For over 100 years, the entertainment world’s box office records were set by the latest Hollywood movie releases. Movie-goers anxiously awaited the latest in the Rocky franchise when Rocky IV grossed $300 million at the box office.
The James Bond series is another eagerly awaited movie series, with Spectre grossing $880 million. However, by 2013 Hollywood releases paled in comparison to online gaming releases when Grand Theft Auto V earned a whopping $800 million in its first day—and $1 billion within its first three days. In 2018 Red Dead Redemption 2 wasn’t far behind, with an opening weekend of $725 million in sales. As with any successful entertainment venture, online gaming has presented enormous opportunities for lawyers.
Protecting Producers
In 1965 Sega’s video game Periscope was released as a 25¢ arcade game, thereby launching the terminal-based video game entertainment craze, along with legal precedents as to the protection of video games. Atari’s Breakout was recognized as a copyrighted work in 1992 (Atari Games Corp. v. Oman, 979 F. (2d) 242), after a U.S. appeals court had ruled in 1982 that video game manufacturers could copyright images and sounds in a game but not the source code that produced them (Stern Electronics Inc. v. Kaufman, 669 F.2d 852 (2d Cir. 1982).
However, similar to the IP protection hurdles pertaining to any software, U.S. copyright laws protect some elements of video games but not others. One issue is the integration of ‘common assets’ in video game software by which producers make use of someone else’s components to produce game— components, or ‘assets’ that are widely available. Although this is not an issue with commercial, internal developers and distributors such as Sony, independent game developers end up having to pay huge fees in order to access existing assets or to create viable assets in-house from scratch. Often times such assets are deemed ‘Creative Commons’ assets, to which the concept of ‘some rights reserved’ applies.
Protecting the Player
In 2011, the U.S. Supreme Court struck down a California law banning the sale of certain violent video games to children without parental supervision. The court cited protected free speech as the Constitutional basis for their ruling. (Brown v. Entertainment Merchants Association, 564 U.S. 08-1448 (2011).
Conversely, the importance of protecting children in the course of their video game playing has been recognized in Europe with the passage of the Swiss Youth and Media Act, which provides a regulatory framework for video game use. The law holds game providers accountable by taking measures to protect minors from harm presumably caused by the improper use of video games. However, crafting a one-law-fits-all regulation is challenging, given the rapidly evolving features and content of video games aimed at minors.
Transparency of Transactions
The Europeans are also ‘ahead of the game’ in drafting laws related to the consumer transaction aspect of video game purchases. The offering of a ‘free trial’ is a common practice by most providers, and a watchdog group, the German Federal Association of Consumer Organizations, challenged the ‘paid subscription after free month’ promotion, arguing that this could mislead consumers as to the conditions triggering an obligation to pay. They also objected to terms and conditions that gave the provider the right to change the subscription offer and prices at any time. After a provider refused to comply with the demands of a cease-and-desist letter, the Court of Appeals in Berlin ruled in favor of the watchdog group.
The recently adopted Fair Consumer Contracts Act (FCCA) mandates that video games have a ‘cancelation button’ with which consumers can more easily cancel online subscriptions, and this is expected to have far-reaching financial consequences for subscription-based business models that producers and distributors of gaming, streaming and other digital content depend on. The FCCA is considered much stronger than the EU consumer protection law known as the European New Deal for Consumers, and critics charge that it will undermine efforts to maintain European consensus regulation.
Also, in Germany, the online youth protection regulator, KJM, published ratings as to AI applications for age verification using biometric features to determine whether a user is of a certain age, thereby obviating the need for more convoluted ID checks.
Then There Is the Licensing…
Last October, the Illinois legislature passed legislation radically changing the state’s regulatory landscape for video gaming. Among other things, the law codified state supremacy over all video gaming activity, curtailing the ability of municipalities to tax and license establishments, video gaming terminals (VGTs), and terminal operators. Whereas non-home rule municipalities could only charge fees of $25.00 per VGT, the new law raised the fee to $250 per VGT.
Under a provision regarding a ‘push tax’ (as in pushing the button), a one-cent per-play tax is assessed on anyone playing a video game from a VGT. The push tax is currently being challenged by terminal operators who argue that there are legal as well as technological obstacles to enforcing that tax.
Litigation Rising
The online video gaming industry has now surpassed that of both the movie and music segments of the entertainment markets, realizing a 27% increase last year in consumer spending on gaming, hardware, and accessories. Home confinement during the pandemic certainly fueled this growth as movie theaters remained shuttered and live indoor concerts were canceled. Along with that growth has come an increase in litigation. From IP challenges to licensing and distribution agreement controversies, as well as regulatory intervention, the field is wide open for lawyers who may wish to build a career in this fast-growing industry.
An example of where litigation comes into play is the case of a fine line between gaming versus a game of chance and gambling. Gaming is supposed to be dependent upon well-honed mental and physical skills in order to accomplish a certain level of competency, while games of chance depend more on ‘luck’. With that distinction in mind, a class action lawsuit has been filed against Sega claiming that its Key Master game is ‘rigged’, allowing a player to win only after a certain number of losses. The game, according to the lawsuit, is therefore not a game of skill at all but more a game of chance. Either way, you pay your money…and take your chances.
Executive Summary
The Issue
What are the opportunities for lawyers in the field of Gaming Law?
The Gravamen
This segment of the entertainment industry is surpassing that of the movie industry and music industry combined and offers opportunities for lawyers across a wide field of practice areas.
The Path Forward
Technological and creative content developments are changing rapidly, and both case law and regulatory enforcement are rapidly evolving.
Action
1. Domestic Regulation:
State legislatures are promulgating laws affecting licensing as well as minor-player protections; know what risks exist for distributors and bars, restaurants, and fraternal organization lodges.
2. Cross-border Concerns:
Before advising a video game developer or producer, understand where the game will be marketed and what regulations will apply in that jurisdiction.
3. IP Infringement:
Become well-versed as to what constitutes Creative Commons assets versus those that are proprietary to such big-name developers as Sony.
4. Is It Gambling?:
Be aware that not all video games constitute games of skill and might be defined as gambling devices, thereby invoking both regulations as well as possible criminal sanctions.
Further Reading:
- https://www.jdsupra.com/legalnews/video-gaming-e-gaming-law-update-8310040/
- https://gameslaw.org/
- https://ugaminggroup.com/update-changes-to-illinois-video-gaming-law/
- https://www.law.com/corpcounsel/2022/03/30/is-the-video-gaming-industry-facing-increased-litigation/?slreturn=20220906023103
- https://www.businessinsider.com/lawsuit-says-sega-key-master-arcade-game-is-intentionally-rigged-2021-7
- https://www.npd.com/news/press-releases/2022/the-npd-group-consumer-spend-on-pc-gaming-hardware-and-accessories-in-us-increased-25-in-2021/#:~:text=28%2C%202022%20%E2%80%93%20According%20to%20The,2019.
