King Riccardo Zacconi files cloning lawsuit against 6Waves

GamesBeat, the games industry news service, has reported that King Riccardo Zacconi is taking legal action against developer 6Waves, claiming it has cloned Pet Rescue Saga and Farm Heroes Saga in titles Treasure Epic and Farm Epic.

King’s CEO has confirmed that “6Waves went well beyond simply using King’s ideas for inspiration; they copied the original and creative expression that our employees worked very hard to develop. We invest heavily in the creative and technical processes that go into creating such unique games. We welcome fair competition but developers that simply mimic our products severely inhibit our ability to put vibrant and fun games in front of our players. Such practices pose a threat not just to us, but to the entire games industry.

Apparently. the games look very similar, not just in user interface, but also games physics and colours.

6Waves has previously faced similar legal action, when last October it settled out of court with Spry Fox over claims it had cloned match three title Triple Town with its game Yeti Town.

6waves has denied all allegations, commenting: “Puzzle solving games and themes like farming and jewels are not unique and have been created by many other companies. Such popular gameplay and themes cannot be copyrighted.

Whether there has been a copyright infringement under English law will depend as a general rule of thumb on whether or not there has been a substantial copy, which usually amounts to more than fifty percent.

© Brian Miller, Solicitor, 2013. This article may not be reproduced without the prior written permission of the author.

Brian is a solicitor at Stone King LLP.  For further news and information on legal topics of interest, please visit Brian’s other blogs:

Brian Miller Solicitor’s IP Law Blog
Brian Miller Solicitor’s Privacy & Data Protection Law Blog
Brian Miller Solicitor’s IT Law Blog

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New Games Tax Relief Proposed By TIGA

TIGA’s proposals for new Games Tax Relief should benefit the UK video games companies

Earlier this year, the Government launched a consultation on the issue of extending to other creative industries the corporation tax reliefs that currently apply to certain “culturally British” film productions.  The Government proposed slightly different rules for each of the three new reliefs it was creating, which include reliefs for high-end TV, animation and video games. However, for each there is a requirement that 25% of ‘core expenditure’ be incurred in the UK and also the option of receiving a cash tax credit. Although the Government has not stated what the proposed rate of relief will be, it has said that it is expected to be of “similar generosity” to the existing film tax relief, which it says has resulted in an additional investment of £1 billion in the UK film industry.

The film tax scheme has been available since 2007.  Under this scheme, the production company of a film, which has core expenditure of more than £20 million, can claim an additional deduction of 80% and a payable cash rebate of up to 20% of UK qualifying film production expenditure. Films which have a core expenditure of £20m or less are entitled to an additional deduction of 100% and a payable cash rebate of up to 25% of UK qualifying film production expenditure. To fall within the scheme, a film must be certified as ‘”culturally British” by the Culture Secretary on the advice of the British Film Institute.

In its response to the Government proposals, TIGA is calling for a Games Tax Relief (GTR) to apply to a wide range of UK video games companies and has said that it should not only be available to firms developing games in the first instance but also to those incurring costs on updates or in fixing problems, following release of the game.  It proposes that eligibility should not be subject to a minimum amount of expenditure and that the Government should draft rules that will enable as many firms as possible to qualify.

However, in accordance with EU state aid rules, only companies producing culturally British content will be eligible for the relief.  The “cultural test” that will apply to determine which firms will be eligible for the tax break has yet to be drafted by the Government, but TIGA is pushing for a generous test so that as many companies in the video games sector as possible can benefit from the relief.  In its latest press release dated 12th September 2012, TIGA has asked for the views on the content of this test from digital publishers, developers and the wider UK gaming community.

The CEO of TIGA, Dr Richard Wilson, said “TIGA’s aim is to strengthen the UK games development and digital publishing sector and to ensure that the industry contributes to economic growth. Video games can be cultural products and provided that the cultural test is designed to reflect the nature of video games, then the culturally based Games Tax Relief will give a powerful boost to the UK games sector.

“Games draw upon many artistic disciplines. Typically, 30 – 50 per cent of the cost of game development is spent on artists, animators and designers, with studios such as Frontier Developments creating beautiful art. Music is also an essential element of many games. Driver San Francisco, developed by Ubisoft Reflections, involves 80 licensed tracks.  Similarly, the compose Richard Jacques used a live symphony orchestra in the video game soundtrack for Headhunter.

Jason Kingsley OBE, TIGA Chairman and CEO and Creative Director at Rebellion, said:  “TIGA’s members include small and start-up studios. These developers and digital publishers in particular need as much certainty as possible before or during the prototype phase that their game will pass the cultural test.”

Tax law expert, Matthew Rowbotham of Pinsent Masons, considers it unlikely that  the Government would draft too broad a cultural test.  He commented that TIGA’s proposed 30% tax relief was “more generous than film tax relief in the UK” and would be “more generous than France’s video games relief” regime. He said “EU state aid rules prevent such a wide relief. Nonetheless TIGA is understandably pushing for as generous a test as possible. The idea that games might qualify if they have a ‘British feel’ is unlikely to find favour with the EU. Pity the poor Secretary of State asked to adjudicate on whether a game has a British sense of humour! The Government is likely to play it safe, with a reasonably objective cultural test. Further consultation on the detailed cultural test is expected this autumn.”

Draft legislation is expected from the Government later this year.  Subject to state aid approval, the new relief is due to be introduced from April 2013.

© Brian Miller, Solicitor, 2012. This article may not be reproduced without the prior written permission of the author.

Brian is a solicitor at Stone King Solicitors.  For further news and information on legal topics of interest, please visit Brian’s other blogs:

Brian Miller Solicitor’s IP Law Blog
Brian Miller Solicitor’s Privacy & Data Protection Law Blog
Brian Miller Solicitor’s IT Law Blog

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The Perils And Pitfalls Of Development Agreements by Brian Miller Solicitor

(originally featured in Develop Magazine)

All developers have at some point, faced pressure to sign a fifty page development agreement supplied by a publisher at short notice with very little time (and possibly scope) for negotiation.  Here is a brief survival guide if you find yourself in this situation.

Advance

The first thing to consider is the signature payment.  It is clearly important to try and recoup the cost of making any demo which the publisher requires.  As many developers are aware, a demo can now cost as much as $250,000 (and possibly more).  While the publisher may not be prepared to pay more than a certain amount, it is crucial that the developer does not put itself on the back foot financially before it moves into full production of the game.  Accordingly, make a proper calculation of the number of heads doing what and when for the pre-production period and the likely cost, justifying to the publisher the amount in question and see what you can get.  The same goes for full production.

Royalties

Royalty deals in development agreements vary enormously from amounts as little as 5% to as much as 30% of net sales (and possibly more if a developer manages to involve a completion bonding company or part-funds the game itself).  The payment of any royalties to a developer will, of course, eat into any profits the publisher will make on a game, so a publisher will be keen to limit the royalty it pays to the developer.  It is probably true to say that a good royalty rate for a developer negotiating at arm’s length with reasonable bargaining power ought to be between 20-25%.  This can, of course, vary enormously, depending on a number of factors, the main one being the strength of each party’s bargaining position.

Try, therefore, to justify the royalty rates you are seeking by obtaining from the publisher what it estimates the likely sales will be and what the publisher’s costs will be (so you can work out what ‘net sales’ means), its margin and any other relevant information.  Then estimate what the publisher will get and what you will get as a percentage of net sales.  If the publisher will make a £40 million profit after paying you a royalty of 10%, you should be thinking about asking for more…

Intellectual Property

This is clearly one of the (if not the) most important clauses for both parties.  What a developer can hold on to in terms of intellectual property is often its only and most valuable asset.  Many publishers try to get an assignment of all intellectual property as and when it is created by the developer, so that at no time will the developer own any intellectual property in the game itself.  Many contracts simply allow the developer to retain intellectual property in its core engine which it will be using and developing in the production of the game.

At the very least, a developer must ensure it retains all rights in its engine and should only grant a licence for its use in the game, otherwise it will find itself the proud owner of diddly-squat.  Furthermore, a developer should do its utmost to negotiate for itself at least 50% of the intellectual property in the game (and ideally more).  Whether it can achieve this will depend upon the relative bargaining powers of each party.  As the developer will, along with the publisher, be putting its heart and soul into producing what will hopefully be a triple-A product, it should also be rewarded for its efforts.

Payment Terms

It goes without saying that timely payment of milestones is critical for a developer.  It is also a truism that one or more milestones will be late at some point during the development process.  This will result in anticipated milestone payments that were sitting in a developer’s cashflow spreadsheet being pushed sharply to the right by however many weeks of delay there are plus any resubmission time required by the publisher before approval will be given.

Unfortunately, payment terms in development contracts are often similar to their commercial counterparts (i.e. 30 days, although 45 is not unusual), even though this could put the developer in difficulties if there are any delays in approving one or more milestones and the developer has little or no capital reserves.

A further problem with standard payment terms is that if the publisher does not pay upon expiry of the payment period, the developer still has no legal recourse in terms of threatening termination until it serves a notice on the publisher and waits for the stipulated period (usually 4 weeks) to elapse.  In theory, it is possible for a developer to issue either a statutory demand or legal proceedings against the publisher for non-payment of any approved milestones as soon as the relevant period for payment has passed.  In practice, however, a developer is unlikely to want to do the latter, both from a financial perspective and because it is likely to sour the relationship with the publisher.  Many developers are reluctant even to serve a notice of breach upon a publisher for fear of ruffling feathers.  However, it is generally advisable for the developer to point out the error of the publisher’s ways, otherwise the developer might be thought of as a pushover.  Try, then, to work out when you should be paid and in the worst case scenario, if the payment is never forthcoming, you cannot begin to terminate the agreement until notice of breach has been served and the cure period has elapsed.

Approval of Milestones

The approval process can often be fraught with difficulties.  Many of the problems are due to inadequate and improper drafting of the specification.  In the absence of a complete and thorough description of how the game should be written and developed in all its aspects (which is probably impossible, anyway, because of the evolving process of game development), there will always be room for the publisher twisting a couple of sentences into a new 3D world of effects and features.  That is not to say that far more effort should not be put into the drafting process to ensure that there is as little scope for uncertainty as possible.

At the end of the day, if the publisher is requesting a feature, or a number of features, which clearly require a substantial amount of extra work (i.e. it is not in the spec), then it is important to raise the “change order” process (and it goes without saying that there should be such a procedure laid down in the contract …).  Failure to do this will result in further tears and misery for the developer, as it carries out what is effectively “free” work and impacting upon the bottom line of its accounts.

Another important aspect of approval is ensuring that it actually happens and does not drag out indefinitely.  Any well-drafted contract for the benefit of the developer should include a ‘deemed approval’ clause, stating that the deliverable will be deemed approved if the publisher does not accept or reject it within a set period of time.  Failure to include this can leave the developer considerably exposed throughout the development cycle.

Delivery of Master

In rare cases, the publisher will seek to charge a penalty if the gold master is not delivered on time or will simply terminate the agreement and demand a refund if the master has not been approved within, say, three months of its first submission.  The effective fine (where there is no termination) can be substantial, particularly if the delay is considerable, and can take from the developer any profit it may have made from the production process.  Such a clause is, in any event, problematical for the simple reason that not all delays are down to the developer itself.  Avoid whenever possible.

Termination

Another clause which can bankrupt a developer is one requiring repayment of all advances if the publisher terminates the agreement for breach (or repeated breach) of contract by the developer.  In many agreements, the publisher will ensure that it owns 100% of the intellectual property rights in the game.  Accordingly, in this scenario, the publisher is likely to gain physical possession (to the extent it has not already) of one or more previously approved milestones (and for those it has not, it should not have paid for them).  The publisher will therefore receive valuable consideration for the money it had previously handed over for approved deliverables and will own the intellectual property rights in them and in any partly completed ones it might receive on termination for which the developer should not have been paid.

The developer should therefore not be required to refund all monies paid for approved milestones, since the publisher is, in theory, able to commission a new developer to complete the game.  Although one developer taking over another’s work is not easy, this should not be accepted as a reason for including such a large stick in the contract.

© Brian Miller, Solicitor, 2012. This article may not be reproduced without the prior written permission of the author.

Brian is a solicitor at Stone King Solicitors.  For further news and information on legal topics of interest, please visit Brian’s other blogs:

Brian Miller Solicitor’s IP Blog
Brian Miller Solicitor’s Privacy & Data Protection Blog

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Sex, Violence and the Law by Brian Miller Solicitor

(Previously featured in MCV magazine.)

Video games have long been the scapegoat of politicians and media campaigns. Whilst the majority of the focus has been upon the depictions of violence within games – as the furore over Grand Theft Auto’s now infamous “hot coffee” scandal and subsequent legal wrangling demonstrates – the potential controversy of depicting explicit sexual acts in games is even greater. With the next generation of consoles promising even greater realism and detail, this article aims to take a whistle stop tour of the current regulation schemes in the UK and Europe and offer some clarification of the law for developers and publishers alike.

Unlike the US, which remains governed entirely under a system of self regulation – as yet there is no federal law against the sale of violent or sexually explicit video games to children (although certain states have introduced legislation) – the UK has a mandatory system for certain types of video games depending upon the content.

The UK

Games featuring sex or violence must be submitted for classification by the British Board of Film Classification (BBFC) in accordance with the Video Recordings Act 1984.  The role of digital and interactive media was elaborated in the Criminal Justice & Public Order Act 1994, which introduced a number of new tests to the classification process, including a specific requirement to consider the ‘harm’ that the work may cause a potential viewer.

Video games remain generally exempt under the Video Recordings Act 1984 (VRA) however the exemption will not apply if that game depicts:

  • sex;
  • violence;
  • may encourage criminal activity (or other “matters of concern”); and/or
  • where the depiction of such material is particularly realistic.

The VRA was introduced at a time when games could not hope to rival the imagery of movies and films, but given the increasing visual fidelity of current and next generation videogames and the considerable crossover of interactive and traditional media entertainment this exemption is of increasingly little value.

The attitude towards classification in the games industry has shifted over time and as a result many publishers submit each and every new game to the BBFC to ensure the game has been classified before publication.

Europe

In addition to the UK’s own mandatory age classification scheme, the PEGI (Pan-European Game Information) scheme is a voluntary age suitability scheme aimed primarily at advising parents. In the UK this scheme is supported by ELSPA (Entertainment & Leisure Software Publishers Association) and all its members are required to submit all games which are exempt from BBFC classification for classification under the PEGI system. In contrast to the BBFC system, publishers are required to fill out a self-assessment application form, based upon the content and provide their own suggested age rating which is verified upon receipt.

The PEGI scheme currently covers 16 countries within Europe with Germany being the most notable absentee as it relies upon its own compulsory classification procedure. Some other countries also use their own classification systems (e.g. Finland) and the ratings in these countries are adjusted accordingly. In essence the PEGI scheme provides a useful guide to the likely classification of a release for publishers in Europe.

Age classification

Both the BBFC and PEGI systems are fundamentally aimed at the protection of children and young persons and therefore employ a system of age classification. Publishers are strongly advised to consider submitting new games to the BBFC if they are in any doubt as to the content, as unlike the PEGI scheme, it is a criminal offence to supply illegal unclassified works or to supply age restricted material to persons under that age with fines and/or prison sentences for any person found in breach.

The BBFC will only classify the product and, where necessary, advise on cuts that need to be made. The BBFC cannot rule on the legality of the content, but in any event they will not classify material that they believe is in breach of the law.

Any submissions made under the PEGI scheme will be required to consult a checklist of the type of content that is likely to require mandatory classification. Whilst the checklist on the application form should not be taken as a complete summary, it does provide further guidance of the type of content to be wary of. It should be noted however that the age classifications under the BBFC and PEGI schemes do not necessarily match.

Types of content – prohibited content

The law in relation to what is illegal is judged according to whether the material in question is legally obscene. Fortunately whilst the Obscene Publications Acts were crafted in the early 1960’s, the test is judged according to the contemporary standards. The test is simply whether the effect of the material (considered as a whole) is “such as to deprave and corrupt persons”. There is no set definition; it is not enough that the publication shock or disgust, it must have a morally debasing, corrupting effect upon the viewer.

The requirement that the material be taken as a whole, rather than in relation to a specific item of content considerably reduces the scope of the law in this area. In practice, the law of obscenity is rarely used, as mandatory classification has for the most part dealt with this issue. The key factor is the intended audience for the material. In light of this publishers may wish to consider the material which is contained on a games website, given the difficulties of restricting access to a particular age group over the internet.

The BBFC ratings

Given the generally balanced approach to censorship in the UK, the barrier as to what is and is not permissible within a video game is largely a decision for the publisher, depending on the market they are aiming for. The increasingly mature audience of the gaming market means that publishers may feel they can afford to release games that are restricted to the over 18 audience without taking a major hit in sales, as the Grand Theft Auto series ably demonstrates. If explicit sexual scenes are a feature within the game, the publisher can expect an ‘18’ classification and be treated by retailers accordingly.

The BBFC publish guidelines on a regular basis (available at www.bbfc.co.uk) and these should be the first reference for any developer or publisher wishing to have a better understanding of the likely classification of an intended release.

Because R18 material is reserved for highly explicit sexual material it is difficult to see how any video game would fall into this category without a concerted effort on the part of the developer and publisher. Clearly any game featuring explicit sexual material must be submitted for classification by the BBFC.

The current regime

Whilst the “hot coffee” hidden mini game in GTA: San Andreas may have (and continues) to cause its publishers problems in the US, the game had already received an 18 certificate in the UK by the BBFC; there is nothing to suggest it would be treated differently under the BBFC’s guidelines if this material had been an intended part of the final game. This is in stark contrast with the reception abroad – in Australia and New Zealand for instance, two territories that closely follow UK law across a wide range of areas, the game was either banned or given an R18 rating in response.

Given that the fundamental basis of the age classification schemes is the protection of children, it follows that PG, 12 and 15 rated works will require greater scrutiny on the part of the developer/publisher to ensure that the game meets the required classification. Looking at the BBFC’s most recent decisions this is likely to affect magazine publishers who may bundle a mixture of demos and videos on cover mounted disks and wish to sell the magazine to the broadest audience available.

A comparison of “Psychonauts” – rated PG, “From Russia with Love” – rated 12 and “Resident Evil 4” – rated 15, shows that even strong violence may not automatically result in an 18 certificate. However, a title featuring strong sex/violence within a realistic setting, particularly featuring criminal related activity, for example the Grand Theft Auto series, will inevitably be aimed at an adult audience and be rated accordingly.

Unfortunately there are no hard and fast rules as to what particular type of content will lead to a particular rating, but an awareness of the above issues will provide a better understanding of how the system works. A developer would be well advised to bear in mind the intended rating from the start of a project to avoid any future headaches further down the line.

©Brian Miller, solicitor, 2012. This article may not be reproduced without the prior written permission of the author. This article reflects the current law and practice. It is general in nature, and does not purport in any way to be comprehensive or a substitute for specialist legal advice in individual circumstances.

Brian is a solicitor at Stone King Solicitors.  For further news and information on legal topics of interest, please visit Brian’s other blogs:

Brian Miller Solicitor’s IP Blog
Brian Miller Solicitor’s Privacy & Data Protection Blog


LINKS
1.         The BBFC website provides information and guidance on the classification scheme, application forms and a database of previous decisions
2.         PEGI (Pan European Game Information) website provides further guidance on the ratings system and downloadable assessment forms for publishers.
3.         ELSPA has a wealth of information for publishers, codes of practice, piracy and other matters relevant to the UK games industry
4.     The Video Standards Council provides some additional advice on what is covered by the VRA, as well as practical advice for retailers
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Repackaging Your Product Legally (or how to avoid being injuncted when dealing in parallel imports) by Brian Miller Solicitor

(featured in MCV Magazine)

Introduction

Manufacturers will often sell their products at different prices in different countries, in order to capitalise on the diverse market conditions that exist around the world. For example, a pharmaceutical manufacturer may sell a particular drug to rich American consumers at $20 per bottle while offering it to comparatively poorer consumers in Zimbabwe for $5 per bottle. The reasons for this are not hard to understand. Relatively richer Americans are willing and able to pay the higher price, so there is no economic reason for the manufacturer to sell the drug to Americans at a lower price. However, the fact that hardly any Zimbabweans could afford the higher price provides a very good economic reason for the manufacturer to market the drug at a lower price in Zimbabwe. It is better for the manufacturer to have some customers in Zimbabwe rather than none at all, even if it means slimmer profit margins than in the US.

Manufacturers of games consoles will often engage in similar market partitioning. They, like their cousins in the pharmaceutical business, are acutely aware of the varied market conditions that exist in different countries, and they are naturally keen to exploit these differences to their advantage. PS2 trade price in the UK is currently (as at 23/11/04) £82.21 plus VAT, however many units are available at prices between €105- €115 + applicable VAT in the EU zone for bulk orders, which translates to £73.49- £80.49 plus applicable VAT at current exchange rates. So there appears to be more flexibility on price in Europe for trade purchases and little incentive for the prospective British customer to make a special trip to the Continent to pick up a cheaper console there, since the official retail price for one unit is £104.99 (inc VAT) in the UK and €159.99 (inc VAT) in the EU (equivalent currently to £112.03)

Some enterprising companies have, however, spotted a gap in the market, particularly when exchange rates fluctuate or supply shortages arise in one or more countries. If you can buy cheaper French games consoles and ship them over to the UK, you may be able to sell them at a cheaper than market price in Britain while still retaining a reasonable profit margin. Economists and lawyers refer to this practice as “parallel importation”.

Whether they are in the business of making Playstations or antiretroviral drugs, manufacturers have a clear incentive to suppress parallel importation, because it acts as a powerful force which pulls the prices down in their more expensive markets, squeezing the margins on products which they sell directly to consumers in those markets.

Unsurprisingly, manufacturers will use any means at their disposal to thwart parallel importers and to keep markets partitioned. One powerful weapon in the manufacturers’ armoury is the use (or the threat) of a trade mark infringement lawsuit, as Tesco found to its detriment in 1999 and as more than one distributor of gaming consoles is discovering in 2004.

The Tesco case

Tesco had been importing Sony Playstations from France and selling them in the UK. As the Playstations were intended for the French market, they had French-style power plugs and SCART plugs for connection to TVs. To make the consoles suitable for the British market, Tesco had to open up the boxes to fit British-style power plugs and to add radio frequency modulator (RFM) units, as some older British TV sets do not have SCART sockets. Tesco then added a label to the box of each imported console which said “This product has been opened to fit an adaptor to enable it to be used in UK three pin power sockets and to include an optional RFU adaptor repacked for Tesco stores UK”.

Sony took legal action against Tesco, alleging trade mark infringement. The RFM units that Tesco had added to its repackaged consoles bore the words “Sony Playstation”, which Sony argued was a blatant infringement of its registered trade mark.

The court examined the question of whether Tesco’s labels had made it clear that Sony was not responsible for the additional items which had been added to the Playstation boxes. Under European Community (EC) case law, this could have provided Tesco with a defence to the allegation of trade mark infringement. The court took the view that Tesco’s labels were not sufficient to dispel the impression that Sony was responsible for the additional items. Furthermore, the court described Tesco’s use of the Playstation trade mark on the RFM units as “the clearest possible breach of trade mark rights”.

The court ordered an injunction to prevent Tesco from selling the offending repackaged consoles unless Tesco attached more explicit labels which clearly stated that the RFM units were not made or approved by Sony.

How to avoid Tesco’s mistakes

Under EC law, European companies and citizens have the right freely to move goods from one EC country to another. This right is not completely unqualified, but in certain circumstances it can trump the rights of trade mark owners. This is because the right to engage in parallel importation is seen as an important element of the common market, which is at the heart of the whole European project. Market partitioning is heavily frowned upon by the bureaurocrats in Brussels.

Certain provisions of EC law and UK law ensure that trade mark owners cannot use their trade mark rights to prevent parallel importation without a ‘legitimate reason’. Such a legitimate reason might be that the products have been damaged or rendered unsafe by the importer.

In a series of cases relating to parallel importation of pharmaceutical drugs, the European Court of Justice (ECJ) has spelt out what a parallel importer has to do in order to avoid being successfully sued for trade mark infringement. In the context of repackaging games consoles for sale in the UK, a parallel importer must ensure that it sticks to the following legal requirements.

1. The repackaging must not affect the original condition of the consoles. The importer must be careful not to inflict any damage on the consoles through the process of importing and repackaging. In addition, the repackaged boxes must not be damaged, untidy or of poor quality, as this could damage the reputation of the trade mark owner.

2. The new packaging must clearly state who repackaged the consoles as well as the name of the manufacturer. It is no good putting this in the small print – this statement must be in a sufficiently large typeface that a person with normal eyesight would be likely to notice it. However, there is no requirement for the importer to state that the repackaging was carried out without the manufacturer’s authorisation.

3. If the importer adds any extra items to the consoles (such as power plugs or RFU adaptors) then it must make it absolutely clear that the manufacturer is not responsible for these items. The extra items must also be entirely safe to use with the consoles, and must comply with any relevant British Standards.

4. The importer must give the trade mark owner advance notice of its intention to put the repackaged consoles on sale. Such notice must be given at least 15 working days before the repackaged products are put on the market. The trade mark owner then has the right to ask the importer for a specimen repackaged console, which the importer must provide.

5. The repackaging itself must actually be necessary in order for the importer to successfully market the consoles. There must be a genuine reason for the repackaging, such as the need to insert extra components into the boxes.

As long as the parallel importer follows these rules, it should be safe from any potential trade mark infringement proceedings that might be threatened by the manufacturer.

It is, however, important to note that different rules will apply to a so-called “grey importer” who is importing consoles from outside the EU and then repackaging them for sale within the EU. More on that another time..

What could happen to importers who don’t follow the rules

If an importer breaks any of the rules set out above, it runs the risk of being successfully sued for trade mark infringement. The consequences of this could be as follows.

 1. The importer may be ordered to pay the trade mark owner a substantial sum in damages. Alternatively the importer could be ordered to hand over the profits it has made from its parallel importation to the trade mark owner.

2. The manufacturer may obtain an injunction to prevent the importer from selling the consoles in question.

3. The court could order the importer to hand over its stocks of repackaged consoles to the manufacturer.

4. As with any lawsuit, if the importer has been successfully sued it will most probably have to pay the manufacturer’s legal costs, which could be significant.

In short, if you don’t stick to the rules established by the ECJ, it could prove very costly for you.

© Brian Miller, solicitor, 2012. This article may not be reproduced without the prior written permission of the author. This article reflects the current law and practice. It is general in nature, and does not purport in any way to be comprehensive or a substitute for specialist legal advice in individual circumstances.

Brian is a solicitor at Stone King Solicitors.  For further news and information on legal topics of interest, please visit Brian’s other blogs:

Brian Miller Solicitor’s IP Blog
Brian Miller Solicitor’s Privacy & Data Protection Blog

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Manhunt and Beyond by Brian Miller Solicitor

(featured in MCV Magazine)

‘And shall we just carelessly allow children to hear .. tales which may be devised by casual persons, and to receive into their minds ideas for the most part the very opposite of those which we should wish them to have when they are grown up?’ Plato, 374 BC.

The parents of the recently murdered schoolboy, Stefan Pakeerah, are claiming that the makers of violent 18-rated game Manhunt are responsible for the death of their son. The boy was murdered by his 17-year old killer and friend, Warren Leblanc, using methods similar to those featuring in the computer game Manhunt, which involves the player taking on a role of convicted murderer who is then forced to kill others in order to survive. Weapons used in the game include claw hammers, guns, baseball bats and knives.

Stefan Pakeerah died from horrific and fatal injuries sustained from a claw hammer. The boy had been hit so hard that his head had been fractured in several places with deep cuts to his head and neck, he had multiple stab wounds from knife plunges so deep they had caused serious injuries to his kidney and liver. Evidence has shown that his killer was obsessed with playing Manhunt, being a reclusive child left to his own devices since an early age after his mother was killed.

Dixons, Woolworths and Game took the unusual step earlier this week of removing the product from its shelves. For those stores still selling the game, like HMV, the game has apparently sold out and re-entered the Top Twenty Charts. Calls have again been made to ban this game as being the root of the death. It was already banned six months ago in New Zealand by censorship officials. ELSPA, one the key industry bodies representing the games industry, firmly rejects any links between Manhunt and the tragic events. As it said in an official statement, “the game in question is classified by the British Board of Film Classification and therefore should not be in the possession of a juvenile…We would add that simply being in someone’s possession does not and should not lead to the conclusion that a game is responsible for these tragic events.” The police have also currently said they have not connected the game with the murder, the motive being robbery.

With an ever-increasing number of games featuring violence as the major theme, fears have often been expressed that this may result in the player becoming more aggressive and potentially being incited to commit acts of violence or even murder. There are many examples of such games, for which a cry has oft gone out for their ban. Hooligans – Storm over Europe (rated 18), is a game that was released in 2003 and gives players the chance to be a football hooligan in Europe. The game depicts gruesome scenes of soccer thugs fighting one another in pubs and terraces armed with broken bottles, knives and other weapons. Grand Theft Auto, set in Miami, has a main character who roams the streets killing for pleasure. The more people killed, the greater the points. They are many other examples, too long to list here.

Can any of this lead to the user replicating the acts of violence depicted in these games? Research is beginning to give us a picture of what these effects might be. Middlesex University has carried out research and concluded that violent computer games may be directly responsible for aggressive behaviour. The University carried out its research on the behavior of 204 pupils aged between 12 and 14 at a London school. They discovered that the longer children played violent computer games, the more aggressive their behaviour became. They concluded that ‘there is a growing body of evidence to suggest that there is a link between playing games and aggression.’

But surely the same can be said about film, books, or boxing on telly, or as one individual remarked, following the fifteen deaths caused by Robert Steinhäuser when he stormed his former school in Erfurt in Germany armed with guns after becoming obsessed with the game Counterstrike, should we ban bread because 90% of killers have eaten bread before their crime? As we all know, most juveniles who commit crimes of this nature will have suffered a difficult childhood, possibly having been abused themselves, losing one or both parents through death or divorce, or having mental illness of some sort. The matter must surely be more complicated than just focusing on what the child had been playing on his games console 48 hours before his victim’s death.

So could the makers of computer games be held legally liable for acts such as that committed by Pakeerah’s juvenile killer? It could be argued that both the developer, when creating the game, and the publisher when publishing and distributing the game, have a legal duty of care under the law of tort and doctrine of negligence. It is arguable that those parties should have foreseen that playing a violent game repeatedly might cause a player to go and carry out in real life what had been experienced on the screen. But a victim harmed would have to prove that the developers and/or publishers’ negligence was the cause of the injury, although it is not necessary for it to be the sole or dominant cause. This may be hard to prove, but in light of an increasing body of evidence to suggest that there is a causal link between use of a computer game and increased levels of aggression, this is a potential risk that should not be totally ignored. One might also argue that there is a distinction between books/films and games: in the former, the reader/viewer is generally passive, but in a game, there is a truly interactive experience.

Although no one has yet succeeded in a court of law in establishing a link between aggression and playing violent computer games in real life, there have been a number of dramatic events in recent years resulting in legal proceedings being issued against publishers and developers of computer games. In 1997 in West Paducah, Kentucky, the parents of three girls shot at Heath High School filed a $130m lawsuit against 25 media companies including Time Warner, Nintendo, Sega of America Inc., Atari Corporation, Nintendo of America, Sega of America Inc. and Sony Computer Entertainment. The lawsuit was for negligence based on their not warning consumers that content they made available could incite copycat violence. The basis of the claim was that, as the gunman, high school freshman Michael Carneal, played violent computer and video games, visited Internet pornography sites and watched violent movies, he was influenced sufficiently by them to commit murder. In April 2000, a federal judge dismissed the lawsuit based on finding that the video game makers could not have foreseen what Carneal would do, having played their games. The judge’s opinion was based heavily on a similar case that arose over a decade ago in which the Sixth US Circuit Court of Appeal held that the makers of the Dungeons and Dragons popular role playing game were not liable for a teenager’s suicide. The West Paducah shooting was among the first in a string of school shootings nationwide that also included Jones Burrow, Arkansaw, Stringfield, Oregon and Columbine High School in Littleton, Colorado.

More recently, earlier this year, US lawyers brought actions against the Edinburgh-based developer Rockstar Games, who produced the game Grand Theft Auto, following claims by teenage boys in Tennessee that they were acting out the game when they shot at vehicles. A man was killed and a woman wounded after being shot in their cars near the Tennessee town of Newport. It is understood that the parents of murdered teenager, Stefan Pakeerah, have also prepared writs against Rockstar in relation to Manhunt. Of further interest, is that a copy of the game was also found in Stefan’s games collection.

Case law has been unable so far to establish a link between aggression and computer games and has resulted in a number of US cases being dismissed. Whether things will change in the future will remain to be seen. It is hard to believe they will, for the reasons given above, and no doubt to the relief of the games industry. Whether there should be any change to the content of games is, of course, a different matter. But at the end of the day, games developers and publishers are just responding to market forces. If we, as consumer, didn’t have a hunger, either ourselves or through our children, to buy these games, then there would be no market for them. Recent sales of this game, following the “bad” press, indicate otherwise. It could be said that children will always be attracted to such things, not always being in a position to judge right from wrong. Which means we, as parents, need to take more responsibility in controlling what games our children play. It is, of course, very difficult to control this entirely, children always being adept at borrowing from their friends or playing at their friends’ houses, hiding away the games and so on.

Most of us know we would never kill or maim, no matter how many games we may play of a violent nature, movies we may watch or circumstances in which we find ourselves in. But there is always that tiny percentage who will. To blame games for that is probably a little short-sighted.

This article does not purport to be comprehensive or give specific legal advice. Before any action is taken on matters covered, you should obtain professional advice.

©Brian Miller, solicitor, 2012. This article may not be reproduced without the prior written permission of the author. This article reflects the current law and practice. It is general in nature, and does not purport in any way to be comprehensive or a substitute for specialist legal advice in individual circumstances.

Brian is a solicitor at Stone King Solicitors.  For further news and information on legal topics of interest, please visit Brian’s other blogs:

Brian Miller Solicitor’s IP Blog
Brian Miller Solicitor’s Privacy & Data Protection Blog

This article reflects the current law and practice. It is general in nature, and does not purport in any way to be comprehensive or a substitute for specialist legal advice in individual circumstances.

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Pre-Owned and Your Rights by Brian Miller Solicitor

(originally published in MCV Magazine)

Following the rumours that Sony’s Playstation 3 would utilise a form of licence in a bid to prevent the sale of pre-owned titles, this article examines the legal implications of such a licensing scheme in the marketplace, as well as looking at some of the other issues arising out of games publishers’ attempts to stem the sale of pre-owned games.  We will also look at some of the options available to publishers in addressing this increasingly lucrative market.

Unlike pirated games, the pre-owned market involves the sale of genuine products that have already been sold to punters. The concern for publishers is that such copies do not feed back any further royalties into the industry and that the size of the pre-owned market threatens to stifle future development and income.

The software licence model

Whilst software licensing is nothing new in the realm of PC gaming and software, the Sony proposal, if real, would go somewhat further by attempting to preclude the re-sale of the disk or its use on other PS3 consoles. The concept would be a radical departure from the current system, effectively tying the purchased disk to a single machine. The idea is based upon the consumer purchasing a licence to use the game, rather than acquiring ownership of the product itself.

Leaving aside the practicalities of creating such a form of licence and the various difficulties that might arise, for example, where the purchaser owned two consoles, it is difficult to determine the legal basis upon which Sony would be able to prevent subsequent resale of the disk. The consumer would have to agree to the terms of the licence itself, either through the use of a “shrink-wrap” agreement (whereby the user indicates acceptance to the terms of the agreement by opening the box, the enforceability of which remains unclear in both the EU and UK) or through a “click-wrap” agreement, where the user indicates their acceptance of the terms by ticking a box before installing the software onto their computer, and if they do not, the software will not install. Whilst both methods are common in the use of PC software, they have rarely, if ever, been seen in the console sector before.

The problem for console software is that it is still, despite the gradual maturing of the marketplace, aimed at young people and children, who could not be legally bound by a complicated terms of use licence. Even if a child were to indicate their acceptance to the terms, such a contract would not be enforceable and the courts would in all likelihood take a very dim view of any such practice. The licence would therefore either require a user to be over eighteen years old (a minor is anyone under the age of eighteen for litigation purposes in the UK) or provide a means of opt-out, which would presumably involve a circumvention of whatever form of registration the system would use.

Even if the game disk were to utilise a similar system to the PC model, the Sony licence would take this one stage further, by tying the disk to an individual console, presumably by marking it through an online verification system. Given that the disk itself would presumably not be changed physically by this process (unless there is some additional technology at work in the PS3 that we have not heard about), it is not easy to see how the licence would operate if the console were not connected online.

There are other problems that also spring to mind.  For example, whilst a user could agree not to transfer his personal licence, the legal basis upon which Sony would be able to stop the user selling the physical disk that holds the licence is less clear. The contract would be personal between the user and Sony and it would not be enforceable against a third party. Notwithstanding that such a term may be unfair under the Unfair Terms of Consumer Contracts Regulations 1994 (given the detriment such a term would represent to the consumer and inequality of the parties’ respective bargaining positions), the fact that the disk is unlikely to be physically altered means that it is difficult to see what measures could be taken that would comprehensively prevent the subsequent resale (and use) of the game. Whilst Sony could theoretically sue the original user (if they can be traced) for breaching the terms of their licence, the obvious practical difficulties of doing so, not to mention cost and negative impact on the company’s goodwill, means that the rumoured licence scheme is unlikely to see the light of day.

If licensing is therefore not a viable solution, what other options are available?

The starting point is for publishers to consider their ability to control the resale of their games. Is there any means of redress? Unfortunately, the short answer is probably no. In the European Economic Area or EEA (which includes all EU countries), once goods have been put on the market in one jurisdiction, a publisher is deemed, under European law to have “exhausted” its right to control the resale of those goods in all those markets. Accordingly although there is little authority on this point, it would seem that a supplier cannot attempt to assert its rights in respect of those goods.

An in-depth examination of the ramifications of competition law on the ability of publishers to prevent or restrict the sale of pre-owned is beyond the scope of this article. The courts and related enforcement bodies adopt a purposive approach to competition law, meaning they will look at the underlying purpose (and the effects) of the agreement. Stated in the briefest terms, any manufacturer or supplier which sought to restrict the sale of goods to distributors, who agreed not to sell pre-owned games, could find itself in hot water. Any agreement (whether formal or informal) which has as its object or effect, the effect of distorting competition, or stopping and/or restricting the growth of the pre-owned market, may fall foul of the Competition Act 1998.

Conclusion

Clearly the options explored above are all, to some extent, unsatisfactory or unworkable for publishers.  However, the digital distribution model can be very lucrative (although it presents its own problems by undermining physical retail). This in itself may prove to be a powerful tool for publishers in the future. The success of Xbox Live demonstrates that console owners are prepared to accept such a means of distribution, and the Live features included in the games help prolong the use and consequently the ownership of the product. Perhaps by building on this area, by focussing on maintaining and extending the life of the game, the industry may be able to stem some of the flow to the pre-owned market.

© Brian Miller, Solicitor, 2012. This article may not be reproduced without the prior written permission of the author.

Brian is a solicitor at Stone King Solicitors.  For further news and information on legal topics of interest, please visit Brian’s other blogs:

Brian Miller Solicitor’s IP Blog
Brian Miller Solicitor’s Privacy & Data Protection Blog

This article reflects the current law and practice. It is general in nature, and does not purport in any way to be comprehensive or a substitute for specialist legal advice in individual circumstances.

 LINKS
  1. ELSPA has a wealth of information for publishers, codes of practice, piracy and other matters relevant to the UK games industry
  2. The Office of Fair Trading provides guidance on the Competition Act 1998 together with notes for businesses.
  3. Gamesindustry.biz links to the article on Sony’s rumoured new licensing system and Sony’s swift denial
  4. Unfair Terms  this section of the OFT website provides information on unfair terms in consumer contracts
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Used Games Market in UK Takes A Dent With Argos Withdrawal by Brian Miller Solicitor

(First published on Webwire on December 17th, 2011).  Following Argos’ withdrawal from the pre-owned games market last week, other large retailers such as Asda and Tesco are still insisting their own catalogues of used games remain popular with customers.  Asda’s Head of Games, Andrew Thompson, does not “read anything” into Argos’ withdrawal and likewise, Tesco’s Mark Burgess has stated that Argos’ departure “will have no effect on our current plans.”

It is an interesting legal question, according computer games expert and lawyer, Brian Miller, to consider what ability publishers have to control the resale of their games.  “Unlike pirated games, the pre-owned market involves the sale of genuine products that have already been sold to punters. The concern for publishers is that such copies do not feed back any further royalties into the industry and that the size of the pre-owned market threatens to stifle future development and income.”

Under EU competition law, Miller says, once goods have been put on the market in one jurisdiction, a publisher is deemed under European law to have “exhausted” its right to control the resale of those goods in all those markets.  “In terms of competition law, the courts and related enforcement bodies will look at the underlying purpose (and the effects) of the agreement between the publisher and distributor.  Any manufacturer or supplier which sought to impose terms during the sale of goods to distributors could find itself in hot water.”

In conclusion, it would seem that a publisher cannot attempt to prevent a resale once the game is used.  One way in which a publisher can lawfully restrict or avoid the resale of pre-owned product is to employ the digital distribution model only, where the game is licensed via a console or other online gaming system to a single user (or machine) only.  This can be very lucrative for a publisher, although it does undermine physical retail.

The success of the major online gaming networks demonstrate that consumers are prepared to accept such a means of distribution, and the features included in the games help prolong the use and consequently the ownership of the product.

It will be interesting to see what impact online has had on the used games market in five years’ time.  “I am not sure it will be around then”, concludes Miller.  Or as one industry veteran, Chris Avellone, Chief Creative Officer of Obsidian Entertainment commented this week, “I hope digital distribution stabs the used game market in the heart”.

© Brian Miller, Solicitor, 2012. This article may not be reproduced without the prior written permission of the author.

Brian is a solicitor at Stone King Solicitors.  For further news and information on legal topics of interest, please visit Brian’s other blogs:

Brian Miller Solicitor’s IP Blog
Brian Miller Solicitor’s Privacy & Data Protection Blog

This article reflects the current law and practice. It is general in nature, and does not purport in any way to be comprehensive or a substitute for specialist legal advice in individual circumstances.

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DOTA Mark Brings Riot to the Defence by Brian Miller Solicitor

A dispute in potentially brewing in relation to the trade mark DotA (otherwise meaning ‘Defence of the Ancients’), which Valve is now seeking to register as a trade mark in the US. Riot Games, a competing publisher, has since counter-filed for a trademark for “Defense of the Ancients“.

Defense of the Ancients (commonly known as DotA) is a custom scenario for the real-time strategy video game Warcraft III: Reign of Chaos and its expansion, Warcraft III: The Frozen Throne, based on the “Aeon of Strife” map for StarCraft. The objective of the scenario is for each team to destroy the opponents’ Ancients, heavily guarded structures at opposing corners of the map. Players use powerful units known as heroes, and are assisted by allied heroes and AI-controlled fighters called “creeps”. As in role-playing games, players level up their heroes and use gold to buy equipment during the mission. [1].

This specific scenario has been maintained by several developers during development, with the current publicly anonymous developer known as “IceFrog” developing the game since 2005.  It would appear that more than one developer worked on the IP in the past, each either in their own right and then (either during or afterwards) whilst at different companies, one of them being Riot Games, who as stated above, has made the counter filing for mark “Defense of the Ancients” above.

From the above, what is clear is that the legal position is far from clear in terms of copyright ownership, given the potential competing claims to the IP from the developers, the companies for whom they may have worked at the same time as working on the code, and the two trade mark applicants.  Likewise in the case of any design rights which may subsist under US law.  As to the trademark issue, under English law (which will not in any event apply to a trademark application in the US), Valve could apply for the trade mark, but may face opposition from others who consider that they have competing claims, eg. Riot Games.

Both Riot Games and Blizzard clearly feel they have rights in the mark, or at least, that Valve should not be registering it, given it is felt that it emerged out of the DOTA mod development community, which allegedly was built out of the Blizzard community.

Only time will tell as to what will happen in this matter, which may brew into something bigger, particularly if DOTA is a money spinner for Valve next year…

© Brian Miller, Solicitor, 2012. This article may not be reproduced without the prior written permission of the author.

Brian is a solicitor at Stone King Solicitors.  For further news and information on legal topics of interest, please visit Brian’s other blogs:

Brian Miller Solicitor’s IP Blog
Brian Miller Solicitor’s Privacy & Data Protection Blog

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