In-game items and transactions with them: does the law regulate them?
Who owns in—game items and how international legislation relates to them, – says in his column for App2Top.ru Alexey Vikharev, lawyer at VERSUS.legal.
Alexey Vikharev, lawyer VERSUS.legal
Multiplayer games have thoroughly entered our lives. Today, it is already difficult to surprise anyone with the number of fake hours that have long passed into four-digit figures, or the opportunity to sell the resulting skin for “real money”. The cost of in-game items (in-game items), of course, can still amaze, but there is no doubt about the actual economic value of such objects now.
The basic purpose of in—game items is simple – their variety allows you to maintain user interest in the game. After all, such “cosmetic” external changes are perfectly combined with the personal desire of each player for uniqueness in such mass hobbies. Therefore, developers pay special attention to additional features for the design of the appearance of the character, inventory, or even individual locations.
But everything becomes not so simple when there is a corresponding offer for such a demand. Recognizing the value of the received object, it is impossible not to think about whether it is possible to transfer it to another player. It’s not always possible to spend a lot of time playing, and the right armor would be useful right now. Such an obvious and simple request entails an infinite number of legal questions (availability of rights and their protection, regulation of transfer and payment, and much more), the answers to which are no longer so simple. Let’s deal with everything in order.
Who owns the game items?
With a serious passion for the game, when hundreds or thousands of hours have gone into a long and difficult development of your character and inventory, I intuitively want to say that everything belongs to me. Even more confidence in this is given not only by the amount of effort spent, but also by the amount of money spent. If I buy clothes for money, then it belongs to me, so when buying clothes for money to my character, such clothes belong to me, because I buy them myself and for my own purposes.
Such explanations, although understandable, are still far from reality. Unfortunately, it is easy to forget about this when more than one thousand hours and rubles have been spent on the game, which leads to disputes and conflict situations with developers.
Any purchase of items, skins or cards inside the game is always conditional. Moreover, both in the case of receiving an object for free during a quest or at the end of the next batch, and in the case of buying it for money (including independent purchases within the system and purchases of objects from other players on trading platforms).
Without going too deep into legal aspects, the game is an object of intellectual property. Each object has a copyright holder (often the game developer acts as such), who sets the scope and possible ways of using the game and its individual parts. Therefore, it is always necessary to keep in mind that the player is the owner of a particular item only in the playing field, but not in the legal one.
“But I paid the money, not just found it” — that’s right, you just need to understand what exactly the money was paid for. The difference between a material object and an immaterial one is not only that it is impossible to physically try on a Cat jumpsuit bought for an Arsonist. An intangible object is limited by its place of use — the game. In other words, the player does not buy a specific thing in the game, but the right to use such a thing in the game according to the rules determined by the copyright holder.
Thus, there is another reason to visit the developer’s website and read the User agreement or End-user license agreement (EULA). All subsequent explanations about any use and transfer of in—game objects will be based on the obvious conclusion – the objects belong to the copyright holders (developers), therefore, for each specific case, you should refer to the text of the relevant agreement.
And so everywhere?
Separate regulation of in-game items at the legislative level is rare, but approaches to resolving disputes in different states are largely similar.
One of the most common concepts regarding items in multiplayer games was developed in the USA under the name Magic Circle. The essence of such a concept can be summarized as follows — all actions of players in relation to objects that directly relate to the gameplay cannot have legal consequences in the real world, even if they are associated, for example, with theft or deception. Conversely, the player’s actions will have legal consequences in reality if such actions, although related to the game, go beyond the gameplay.
This approach seems logical and allows you to distinguish between situations that are characteristic of any game and actual offenses. For example, many game mechanics directly provide for the ability to steal an item from another character’s inventory. Or the players agree that one will take part in the raid if the other first gives him the necessary artifact or a certain amount of gold. Having received the agreed, the first can simply exit the game, and the second will not be able to protect their rights in the real world.
Such situations are, of course, offensive and unfair, but they are completely different from offenses. The latter can include, for example, physical or psychological violence by one player or group over another in order to obtain the necessary object, or direct hacking of an account to steal a pumped character or object.
The Magic Circle concept has its supporters and opponents. It is used with varying degrees of success in courts to protect rights, may occur under different names in other countries, but it is the basic idea that not all gaming processes can have real consequences in reality.
Such a boundary between actual violations and ordinary actions in the game also exists in a number of Asian countries, where esports has been popular throughout the country for many years (primarily in China and South Korea). A few years ago, a legal dispute was considered in China, which is notable for the broader border of player rights protection.
One player had to return his character to another, for the development of which more than a million dollars were spent, through the trading platform, setting a certain high cost, but he was sealed in the price. As a result, the character was immediately acquired by a third party, which served as a reason to go to court. It is noteworthy that the court did not limit itself only to the rules of the trading platform and allowed the parties to agree in court, where in the end the transaction was canceled, and the buyer received an impressive compensation.
In South Korea, a similar approach applies — game items cannot be recognized as the player’s property. Therefore, for example, the theft of an object cannot be equated to a criminal offense, if such actions do not violate the legislation on the protection of information. In Western legal literature, there are mentions that in Taiwan game items are property and their theft is criminally punishable. At the same time, relevant norms of the Criminal Code also apply to violations of information protection (Offenses Against the Computer Security).
Russian law and order and multiplayer games
The Russian law and order also does not stand aside. Of course, it is too early to talk about the regulation of in-game objects in Russia at the legislative level. However, the practice of our courts, consciously or intuitively, follows a generally accepted concept — usually courts refuse players to resolve controversial issues related to game items. In practice, such disputes usually arise in relation to the ban of the account, in the development of which the player has invested a lot of money. Such a refusal to satisfy the player’s claims, including compensation for the funds spent, is based on the norm of Article 1062 of the Civil Code of the Russian Federation, according to which relations related to participation in the game, including online games, are not subject to judicial protection (see, for example, the Appeal Rulings of the Moscow City Court of 20.05.2019 in the case No.33-21065/2019 and No. 33-24464 dated 14.07.2015).
Usually, the developer places a user agreement in an accessible place, where the rules are prescribed, which each player agrees to by installing the game or logging in to the account. Including such rules, in violation of which the player may be deprived of the received item, the whole character, or even access to the account. This should be remembered by every player before he decides to go to court in a conflict with the developer or administrator of the game.
A separate issue for the Russian law and order is the specifics of taxation, and in particular, the need for the payment of VAT by the developer for the sale of in-game items. The Tax Code of the Russian Federation provides benefits in the form of exemption from VAT in certain cases, including the transfer of rights of use on the basis of a license agreement (paragraph 26, paragraph 2, Article 149). Each developer strives to minimize the necessary costs, and the amount of VAT for the received sales of game items in popular games can exceed more than one million rubles.
I made an attempt to figure it out Mail.Ru Group in a well-known case on appealing the decision of the Federal Tax Service (FTS) on bringing to responsibility for non-payment of VAT on the sale of game items (case no. A40-91072/2014). The position of the Federal Tax Service was that the sale of in-game items does not mean the granting of the right to use on the basis of a license agreement, but the provision of services for the organization of the gameplay, and therefore the payment of VAT is mandatory. This dispute reached the Supreme Court of the Russian Federation, which supported the position of the tax authority (see the ruling of the Supreme Court of the Russian Federation dated 30.09.2015 in case No. 305-KG15-12154).
Such qualification of the sale of game items seems, in our opinion, somewhat one-sided and does not take into account the specifics and the basis for the provision of “gaming services”. It is noteworthy that in the future Mail.Ru The Group managed to defend its position, and the Federal Tax Service in an official letter on the consideration of the appeal confirmed that in the case in question it is about the transfer of rights to use non-activated data and game commands, which is subject to the exemption from VAT (see letter of the Federal Tax Service dated January 23, 2017 No.SD-4-3/988@).
Nevertheless, the new version of Clause 26, clause 2, Article 149 of the Tax Code of the Russian Federation, which entered into force on 01.01.2021, significantly restricts the use of such a preferential opportunity. However, this restriction is subjective, not essential. So, since 01.01.2021, the granting of the right to use only those programs that are included in the Unified Register of Russian programs for Electronic computers and databases is not subject to taxation.
This register is formed by the Expert Council on Russian Software under the Ministry of Finance of Russia and contains a number of mandatory requirements (see Decree of the Government of the Russian Federation No. 1236 of 16.11.2015). One of the key requirements for developers is the following: “the software does not have forced updates and management from abroad.” Unfortunately, such a broad formulation in practice may lead to a ban on the use of foreign advertising aggregators and analytics services (for example, Unity, Google, Amazon) as part of the SDK software, which reduces the number of programs that can be entered into the registry.
At the same time, from the point of view of tax exemption for the sale of in-game objects, the meaning of the above norm of the Tax Code remained unchanged. If you include the game in the registry of the Ministry of Finance of Russia (for example, Mail.Ru The Group has entered the Warface game into the register), then the necessary requirements of tax legislation for the provision of benefits will be met.
Russia also provides for criminal liability for actions in relation to obtaining unauthorized access to an account (for example, hacking it) on the basis of Article 272 of the Criminal Code of the Russian Federation. In such rare cases, it is a crime to unlawfully access the e-mail of a player to whom an account in the game was linked, including for the purpose, for example, to link such an account to his mail (see the appeal decision of the Nizhny Novgorod Regional Court of 22.03.2018 in case No. 22-1216/2018).
Nevertheless, it is always worth taking into account the specifics of the Russian law and order and courts — the vast majority of cases are considered by courts of general jurisdiction. Cases related to intellectual property are rarely found in them, and cases when an ordinary citizen complains about the actions of a large corporation are often. In the end, this can lead to unexpected results.
The legal regulation in each country may differ significantly even in relation to some simple and similar issues. Nevertheless, the general trend of recognizing the rights to objects for the rightholders of the game and recognizing the rights to use such objects in separately permitted cases for the players of the game is widespread.
Sale and purchase of in-game items
The value of game items directly depends on their rarity and popularity of the game — the rarer the item is and the more popular the game, the higher the final cost will be (just remember the story with the courier from Dota 2 or the recent purchase of two skins in CS: GO). Realizing the possible profit, players strive to get as many rare objects as possible, including without neglecting farming.
Since all the objects belong to the developers, then the possibility of their transfer to other players is regulated by the same developers in the user agreement. However, if developers usually do not mind when a player purchases another improvement for rubles or dollars, then the situation of withdrawing game currency / selling a rare skin for money is already less acceptable.
Some companies impose a complete ban on the possibility of transferring game objects to other players as a basic rule. So, for example, Wargaming did, stating in its license agreement that the user does not have the right to transfer the rights to “inactive data and commands” in any way. In this case, such a name of game objects serves as a reminder to players that we are not talking about any actual objects, but about parts of the game, the rights to which also belong to the developers.
A similar ban can be found in the Blizzard license agreement. Both companies also prohibit the transfer or exchange of accounts in order to avoid the transfer of characters or inventory between players. Nevertheless, realizing the popularity of such transactions, Blizzard decided to go a little further. She offered World of Warcraft players the opportunity to purchase tokens for money, which can be sold for in-game currency. The buyer can use such a token for 30 days of game time.
The desire to keep the main flow of funds inside the gaming platform is not something new and has been implemented on the Steam platform for quite a long time. Players, receiving in-game items in accordance with the rules of the games, can place them on the trading platform or on the “Exchange Offers” page, and sell or transfer such objects among themselves.
Steam also allows you to purchase game items for money through your account wallet. At the same time, the player is not limited to one game — the funds received that remain in the wallet, he can spend on the purchase of an item from another game or on the purchase of another game on the platform. However, the entire turnover of items and funds is limited by Steam itself — the rules of the service do not allow transferring funds from a wallet to any bank account (but there are other platforms that allow you to withdraw funds to your account, for example, a new project from Mail.Ru Group — Lootgog).
At the same time, and in the presence of such a platform, the basic rules for regulating the turnover of game items belong to the developers. They decide whether to place their game on the platform and allow in-game trading (a significant number of games on Steam do not support trading in game items). Platforms such as Steam only act as a relatively reliable intermediary and sets its own commission, offering a convenient platform for the purchase or sale of the received objects.
However, each platform has its own disadvantages and vulnerabilities. In particular, account hacking, inability to withdraw funds, or a set price limit (for example, the maximum value of an item that a player can set on Steam is $ 1,800). The presence of such shortcomings leads to the appearance of illegal sites or markets where it is possible to sell the received item faster and withdraw money to a third-party wallet.
For example, market for CS:GO acts as a certain intermediary in the sale of items: its own wallet on the site allows you to withdraw funds for a transaction, and synchronization with a Steam account makes sure that the proposed object is available. At the time of sale, the player-seller actually makes a gratuitous exchange of goods through Steam, while the necessary amount is transferred to his account in the market. Obviously, there is no regulation or protection of both the buyer and the seller here, and it will be impossible to apply either to technical support or to court requirements.
Including for these reasons, many players prefer to conduct transactions for the sale of rare and expensive items offline in order to minimize any deception. As, for example, it was in the case mentioned above with the sale of CS:GO skins. It is possible to imagine that at such a meeting, skins were also transferred through the exchange function, but only at the moment when the seller actually received the agreed amount.
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Game items are in many ways just a good decision by developers to improve their own game. The acquisition of in—game objects allows you to possess such a “thing” only conditionally – only inside a certain game and in accordance with the rules of its developers. Modern law and order prefer not to interfere much in the relationship between the players, as long as it does not threaten the security of the individual or does not violate the existing norms of the law.
Therefore, all rules related to the creation, exchange, purchase or sale of a game item are initially created and regulated by the copyright holder of the game. Such rules are offered to players on the take it or leave it principle, which cannot cause dissatisfaction in certain cases and only contributes to the creation of shadow platforms for more flexible and comfortable, but also less secure interaction.
