Game On! Intellectual Property Rights in the Billion Dollar Video Games Industry – Lexology

Game On! Intellectual Property Rights in the Billion Dollar Video Games Industry – Lexology

In January 2022, Microsoft announced plans to acquire Activision Blizzard Inc. (“Blizzard”) in an all-cash transaction valued at USD68.7 billion. If you play video games, the name Blizzard is instantly recognisable as the game developer/publisher of acclaimed games such as Call of Duty, World of Warcraft and Overwatch. But if the name Blizzard is foreign to you, you are probably wondering why a video game company you’ve never heard of before is worth USD68.7 billion to one of the largest and most prestigious technology companies in the world.

Video games have been around for nearly 60 years. Some may remember the name Atari, the pioneer of arcade video games and video game consoles. Arcade video games captured the imagination of gamers (even before the word was coined) in its nascent days with iconic games like Space Invaders, PacMan and Donkey Kong. This was then followed by the handheld video game era dominated by Nintendo with the Game Boy and games like Super Mario. The advent of the personal computer brought another spurt of growth in the industry.

Even before the onset of the Covid-19 pandemic, the gaming industry had already grown into a billion dollar industry for various reasons including advancement in game-making technology and devices used for gaming e.g. mobile phones, dedicated gaming hardware and peripherals. Mobile games such as Candy Crush (developed and published by Blizzard’s subsidiary) also rapidly gained popularity. But the sudden massive boost and growth to the video games industry happened in the last two years. It is not a coincidence that this happened at the same time as global restrictions on movement and travel which confined people to their homes. Video games suddenly seemed like the perfect escape entertainment.

Most people outside of the video games industry may not comprehend why the industry is worth billions of dollars. The answer lies in intellectual property (“IP”). IP is the main revenue-generating asset of a video game company and the success or failure of a video game company depends on how well they can protect and monetize their IP.

This article will briefly discuss the three main types of IP involved in the video games industry with some real-life examples.

Trademarks

The name of a game is a trademark. A trademark is defined under the Trademarks Act 2019 in Malaysia as “any sign capable of being represented graphically which is capable of distinguishing goods or services of one undertaking from those of other undertaking”. Sign is further defined broadly as including letters, word, name, devices, sound, scent and even sequence of motion. Upon registration as a trademark in Malaysia, there is prima facie protection under the statute (subject to challenge to the registration by third parties).

Trademark acts as a source of indicator and protects the goodwill and reputation of a distinctive game and/or its characters. Trademark protection can extend to the name of a game, logo or even the name of the characters in the game e.g. Pikachu and Mario are both registered as trademarks in Malaysia. Trademark protection for video games is of crucial importance today.

This is best demonstrated by the recently popular free word game known as Wordle. Wordle is the reason your social media timelines and feeds are suddenly inundated by green, yellow and grey boxes. Wordle (which itself is a play of the name of the developer, Josh Wardle) is a simple web-based i.e. it can be opened on any web browser, puzzle word game where players are given six chances a day to guess a word. Wordle shot to popularity out of nowhere in January 2022 and as with all popular concepts, attracted people who wanted to ride on its goodwill and reputation. Within a couple of weeks, there were copycat “Wordle” apps all over the Apple App Store (Apple has since issued takedowns on the copycat apps with the identical name). One of the more high-profile copycat apps was an app with the name “Wordle – The App” by game developer Zach Shakked. Shakked has since apologised for his actions via a Tweet. Crucially, he stated that one of his justifications was that “Wordle the word isn’t trademarked and there’s a bunch of other unrelated word apps named the same thing”1. Shakked also allegedly made the app in just a weekend. Despite the proliferation of copycats, people continued to return to the “original” Wordle and it maintained its popularity. On 31 January 2022, the New York Times announced that they have acquired Wordle for a price “in the low seven figures”.2 The New York Times clearly knew of the importance of obtaining trademark registration for their new acquisition – on 1 February 2022, the New York Times filed a trademark application for “WORDLE” in the US.3

Patents

Patent protection covers the more technical aspects of video game development and gaming hardware such as consoles. A patent is a time-limited right of monopoly granted to an inventor for an invention that is new, involves an inventive step and is industrially applicable. In exchange for the monopoly, the inventor is required to disclose the details of his invention publicly so as to encourage further development and innovation. Patent protection in Malaysia is provided under the Patents Act 1983. An invention is defined as “an idea of an inventor which permits in practice the solution to a specific problem in the field of technology”.

The overarching theory is that one cannot patent a game idea as it generally does not satisfy the patentability requirements. In the Wordle example, it is highly unlikely that the idea of a word game where players get six chances to guess a five-letter word can be successfully patented because it is not novel. In addition to that, a patent application is time consuming and expensive. As such, unless the invention is so innovative and likely to be commercially valuable to a company in the long run, it is generally not a practical consideration in the fast-moving video games industry for small or indie game developers. However, for big companies like Sony, Nintendo and Microsoft, patent protection for inventive video game hardware or even gameplay mechanics are often at the forefront of their business model. The US Patent and Trademark Office recently published a patent application by Sony for a technology which will allow players to turn household objects or fruits like a banana or an orange into a Play Station controller.4

Copyright

Copyright arguably provides the most significant IP protection in a video game because it covers a whole range of artistic expressions including game design, story, characters and art. Contrary to patents, copyright protection is also less cost-prohibitive and time consuming. It is a protection afforded to all creators and authors of an original creative work.

In Malaysia, copyright protection is provided under the Copyright Act 1987. Copyright protection arises upon the creation of the work as long as the requirements are met. Although the Copyright Act 1987 also provides for a voluntary notification process (where the author can affirm a Statutory Declaration and submit a notification to the copyright registrar), this does not affect the creation of copyright because there is no registration requirement under the statute. In general, to qualify for copyright protection in Malaysia, the work (i) must be original; (ii) must have been reduced to a material form; and (iii) is a category of work entitled to copyright such as literary works, musical works, artistic works, films, sound recordings, broadcasts, typographical arrangements of published editions and derivative works. It is also necessary for there to be a connection between the copyrighted work and Malaysia, either through citizenship, as a place of first publication or based on Malaysia’s obligations under international treaties.

One of the key copyright concepts in the video games industry which often leads to disputes is the principle that the idea and genre of a game cannot be copyrighted. Copyright protects only the expression of the idea of the game. This concept is often tested in cases of copyright infringement litigation in the video games industry. In the past five years, disputes have arisen in the popular battle royale genre in video games. Essentially, it is a concept where the last-man standing wins the game such as in a boxing match. In video games, it is often a multiplayer game where players or teams compete against each other until there is a last-man or last-team standing. PlayerUnknown’s Battlegrounds (“PUBG”) is a very popular battle royale game developed by Krafton, a South Korean company, and which led to Tencent’s investment in the company. PUBG has a history of taking strong stances against similar battle royale games by instituting copyright infringement suits against them. In 2018, PUBG filed a copyright infringement suit in Korea against Epic Games, the game developer of Fortnite (another very popular battle royale game). PUBG’s complaint went further than the same battle royale gameplay theme as it alleged that Fortnite also copied their user interface and design of the game weapons. Both parties ultimately settled the dispute.

Recently in January 2022, PUBG filed a copyright infringement suit in the US against Garena, the developer of the game known as Garena Free Fire. The suit even included Apple and Google for distribution of the games on their app stores. Garena Free Fire is a battle royale theme mobile game that has reportedly earned USD1.1 billion in 2021.5 In the publicly available complaint, PUBG alleges that Garena Free Fire “cop[ies] numerous aspects of Battlegrounds, both individually and in combination, including Battlegrounds’ copyrighted unique game opening “air drop” feature, the game structure and play, the combination and selection of weapons, armor, and unique objects, locations, and the overall choice of color schemes, materials, and textures.”6

Conclusion

Video game development is certainly becoming more accessible and viable to a larger population today due to the progress in technology. It only took one person one weekend to develop the copycat Wordle app which was downloaded by thousands of people before it was removed. All video game developers, whether small or big, can benefit from identifying exactly what IP they own, how it can be protected and how they can monetize their IP assets. The future of video games appears even more promising with the advancement in technology relating to artificial intelligence, virtual reality (“VR”), augmented reality and the metaverse. VR games have already taken off and are expected to become more common once the hardware technology for VR headsets improve. Game development for the metaverse is also likely to be the next focus area for video game companies.

Source: https://www.lexology.com/library/detail.aspx?g=61badb90-120b-411f-90c0-76ca5f4f67e4