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This article covers the first and second parts in a series about Video Game Law. There is a wealth of academic information on the topic of game law on the Internet, but my hope is to provide more practical legal insight in a way that could actually help a game developer or startup tackle some of these issues in practice and understand the lay of the land. As much fun as it is for lawyers like me to contemplate hypothetical issues, like whether there is such a thing as trespass in a virtual world like Second Life, these issues don’t generally help people make games. The goal of this series is to give game makers a practical look at the legal issues they should consider when running a game company. My clients don’t pay me to wax philosophic about laws that don’t exist yet, but I do spend a lot of time answering real questions that game makers face. This series of articles will share that insight with you.

DISCLAIMER: Please read the disclaimer language using the link at the top of this page, or click here. This is not legal advice. The law varies from jurisdiction to jurisdiction and you should consult with an attorney before relying on anything you read here. I also need to say that this article and this blog do not reflect the views of my employer Wilson Sonsini Goodrich and Rosati.

Part One: Growth in the Interactive Entertainment Industry.

This first part “Growth in the Interactive Entertainment Industry,” is not legal in nature, but is intended to give an overview of why practitioners and business people should be paying attention to this stuff. Gaming as a form of entertainment is becoming wider spread each year.

To give you an idea of the size of the industry, game related products accounted for close to eight billion dollars in 2007. Around two out of three households in the US plays games, and that number is growing. The average age of a gamer in the States is 35. One in four gamers is over 50. The game industry spans a variety of game types, from basic but highly profitable Casual Games, to more in-depth “Hard Core” PC or console games, to virtual words and massive multiplayer online games.

Part Two: Convergence of Games with More Traditional Media.

As technology has improved, games have become less expensive to make, while at the same time the success of blockbuster releases like Halo 3 and Grand Theft Auto IV are fueling a wave of big budget games with cinematics and storytelling that rival motion pictures. Story telling in games has its roots in text based adventure games like Zork, where games were a hybrid of technology and literature. This was extended into graphical games like the Legend of Zelda, where the game was graphical, but the story telling was still implemented with text. Gaming in the 80s required a lot of reading, and if Zork is the gaming equivalent of a book, then the Legend of Zelda is the equivalent of a book with illustrations.

There are still games that can be traced back to a literary tradition of story telling, but most modern games can best be compared with motion pictures. Games like Halo 3 use a combination of music, professional voice talent, and detailed cinematic cut scenes to advance the story. It is no longer enough for a game to have a good written story, the story must be brought to life with visuals and sound. Like a good motion picture, when executed properly, the player feels like they are transported into the story. The best example of this based on the current generation of games is BioShock from 2K Games. Video below:

Games are converging with traditional media, like motion pictures and television, in terms of financial proceeds. The chart below shows revenues from music, motion pictures, and games over the past 5 years. What is more interesting, however, is the convergence of games with traditional media in terms of the entertainment value that they represent. Every year games become more compelling. Developers become more and more skilled at taking advantage of current hardware, and every 4 years or so, consoles are upgraded, causing spikes in game quality. Consider the value proposition that a motion picture or music album represents. This experience has not changed significantly in the last ten years. Movie screens are bigger, and music is now downloadable, but the content is essentially the same. Movies today don’t tell stories better than they did ten years ago. Music today has changed but is not significantly more entertaining that it was ten years ago.

When you compare games today with what was available in 1997, it is clear that players are getting more for their money, and the overall gaming experience is more compelling.

By way of example, in 1997 Sony launched its Gran Turismo series, and the top grossing movie of that year was Titanic. Watch the videos below and decide for your self which is more entertaining.

Now skip forward ten years and take a look at Sony’s new Gran Turismo V, as compared with the top grossing movie of 2007, Spiderman 3. It is getting harder to determine which is more entertaining. The difference between Titanic and Spiderman 3 is relatively small with respect to how entertaining those movies were, but the difference in quality between the original Gran Turismo and the new Gran Turismo V is hard to ignore. Ask yourself what games will look like in another 10 years. Assuming that movies don’t reinvent themselves somehow, it is likely that movies will still be telling stories in the same format, and are unlikely to rival interactive entertainment for pure entertainment value.

So why does this matter? Two reasons.

From a business perspective, money. In ten years the interactive entertainment industry will be as big or bigger than the movie industry. Games will pull people away from the television and keep them from going to movies. Games are an active, as opposed to passive experience, and are increasingly social, with online play practically standard on most new console games. If you are in the advertising, music, motion picture, or televisions industries, this stuff should matter to you because it is where the money will be spent. If you are in the technology space, games will be the driver of new hardware sales (computers are already faster than they need to be for non-gaming activities).

From a legal perspective, this convergence matters because the legal needs of game companies are changing. Gaming companies have historically required legal expertise in technology and software related intellectual property. As games evolve game lawyers spend more time addressing pure entertainment issues, like rights of publicity, negotiation with talent, disputes over credits, and merchandising related to game franchises.

These first two parts of this series are a non-legal introduction to the articles to come. In the next few weeks, I will be posting about the decisions game companies must make when introducing virtual property into their game universe. I will be posting about management of on-line communities, and how and when you can kick people out of your game. I will cover talent related issues, and whether or not your game company wants to work with guild vs. non-guild talent. Stay tuned.

Up Next:

• Part Three: Virtual Property Law.
• Part Four: On-Line Community Management.
• Part Five: User Generated Content Issues.
• Part Six: Talent Issues. Guild or No Guild.
• Part Seven: Game Specific IP Issues.
• Part Eight: New Revenue Streams for Game Companies.
  
• Part Nine: Unsolicited Submissions.
• Part Ten: Development and Publishing Agreements.
• Part Eleven: Gambling, Lotteries, Sweepstakes and Contests.
• Part Twelve: In-Game Currency Issues.
• Part Thirteen: Content Regulation and Freedom of Speech.
• Part Fourteen: Merchandising.

I was in the Bay Area Tuesday to give a talk at WSGR’s Palo Alto office on recent developments in interactive entertainment law.  My practice focuses in large part on helping game companies develop and commercialize products, and the legal issues involved in making games are part of what makes me love my job.

Since I took the effort to pull together my thoughts for the lecture, I thought I would try to cover some of the same material here on the blog.  I plan to break out the segments of the presentation into a series of posts over then next few weeks.  New posts will be in the “Law” category on this site.  Clicking this link will take you to a page that has all the posts in the category.

This first post is just a preview of the topics I plan to cover. Think of it as the table of contents, if such a thing exists on the Internets.

Legal Issues in Interactive Entertainment (update on video game law):

• Part One:  Growth in the Interactive Entertainment Industry.
• Part Two:  Convergence of Games with More Traditional Media.
• Part Three: Virtual Property Law.
• Part Four:  On-Line Community Management.
• Part Five:  User Generated Content Issues.
• Part Six:  Talent Issues.  Guild or No Guild.
• Part Seven:  Game Specific IP Issues.
• Part Eight:  New Revenue Streams for Game Companies.
  
• Part Nine:  Unsolicited Submissions.
• Part Ten:  Development and Publishing Agreements.
• Part Eleven:  Gambling, Lotteries, Sweepstakes and Contests.
• Part Twelve:  In-Game Currency Issues.
• Part Thirteen:  Content Regulation and Freedom of Speech.
• Part Fourteen:  Merchandising.

If there are topics that you are interested in that are not covered here, please leave a comment, or shoot me an email at submissions@thisistech.com.

Apple’s iPhone App Store rolls out today, which means we will finally get a look at the breadth and quality of applications that have been developed.

The launch applications for the App Store are less ambitious than I had hoped. There are around 500 applications available, many of which are eBooks of classic literature. Hopefully the interface on these eBooks is something special, because the same books can be read on the iPhone for free by browsing to project Gutenberg using Safari.

Among the most interesting apps are those that tap into the iPhone’s geolocative captivities.

The Most Interesting:

• Loopt. Loopt is one of the more ambitious iPhone applications, allowing you to track the location of friends, among other things.

• Pandora Radio and AOL Radio. AOL Radio and Pandora are both excellent services. Having access to them on the iPhone will be great.

• Remote. This application allows you to control your desktop iTunes playback using your iPhone. This might be a nice alternative to an expensive system like Sonos.

Worst iPhone Apps:

• Phone Saber. This application appears to make light saber noises when you move your iPhone around.

[Update: I just saw that Mike Arrington at TechCrunch thinkgs this is going to be a sleeper hit. I hope he is joking. I love Star Wars too, but come on. Using the iPhone SDK to create a crazy expensive version of a toy, is a waste of the opportunity that Apple gave developers. They have greeting cards with enough processing power to make these noises. The iPhone can handle 3d graphics, has network functionality and GPS, and you use the SDK to create a program that makes noises when you shake the phone. Am I alone in thinking this is lame?]

• Quick Light / Flashlight. These two applications make your screen light up so you can use your iPhone as a flashlight. I know this might be usefull for some people, but seriously, this is embarrassing.

• Cow Toss. This application is a picture of a cow that you can drag with your finger to throw the cow. WTF.

21st Century Monocycle by Ben Wilson: ”

Are traditional bikes a bit too pedestrian for you? Ben Wilson recently unveiled a sleek monocycle at this year’s XXIst Century Man Exhibition in Tokyo. Wilson’s pedal-powered prototype one-ups those tendentious ‘bi-cycles’ with a single center-seated wheel. The elegant nimbus may not provide for the smoothest ride, but it more than makes up for it via its pure awesome appeal.”

(Via Inhabitat.)

Image via Wikipedia

In response to my open call for questions post, I received an email asking, “when does it makes sense to file a copyright?”

The short answer is that if you have a copyrighted work worth protecting, file early. Copyright applications are fairly inexpensive and (for better or worse) provide very long term protection.  By way of background, copyright is a form of intellectual property protection that is provided for “original works of authorship.”  This includes things like literary works (like books, screenplays, technical documentation, and computer software), works of the performing arts (like musical compositions and movies), visual art works (like paintings or photographs), and sound recordings.

Copyright protection exists automatically from the moment that a work of authorship is “fixed” in a tangible medium of expression.  This means that the work is recorded in some way, for example written down, or video recorded. So if copyright protection exists automatically, why would a company or someone want to spend the money and time to file an application?  The answer is that registration give you a variety of additional benefits that don’t apply automatically.

(more…)

Seattle startup Dashwire has launched the second version of its mobile phone syncing software.  With some nice press in the Wall Street Journal the new version is off to a good start.  Ford Davidson and his team at Dashwire have built a transparent syncing system for mobile phones that allow users to automatically pull pictures and video from their phones and synchronize contacts with a desktop computer.  If you have a Windows mobile 5 or 6 device, you should check out the free application.  Video demo here.

As a interactive media lawyer, it goes without saying that I am bullish on the future of the games industry. Every year video games get more compelling, more detailed, more fun to play. Meanwhile television and movie producers keep pumping out more of the same.

The rumors going around the web are that Activision and MTV Games have both been in talks with the Beatles‘ representatives regarding a license to create playable tracks based on the Beatles’ catalog. It would say a lot about the market power of the video game industry if Activision or MTV Games were able to score a licensing deal with the Beatles. Every six months or so there are whispers that Apple will finally be adding the Beatles to iTunes, but it hasn’t happened yet.

One aspect of a video game deal involving Beatles content that makes it more likely than a traditional music distribution license is that a Rock Band or Guitar Hero game may only require publishing rights tied to the underlying Beatles compositions and not the recordings themselves.  Use of the recordings would require a license to both the composition and the recording.  A composition only license would require the game developer to re-record the songs, however, which would make the game less compelling than if they used the original recordings. Somehow I doubt Paul and Ringo want to get back in the recording studio to re-record Twist and Shout for Rock Band.  Then again, they might just use covers.

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Excerpt from Joystiq.com’s coverage below:

FT.com revisits the pursuit and reports that, perhaps unsurprisingly, Beatles ‘representatives have held discussions with both Activision and MTV Games’ in pursuit of a ‘final deal [that] would be worth several million dollars’ and ‘could be reached in a matter of weeks.’ Well, we’ll be here in a matter of weeks … say, E3 would be a really nice time to announce something. We’re just sayin’

(Via Joystiq.)

My firm just published our Spring 2008 Entrepreneurs Report, summarizing trends in the venture-backed technology market over the last several years. Among the statistics is this chart showing the average founder equity dilution in Series A and Series B financings broken down by industry. The dilution numbers on the BioTech industry are up above 90%, meaning that by the end of the second round of financing, founders of biotech companies don’t own much of the company. The flip-side of this is that biotech projects require a huge degree of funding, and it is difficult to raise that much money without giving up significant equity.

This morning I saw a demo on Venturebeat.com of a new native iPhone app from a Seattle-based startup called Urban Spoon. Urban Spoon is a client of my firm, so I have had some exposure to their original website, which aggregates information about restaurants and allows users to vote on which restaurants they like.

Urban Spoon has an iPhone application in the wings that looks to be a great way to add some spontaneity to your dining plans. The application (demo embedded below) uses the iPhone’s location awareness and provides you with a slot machine style wheel of fortune for picking restaurants. Shake the iPhone and a recommendation is made. Don’t like the pick, shake it again.

Massage chairs have officially gotten out of hand. Check out this top of the line behemoth from Tristar. Not sure how high pressure lamps will help you relax, but I would be willing to give it a try to find out.

Tristar Massage Chair: “

The Tristar Massage Chair seems like something out of outer space, but this is a special piece of furniture that will help you unwind after a long, stressful day at work. I suppose you’ll need this after taking a loan to make a purchase since it retails for €5,000 - by no means small change for anybody. It features adjustable massage settings with half a dozen techniques to choose from, accompanied by a new foot massage system that helps you de-stress completely with Kalfasun high pressure lamps helping your face and hand muscles relax. The built-in CD player and audio system ensures you feel totaly rejuvenated after each experience.

(Via Ubergizmo.)