The video games industry generates billions of dollars annually, a trend that accelerated during the pandemic as consumers sought entertainment and connection. As the industry has grown, so has its entanglement with the legal system. According to analytics, top companies receive lawsuits over monetization systems and digital recreations of other works, among a variety of other lawsuit types.
The gaming industry has made an impact on the M&A market as well. Two blockbuster acquisitions of game studios were announced in early 2022. Microsoft’s acquisition of Call of Duty and World of Warcraft developer Activision Blizzard was valued at nearly $70 billion, the biggest deal of the year so far. Take-Two Interactive also announced a $12 billion purchase of Farmville developer Zynga weeks before.
An analysis of litigation faced by a set of top game developers and publishers reveals that the industry faces a variety of different federal case types, from patent cases present in any technology industry to unique challenges brought about by game developers’ evolving monetization practices. (The analysis excludes some gaming giants like Sony and Microsoft because gaming is only one part of a larger business).
Epic Games
One of the biggest names in gaming is Epic Games, the company behind Fortnite. About one third of federal lawsuits involving Epic are classified as copyright lawsuits. These include lawsuits filed by Epic over cheating or hacking in the game, while some others filed against Epic allege that the company copied dances that players can reenact in-game.
Across all types, Epic is represented by a variety of firms, foremost among them Faegre Drinker Biddle & Reath. Others include Cravath, Swaine & Moore and Kirkland & Ellis.
Activision Blizzard
Over one third of federal lawsuits faced by Activision Blizzard in recent years are classified as securities cases, with many occurring after the announcement of its purchase by Microsoft. The company has also faced at least one recent securities suit in relation to allegations of workplace misconduct. Like other gaming companies, Activision Blizzard has additionally faced intellectual property litigation in recent years.
The company is represented by firms including Winston & Strawn, Morris, Nichols, Arsht & Tunnell, and Cooley, according to Docket Alarm analysis.
Take Two Interactive
Take Two Interactive, which publishes sports games like NBA 2K, among others, also faces largely copyright and patent suits. One suit involves a tattoo artist who claims that Take Two infringed on his copyright due to NBA 2K’s digital recreations of real-life tattoos he made for his clients, including superstar LeBron James.
Take Two is represented by a wide variety of firms, led in recent years by Kirkland & Ellis.
Monetization
Beyond intellectual property and securities issues, fraud and contract cases are among the most frequently filed case types against video game companies. These cases often concern various ways that video games offer in-game purchases.
Some lawsuits seek disaffirmance of a contract to purchase virtual currency used to buy in-game items, because the currency was purchased by a minor. One lawsuit objected to the deletion of purchased content in the hit game Roblox.
Another source of litigation for the games indsutry are so-called “loot boxes,” or purchasable opportunities to receive in-game items, with more powerful or valuable items being rarer. Loot boxes have been likened to gambling by regulators and plaintiffs. Darius Gambino, a partner at Saul Ewing Arnstein & Lehr LLP and a published expert on loot boxes, explained that “Most litigation regarding loot boxes has been centered around game players as the plaintiffs – sometimes these plaintiffs are minors, but not in all cases. These litigants typically bring claims under consumer protections laws, for deceptive trade practices, and for unfair competition.”
According to Gambino, some of these lawsuits have resulted in publishers like Activision and Epic Games setting up class action funds. “The Zanca v. Epic Games case, for example, resulted in the establishment of a $68 million settlement fund for affected players,” Gambino added
Gambino speculated that these types of lawsuits will continue. “Some players spend thousands of dollars over the 6 to 10 month ‘life’ of a yearly sports game,” Gambino said. “I think we will continue to see lawsuits from players who have ‘invested’ money into games.”