The video game industry is one of the largest in the country. Despite recent waves of layoffs, hundreds of thousands still work on developing games and the hardware they run on. In terms of litigation, the lion’s share since 2019 has been disputes over intellectual property. Of the 400 cases that include a top games company as a party, 73 contain the Nature of Suit (NOS) code for patent disputes, 48 are Inter Partes Reviews before the US Patent Trial and Appeal Board, 78 contain the NOS code for Trademark disputes, and 47 contain the NOS code for Copyright disputes. Notably excluded from the following analyses are Tencent and Microsoft, for their litigation related to videogames cannot be easily separated from their work in other technology sectors.
Patent Disputes
Of all the patent disputes, 70% concern software and 29.17% concern hardware. The filings of one case, Sony Corporation et al v. Rovi Guides, Inc. et al, were so redacted that it is unclear what the dispute concerns. By company, only Nintendo, Sony, and Valve have faced suits over hardware. This is not surprising, since only these companies manufacture gaming consoles, the Switch, Playstation, and Steam Deck/VIVE respectively.
Hardware
Of Nintendo’s hardware patent suits, four concern the motion-control technology in Wiimotes and joy cons, controllers for their recent game consoles. Nintendo also faced a suit alleging the Switch OLED violates Solas OLED Ltd’s patent on high-definition screens. Two suits, one in the Western District of Washington and one before the Patent Trials and Appeals Board concern the Switch’s ability to adjust screen brightness according to ambient lighting conditions. And Nintendo and Gamevice have sparred in two cases before the Patent Trials and Appeals Board over whether the Switch violates patents for a similar device that adds controllers outboard of a phone. One of these cases was appealed to the Federal Circuit. Nintendo has won all but one of these cases.
Valve has faced a fair amount of litigation over haptic feedback in controllers for both the Steam Deck and the VIVE virtual reality console, though they have faced more cases over patents that describe paddles on the back of a game controller. Most of Valve’s cases in this regard are ongoing, though judges have ruled in their favor regarding the patented paddles.
Of Sony’s hardware patent cases, most concern nodules that allow Playstation controllers to vibrate in response to commands or events in the game being played. These cases are also ongoing.
Software
In software patent suits, Sony’s most frequent foe has been Intellectual Pixels Limited. Dun and Bradsheet describe them as being in the business of holding and leasing intellectual property. Their suits with Sony have centered around technology to remotely process 3D graphics and then display them on a device with limited power, such as a phone.
The second-most prolific party to spar with Sony has been Bot M8, LLC. In court filings, Bot M8 simply describes themselves as a Delaware Limited Liability Company. In their suits with Sony, they claim the games giant infringes on a number of patents ranging from technology to check for memory faults to various bits of code to manage online play. Sony has mostly won these disputes.
Sony has also faced litigation from MZ Audio Sciences, LLC surrounding technology to encode and remove watermarks from audio tracks and from Infernal Technology, LLC, a game development company, over techniques for rendering lighting and shadows.
Epic’s patent litigation has centered around various software for servers to communicate with each other, alongside a case each around online messaging software and from Infernal Technology over techniques for rendering lighting and shadows.
While it is clear that at least some of these suits are brought by patent trolls, it is difficult to ascertain exactly how many. That said, in Epic Games, Inc. v. Acceleration Bay LLC, Epic alleged in court documents that “Acceleration is exclusively in the business of monetizing patents acquired from third parties.” This case was settled out of court.
Trademarks and the Northern District of Illinois/
On July 12, 2022 Epic sued a slurry of Chinese manufacturers of knockoff and counterfeit products in the Northern District of Illinois. Since then, Epic, Roblox, Sega, and Ubisoft have filed 65 similar suits in the same court. The game giants have overwhelmingly won these suits.
In addition to the biggest players, 15 cases have been filed by Bryan and Garrett Fletcher, developers of the popular game Rainbow Friends, which exists on Roblox’s platform. They have similarly won these cases.
These results mirror a larger trend of copyright and trademark suits rising in the district.
Fortnite and Signature Dances
Since 2019, Epic and Take-Two have faced 11 suits alleging that Fortnite and the NBA 2k series stole signature dances. The legal dispute is over whether the dances in question are copyrightable. Under 17 US Code Section 102(a), “choreographic works” can be copyrighted. However, the Copyright Office explains that choreographic works are made up of simple dance steps, which are not, in and of themselves, copyrightable. Thus the legal question is whether primarily Fortnite emotes constitute choreographed works or simple dance steps. Unfortunately, the courts have only ruled on this issue in two suits. In Brantley et al v. Epic Games, Inc. et al, the District of Maryland ruled that the plaintiff’s dance was a simple dance step, whereas in Kyle Hanagami v. Epic Games, Inc., et al, the Ninth Circuit ruled that the plaintiff’s dance was a choreographed work. In all the other suits, including two about the use of the Soulja Boy dance in NBA 2k, the parties settled out of court or one of the parties voluntarily dismissed.
Nintendo and Piracy
While these cases only make up 12.8% of Nintendo’s case load, anti-piracy suits have earned the Japanese company the most notoriety within the gaming community. Most recently, Nintendo successfully sued and shut down the Switch emulator Yuzu for allegedly promoting piracy. As part of the settlement, Tropic Haze, the company that made Yuzu, agreed to stop distributing the emulator and pay Nintendo $2.4 million.
While Nintendo argued the emulation enabled piracy, and thus infringed on their copyright, the case law is rather murky. In two notable instances, the courts have ruled that emulation is legal. Emulators are software packages that allow computers to read and play console games. The first case of note is Sega v. Accolade. In this landmark case, the Ninth Circuit ruled that Accolade, Inc. did not violate Sega’s copyright by reverse engineering the software package Sega used to ensure only licensed games were playable on the Genesis. Nintendo has likewise sued and won against companies producing chips that circumvent their own similar software. All of these cases were either settled or resulted in default judgments.
In the wake of the Digital Millennium Copyright Act, the Ninth Circuit ruled in favor of Connectix, the developer of a Playstation 1 emulator. Heavily citing Sega v. Accolade, the court decided that Connectix did not violate Sony’s copyright in copying, then reverse engineering the Playstation’s BIOS.
Why Gamers Defend Piracy
While Nintendo and other game developers argue that piracy is theft, the courts have ruled differently. In 1990’s Dowling v. United States, the Supreme Court ruled that “While one may colloquially link [copyright] infringement with some general notion of wrongful appropriation, infringement plainly implicates a more complex set of property interests than does run-of-the-mill theft, conversion, or fraud.”
More informally, the argument that piracy is theft relies on the assumption that pirated copies of, for example, a videogame are equivalent to lost sales; the academic research studying this question is mixed. A 2015 report by the European Union, for example, found a positive correlation between piracy and video game sales. On the flip side, a 2020 study in Information Economics and Policy found that while music piracy was associated with lower sales, it seemed to hurt the biggest names more and might have even helped smaller, lesser known artists. In the movie industry, a 2019 paper found that pre-release piracy was associated with lower box office sales while post-release piracy was associated with increased box office sales. Other research has indeed found negative statistical effects of piracy on sales, though the highly variable results suggest that piracy’s impact likely varies by industry and even within each industry.
Anecdotally, Gabe Newell, president of Valve, found Russian piracy plummeted when they started selling games in the country.
Furthermore, in countries where games are not localized, translated and otherwise adapted for local cultural contexts, pirates have been releasing fan translations.
Digital Rights Management Software
Perhaps the principal motivation behind video game piracy is Digital Rights Management Software (DRM). DRM is software that prevents the unauthorized duplication and distribution of media, such as books, movies, and videogames.
And in video games, according to reporting summarized by video essayist and game critic Lextorias, DRM is associated with poorer performance. This has in part led to a large community of so-called Crackers who compete to break DRM on new releases. According to reporting by Ars Technica, DRM is used primarily to delay piracy and is often removed once the game is cracked.
Disclaimer: David Herman represented by Mason, LLP in a pending mass arbitration over Steam’s alleged monopoly before the American Arbitration Association.
