ratings and apply only the PEGI ratings system to games. However, the Bill provides that will only happen once the new regime has become approved law – so there is no express reference to PEGI in the Bill itself.
The Video Standards Council would likely need to issue guidance regarding how it will classify games in the future and it may issue a code of practice with which publishers would need to comply.
Failure to comply with the new regime could result in criminal prosecution.

Why is the Government amending the law on games classification?

Previously, games were classified under either or both of the BBFC or the PEGI systems (although increasingly the majority of the industry used the PEGI system in practice).

In 2007, the Government-commissioned Byron Review called for a new legally enforced, cinema-style classification system making it illegal to sell games to children below the recommended age. Cue a long debate as to whether that new system should use BBFC or PEGI. Then, in June 2009, the Government announced that it would use the PEGI system in the new legal regime. Now here we are with the Digital Economy Bill.

So, the new law seems to have two objectives: (i) the better protection of children as regards games; and (ii) implementing a single classification standard for the games industry to adopt.

What happens next?

The Digital Economy Bill still needs to be debated fully, which could result in amendments making the new classification regime different to the outline provided above. However, the Bill also proposes a number of other legal changes, of which the most (in)famous is a new anti copyright-infringement regime for the UK. This could well lead to significant (and time-consuming) debate in Parliament. So it remains to be seen whether the Bill can complete its legal journey before the 2010 general election.

As lawyers will often tell you when it comes to legal matters, there is no easy way to predict exactly where this will go next – we will have to wait and see what the next months bring. But, since games classification is the main way in which the Government directly regulates games, and given the periodic media scrutiny into ‘violent games’, clearly what happens to games classification will be important for the games industry.

Jas Purewal is an associate at Olswang LLP and writes www.gamerlaw.co.uk

Why NDAs are not worth the bother

Nicholas Lovell — Wed, 14 Oct 2009 09:30:19 +0000

Chris Dixon wrote a great post on why entrepreneurs with an idea should share it with everyone. He argues that there is very little downside and makes good points that you should read.

He ends with a coda on non-disclosure agreements.

A note about NDAs:

almost no experienced entrepreneurs/VCs will sign them (in fact, you asking them too is widely considered a sign of inexperience)
It’s not clear they have any real value – are you really going to spend years suing someone who signed an NDA? I’ve personally never heard of it happening.

While the same may not be true of big corporations about to launch, for example, a new console, it is generally true for start-ups and even early-stage game ideas.

My personal mantra is that “ideas are nothing; execution is everything”. A great team can take a rubbish idea and make a good business, whereas a rubbish team can turn the most brilliant idea into so much wasted time.

In the end, though, I’m going to refer you back to Edison:

“Genius is one percent inspiration and ninety-nine percent perspiration.”

Do you agree?

Where videogames meet the law – in 140 characters – Part 2

Nicholas Lovell — Tue, 29 Sep 2009 16:08:52 +0000

The afternoon’s tweets from IBC’s “Protecting & Exploiting Content in Video Games”. Many of these (but not all of them) were tweeted, as I suddenly got access to the web.

Games industry gets 35% of revenues from digital downloads, compared with 20% for music industry. Surprising.

Ambulance-chasing "forensic investigators" exist who get a %age of damages when they target pirates for copyright owners

Games may be heading nearer the movie model where you need to get clearance for all the incidental images in the game (e.g. if you set a game in Bahrain, do the individual buildings have their own IP rights?)

Universal Music says licensing revenue from games now exceeds that to films, and is only behind licensing to advertising

Lawyers amazed that people think laws don’t apply in virtual worlds; real world laws re contract, tort and crime apply

Debate in Second Life centres on whether items sold are goods or services; perhaps they’re more like financial instruments (e.g. shares or bonds)

In Second Life, shops have salespeople. Employment relationship? If you hire an illegal immigrant, are you a criminal?

Tax authorities have concluded virtual income should be taxed. Key Q is when: earning, in-game transaction or cashout?

Marvel largely failed to enforce its claim against City of Heroes because the court decided primary motivation of the users who created infringing content wasn’t commerce

Speakers were Paul Groves (Harbottle Lewis), Seth Krauss (Take Two), Brian Miller (www.virtuallyinhouse.com), David Cran (Reynolds Porter Chamberlain) and David Naylor (Field Fisher Waterhouse). The event was chaired by Paul Gardner of Osborne Clarke.

Thanks to IBC for arranging Protecting & Exploiting Content in Video Games.

Where videogames meet the law – in 140 characters

Nicholas Lovell — Tue, 29 Sep 2009 12:37:50 +0000

Lawyers like to keep things close to their chest, and a recent IBC conference on videogames and law was no exception. We were in a subterranean chamber with no access to Twitter. So here are the key tweets I noted down during the day.

Dragon Force (from Guitar Hero III): Song had 55k downloads before GHIII release; 624k downloads 12 months later. GHIII = v strong marketing.

The point of user generated content is not for you wade through the shit; it’s for people have fun playing with their own faeces. Its value isn’t in the finished product but the fun the creator has in the process – Morak

Marvel employed people to create avatars that infringed their own trademarks/copyright in City of Heroes – welcome to the murky world of online games

City of Heroes has Ts&Cs that say that users warrant that the characters they create don’t infringe any IP and indemnify NCSoft against any costs. If they create, for example, a copy of the Incredible Hulk and Marvel sues NCsoft, the end user is liable. Ouch.

Interesting debate over whether Sales of Goods Act applies to a virtual good. Not conclusive

“Freemium” is a business model, not a market. Every strategy is unique

iBeer is very successful game. iPint, a competing product from Coors, was sued for $12.5 million for being too direct a copy. That’s a big claim, and suggests iBeer was making a lot of money

Installed base of the current generation of consoles is half what we thought it would be and costs are 2-5x more expensive. Our games are a $20-$50 million investment. #take2

In the US, the state of Maine has different rule of privacy protection of minors from the federal rules; a number of states are the same, and many are inconsistent with each other and the federal law. <- Ouch again

Take Two paid $30 million to outside law firms in 2007; $25 million in 2008. That’s a lot of lawyers.

Take Two now has 17 inhouse lawyers, fighting patent trolls, regulatory issues, litigious music providers and more.

That was the morning session. It appears we have Wi-fi access, so the rest of the day may be tweeted in a more traditional way.

Why suing your rivals makes good business sense

Nicholas Lovell — Thu, 24 Sep 2009 09:20:26 +0000

The social games space is full of lawsuits. Mob Wars creator David Maestri left SGN to launch the game himself, so they sued him. They settled and Maestri then sued Zynga (creator of Mafia Wars) and Playdom (creator of Mobsters). Zynga has filed 22 lawsuits itself so far this year. Even Playfish, which has generally stood aloof from these shenanigans has filed a lawsuit this year (although that was about a third party item seller that was selling Pet Society goods, not a copycat game).

Companies generally avoid lawsuits. They are expensive and time-consuming. The outcome is never certain, no matter how good you think your case is. And they run the risk of a counter-suit, particularly in the murky world of “who is copying who” amongst social games companies.

But there can be a good reason to sue a rival. And that is to scare off VCs.

Social games companies are in a landgrab. At stake: a huge slice of the $45 billion that is spent by consumers on games and games-related consumers at retail stores. The leading social games companies are already making hundreds of millions of dollars or revenue, and are profitable. Playfish and Zynga, for example, haven’t had to dip into their most recent rounds of VC funding at all.

But now that they have blazed the trail, others are following. The social games market will get more competitive. One way of competing is to outspend your rivals on marketing. When you have a warchest of $39 million, that’s a lot of marketing.

But the other way is to prevent your rivals from raising their own warchest. And nothing frightens VCs as much as “contingent liabilities”, a fancy phrase for “uncertain amounts we may have to pay in the future”.

So if you want to march ahead in the battle to win market share on Facebook, spend more than your competitors on marketing and slap a lawsuit on anyone you think might be trying to raise capital to compete with you.

It’s aggressive, but all’s far in love and social games development, right?