Teachings from the Blizzard WoW case

Last week the US Ninth Circuit Court of Appeals released its decision in the MDY INDUSTRIES, LLC v BLIZZARD ENTERTAINMENT, INC case.

The case involved Blizzard, the creator of World of Warcraft (“WoW”), a popular multiplayer online role-playing game in which players interact in a virtual world while advancing through the game’s 70 levels. MDY developed and sold Glider, a software program that automatically plays the early levels of WoW for players. MDY had brought an action for a declaratory judgment to establish that its Glider sales did not infringe Blizzard’s copyright or other rights. Blizzard asserted counterclaims for copyright infringement, violation of the DMCA’s TPM provisions, and tortious interference with contract. The district court found MDY liable for secondary copyright infringement, violations of the DMCA and tortious interference with contract. The Ninth Circuit reversed the district court except as to MDY’s liability for violation of the DMCA and remanded for trial on Blizzard’s claim for tortious interference with contract.

In giving reasons for decision the Court made at least three very important legal rulings.

The first was whether end users of WoW were owners or licensees of their copies of the WoW software. This is important because under US copyright law an owner of a copy of software may copy the software without infringing copyright under USC 117(a) if making the copy is an essential step in using the software with a computer. (The distinction between a licensed and an owned copy is also important under the Canadian Copyright Act.) Following the Court’s previous decision in Vernor v. Autodesk, Inc, 621 F.3d 1102 (9th Cir. 2010), the Court concluded that end users were licensees and not owners of the WoW software because of the significant use restrictions in Blizzard’s EULA.

In Vernor v. Autodesk, Inc., we recently distinguished between  “owners” and  “licensees” of copies for purposes of the essential step defense. Vernor v. Autodesk, Inc., 621 F.3d 1102, 1108-09 (9th Cir. 2010;  see also MAI Sys. Corp. v. Peak Computer, Inc., 991 F.2d 511, 519 n.5 (9th Cir. 1993); 19992 MDY INDUSTRIES v. BLIZZARD ENTERTAINMENTTriad Sys. Corp. v. Se. Express Co., 64 F.3d 1330, 1333, 1335-36 (9th Cir. 1995);  Wall Data, Inc. v. Los Angeles County Sheriff’s Dep’t, 447 F.3d 769, 784-85 (9th Cir. 2006). In Vernor, we held  “that a software user is a licensee rather than an owner of a copy where the copyright owner (1) specifies that the user is granted a license; (2) significantly restricts the user’s ability to transfer the software; and (3) imposes notable use” restrictions. 621 F.3d at 1111 (internal footnote omitted).

Applying  Vernor, we hold that WoW players are licensees of WoW’s game client software. Blizzard reserves title in the software and grants players a non-exclusive, limited license. Blizzard also imposes transfer restrictions if a player seeks to transfer the license: the player must (1) transfer all original packaging and documentation; (2) permanently delete all of the copies and installation of the game client; and (3) transfer only to a recipient who accepts the EULA. A player may not sell or give away the account.

Blizzard also imposes a variety of use restrictions. The game must be used only for non-commercial entertainment purposes and may not be used in cyber cafes and computer gaming centers without Blizzard’s permission. Players may not concurrently use unauthorized third-party programs. Also, Blizzard may alter the game client itself remotely without a player’s knowledge or permission, and may terminate the EULA and ToU if players violate their terms. Termination ends a player’s license to access and play WoW. Following termination, players must immediately destroy their copies of the game and uninstall the game client from their computers, but need not return the software to Blizzard.

The second ruling provides guidance on when a restriction in a software license is a condition, the breach of which constitutes copyright infringement, and when a restriction is a covenant, the breach of which is actionable only under contract law. The Court concluded that WoW’s prohibitions against bots and use of unauthorized third-party software were covenants rather than copyright enforceable conditions.

Central to the Court’s ruling was the holding that “for a licensee’s violation of a contract to constitute copyright infringement, there must be a nexus between the condition and the licensor’s exclusive rights of copyright.”  Here, WoW players did not commit copyright infringement by using Glider in violation of the WoW’s Terms of Use.

This Court’s holding seems to require that for a term to be a condition, its violation must be an infringement of copyright. If this is truly the holding, it is significant as other cases focuse on whether a term was drafted to be a condition rather than a mere promise by analyzing the license language. See, Jacobsen v Katzer, 535 F.3d 1373 (Fed. Cir. 2008) summarized here.

The third important ruling was the Court’s construction of the scope of the DMCA’s legal protection for technological measures. In particular, the Court considered whether Glider violated Sections 1201(a)(2) or (b)(1) of the DMCA by allowing users to circumvent a technology called Warden that prevents players who use unauthorized third-party software, including bots, from connecting to WoW’s servers. MDY contended that the provisions of § 1201 prohibit circumvention of access control TPMs only when the circumvention of the TPM infringes or facilitates the infringement of the plaintiff’s copyright e.g., there is an infringement nexus requirement for a circumvention of an access control TPM to violate the DMCA.

The Court, after construing § 1201 of the DMCA and comprehensively reviewing previous cases and the legislative history of the DMCA, held that there was not such a nexus. “In sum”, wrote the Court, “we conclude that a fair reading of the statute (supported by legislative history) indicates that Congress created a distinct anti-circumvention right under § 1201(a) without an infringement nexus requirement.”

The Court explained that Congress had explicitly rejected requiring that circumvention of an access control be linked to an infringing act “in order to grant copyright owners an independent right to enforce the prohibition against circumvention of effective technological access controls. Congress did do so to encourage copyright owners to make their works available in digital formats such as ‘on-demand’ or  ‘pay-per-view,’ which allow consumers effectively to ‘borrow’ a copy of the work for a limited time or a limited number of uses.”

Last month a US District Court in the USA v Crippen case ruled that fair use is not a defense to circumventing an access control TPM under the DMCA. The Blizzard and Crippen cases are further evidence that the  TPM provisions in C-32 are not more restrictive than those in the DMCA, as some critics of the TPM provisions in C-32 have contended. See, Are the TPM provisions in C-32 more restrictive than those in the DMCA?

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