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There has been much buzz about Zynga’s attempt to patent virtual currency. As is often the case with patents, there is much hype, many misconceptions and little focus on the actual facts. Here are the facts.

1. Zynga does not have a patent on virtual currency. It has applied for a patent, the application has been published but has not yet been examined. It will be some time, if ever, before a patent will issue. The published application is 2010-0227675. Here is a copy of the Zynga Application.

2. Zynga is seeking protection for various aspects of virtual currency, particularly in the context of “gambling” games. The following is an example of one of the claims:

A method, comprising:receiving, at a server, a purchase order for virtual currency from a player, wherein the purchase order was made with legal currency, and wherein the virtual currency is usable within the context of a computer-implemented game;crediting an account of the player with virtual currency, wherein the virtual currency is not redeemable for legal currency;receiving a second purchase order for a virtual object within the context of the computer-implemented game from the player,
wherein the second purchase order was made with virtual currency;
and debiting the account of the player based on the second purchase order.

3. This claim appears to be seeking protection using real money to buy virtual currency, precluding redemption of the virtual currency for real money but enabling it to be used to buy virtual objects in the game.

4. The patent application was filed

03-03-2010 and claims priority to a provisional application 61/158,246 filed March 6, 2009.

5. We will monitor the status of this application as it is examined and any rejections are made.

While many believe that this patent application will be rejected due to prior art, the most important take always are these:

  • MANY ASPECTS OF SOCIAL GAMES ARE POTENTIALLY PATENTABLE
  • ZYNGA (AND OTHERS) ARE PURSUING MORE PATENTS IN THIS SPACE
  • IT IS WELL KNOWN THAT THERE IS A LOT OF “BORROWING” OF IDEAS FROM COMPETITORS IN THE SOCIAL GAME SPACE
  • THIS HAS BEEN FACILITATED BY LACK OF ATTENTION TO IP PROTECTION
  • IT IS CRITICAL FOR ANYONE OPERATING IN THE SOCIAL GAMING SPACE TO DEVELOP A COMPREHENSIVE IP PROTECTION STRATEGY,  INCLUDING PATENTS, COPYRIGHTS AND TRADEMARKS

E-mail us for a free guide on patent and other IP strategies in the social game space.

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whatis_gallery_slide120100901.jpgApple recently announced a hockey-puck-size AppleTV device. Early adopters seem to love the video-management and TV program and movie download features. But what may be even more important in the future is a feature called AirPlay.This feature essentially turns the AppleTV into a gaming console that can compete with the Sony (SNE) PS3, the Microsoft (MSFT) XBox and the Nintendo (NTDOY) Wii, among others. At $99 and over a quarter of a million units sold in 2 months, it seems to have some momentum. This will be an interesting development to watch as the gaming space continues to evolve.

 

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EA has defeated Edge Games’ attempt to broadly assert rights in the word “EDGE” in connection with video games. Edge sued Electronic Arts for trademark infringement, alleging that EA’s use of “MIRROR’S EDGE” for video games infringed its trademark rights. EA countered that Dr. Langdell and Edge committed fraud on the USPTO by submitting false/doctored specimens of use and making false representations regarding use of its marks. The U.S. District Court for the Northern District of California denied Edge’s motion for a preliminary injunction, finding that all of Edge’s “representations regarding the validity and use of the asserted marks are infected by evidence of deceit.” Edge Games, Inc. v. Electronics Art, Inc., Civil Action No. c10-02614 WHA (N.D. Cal. October 1, 2010).

The case promptly and on October 10, 2010, the Court entered a Final Judgment (here) and an Order approving the parties’ stipulation regarding the disposition of the claims (here). In the Judgment, the Court ordered the USPTO to cancel five registrations owned by Edge. The Order required Edge to notify its licenses that the marks [sic] have been cancelled, and to provide them with a copy of the order denying Edge’s motion for preliminary injunction.

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In a very significant decision, the 9th circuit Court of Appeals ruled that software developers can legally prevent customers from owning the copies of software that they pay for. Instead, if the software license agreement is properly drafted, the software developer retains ownership in the copies they distribute and the customers merely have a license to use the software.

This is significant for many reasons. The first is that this means the “first sale doctrine” does not apply. Under this doctrine a copyright owners rights are extinguished in a particular copy of the software after an authorized first sale. As a result, the customer can rightfully sell the software if they no longer need/want it. In contrast, with a license that restricts transfer this is not permissible.

This ruling by analogy may be applicable to virtual goods as well. Many terms of service specify that virtual goods are merely licensed and not owned by customers.

Vernor 

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Target’s recent launch of a program to sell gift cards redeemable for Facebook Credits or in the virtual world Poptropica towards either membership fees or the purchase of virtual currency further blurs the line (to the extent there still was one) between in-worldfacebookx-large.jpgcurrency and real-world currency. Facebook and Zynga agreed earlier this year that players of Zynga games (such as Farmville) can use Facebook Credits to buy virtual goods, but there is no reason why real-world retailers looking to attract Facebook users and create online buzz couldn’t set up exclusive deals for Facebook Credits. Steve Richards has an interesting post at ecoconsultancy.com on just that topic – he even questions how long it will be before sites that enable you to buy, sell and trade virtual currencies become regulated exchanges.

As the line between virtual and real-world currencies disappears, there are a host of legal issues that virtual world operators will need to deal with. As we noted in this post, because of laws like the CARD Act and various state, local and even international laws and regulations related to the use of stored value cards and accounts, it is important to ensure that if you are offering virtual currency as part of your business model, you verify that you are in compliance with federal, state and international laws.

For more information on legal issues with virtual currencies see our

Overview of Legal Issues with Virtual Currencies.

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Augmented reality (sometimes referred to as Mixed Reality) will likely get a boost from Canon’s vision for the future of imaging. The following is an excerpt from an announcement about Canon’s upcoming EXPO in NY.

 

Canon EXPO 2010 New York will feature the “Imaging for Tomorrow” exhibit
showcasing new technologies that will enhance people’s lives and offers a
preview of Canon’s vision for the future of imaging. Capitalizing on the
significant developments in display technology and cameras, the exhibit will
include Canon’s mixed-reality initiative, which uses computers to combine the
real and virtual worlds in real-time, creating a visual experience in which
users can not only “see” images in a visual space, but also control and create
them. Canon’s Mixed Reality system utilizes a head-mounted display with built-in
cameras and a computer that processes video to blend real and virtual realities.

 

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In the real world (at least in the US), the 5th Amendment to the Constitution states, “No person shall … be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.” A host of jurisprudence has determined what the government is, and is not, allowed to do affecting property owned by private citizens. With an announcement from Linden Labs that the Teen Grid in Second Life will be shutting down on Dec. 31, a number of users are discovering that there’s no such protection in a privately owned virtual world.

According to this article, those who have invested in developing content and educational tools for use in Second Life Teen are faced with the question of whether to transfer to another platform or give up using the tools they’ve developed. The situation illustrates the catch-22 facing those who want to invest significant time, energy and resources into developing virtual world real estate when the owner of the platform has the right to take away that real estate without compensating the members of the community for “taking” their property rights in the virtual world away.

As discussed further in this post, Linden Research Inc. and its CEO Philip Rosedale have already been named as defendants in a class action lawsuit relating to the ownership status of virtual property in Second Life. Interestingly, the home page for Teen Second Life still includes, “Click here for a FREE Lifetime Basic account.” It isn’t clear what Linden plans to do with all of its teen members, since Second Life includes more adult interactions and content and currently requires users to be over 18. The Teen Second Life page also still advertises the monthly rental pricing for virtual land on the Teen Second Life grid.

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Thumbnail image for blizzard.pngA California Court ruled last week in favor of Blizzard, finding that Scapegaming (a.k.a. Alyson Reeves) ran an unauthorized secondary market that handled microtransactions in violation of the World of Warcraft terms of service. Blizzard sued Scapegaming last October for copyright infringement. The court awarded about $88 million dollars, including about $64,000 in attorney’s fees and over $85 million in statutory damages.

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Thumbnail image for Thumbnail image for logo1w.pngA federal court dismissed on summary judgment most of the copyright infringement claims against Google, ruling, in part, that Plaintiff’s notices were not compliant with the requirements of the Digital Millennium Copyright Act (“DMCA”). As a result, the court found that Google was entitled to “safe harbor” protection under various sections of the DMCA.

This is another in a string of DMCA rulings that favor online service providers, place the burden of policing infringement on content owners and demonstrate the courts’ inclination to strictly construe the DMCA requirements. We previously posted about the $1 billion damage claim that Google (and its YouTube subsidiary) avoided in its lawsuit with Viacom by reliance on the DMCA. These cases continue to highlight the business need for ensuring that companies have and comply with effective DMCA policies.

In framing some of the issues, the court stated:

In order to be eligible for any of these three safe harbors under the DMCA, a party must satisfy three threshold conditions. First, the party must be a service provider as defined under 17 U.S.C. § 512(k)(1)(B). Second, the party must have “adopted and reasonably implemented, and inform[] subscribers and account holders of the service provider’s system or network of a policy that provides for the termination in appropriate circumstances of subscribers and account holders of the service provider’s system or network who are repeat infringers.” 17 U.S.C. § 512(i)(1). Third, the party must “accommodate[] and . . . not interfere with standard technical measures” used by copyright owners to identify or protect copyrighted works. 17 U.S.C. §§ 512(i)(1)-(2).

The court found that Perfect 10 did not dispute that Google met the first and third prongs, but rather it argued that there were issues about whether Google implemented a suitable policy for repeat infringers. But for some of the technologies at issue (e.g., Google’s Web Search, Image Search and caching feature”), Google does not have account holders or subscribers. Even Perfect 10 did not contend that Google must, or even can, have a repeat infringer policy for those services. See 17 U.S.C. § 512(i)(1)(A) (requiring a repeat infringer policy for those services with “subscribers and account holders”). Thus, the court summarily found in Google’s favor on these issues.

The court also addressed issues relating to the “Information Location Tools” safe harbor under Section 512(d) of the DMCA. Here the court found that Google, in many cases, did not have “actual notice” of infringement, despite receiving numerous notices from Perfect 10. The court stated:

As the Ninth Circuit explained in CCBill, “The DMCA notification procedures place the burden of policing copyright infringement–identifying the potentially infringing material and adequately documenting infringement–squarely on the owners of the copyright.” CCBill, 488 F.3d at 1113. P10’s Group C notices do not “identif[y] . . . the copyrighted work claimed to have been infringed . . . .” 17 U.S.C. § 512(c)(3). To refer Google to more than 15,000 images appearing on the entirety of P10’s website falls far short of identifying what may have been infringed. Nor is a reference to the totality of the P10 image collection “a representative list” of “multiple copyrighted works” appearing without authorization at a single infringing site. See 17 U.S.C. § 512(c)(3). Thus, all of P10’s Group C notices lack the identification of the copyrighted work required by section 512(c)(3)(A)(ii).

P10’s Group C notices are additionally defective because they do not contain all of the required information in a single written communication.

The court also addressed the Safe Harbor for caching under Section 512(b) of the DMCA and various other issues.

The case is Perfect 10, Inc. v. Google, Inc. Here is a  copy of the Decision

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A patent infringement suit targeting a multiplayer, networking feature of Microsoft’s Xbox video game console was dismissed because the court found that, based on how the patent claims were written, the Xbox’s network connectivity mechanism differed from that required in the patent. This case, like many patent infringement cases, turned on the Court’s interpretation of the patent claim language and highlights the importance of the patent attorney’s wording of the patent claims. It is one thing to get a patent. It is another to get one that is commercially significant and can be viably enforced. A patent attorney who understands a range of alternatives can add significant value to a patent.

Interestingly, Sony previously settled a patent infringement suit involving the same patent relating to its PlayStation video game console.

The case, which was filed in the Eastern District of Michigan, alleged infringement by Microsoft of  U.S. Patent No. 5,292,195, entitled “Apparatus and method for electrically connecting remotely located video games” (“the ‘195 Patent”). The ‘195 Patent issued way back in March 8, 1994.  The court stated:

The ‘125 Patent involves an invention that allows “for two or more players playing the same video game to compete with each other without using the same physical video game which alleviates the necessity of proximity of the players.” ‘125 Patent col. 2 ll. 39-43. The ‘125 Patent describes a system where a video game player can talk and play with a remote opponent at the same time over a telephone line.

The Court ruled that Microsoft did not infringe the asserted claims because micro-processor to modem coupling in the Microsoft Xbox was accomplished via inductive coupling, while the court found that the claims require that the components be electrically
connected.  A Special Master had recommended that the claims should be interpreted to include inductive coupling.  However, the Court did not follow the Special Master’s recommendation, holding that the Special Master had improperly relied on extrinsic evidence, rather than relying on “the ordinary meaning of [the] claim language” which, as the Court indicated “may be readily apparent even to lay judges” [quoting Phillips v. AWH Corp., 415 F.3d 1303, 1314 (Fed. Cir. 2005)].  Along with the plain meaning of the term “electrically connected”, the Court relied on the fact that the term “electrically connected” was used in the ‘195 Patent description to refer only to connections accomplished via conductive electrical wires.

Because the Court’s interpretation is a legal determination, it is subject to review on appeal. Stay tuned to this blog for further developments should an appeal proceed.

Click here for a copy of the Decision.