2018 in Review: A Legal Perspective

In 2018, we had a lot of new ground covered in the video game industry from a legal perspective. Here are some of the most notable, influential stories in case you missed them:

Studio Closures & Snafus

More than a thousand jobs have been lost in the video game industry in 2018 alone – and that tally was noted before even entering Q4. Studio closures have included Runic Games, Visceral Games, Gazillion Entertainment, Telltale Games, Boss Key Productions, Carbine Studios, Capcom Vancouver and more.

Most notably this year has been the closure of Telltale Games. In September, Telltale Games became a defendant in a WARN Act class action lawsuit, brought by Vernie Roberts int he federal district of Northern California. The suit revolves around the unpaid wages and benefits not provided for those affected by the layoff, which at the time left 90 percent of the company without jobs or severance pay. By November, however, Telltale Games began going through assignment proceedings to wind down the company completely.

Loot Boxes, Loot Boxes, Loot Boxes

Early on this year, Hawaii legislators introduced four bills to regulate loot boxes and/or loot crates in video games. Two of the bills would prohibit the sale of loot boxes/games containing loot boxes to consumers under the age of 21, whereas the other two bills would require publishers to label their games with notifications that the game includes loot boxes and disclose the rates of rewards.

The Netherlands, Belgium, Korea and many other countries have come out aggressively against loot boxes, stating that they violate gambling laws. The UK, New Zealand and Ireland have judged that loot boxes are not considered to be gambling mechanisms.

The ESRB’s stance so far has been that loot boxes do not constitute gambling and they’ve stated, “While there’s an element of chance in these mechanics, the player is always guaranteed to receive in-game content (even if the player unfortunately receives something they don’t want).” However, they have begun to add “In-Game Purchases” labels to boxed games that include any sort of in-game purchase as of February.

Interestingly enough, online e-sports gambling also made its debut in the US this year after the US Supreme Court struck down the Professional and Amateur Sports Protection Act. Per the Odin Law blog post on the topic, many states are expected to legalize sports betting in a year or two, potentially leading to a $150 billion market.

Cheating Has Consequences

Rockstar Games and Epic Games have led the way in 2018 with regards to protecting their games against cheaters.

Rockstar Games and its parent company, Take-Two Interactive, received the right to search the homes of people accused of making cheating software (the “Infamous” cheat in particular) within their games. The software was sold for approximately $40 USD and gave players the ability to create in-game currency and change the environment of the game, giving them an advantage over other players. The Australian court has frozen the assets of the five people accused of developing and distributing the software.

Epic Games has also sued YouTubers over allegedly selling Fortnite cheats in their videos. The legal complaint accuses Brandon Lucas and Colton Conter of “copyright infringement, breach of contract, and tortious interference” due to “injecting unauthorized cheat software (‘cheats’ or ‘hacks’) into the copyright protected code of [Fortnite]” in the North Carolina Federal Court.

Per an Epic Games statement provided to IGN,

When cheaters use aimbots or other cheat technologies to gain an unfair advantage, they ruin games for people who are playing fairly. We take cheating seriously, and we’ll pursue all available options to make sure our games are fun, fair, and competitive for players.”

Epic Games also bought security firm Kamu this year as an additional effort to prevent cheating within its games.

GDPR

The General Data Protection Regulation (GDPR) went into effect in the European Union on May 25th. This is a new regulation on data protection and privacy for all individuals residing in the EU and it addresses the export of personal data outside of the EU. Essentially, this regulation extends the scope of EU data protection to all companies (in the world) processing data for people who live in the EU. In theory, it will make it simpler for non-European companies to comply with European data standards but it will also come with stricter penalties for non-compliance (up to €20 million, or ~$24 million USD).

So far, most efforts are falling short for compliance as the regulation has been interpreted in many different ways. If you’d like to read more about GDPR, Odin Law and Media featured a guest post by David Flint, a senior partner of MacRoberts LLP (a law firm based in the UK).

DMCA Exemptions for Video Game Preservationists

Brandon J. Huffman of Odin Law and Media wrote an overview earlier in the year for Gamasutra entitled “What’s up with the DMCA fight over defunct online games?

In summary, “A ‘museum’ petitioned the copyright office to change the rules to allow them to provide multiplayer servers for games. Last month, ESA opposed the rule change for a number of reasons like: it could allow widespread infringement, it’s not really about preservation, etc.”

As of October, however, researchers can now legally restore “abandoned” game servers. However, in order to comply with the ruling, the research institution set on preserving a game must have “lawful possession” of the original server code and any restoration and/or play of online games must take place within “the physical premises of the eligible library, archives, or museum.”

Surprise – ROMS are Still Illegal

In August, EmuParadise took down their collection of console game ROMs after 18 years of distributing games. According to the site,

It’s not worth it for us to risk potentially disastrous consequences,” the post reads. “I cannot in good conscience risk the futures of our team members who have contributed to the site through the years. We run EmuParadise for the love of retro games and for you to be able to revisit those good times. Unfortunately, it’s not possible right now to do so in a way that makes everyone happy and keeps us out of trouble.”

More notably, in November, Nintendo then reached a settlement with the operators of two ROM sites they sued this summer. LoveROMS.com and LoveRETRO.co reached a settlement of $12.2 million, signaling a steep warning to all other ROM hosts.

A Few Other Notable Cases