Addressing legal issues with the latest technological developments and social media trends.
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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.

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On October 30, 2012, California Attorney General Kamala D. Harris issued a press release regarding a new enforcement effort involving California’s Online Privacy Protection Act,  Cal. Bus. & Prof. Code §§ 22575-22579 (“CalOPPA”). CalOPPA requires that “an operator of a commercial Web site or online service that collects personally identifiable information through the Internet about individual consumers residing in California who use or visit its commercial Web site or online service” conspicuously post a privacy policy that complies with specified requirements. In the case of an online service, the privacy policy must be “reasonably accessible … for consumers of the online service.” An operator of a mobile application (“App”) that uses the Internet to collect personally identifiable information is an “online service.” An App’s commercial operator will be required to conspicuously post its privacy policy so that it is reasonably accessible to the consumer. The AG confirmed that, having a website with the applicable privacy policy conspicuously posted may be adequate, but only if a link to that website is “reasonably accessible” to the user within the App. The AG warned that, under California’s unfair competition law, violations of CalOPPA may result in penalties of up to $2,500 for each violation, i.e., for each copy of the unlawful App downloaded by California consumers. Click here for a copy of the California Attorney General Kamala D. Harris’ press release and a sample non-compliance letter. 

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

 

 

Cypress Hill Singer’s Grand Theft Likeness Suit Put To Rest
A California appeals court refused Wednesday to revive a former Cypress Hill backup singer’s suit claiming that his likeness was misappropriated in a Grand Theft Auto video game, ruling the game’s creative elements transformed it into more than a mere imitation of the plaintiff.

VCs invest $150m in mHealth during Q3: YTD total hits $616m
In the third quarter of 2012, mhealth companies received $150.1 million in venture capital bringing the year to date total investment in the sector to $616 million according to data collected by Mobile Health Market News.

Feel The Force: Angry Birds Star Wars Tops U.S. App Store In Record 2.5 Hours, Says Rovio
Rovio’s Angry Birds Star Wars mash-up launched yesterday — and took just 2.5 hours to reach the number one spot in the U.S. App Store. In a blog announcing the figure, the games maker noted that the speed with which its latest Angry Birds incarnation rocketed to the top of the chart beat all its previous records.

Twitter unintentionally resets some passwords trying to plug breach
Twitter reset some passwords in an attempt to protect members whose accounts may have been compromised by a hacker, but inadvertently reset a larger number of accounts than needed, the micro-blogging service said Thursday.

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

 

 

Google Wallet targeted in patent infringement suit
Google is the target of a new lawsuit alleging its Wallet contactless payment system infringes on a patent issued in late 2007.

Site Unseen: Schools, Bosses Barred from Eyeing Students’, Workers’ Social Media
This year several states have sought to block personal passwords from inquiring principals and bosses.

California Targets Mobile Apps For Missing Privacy Policies
Mobile app developers that don’t post conspicuous online and in-app privacy policies will face $2,500 fine per download.

Girl Scouts Use Social Media, Mobile Tech to Break Cookie Sales Records
The ease of connecting with customers through email, texting and social media is one of the reasons the Girl Scouts are selling more cookies than ever before. Almost $800 million worth of Thin Mints, Samoas and other coveted flavors were sold during the 2011-2012 selling season.

Virtual worlds help autistic kids develop social skills
A new study has suggested that the benefits of virtual worlds can be used to help autistic children develop social skills beyond their anticipated levels.

 

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App Conference PIC.jpgThe App Conference and Global Mobile Internet Conference (GMIC) took place October 18-19-20 at the San Jose Hilton and San Jose Convention Center. This event brought together more than 100 speakers that addressed key components of app development, marketing and revenue in 6 conference tracks over 3 days. With an emphasis on cross platform development, revenue strategies, and global growth, the shows provided key insight and networking for both developers and business professionals. Pillsbury team members Jim Gatto, Ian Schick and Jessica Slater (pictured) attended the conference.

Jim Gatto participated on the “Going Global” panel. The panel discussed a broad range of international issues and answered a number of questions including: How should developers think about going global and implementing an international strategy? Is there a difference in the way apps are conceived, developed and marketed in each type of market that each can learn from? When is the right time to localize a successful domestic app for international audiences? What are some of the pitfalls to avoid when trying to market an app internationally, and who should you be partnering with for distribution? What cultural, educational and financial differences affect the way in which apps are adopted? How do you successfully launch an app for worldwide audiences?

Fellow panelists included executives from GAMEVIL, BlueRun Ventures and Tapjoy, Inc.

For more information, feel free to contact any member of the Pillsbury team.