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Senator Richard Blumenthal (D-CT) recently introduced S. 3636, the Gift Card Consumer Protection Act of 2012, which would ban expiration dates and specified fees for inactivity or services on gift certificates, store gift cards, or general-use-prepaid cards (“Cards”), including those issued in connection with loyalty, award and promotional programs (“Loyalty Products”). The legislation would change current federal gift card law, which permits issuers to charge certain fees after 12 consecutive months of inactivity, permits expiration after 5 years, and excludes Loyalty Products from these restrictions if certain disclosures are made. Senator Blumenthal commented: “Today I am introducing legislation to help substantially remedy that problem and to ensure that consumers receive the full value that is stored on their gift cards.

Whether it is a bankrupt company that refuses to honor a gift certificate, a gift card with hidden fees that slowly withers down to nothing, or a ‘promotional’ gift card that expires in the virtual blink of an eye, consumers in Connecticut and across the nation are in danger of seeing the value of their gift cards disappear.”

In summary, the bill proposes to:
·         Ban inactivity fees on Cards
·         Ban expiration dates on Cards
·         Eliminate the exclusion for Loyalty Products
·         Provide stronger consumer protections for cardholders when a company that issues or sells gift cards files for bankruptcy protection

Click here to read the complete bill.

Many issuers of Cards will be surprised to learn that the bill would prohibit expiration dates on Loyalty Products. Loyalty Products typically include strategically developed expiration dates designed to incentivize patronage during periods of time when sales are generally slower or when competition is fierce. If expiration dates on these products are prohibited, Loyalty Products may be far less effective for these and other purposes.

 

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Kickflip, which does business under the name Gambit, sued Facebook for allegedly monopolizing the “virtual currency” market used in online games by requiring game publishers to use Facebook credits. It is also alleges tortious interference with Gambit’s contracts and prospective business opportunities.

The complaint alleges:

Image for blog·         That Gambit was a leading virtual-currency and payment-processing provider to software developers that published games on Facebook and other social networks.

·         Until Facebook violated antitrust laws, game developers turned to a vibrant and competitive market of virtual currency and payment-processing service providers competed vigorously on service and price.

·         In 2009, Facebook began offering its own virtual-currency services to compete with Gambit and its rivals and charged a 30% fee which was significantly more than the market rate (e.g., the 10% charged by Gambit), yet provided only a narrow range of services.

·         Unsurprisingly, Facebook’s virtual-currency services never gained significant market share when competing on the merits.

·         Facebook exploited its dominance in the separate market for social-game networks to force its virtual-currency competitors to the sidelines.

·         Facebook blacklisted Gambit under the false pretext of maintaining the integrity of its social network, prohibited social-game developers from accessing Facebook’s social-game network unless they agreed to only use Facebook’s virtual-currency services and forced developers to switch to its services exclusively in 2009 and 2010, thereby systematically excluding alternative virtual-currency services providers like Gambit.

·         Consequently, Facebook leveraged its dominance in the social-game marketplace to control and dominate the separate market for virtual-currency services.

·         As the result of Facebook’s actions, Gambit’s business was destroyed.

The complaint is chock full of other interesting allegations about how Facebook allegedly choreographed a perceived need for a “safe” virtual currency in the aftermath of the infamous “Scamville” incident  and made Gambit a fall guy in the process.

Among other things, Kickflip seeks an injunction barring Facebook from enforcing its policies as a condition for access to its social-game network.

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Binary world A weekly wrap up of interesting news about virtual worlds, virtual goods and other social media.

 

 

Social Casino Games Market Now Worth $1.6 Billion
The social gaming market is moving fast, as more companies take advantage of the growing online phenomenon. According to a new study by internet games research firm SuperData, the global social casino games market will reach $1.6bn in 2012 and grow to $2.4bn by 2015.

Nintendo’s Wii, 3DS Targeted in Texas Patent Suit
Nintendo Co. Ltd. was sued Friday by a Texas company that claims the Japanese-gaming giant’s Wii and 3DS gaming systems infringe one of its patents.

USPTO Head Defends Software Patents Amid Smartphone Wars
Patents on software are vital to the American economy and calls to abolish them are wrong, U.S. Patent and Trademark Office Director David Kappos said in a speech Tuesday that also belittled claims that the smartphone wars show the patent system is broken.

Buy Virtual Goods in Zynga Games, Give Non-Virtual Money to Charity
Buying a $1 virtual horse for your virtual farm in FarmVille or a $15 tower for your castle in CastleVille might go farther than you think for the next couple of weeks. Those virtual goods are being turned into tangible cash — cash that Zynga will be donating to Toys for Tots.

 

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The U.S. Copyright Office recently issued its exemptions to the Digital Millennium Copyright Act of 1998 (“DMCA”). The exemptions, effective as of Oct. 28, 2012 define the limited circumstances that users are allowed to circumvent technology that prevents access to copyrighted works, e.g., content encryption schemes.  The exemptions are reviewed and issued anew every three years, so what was allowable prior to the ruling may not be anymore, and new exemptions, primarily directed to assistive technologies for the blind, are available.

Companies that relied on previous exemptions should take heed that many are no longer lawful, and the Copyright Office affirmatively denied the universal legality of jailbreaking devices. For our complete client alert on the topic, please click here.

The following are the newly issued exemptions:

Literary works distributed electronically – Assistive Technologies: This exemption allows blind people or those with “print disabilities” to work around circumvention measures on lawfully obtained copies of an electronic book (“eBook”) for the purpose of enabling “read aloud” functionality in the eBook.  The only catch is that the author must be paid for the work as he or she would be if the book had been purchased through other channels.  This caveat though should not be an issue for any eBook that is purchased from an established eBook seller.

Motion Pictures and Other Audiovisual Works – Captioning and Descriptive Audio: This exemption allows users to circumvent access control mechanisms to access the playhead and time codes in a motion picture or audiovisual work so that assistive technologies can be developed to render descriptions of the visual portions of the content.  The exemption was made so that that visually or hearing impaired users can enjoy a lawfully obtained copy of the work.

The following are alterations to prior exemptions:

Wireless Telephone Handsets – Software Interoperability: This exemption allows users to circumvent access control schemes on cellular telephones for the purpose of executing lawfully obtained software programs that the cell phone provider has not provided (e.g., “jailbreaking” a phone).  A request to extend this class of works to tablet computers was rejected. 

Wireless Telephone Handsets – Interoperability with Alternative Networks:  This exemption allows users to circumvent access control schemes for the purpose of “unlocking” a cell phone and using it on a network that it was not originally purchased for (e.g. purchasing a phone at a T-Mobile store and then unlocking the phone so it may be used on AT&T’s network).  The change in this exemption is that owners of legacy phones may still circumvent the control schemes to unlock previously purchased phones, but for phones purchased more than 90 days after the effective date of the exemption, the exemption does not apply.       

Motion Picture Excerpts – Commentary, Criticism, and Educational Uses: This exemption allows users to excerpt portions of motion pictures, lawfully obtained on DVDs or online where the use is for the purposes of commentary or criticism, provided the use must also be: in noncommercial videos, in documentary films, in nonfiction eBooks offering film analysis, or in educational classes such as film study or that require close analysis of media excerpts.  The alteration is that excerpts from motion pictures obtained online are now allowable.

Various Proposed exemptions that were not adopted relate to:

·        Digital Access to Literary Works in the Public Domain
·        Software Interoperability of Video Game Consoles
·        Software Interoperability of Personal Computing Devices
·        Space Shifting of Motion Pictures and Others Works on DVDs and Other Media

Various Prior exemptions that are no longer available:

·        Circumvention of technological protection measures to control access to video games accessible on a personal computer provided the circumvention is accomplished solely for the purpose of good faith testing for, investigating, or correcting security flaws.
·        Computer programs protected by dongles that prevent access due to malfunction or damage and which are obsolete. 

 

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Zynga and Facebook revised their two year-old agreement that provided special terms to Zynga as compared with other game companies publishing via the Facebook network. Going forward Facebook will treat Zynga with the same rules as it applies to all other game developers. These revisions prevent Zynga from driving gamers from Facebook to Zynga.com. This provision benefits Facebook as it allows Facebook to keep such gamers on the Facebook network. Facebook is also now free to develop its own games, but has said “We’re not in the business of building games and we have no plans to do so.”

Zynga benefits from the revision by having more latitude to expand Zynga.com, its own gaming network. Additionally, Zynga is no longer required to display Facebook ads or use Facebook credits.

iStock_000017045675small.jpgFacebook and Zynga are both spinning this as a positive.

Facebook stated: “We have streamlined our terms with Zynga so that Zynga.com’s use of Facebook Platform is governed by the same policies as the rest of the ecosystem. We will continue to work with Zynga, just as we do with developers of all sizes, to build great experiences for people playing social games through Facebook.”

Zynga stated: “Zynga’s mission is to connect the world through games. In order to do this, Zynga is focused on building enduring relationships with consumers across all platforms from Facebook and Zynga.com on the web to tablets and mobile. Our amended agreement with Facebook continues our long and successful partnership while also allowing us the flexibility to ensure the universal availability of our products and services.”

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Due to “legal and regulatory pressure” Dublin-based Intrade will no longer accept bets from US customers and all existing US customers must exit their trades and close their accounts. Intrade operates a real-money based prediction market. This announcement from Intrade came just hours after U.S. regulators filed a civil complaint against it.  

This action is another example of how gambling and gambling related activities are being subject to regulatory scrutiny. This trend is important for companies to note, particularly as a broader range of companies get involved in on line gambling. This is also important for companies involved in “gamblification.” Gamblification is the use of gambling mechanics for non-gambling purposes, i.e, leveraging the fun of gambling without real money at stake. Gamblification raises a whole host of legal issues, of which companies leveraging this phenomena must be aware.

The lawsuit was filed by the Commodity Futures Trading Commission, which accused Intrade and its parent company of violating its ban on off-exchange options trading, by enabling users to bet on predictions relating to commodities prices. But commodity trading is just one aspect of Intrade’s business. Intrade’s prediction market also enables users to bet on “predictions,” ranging from who will win presidential elections or Academy Awards or whether a dictator will be toppled by a certain date.

“It is against the law to solicit U.S. persons to buy and sell commodity options, even if they are called “prediction” contracts, unless they are listed for trading and traded on a CFTC-registered exchange or unless legally exempt,” Enforcement Director David Meister said in a statement. However, the CFTC has previously rejected exchange applications from companies that wanted to sell options on political outcomes, because they involve gaming and are contrary to the public interest.

A number of US-based companies operate prediction market platforms that enable users to make predictions on a range of activities, but sports-related predictions are among the most popular.  However, most of these platforms do not enable users to wager and/or win real-money. Some use virtual currency that users “wager” in connection with a prediction, but usually the virtual currency cannot be cashed out. The “win” that keeps users coming back is the bragging rights for those who are most accurate in their predictions.

While many of these models steer clear of the gambling laws, they must be done right to avoid crossing the line. Getting it right is especially tricky when virtual goods and/or currency are involved. Pillsbury’s social media team has prepared a client advisory on gamblification and the use of virtual goods/currency in these gamblification models. For a copy email us.

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The Director of the USPTO recently explained why patents are “innovation currency,” how they create jobs and how they add significantly to the economy. He also explained why this is driving the multi-billion dollar acquisitions of patents and high-profile patent wars in the mobile space. The Director also acknowledged that the patent system is not perfect, but highlighted the new patent laws that will help ensure the quality of software patents. In part, the Director said:

It is increasingly clear that intellectual property, or IP, is a key driver of economic growth, exports, and job creation. IP rights are the global currency for creating value for products and services, for all innovators, in all markets. And the protection provided by patents is critical to the innovation ecosystem. In fact, last spring, the U.S. Commerce Department released a report that found IP-intensive industries support at least 40 million jobs and contributes more than $5 trillion to our economy, accounting for 35 percent of America’s gross domestic product. So it is in this context that we are seeing multi-billion dollar acquisitions of patent portfolios and a number of high profile patent lawsuits, involving some of the most innovative companies on the planet, who are producing some of the most popular technologies ever created.

For a full copy of the speech, click here. 

Notwithstanding the clear value and importance of software patents, many companies still do not appreciate their value. Additionally, many people do not fully understand the types of software-based inventions that can be patented. Those that do not seek guidance from knowledgeable patent attorneys who specialize in software and internet patents fail to retain their rightful share of innovation currency.

Software and internet patents are crucial to many of today’s leading industries, including games, social media and mobile.

If you are interested in learning more about challenging software patents under the new laws, we have a team of people dedicated to these new procedures.

 

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patent images.jpgYES! One of the often cited reasons for not pursuing patents
is that they take too long to obtain. In response to this concern, the
US Patent office has implemented a procedure that enables applicants to
make a request, when an application is field, to expedite examination of the application.

Based on recently published statistics, the vast majority of these
requests are being granted (if submitted properly) and cases are being
allowed within 11 months from filing (assuming they are patentable).

In fast moving spaces such as social games, mobile apps and social
media, this procedure can be very effective to rapidly obtain much
needed patents.

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The U.S. DOJ’s announcement last December –that it was now interpreting the 1961 Wire Act as primarily prohibiting only online sports betting– generated a lot of excitement and speculation that many states would move to legalize online gaming.

Today, almost one year later, the excitement remains although little actual activity has occurred. So far, only Nevada and Delaware have enacted legislation permitting online gaming. DC enacted legislation, but it was repealed before it was implemented.

As this article makes clear, however, social gaming continues to provide a viable and profitable online gaming alternative, while states craft legislation to address online gambling.

Meanwhile, a number of companies are jockeying for position in anticipation of more online gaming legislation. Numerous acquisitions have occurred in this space. For example, International Game Technology acquired Facebook casino games developer DoubleDown in January, 2012 for $500 million.  DoubleDown does not permit betting with real money, but rather generates revenue by selling virtual gaming chips.

Social entertainment company RockYou acquired Facebook casino developer Ryzing, creators of Bingo by Ryzing.

Social game developer Zynga is doubling down on its gambling-based business strategy. Zynga rakes in some serious profits from Zynga poker (selling virtual poker chips that cannot be redeemed for cash). Reportedly, Zynga is expanding its focus in this area to include online gambling.

Social game developer Big Fish launched a new iPhone app called Big Fish Casino, which includes real-money gambling (in the UK) in conjunction with the Betable gambling platform. This is the first time that a real-money gambling game will be available in the App Store.

Facebook, too, has started hosting real-money gambling games, by offering Bingo Friendzy by Gamesys on its platform.

Casino operators are also jumping on the band-wagon.  Las Vegas Casino operator Station Casinos announced it is acquiring a stake in Fertitta Interactive, which offers online games, social gaming, and entertainment services, including an online poker game.

And the list continues.

As this sampling shows, many companies are diving into online gambling, where it is legal. Others are leveraging social gaming and other models that (ideally) do not involve real money gambling. Others are employing creative business models and strategies involving contests, sweepstakes and gambling-like activities in social games or what we refer to as gamblification!

Pillsbury’s Social Media, Entertainment & Technology Team has prepared a white paper on legal issues associated with these “gamblification” strategies.

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Binary world A weekly wrap up of interesting news about virtual worlds, virtual goods and other social media.

 

 

Beyonce Still Can’t Nix Video Game Suit, Appeals Court Says
A New York intermediate appeals court on Thursday affirmed a lower court ruling that pop singer Beyonce could not nix a suit alleging she violated a contract by abruptly pulling the plug on a multimillion-dollar video game development deal.

Video Game Co.’s Award Doubled To Over $9M In IP Battle
A North Carolina federal judge on Wednesday more than doubled a $4.5 million jury award Epic Games Inc. won against another video game developer, finding Silicon Knights Inc. deliberately copied code for Epic’s game engine and then initiated “a prolonged coverup.”

Consumers find social media increasingly trustworthy
In line with ING’s ambition to be at the forefront of developments in social media, ING is today presenting the study ‘Impact of social media 2012 (#SMING12)’ based on a survey among 1,500 Dutch consumers. The survey shows that consumers find social media increasingly trustworthy. 65% said they find the information posted on online media to be trustworthy. 40% of consumers find posts made on social media to be trustworthy.

HoneyBaked Granted Social Media Discovery in EEOC Suit
A magistrate judge in Colorado has granted HoneyBaked Ham Co.’s request for discovery of social media accounts, text messages and emails of a class of women in the U.S. Equal Employment Opportunity Commission’s’ sexual harassment suit against the company.