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For developers of online multiplayer games, a game is only as strong as its community.  The problem is that publishers can’t fully control the social aspects of their games.  So how does a game company foster the type of online community that provides the most value to players?

Terms of Service.

Community management starts with a publisher’s Terms of Service.  I discussed Terms of Service briefly in my previous article about virtual property.  In a multiplayer online game, the Terms of Service are the law.  They create the framework for what is and is not acceptable in the game’s community.  As game companies draft their Terms of Service, they need to make choices about the type of community that they are trying to create.  This article walks you through some of those choices.

How Will You Enforce.

Is your company prepared to ban players from your community if they do not follow the posted code of conduct?  How active a role will your company take in policing the community?  In large online communities, it is not practical for the publisher or developer to monitor and stop all offending or unsportsmanlike conduct.  In order for the terms to have a real effect on the nature of the game’s community, there must be consequences for failing to comply.  For serious violations, banning a player’s account is the most effective choice.  For more minor violations or simple unsportsmanlike conduct, incorporating penalties and rewards into game play is another solution.  If certain in-game items, arenas for game play, and matchmaking opportunities are only available to members of the community in good standing, players are penalized if they act in ways that ruin the game for others.

Complaint Based Systems.

Fully policing an online community is a difficult, if not impossible, and most companies have limited resources to spend on community management issues. The best mechanism for maintaining law and order without paying people to moderate the game is to build community policing mechanisms into your game.  If you make your rules clear and available, your players can be the eyes and ears of your policing efforts.  Most players want to preserve a good gaming environment, and are willing to complain when a player is clearly breaking the communities’ rules.  Complaint-based systems are becoming the standard for policing online communities, and incorporating some form of formal complaint system into your game gives a remedy to players that are affected by griefers and other negative elements of the community.
There are conflicting opinions on how best to respond to in-game complaints.  Some companies take a hard line and ban players from the game that receive too many complaints.  Other companies suspend a player’s account for a period of time or take an even more hands off approach.  Companies making this decision are typically torn between wanting to maintain a positive, fair and welcoming game community, and not being faced with continually making judgments on where the line is with respect to bad conduct in the game.  One solution that I have been advocating to clients is a reputation based filtering system as a means of automatic policing of an in-game community.

Reputation-Based Filtering.

In a reputation-based online community, individual players establish a conduct-based reputation through their interaction with other members of the community.  Complaints by other players negatively affect a player’s reputation.  Actions that indicate cheating negatively affect a player’s reputation.  Good feedback from a wide variety of other players positively effects reputation.  With a reputation system in place, players can set a threshold reputation for their matchups with other players.  Sensitive members of the community may only want to come into contact with players of their own reputation level and above.  Players that offend enough people in-game would find they no longer have access to the more upstanding members of the community.   The benefits of this approach are that it allows the community to police itself, and allows players to screen themselves from disruptive players.  This approach also avoids the complications of banning a player from a game all together.

Liability Issues.

When managing an online community, it is important for game companies to create policies that provide protection from liability based on bad actors within the community.  The best example of this is the implementation of a properly crafted DMCA Safe Harbor provision.  In some circumstances, the Digital Millennium Copyright Act can provide safe harbor from liability for contributory copyright infringement.  If your online community allows gamers to communicate with each other, post items of content or design in-game items, the concern is that copyright infringement by a player in-game, could expose the publisher to liability.  The DMCA can provide a defense against contributory copyright claims, but only if the game company takes some fairly specific measures.  First, a game company’s terms of service need to include a DMCA compliance notice and take down provision.  This language indicates who content owners should contact if they believe their work is being infringed in the online community.  Additionally, a company must file a form with the US Copyright Office identifying its copyright agent for notice and takedown purposes.  Among other things, it is essential that a company enforce its notice and takedown policy and act promptly in response to complaints.  Companies should also enforce a policy of banning repeat infringers.  DMCA issues are complicated, and game companies operating on-line communities should work closely with their attorneys to best position themselves to take advantage of the safe harbor that the law can provide.

DISCLAIMER: Please read the disclaimer language using the link at the top of this page, or click here. This article is not intended to be legal advice, and no attorney client relationship should be inferred from this blog. The law varies from jurisdiction to jurisdiction and you should consult with an attorney before relying on anything you read here. This article and this blog do not reflect the views of Wilson Sonsini Goodrich and Rosati.

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Virtual property is a topic that gets lots of attention from legal scholars. There is something intriguing about the lawlessness of virtual worlds. Most of the legal writing in this area focuses on which laws apply and whether traditional legal principles can be transfigured to apply to virtual worlds. As I have mentioned in earlier posts in this series, the focus of these articles is not the theoretical, but practical information for people who make games.

In a virtual world, the publisher’s Terms of Service are the Law. While scholars think theoretically about which real-world laws should and shouldn’t apply in virtual worlds, game developers fortunately have the ability to move past the issue and create their own law.  In a virtual world, this means creating a clear and well drafted Terms of Service.  A developer or publisher’s Terms of Service are the constitution for its new world. If the publisher says it is legal for people to steal in-game items from each other, then it is. If the publisher’s Terms of Service say that the publisher can suspend player’s accounts, or repossess in-game items, it can. That said, while publishers can create the law, like real world legislators, if the publisher’s laws are too restrictive, arbitrary or unfair, gamers will rebel or take up residence in a more favorable world.

As a game company develops its rule of law, there are two decisions that will have a significant effect on the type of game it creates.

Who Owns Player Created IP?

One issue that that gamers have been paying more attention to in recent years is who owns items that they create in-game.  Some publishers of virtual worlds, like Linden Lab, give IP rights in creations to the gamers that create them.  Other publishers maintain ownership of all in-world items.

There are upsides to giving players rights in their creations.  Second Life’s policies with respect to IP ownership have resulted in a vast and diverse world created primarily based on the time and effort of its players.  When Second Life shifted to a policy of allowing players to own the IP rights in their creations, development in-world increased dramatically

The downside to allowing users to own IP rights in their creations is that the publisher looses some degree of control over its world. This is less of an issue in Second Life, because it is not trying to tell a story in the way that many games do. In story driven games like the the Matrix Online or Starwars Galaxies, valuable intellectual property is embodied in the virtual worlds themselves. The Matrix and Starwars universes, for instance, are too valuable to risk allowing users to create derivative characters or stories within the world.

Whether to Acknowledge Virtual Property?

Many game companies do not consider this question in enough depth before launching their game. There are two positions a game company can take with respect to in-game property:

Disavow Virtual Property.  The first position is that in-game property has no real world value. Under this theory, in-game items (e.g., swords, articles of clothing, game cards, gold) are purely licensed rights that can be used within the game. Companies that take this approach typically ban the sale of in-game items inside and outside the game.  In most cases these companies don’t actively enforce this rule. The most compelling reason that companies take this position is to avoid anti-gambling laws.  Each State has its own rules with respect to what constitutes an illegal lottery.  To oversimplify this explanation, a common theme among the States is that gambling equals wagering plus chance (G = W + C).  Companies that take the position that virtual items in their games have no real world value are working to eliminate the wager part of this equation.  The argument is that if in-game items have no value, it is not gambling to put them at risk in a game.  The downside to this approach is that the game company looses the ability to get involved in the marketplace for in-game items, which can be a profit center.

Embrace Virtual Property (but eliminate chance).  The second position is to acknowledge that in-game items have real-world value.  This can make a game or virtual world more compelling for gamers, and can permit a game publisher to become involved in the market for virtual property within the game, but this approach comes with a variety of risks.  One risk is the gambling issue described in the previous section.  By acknowledging property rights in in-game items, a publisher reintroduces the wager element into the equation.  In order to reduce the risk of a claim that its game constitutes gambling or an illegal lottery, the element of chance must be eliminated (or reduced, depending on the jurisdiction).  This is a difficult thing to achieve, and typically involves modifying the game rules to eliminate the degree of chance involved.  The common law theory that provides this leeway for skill-based games dates back to times when governments sought to encourage athletic competition as a means of encouraging a physically fit armed forces.  The legacy is that in many states skill-based competitions are permitted, even when the participants pay an entry fee to compete for a prize.  Game companies that are interested in pursuing this approach, should consult with an attorney to help craft game rules that eliminate as much chance as possible.

Another risk associated with embracing the existence of in-game property is that a player may argue that a game publisher has taken his or her property rights if the game is discontinued, or the player is banned from the online community.  A player recently sued Linden Lab alleging this type of taking.  The player had manipulated Lindon Lab’s land purchasing engine in Second Life to purchase in-game land at below market values.  When Lindon Lab discovered the manipulation of the system, it suspended the players account.  The player sued and the case eventually settled.  Since the case didn’t proceed to judgment, the law is still unsettled.  Until such time as this issue is resolved by the courts, these risks are best mitigated through well drafted and forward-thinking Terms of Service.

Conclusion

This article is a fairly gross simplification of the framework around this area of law.  My hope is to provide some high level thoughts, without writing a treatise on gambling or skill-based gaming.  That said, if you have questions about the area, or there are glaring gaps in the summary, please feel free to let me know and I will update accordingly.

DISCLAIMER: Please read the disclaimer language using the link at the top of this page, or click here. This article is not intended to be legal advice, and no attorney client relationship should be inferred from this blog. The law varies from jurisdiction to jurisdiction and you should consult with an attorney before relying on anything you read here. This article and this blog do not reflect the views of Wilson Sonsini Goodrich and Rosati.

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Copy of the complaint below for anyone that is interested.

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.

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.

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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.)

Despite my legal background, this blog focuses primarily on technology. I write about technology because it is what I find interesting, but recently I have had some requests to touch more on legal issues. So with that in mind, I am asking for readers to submit questions they have about the law. I work with technology companies on issues involving intellectual property and commercial transactions. The DMCA, user generated content, licensing, protection of IP and IP strategy, venture finance, open source, fair use, and virtual property are legal issues I deal with regularly. If you have a general questions about technology related law, send them to me at submissions@thisistech.com. I will do my best to answer in a post.

Now for the disclaimers. These questions and answers are not intended to create an attorney-client relationship, so please do not send any confidential information as part of a question. I will only accept questions that are general in nature. That means if you have a dispute or deal pending with someone specific, don’t send it in.

Thanks for reading. If you have any other questions or comments about the blog, please feel free to send them to submissions@thisistech.com also. I really appreciate the feedback and am glad people are enjoying the site.

• United Kingdom supermarket chain begins using child face recognition to help prevent selling alcohol and cigarettes to minors
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• The first space lawyer!

MIT’s Tech Review has an interactive overview of each presidential candidate’s positions on various technology related topics.

Whether paying court at Google headquarters in Mountain View, CA, or answering detailed questionnaires from technology publications, each candidate has felt compelled to lay out a road map of where he or she plans to lead the country on these complex and sometimes controversial issues. Our interactive guide attempts to give readers a sense of where the candidates currently stand, and it points to key legislation that each candidate has introduced or voted on to see where he or she has stood in the past.