Computer and Internet Law

I have been asked about the following topic several times this week, so I will address it briefly on the blog:

For those of you who are unfamiliar with the dispute between Marvel Entertainment and the heirs of Jack Kirby, Kirby is the creator of several well-known comic book characters, including Spider-Man, Iron Man, and the Hulk. These characters are extremely valuable, especially given the many movies, games, comics and other properties related to them.

Kirby’s heirs have sought to reclaim the rights to those characters by distributing copyright transfer-license termination notices to entities developing works based upon those characters. This termination procedure is described in 17 U.S.C. § 203, which allows an author, and certain other interested parties, to terminate – after, and within, a certain period of time – a grant or license of a copyright, so long as the work is not a work for hire. This termination right cannot be waived by contract.

Marvel filed a lawsuit against the heirs earlier this month, requesting that the court invalidate the termination notices, and declare Marvel to be the rightful owner of those characters. [Article]

It will be interesting to see how this matter is resolved, and whether those characters will be deemed works for hire in light of the well-publicized relationship between Marvel and Kirby. In the meantime, this serves as an important reminder to all business owners to establish the ownership rights of their business’ intellectual properties (e.g., trademarks, copyrights, logos, websites, etc.), especially when relying upon outside parties to develop those properties.

Yesterday, the Federal Circuit issued a ruling in Jacobsen v. Katzer et al., No. 2008-100, 2008 WL 3395772 (Fed. Cir. Aug. 13, 2008). The ruling vacated a decision by the district (lower) court, which had held that the remedy for violation of an open source license was limited to breach of contract. [Decision]

In Jacobsen, the defendants (a software developer and his company) copied portions of the plaintiff’s open source software without complying with the terms of the accompanying license (Artistic License). The plaintiff sought a preliminary injunction against the defendants. The district court denied the request for the injunction. It held that the plaintiff did not have a claim for copyright infringement, only for breach of contract.

On appeal, the Federal Circuit found that the plaintiff had stated a potential claim for copyright infringement. Specifically, it looked to the language of the Artistic License, and found that the terms were conditions – rather than mere contractual covenants – and that the defendants’ violation of those conditions exceeded the scope of the license. It also reiterated the long-standing recognition of the economic motives inherent in public licenses, even when the products released under those licenses are made available without charge, and profit is not immediate. The court ultimately remanded the case to the district court to determine whether the plaintiff had satisfied the other requirements for obtaining a preliminary injunction, and if so, to issue the injunction.

Jacobsen is significant because it expressly recognizes a claim for copyright infringement with respect to violations of an open source license. Such a claim allows an open source developer to seek an injunction and statutory damages, instead of the monetary damages available for a breach of contract claim (which are often difficult to prove, especially with respect to open source projects). While Jacobsen is limited to the Artistic License (which is only one of many open source licenses), and other open source licenses, such as the various Creative Commons licenses and GNU General Public License, must be interpreted according to their own respective languages, Jacobsen provides some much-needed teeth to those distributing their work under an open source license.

Software development companies should take this opportunity to review their development procedures with their programmers. It is not unknown for programmers to ‘borrow’ existing code (whether open source or not) as a shortcut in the software development cycle. While such shortcuts may save substantial time and money, the company must ensure that it is aware of all ‘foreign’ code in its products, and that it complies with all licenses governing such code.

The following is another news item sitting in my perpetual ‘time permitting’ stack, pertaining to Blizzard, the World of Warcraft game, bots, copyright law and tortious interference with contracts:

On October 25, 2006, MDY Industries filed an action against Blizzard Entertainment pertaining to MDY’s software application WoWGlider, an automated system, or ‘bot,’ for playing Blizzard’s World of Warcraft massive multi-player online role-playing game (MMORPG). MDY sought a declaractory judgment that WoWGlider was legal. Blizzard and Vivendi countersued for tortious interference with contract, contributory copyright infringement, vicarious copyright infringement, violation of the Digital Millennium Copyright Act (DMCA), trademark infringement, unfair competition and unjust enrichment.

On July 14, 2008, the Honorable Judge David G. Campbell issued an order for partial summary judgment in MDY Industries, LLC v. Blizzard Entertainment, Inc., No. CV-06-2555-PHX-DGC, 2008 WL 2757357 (D. Ariz. July 14, 2008) in favor of Blizzard on the contributory and vicarious copyright infringement claims, and on the claim for tortious interference with contract. [Decision]

With respect to the copyright infringement claims, the Court ultimately concluded the following:

The Court reaches the following conclusions on the basis of undisputed facts, construction of the EULA and TOU, and controlling Ninth Circuit law: Blizzard owns a valid copyright in the game client software, Blizzard has granted a limited license for WoW players to use the software, use of the software with Glider falls outside the scope of the license established in section 4 of the TOU, use of Glider includes copying to RAM within the meaning of section 106 of the Copyright Act, users of WoW and Glider are not entitled to a section 117 defense, and Glider users therefore infringe Blizzard’s copyright. MDY does not dispute that the other requirements for contributory and vicarious copyright infringement are met, nor has MDY established a misuse defense.

With respect to the the tortious interference claim, the Court noted that the only real issues were whether Blizzard suffered any damages arising from the players’ use of the WoWGlider software (which Blizzard was able to demonstrate), and whether MDY’s actions were improper. For the second issue, the Court looked at all seven factors of impropriety enumerated by the Restatement (Second) of Torts § 767 and Arizona law, and found in favor of Blizzard with respect to all of them.

This ruling raises substantial concerns for those involved in the ‘sub-economy’ surrounding popular MMORPGs. While MDY is (or was) merely an unlicensed third-party MMORPG application developer, it is not difficult to see the decision being cited against players utilizing those applications, and businesses involved in commercial transactions involving MMORPG items (e.g., game ‘farmers’ or ‘miners’ who gather and sell in-game assets or characters for real world money). While a MMORPG developer may not have the desire or resources to file legal actions against its individual players and customers, it may decide to pursue larger violators, such as the bot developers and farmers, to set examples.

[Note: This ruling also reminds me of Hernandez v. Internet Gaming Entertainment, Ltd. et al., a proposed class action currently pending before the United States District Court, Southern District of Florida (Case No. 1:07-CV-21403-JIC). Hernandez is a purported World of Warcraft player claiming to be an intended third-party beneficiary of Blizzard’s End User Licensing Agreement and Terms of Use, who alleges that IGE tortiously interfered with Blizzard’s EULA and TOU, and his enjoyment of the game, by ‘farming’ gold within the game. According to the court docket, the action is still alive and kicking as of this date, with the parties currently embroiled in a discovery dispute.]

Over the next few weeks, I will discuss recent, noteworthy legal developments that occurred prior to the launch of this blog. The first development pertains to the Ninth Circuit’s decision in Quon et al. v. Arch Wireless Operating Co. Inc. et al., 529 F.3d 892 (9th Cir. 2008), filed on June 18, 2008. [Decision]

In Quon, the City of Ontario had a Computer Usage, Internet and E-Mail Policy, which Quon acknowledged, and agreed to comply with, as part of his employment. However, the City failed to enforce the policy. In fact, the City acted contrary to the policy by allowing its employees to avoid audits of their cell phone usage so long as they reimbursed the City for overage charges, which Quon did.

When the City subsequently enforced the Policy, the plaintiffs sued the City, wireless provider and other defendants for invasion of privacy. The Court noted that the Policy may have been enforceable if the City had complied with it. However, the Court found that the plaintiffs enjoyed a reasonable expectation of privacy in their cell phone text messages – notwithstanding Quon’s prior agreement to the Computer Usage, Internet and E-Mail Policy – due to the City’s inconsistent and contrary conduct (the “operational reality”) with respect to that Policy.

This decision ultimately serves as a strong reminder that employers may inadvertently undermine their computer, Internet and e-mail policies by acting inconsistently with those policies. Employers should take special care not to do so, and emphasize such care to their supervisors and managers, especially given the importance of computer, Internet and e-mail data in discovering instances of employee misconduct.