Major Legal Conflicts in the Gaming Industry (January — June 2022)
Semenov&Pevzner Law Firm has prepared a global report on legal conflicts in the gaming industry over the past six months.
The review was prepared by Ekaterina Smirnova, partner of the firm and head of the St. Petersburg office of Semenov&Pevzner, as well as Victoria Matveeva, lawyer of Semenov&Pevzner.
Ekaterina Smirnova and Victoria Matveeva
The work is divided into six parts:
- copyright;
- trademarks;
- patent rights;
- cheats;
- gambling;
- other.
The previous review (July – December 2021) can be found here.
1. Copyright
Riot Games on January 20, 2022 appealed to the District Court of California with a lawsuit against the Vietnamese company Imba Network, because it believes that the game I Am Hero: AFK Tactical Teamfight, developed by the latter, borrowed many elements from Teamfight Tactics owned by Riot Games.
The studio accuses Imba Network of illegally borrowing elements: names, abilities and looks of the characters of the Teamfight Tactics game, which was presented in 2019 as a spin-off of League of Legends.
According to the plaintiff, I Am Hero also copies the playing abilities of the characters. For example, Riot Games discovered a “double” of the scientist Heimerdinger named Dinger; the heroes Vi and Timo also got twins in the world of I Am Hero: AFK Tactical Teamfight – their names are Vai and Tomi. Moreover, the icons of the characters and abilities of the characters of I Am Hero are almost identical to those used in League of Legends. There are also examples of verbatim copying of the description of the heroes from the lore of League of Legends.
Riot Games claims in the lawsuit that due to the similarity of the two games, Imba Network attracts potential players and, accordingly, increases its own profit. Riot claims compensation in the amount of $150 thousand for each copyright infringement and termination of the distribution of the disputed game. Imba denies the charges, but has not provided a public comment to this day.
At the moment, the dispute has not yet been considered, it remains to be expected what decision will be made by the court.
Riot Games, the developer of League of Legends, filed a lawsuit against Shanghai mobile game developer Shanghai Moonton Technology on May 9, 2022, claiming that the studio in its product called Mobile Legends: Bang Bang illegally copies League of Legends: Wild Rift – an adaptation of League of Legends for iOS and Android. The lawsuit was filed in the U.S. District Court of the Central District of California.
It is noteworthy that Riot Games has previously sued the executive director of Shanghai Moonton Technology in a Shanghai court over the game Mobile Legends: 5v5 MOB, which also copied League of Legends. Then Riot won the trial and received compensation of $2.89 million. However, after Moonton removed Mobile Legends: 5v5 MOB from access, it also released a similar game called Mobile Legends: Bang Bang, which also copies the distinctive elements of League of Legends, thereby violating the copyright and exclusive rights of Riot Games.
Riot’s lawsuit contains a significant amount of evidence confirming the illegal borrowing of marketing materials, characters and other elements of the game. The company insists on stopping Moonton from implementing the controversial game on all mobile app markets.
Earlier, Riot Games were able to obtain compensation and the removal of another controversial application from access. While the California court has not resolved the case, it can be assumed that the company will be able to satisfy its requirements this time.
3. Choreographer Kyle Hanagami sued Epic Games for illegal use of dance in Fortnite
The lawsuit against Epic Games was filed in the District Court of California on March 29, 2022 by American choreographer and YouTuber Kyle Hanagami. Epic Games allegedly illegally used Kyle Hanagami’s choreography as one of the variants of the visualized emotions of the Captain America character (It’s Complicated emotion, which was presented by the developers in August 2020) in Fortnite.
In 2017, the choreographer choreographed a dance to Charlie Puth‘s song How Long and published a video with the dance on YouTube hosting, which gained more than 35 million views. Hanagami, indeed, has copyrights, and registered in accordance with the US Copyright Act, both for the choreography and for the dance video itself.
The lawsuit states that Epic stole the “hook” of the Hanagami dance and uses it at the beginning of the It’s Complicated emotion without Hanagami’s agreement. Parallel study of dance videos confirms the identity of movements and choreography in general. However, emotion includes other movements that were not used by the Hanagami in the dance. Moreover, Fortnite developers use different music for emotions, different from the one used by Hanagami.
In addition, the lawsuit contains an indication that Fortnite developers illegally benefited from the popularity of Hanagami’s choreography, especially among his younger fans. The benefit is that developers receive income from the sale of registered choreography.
Hanagami demands a court decision prohibiting the use of controversial dance moves in Fortnite, the emotions of It’s Complicated in general, as well as the payment of compensation to Epic Games for the illegal use of the copyright object.
At the moment, the dispute is still being considered.
4. Krafton filed a lawsuit against Garena, Apple and Google because of clones of PUBG: Battlegrounds
On January 10, 2022, Krafton filed a lawsuit in the District Court of California, USA against three companies at once: the Singaporean developer Garena, which owns the game Free Fire: Battlegrounds, as well as against Apple and Google, which distribute the controversial game in app stores – the App Store and Google Play.
Free Fire: Battlegrounds first became available on mobile devices in 2017, shortly after the release of the original PC version of PUBG. Krafton already then filed a lawsuit for recognition of Garena’s copyright infringement due to copying key elements of the game, which led to a peace agreement between the companies. However, a license agreement between the companies has not been concluded.
Krafton attaches comparative images to the lawsuit, which emphasize the similarity of the games: “the combination and selection of weapons, armor and unique objects, locations and the general choice of color schemes, materials and textures are almost identical.” The lawsuit also mentions that Garena added a river and a second large island to the Free Fire map in order to look more like a PUBG title. Moreover, Free Fire contains a unique armor element in the form of a closed helmet, which is used by PUBG in marketing materials.
Krafton also demands in a lawsuit against Google to remove from the YouTube video hosting not only videos demonstrating the gameplay of Free Fire, but also the Chinese full-length film BiuBiuBiu, which is freely available to YouTube users, which was filmed based on PUBG games.
Krafton claims damages from all three parties for direct, collateral and indirect copyright infringement and claims that it is entitled to the profits received by Apple and Google in connection with the implementation of Free Fire in mobile app stores. To date, the game from Garena has managed to collect over a billion downloads in Google Play alone. The Free Fire game, allegedly infringing copyrights, brought Garena “hundreds of millions of dollars“, and Apple and Google received direct profits from sales of controversial games due to developer commission payments.
The dispute has not been resolved yet.
2. Trademarks
Video game developer Ubisoft, which is the copyright holder of the Assassin’s Creed trademark series, filed a lawsuit with the Central District Court of California on February 2, 2022. The plaintiff claimed that the defendant – Massimo Gallota Productions (hereinafter MGP) – violated trademark rights, copyrights, and also accused him of cybersquatting.
The dispute arose due to the fact that MGP, being the organizer of live symphony shows, offered Ubisoft to conclude an agreement to create such a show based on the popular Assassin’s Creed video game series. However, as the plaintiff pointed out in the lawsuit, MGP violated the rights of the developer, since they registered a domain in their name AssassinsCreedSymphony.com before the license agreements came into force, and continued to use it after the termination of the agreements in June 2020.
In addition, the license agreements concluded between the parties to the dispute did not provide for the transfer to the licensee in the person of MGP of the right to register a domain name using the designation Assassin’s Creed.
The dispute was settled peacefully in March 2022, but the terms of the agreement were not disclosed.
3. Patent rights
1. IBM protects the rights to patents allegedly infringed by the developer of online games
International Business Machines Corp, known by the acronym IBM, on May 2, 2022, filed a lawsuit in the Delaware District Court against Zynga, the developer of Words With Friends and FarmVille, and its subsidiary Chartboost.
IBM is the patent holder of technologies in the field of online marketing and big data processing, which, according to the plaintiff, were illegally used by the game developer.
As the plaintiff points out in the lawsuit, Zynga is “nominally a gaming company,” while industry insiders know that in fact it represents “a big data company disguised as a gaming company.”
At the same time, Zynga, according to IBM, “decided to use IBM’s previous innovations in the field of big data, analytics and online advertising instead of spending time and money on developing its own methods.”
The plaintiff demands payment of compensation to him for the use of 4 patents, as well as damages in a triple amount calculated from the amount of compensation.
The defendants did not leave comments on this case, the result of the dispute resolution is not yet known.
2. The developer of VR systems filed a lawsuit against Meta Platforms* for patent infringement
Immersion Corp. at the end of May 2022, she filed a lawsuit in the District Court of the Western District of Texas against Meta*, claiming that Meta Augmented and Virtual reality systems* allegedly contain six patents related to tactile technologies.
In gaming systems and controllers, tactile sensations allow users to experience vibrations that mimic real forces — for example, blocking a blow in a virtual boxing game.
In Immersion Corp. They noted that Immersion and its employees have been working hard for almost 30 years to invent innovative tactile technologies that allow people to use their sense of touch to interact with products and explore the digital world. In addition, the plaintiff’s representative indicated that the company needs to ensure the protection of its intellectual property, even if it has to resort to litigation, although they appreciate that Meta* has implemented their tactile technology into its AR/VR systems.
While there have been no comments from Meta* representatives, it remains to be expected how the dispute will be resolved by the Texas court.
*The company’s activities are prohibited in Russia.
4. Cheats
1. Activision intends to identify the manufacturers of cheats for Call of Duty
On January 4, 2022, Activision filed a lawsuit against EngineOwning, a seller of cheats for network shooters in the U.S. District Court for the Central District of California. The company stated that the implementation of the cheats not only caused material losses for the company, but also caused reputational losses. The choice of cheats provided by the site varies from automatic aiming to displaying the location of other players, their price ranges from €4.49 for three days of access to €139.99 for 90 days.
The lawsuit states that EngineOwning uses the popularity of the shooter for its personal gain and profit by implementing cheats, hacks and other malicious software, which, in turn, negatively affects the gaming experience of Call of Duty users.
Activision was unable to identify everyone behind the cheat trading (including users such as Bonsai, Homie, NOL3X). To get help in identifying the defendants, the company appealed to the court. Activision lawyers also complain that EngineOwning has been ignoring their official requests since 2017.
As part of the trial, Activision is petitioning for companies such as Reddit, Twitter, Google, PayPal and Discord to be held accountable). She hopes that this will help identify the 15 people who developed and implemented cheats for the Call of Duty series of games.
To date, the case has not been considered yet.
2. Bungie’s lawsuit against the site implementing cheats has reached a new stage
On June 15, 2021, Bungie, a computer game developer and more recently a subsidiary of Sony Interactive Entertainment, filed a lawsuit against AimJunkies, a website that is a service for selling cheats. Bungie demanded that the site remove cheats for Destiny 2, and also accused its owners of repeatedly violating copyrights to the codes and audiovisual components of the game. Despite the fact that AimJunkies removed cheats for Bungie games from the assortment, the trial continued.
On April 27, 2022, the US federal court rejected most of Bungie’s claims as a result of studying the positions of both sides. The court sided with AimJunkies and recognized that the defendant did not use the objects of the plaintiff’s copyright (program code), but independently carried out the development.
The court found violations of the exclusive rights to the Destiny trademark in the defendant’s actions, therefore, the case can be continued on the basis of this offense. Bungie is also given the opportunity to clarify its claims and provide additional evidence of copyright violations.
In May 2022, the plaintiff provided evidence of copying the Destiny 2 program code by the defendant to ensure the operation of the ESP function, which allows players to see through solid walls. In other words, the company recreated part of the program code, the rights to which belong to Bungie, and implemented it to third parties as cheats without the consent of the copyright holder.
The investigation of new evidence is yet to be conducted by the court.
3. Epic Games won a dispute against a cheater from Australia in court
The trial between Epic Games and the Australian cheat manufacturer BlazeFN (Brandon Despotakis) was conducted for more than a year and was completed on May 2, 2022.
The proceedings in the case began in the spring of 2021. The court found that the defendant violated both the Fortnite user License Agreement and the copyright of Epic Games by illegally selling accounts to third parties. The BlazeNF store provided users with the opportunity to purchase accounts that included rare and popular items, as well as cheats. Accordingly, the implementation of accounts is a direct violation of the terms of the game.
Epic Games also made a statement that the sale of compromised accounts and cheats harms the user experience, and players who sold or purchased their accounts through the controversial marketplace may also be sanctioned.
As a result of the proceedings, the work of BlazeNF was terminated, Despotakis made a public apology to the Fortnite gaming community on Twitter and paid compensation to the company, the amount of which is unknown. The compensation paid to the company will be donated to charity.
5. Gambling
1. The court rejected the collective action of the parents of the players against Valve
On January 7, 2022, the US Federal Court rejected a class action lawsuit by parents of children against Valve about gambling with CS items:GO, leaving no possibility of appeal. This lawsuit was one of many lawsuits accusing Valve of facilitating unregulated gambling on third-party sites where players could use skins and CS keys:GO as a currency (the cost of some reached thousands of dollars). The most popular website for trading skins, keys and cases is CSGO Lounge.
In 2016, news about teenagers acquiring keys to CS cases:GO with parents’ credit cards, has reached a wide resonance. The plaintiffs claimed that Valve actually disguises gambling games that have not passed the licensing procedure under the guise of loot boxes, since the company did not indicate the chance of items falling out. Valve was accused of violating consumer protection laws by misleading.
Valve, as part of the lawsuit, stated that loot boxes within the US legal system do not relate to gambling. Moreover, the company claimed that it does not approve and does not support such “online roulette” with CS:GO items.
The court in the framework of this trial established the absence of involvement of “online roulette” to Valve: the company does not own resources using its API, and also does not support such services. The last claim was rejected due to the lack of proof of the plaintiffs’ position: the parents were not CS users:GO or other Valve products, and, therefore, could not get acquainted with any statements from the company.
2. Take-Two is accused of deceiving users by selling loot boxes
On January 11, 2022, a class action lawsuit was filed against Take-Two (GTA publisher) with a claim in the amount of $5 million in connection with the use of gambling mechanics in the implementation of loot boxes in games. The lawsuit, which was originally filed on behalf of a minor and his guardian, is that loot boxes “psychologically distance” players from the financial consequences of in-game purchases: teenagers lack an understanding of the correlation of real money and virtual currency; also, such transactions are carried out without the knowledge of parents and are non-refundable.
These actions of the defendant in the lawsuit are qualified as unfair, since they confuse consumers and cause material damage. The lawsuit is being considered by the Northern District Court of Illinois.
Take-Two has not provided an official comment on this trial.
3. Electronic Arts will not be fined €10 million due to FIFA loot boxes
The Supreme Administrative Court of the Netherlands on March 9, 2022 overturned the decision of the court of first instance, which obliged Electronic Arts (EA) to pay € 10 million for the implementation of loot boxes in FIFA.
EA’s litigation with the Gambling Authority of the Netherlands began back in 2020, at the same time the Hague Court ordered EA to pay a fine (from €500 thousand to €10 million) for each week if EA does not remove the functionality of loot boxes in FIFA, which allegedly violated the requirements of gambling licensing legislation. The lawsuit claimed that EA forces players by regulating difficulty levels to purchase Ultimate Team player packages to increase the chances of winning.
According to the court, the system of “packs” from the FIFA Ultimate Team mode is not a gambling game, according to Dutch law. Gambling refers to independent games that are based on chance, and loot boxes are part of a football simulator. In turn, FIFA, according to its idea, is not a game based on chance. In view of the absence of the fact of violation of the law on betting and gambling, the court decided that there was also no basis for imposing fines.
4. A lawsuit has been filed against Blizzard due to Hearthstone card packs
On May 17, 2022, the guardian filed a lawsuit against Blizzard in the interests of one of the minor players, alleging that the packages force minors to make purchases that are non-refundable. In other words, parents are trying to recognize the implementation of loot boxes as illegal and violating consumer protection legislation.
Hearthstone offers players packs of cards, the content of which is determined by the case. Consequently, players cannot predict whether a valuable card will fall into their hands or not. The lawyer of the accusing party claims that the child spent more than $ 300 and did not receive any rare cards, and Blizzard allegedly exploits gambling techniques when selling packs of cards, since it does not specify the probability of receiving them.
The lawyer argues that under the California Family Code, minors have the right to waive obligations or receive compensation.
As part of the Blizzard case, the plaintiff stated that the company should have implemented a parental control function that allows parents to prohibit purchases or issue a refund.
Permission is requested from the court to recognize the claim as a collective one so that other parents can join it.
Blizzard disputes the claims and notes that it does not have tools to track whether the person behind the monitor screen is an adult or not.
6. Other
1. The developer of Cyberpunk 2077 will pay investors compensation of $ 1.85 million
CD Project – developer of Cyberpunk 2077 — on January 27, 2022 signed a settlement agreement with investors dissatisfied with the quality of the release. However, the company did not admit its guilt. CD Project notes that it was forced to conclude a settlement agreement due to the high cost of litigation in the United States. The settlement negotiations were completed in December last year. The terms of the agreement oblige CD Project and the insurance firm Colonnade Insurance S.A. to pay investors compensation of $ 1.85 million dollars in exchange for the plaintiffs’ rejection of claims against the company and its board members.
In 2020, a class action lawsuit was filed against Nintendo due to the drift of Joy-Con sticks. The plaintiffs were two women who purchased a Nintendo Switch console for their children.
The United States District Court in the Northern District of California suspended the case because the parents accepted the user agreement when activating the console, which deprived them of the right to file a lawsuit.
Joy-Con sticks have repeatedly failed consumers. After active operation, the sticks fail, which forces consumers to purchase a new pair of sticks.
The plaintiffs claim that Nintendo offers service support services for Joy-Con, therefore, it is Nintendo that is responsible for testing the controllers. Moreover, Nintendo is accused of deliberately implementing sticks, the design defect of which was initially known.
The plaintiffs insist on continuing the trial and intend to add their children as plaintiffs to the statement of claim, in connection with which they have filed a corresponding request to the court.
The further fate of the proceedings is still unknown.
3. Activision Blizzard Faces New Allegations of Sexual harassment and discrimination
On March 23, 2022, a new lawsuit was filed in the Los Angeles County Superior Court on behalf of an Activision Blizzard employee: the company was again accused of gender discrimination and sexual harassment.
Last summer, a lawsuit was initiated against Activision Blizzard regarding discrimination against women, which we talked about in the last review. Also in 2021, the company was sued because one of the employees was driven to suicide on the basis of sexual harassment by colleagues.
According to the new lawsuit, the unnamed employee started working for the company back in 2017 as a senior administrative assistant. It is alleged that she was frequently subjected to comments with a sexual context and unwanted physical touching from high-ranking Activision Blizzard employees.
The girl tried to complain about the inappropriate behavior of employees to the then president of Blizzard, Allen J. Brack (J. Allen Brack). However, her appeals were ignored. Moreover, the company’s management instructed Jane not to disclose information about what happened.
The girl faced the impossibility of career development in the company: her applications for open positions were constantly rejected, and later Jane was transferred to another position with a lower salary.
4. Epic Games vs Apple: Is the Battle of the Titans over?
We have already talked about the conflict between Epic Games and Apple, which began in 2020.
On September 10, 2021, the court sided with Apple. He recognized Epic’s claims and accusations as legally unfounded, but Apple was obliged to allow third-party developers to add links to third-party payment systems to applications. Apple decided to appeal the decision.
Epic Games filed a response to Apple’s appeal and a counter-appeal on May 25, 2022. According to the developer, the court unreasonably rejected the claim of Epic Games and made a number of legal mistakes. For example, the court upheld the restrictions imposed by Apple, although, according to Epic, these restrictions are a direct violation of the Sherman Act. Moreover, the court, indeed, found the facts of Apple’s anti-competitive actions, but did not establish more severe regulations for Apple. Epic also disputes the Cupertino company’s claims that the claims may weaken the security of iOS.
Both government agencies (the Prosecutor General’s Office) and tech companies (including Microsoft) sided with Epic. The entry into force of the court’s decision was postponed due to Apple’s petition. Apple claims that Epic has not yet provided any evidence of antitrust violations by the company. Roblox and Koch Group sided with Apple.
The outcome of the proceedings is far from over.
Wolfire Games studio filed an antitrust lawsuit against Valve in April 2021. She accused the company of suppressing competition in the computer games market by exploiting Steam’s dominant position. Valve deprives publishers and developers of the opportunity to reduce prices when selling Steam keys on other sites and obliges them to pay a 30% commission, which results in artificially inflated pricing on all marketplaces. Moreover, the company uses a wide arsenal of sanctions against publishers who sell Steam keys at a reduced price on other sites.
Earlier, we told that in November 2021, the District Court of the Western District of Washington in Seattle rejected the Wolfire Games lawsuit due to the lack of grounds for initiating an antitrust case, providing an opportunity to amend the requirements of the lawsuit and to re-file it.
In May 2022, the claim was sent for a new review, taking into account the amendments. The judge agreed with Valve’s accusation of antitrust activity and concluded that the company’s policy may contain illegal actions. The meeting to consider the claim has not yet been held.
6. Wata Games is accused of artificially inflating prices for retro games
Wata Games, assessing the condition of sealed cartridges with retro games, was brought a class action lawsuit in the District Court of the Central District of California on May 10, 2022. The plaintiffs accuse the company of unfair business conduct and manipulation of the retro video game market due to its dominant position on it. The number of plaintiffs reaches more than 10 thousand people.
Wata Games company offers services for estimating the cost of video games and their further implementation. The price of the carrier depends, as a rule, on its circulation and condition. Wata’s business model involves charging a percentage of the market value of the game based on the results of its evaluation and for the services of providing access to the marketplace. Since 2018, Wata has been a major player in the American retail market.
Prices for retro games on the Wata platform rose sharply during the pandemic: several cartridges sold for more than a million dollars, when a year earlier the record price barely exceeded one hundred thousand dollars.
Moreover, Wata’s subsidiary, Collectors Universe, is accused of spreading false advertising information, non–compliance with the terms of services and the difficulty of returning games after evaluating their value.
There is also evidence confirming the cooperation of Heritage Auctions – an auction house and Wata, the purpose of which was to manipulate the market by issuing press releases stating that the cost of retro game carriers would rise sharply.
According to the plaintiffs, the company earned millions of dollars on the commission for estimating the cost of carriers and for their further sale, creating an artificial increase in pricing in the market.
7. A class action lawsuit was filed against Sony by Russian users for 280 million rubles
In March, Sony Interactive Entertainment blocked the PlayStation Store in Russia, restricted the PS Plus subscription, suspended the supply of devices and physical copies of games. Moreover, Sony has not refunded the user of subscriptions to the services money.
On May 25, the Khoroshevsky District Court registered a class action against Sony’s European division and its Moscow office. 28 plaintiffs in the framework of the class action indicate the requirement to return the opportunity to purchase games, provide access to the PlayStation Store and compensate for moral damage (280 million rubles, 10 million rubles each). Accordingly, all plaintiffs are PlayStation users.
The terms of the user agreement, as well as the legislation of the Russian Federation, do not imply the possibility of unilateral refusal to provide the service “in connection with the internal and foreign policy of the state of location and residence of users.” Moreover, the terms of use of Sony programs indicated on the official website indicate the possibility of protecting the rights of users in the Russian jurisdiction.
The further fate of the claim is still unknown.
