Addressing legal issues with the latest technological developments and social media trends.
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Gametek has filed a complaint for patent infringement against a large number of game and game-related companies over a virtual goods payment patent. 

The patent issued based on an application originally filed September 29, 2000, and claims priority to a provisional application filed June 20, 2000. The patent issued July 11, 2006. We are happy to provide you a copy of the extensive prosecution history, but it is too large to provide a link here.

One of the independent claims recites as follows:

15. A method of managing the operation of a game which includes a game environment, and is programmed to control a gaming action of at least one of a plurality of users, said managing method using a programmed computer to effect the following steps: a) tracking the activity of the at least one user in the course of the gaming action; b) creating an account for the at least one user for maintaining a balance of the at least one user; c) enabling the at least one user to select at least one of a plurality of game objects; d) setting the purchase price of the at least one game object; e) comparing the account balance with the set price of the at least one game object and, determining if the user’s account balance is not less than the set price, then the at least one user is eligible to purchase the one selected game object; f) presenting to the at least one user an offer to purchase the game object dependent upon a group of game parameters comprising the tracked activity of the at least one user, and an indication of whether the at least one user has made a commitment of consideration to purchase the one selected game object; g) ordering the at least one selected game object without interrupting the gaming action of the at least one user; and h) supplying the selected one game object to the at least one user without interruption of the gaming action of the at least one user and incorporating the game object into the game.

The basis for the patent being granted is set forth in the Examiner’s reasons for allowance [Click here for a copy]. In part, the examiner refers to console-based games but noted that none of these “disclose offering a game object to a user for a price and allowing the user to access and incorporate said object in a game without interrupting the game.” The examiner also referred to other prior art and said “the instant invention is distinguished from the prior art…as the system tracks a user’s gaming actions…determines where a user is eligible to purchase a game object based on the user’s account balance…presents and offer to the user to purchase the game object based on …[the] tracked gaming action, [where] the user purchases and is supplied with the game object without interrupting the gaming action, and the object is incorporated into the game.”

Does anyone think that the use of player accounts to enable in-game purchases was new in 2000?

We have collected prior art that may impact the validity of this patent. We have been in touch with some companies and are reaching out to others regarding a potential joint defense group. Even companies who have not yet been sued may be interested in monitoring this case and/or helping to invalidate the patent.

We will provide additional postings here. Please check back.

If you have information to share or have additional questions, please contact us at: Virtual Goods Payment Team

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Date: March 6, 2012
Time: 8:00am – 7:00pm PT
Place: The Palace Hotel, 2 New Montgomery Street, San Francisco, CA

The ABA Forum on the Entertainment and Sports Industries presents Video Games and Digital Media Conference

Join Pillsbury as we co-sponsor this exciting and informative event in San Francisco! Learn about:

  • The Changing World of MMO Games
  • Relationships Among Console, Mobile and Casual Games
  • Investing Update
  • Social and Mobile Games
  • Emerging Business Models
  • Litigation Update

Keynote Address by Michael Gallagher, President and CEO, Entertainment Software Association

Special Offer
Blog readers will receive a special 15% discount on registration! Simply note on your registration form that you are registering via Pillsbury with the Pillsbury discount.

For more information, please click here!

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Pinterest is one of the fastest growing social media sites. Pinterest enables users
to “pin” interesting things to a virtual pinboard to share with others. A pinboard is largely a collection of images organized by topic (home decorating, wedding planning, etc.).

A recent article calls into question the potential risks that users face by “pinning” third party content. As pointed out in the article:

YOU ACKNOWLEDGE AND AGREE THAT, TO THE MAXIMUM EXTENT PERMITTED BY LAW,
THE ENTIRE RISK ARISING OUT OF YOUR ACCESS TO AND USE OF THE SITE,
APPLICATION, SERVICES AND SITE CONTENT REMAINS WITH YOU.

Additionally, Pinterest wants you to indemnify them if your posts create a liability for them.

You agree to defend, indemnify, and hold Cold Brew Labs, its officers,
directors, employees and agents, harmless from and against any claims,
liabilities, damages, losses, and expenses, including, without
limitation, reasonable legal and accounting fees, arising out of or in
any way connected with (i) your access to or use of the Site,
Application, Services or Site Content, (ii) your Member Content, or
(iii) your violation of these Terms.

Sites hosting user uploaded content can shield themselves from liability by leveraging the Digital Millennium Copyright Act. Does this leave users holding the bag if there is infringement?

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On Thursday the Federal Trade Commission released a staff report titled, “Mobile Apps for Kids: Current Privacy Disclosures Are Disappointing,” in which the FTC criticized companies for failing to properly disclose to parents how the companies are collecting personal data through mobile applications (“apps”) aimed at young children.

The results of the FTC’s study follow the FTC’s August 2011 settlement with W3 Innovations, which was the FTC’s first enforcement action against a mobile app developer.

The FTC’s Children’s Online Privacy Protection Act (COPPA) Rule requires that website operators notify parents and obtain their “verifiable consent” before they collect, use, or disclose the personal information of children under 13.  The COPPA Rule also requires that website operators post a privacy policy that is clear, understandable, and complete. Failure to obtain “verifiable parental consent” can expose a company to an FTC enforcement action and the potential for significant damages and unwelcome publicity.

The FTC surveyed approximately 1,000 apps designed for children and available through iTunes and the Android Marketplace by searching for the word “kid.” According to the FTC, despite the warning provided by the W3 Innovations settlement, they found that the operators of those apps could be collecting location (via GPS), phone numbers, contact lists, call logs and other “unique identifiers,” but that the apps do not make it easy for parents to figure out what’s being collected, how the data is being used or to give consent to such collection and use.

“Companies that operate in the mobile marketplace provide great benefits, but they must step up to the plate and provide easily accessible, basic information so that parents can make informed decisions about the apps their kids use,” FTC Chairman Jon Leibowitz said in a statement.

The FTC noted that the various app stores create their own age ratings and that these guidelines are often not consistent.  The Staff Report recommends that app developers provide simple and short disclosures on how they collect and share information about users, including whether their apps connect to social media sites like Facebook.  Connection to Facebook (or other social media sites) for some of these apps could be problematic, since the Facebook terms (and the terms of most other social media sites) specifically prohibit access if the user is under 13 precisely to avoid having to deal with the COPPA Rule.

The FTC also wants app developers to inform parents if apps targeted towards children contain ads.  In some apps, ads and/or content that is inconsistent with the age rating is buried deep within the app and can be found only when a player reaches an advanced stage of the game.

The FTC Staff Report is particularly interesting in light of a report from the Wall Street Journal today asserting that “Google Inc. and other advertising companies have been bypassing the privacy settings of millions of people using Apple Inc.’s Web browser on their iPhones and computers–tracking the Web-browsing habits of people who intended for that kind of monitoring to be blocked.”

The FTC’s evaluation of app privacy disclosures comes as the agency is evaluating the comments it received and finalizing updates to COPPA that were revealed in September 2011.

According to the Staff Report, the FTC is planning to conduct an additional review in the next six months to determine whether some of these mobile apps were violating the COPPA Rule.  As currently drafted, the COPPA Rule creates the potential for violators to be fined up to $1,000 per violation (i.e., per child) – an amount that can add up very quickly for even a moderately popular app.

App developers targeting pre-teens and younger teens should carefully evaluate the data their apps collect, how that data is used and whether the developer’s privacy policy is consistent with such collection and use.

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Date: March 7, 2012
Time: 5:00 – 8:00pm PT
Place: Pillsbury’s San Francisco Office

How do you navigate the sale of your video game company? Join us and find out.

Join Pillsbury as we host a discussion with prominent industry players from Electronic Arts, Zynga, Lightspeed Venture Partners and KlickNation (acquired by EA in 2011) to discuss all aspects of the process surrounding video game company acquisitions. Topics will include how deals are sourced in the video game space, how to decide whether or not to sell, how to shop your company and how to negotiate deal value and other key terms. Panelists come from both sides of the table to provide insights as to how deals work from the perspective of the strategic buyer and the founder/VC investor.

Following the panel discussion, we will take questions from the audience. Questions should be emailed to GDC2012@pillsburylaw.com and will be read to the panel by the moderator.

Agenda
Networking 5:00 – 6:00pm
Panel Discussion 6:00 – 7:00pm
Additional networking 7:00pm – ?
(We promise you’ll be done in time to party! But if you want to stay, feel free! We’ll be there!)

Speakers
Michael Chang
Director, Corporate Development, Electronic Arts

Grant Olsen
Corporate Development, Zynga

Jeremy Liew
Managing Director, Lightspeed Venture Partners

Mark Otero
General Manager of Bioware Social and former CEO of KlickNation (acquired by EA)

For more information, please contact meggan.maromonte@pillsburylaw.com

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The growing use of mobile applications has created great opportunities for all types of businesses. Many companies have leveraged apps to enhance their reach and interactions with customers and potential customers. But with these growing opportunities comes some legal pitfalls. Many companies are not focusing on the vast array of legal issues that relate to what their apps do. The FTC and other government agencies are becoming more active in policing these activities.

In a recent pronouncement, the FTC has warned marketers that certain apps may violate the Fair Credit Reporting Act. The FTC warned the apps marketers that, if they have reason to believe
the background reports they provide are being used for employment
screening, housing, credit, or other similar purposes, they must comply
with the Act.

According to the announcement, “If you have reason to believe that your background reports are being
used for employment or other FCRA purposes, you and your customers who
are using your reports for such purposes must comply with the FCRA.”

The FCRA is designed to protect the privacy of consumer report
information and ensure that the information supplied by consumer
reporting agencies is accurate. Consumer reports are communications
that include information on an individual’s character, reputation, or
personal characteristics and are used or expected to be used for
purposes such as employment, housing or credit.
The companies that received the letters are Everify, Inc., marketer of the Police Records app, InfoPay, Inc., marketer of the Criminal Pages app, and Intelligator, Inc., marketer of Background Checks, Criminal Records Search, Investigate and Locate Anyone, and People Search and Investigator apps. According to the letters, the agency has made no determination whether
the companies are violating the FCRA, but encourages them to review
their apps and their policies and procedures to be sure they comply with the FCRA.

In light of the FTC, FDA, FCC and other government agency’s increased activity in monitoring mobile apps and other social media usage, it is strongly advisable that you submit all of you apps and social media plans to a qualified attorney to review for potential compliance issues.

 

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The number of lawsuits alleging copying of games continues to increase. In one of the latest such lawsuits, Seattle-based game developer Spry Fox filed a copyright infringement lawsuit
against 6waves Lolapps over Spry Fox’s Triple Town game. What exacerbated the issues here is that, apparently, Spry Fox shared information about the game under an NDA, prior to release of the game, when the parties were considering a business relationship.

Even giants like Zynga have been accused of liberally borrowing ideas for its games. NimbleBit, developer of the popular iOS game Tiny Tower, has pointed out the many similarities between their hit and Zynga’s upcoming Dream Heights game. NimbleBit recently sent an open letter addressed to all of Zynga’s 2,789 employees that points out the numerous similarities in the games, offering eight screen shots that show virtually identical features with only slight graphical differences.

These, and other suits that follow these fact patterns, highlight the need for game developers to take certain steps to protect their IP and minimize the need for lawsuits while maximizing the chances of prevailing if they must sue:

  • Consistently use NDAs that prevent the disclosure or use of confidential information that you disclose to third parties, and try to include a provision that gives you ownership of any IP derived from the confidential information. Many NDAs do not include this.
  • Maximize your IP protection with a comprehensive IP strategy that includes patents, trademarks and copyrights. Many game developers have misconceptions about what is protectable and therefore inadvertently forgo certain protection to which they might otherwise be entitled.
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A weekly wrap up of interesting news about virtual worlds, virtual goods and other social media.

Piracy battle goes to CES, Wikipedia may join SOPA protest, Google social search faces privacy concerns

A contentious battle over Internet anti-piracy legislation shifted from Washington to the Consumer Electronics Show, The Washington Post reported. The Consumer Electronics Association, which is behind the show, has been a vocal opponent of the two bills circulating in Congress that would help Hollywood titans, record labels and pharmaceutical firms enforce copyright infringement laws online.

Mobile virtual currency market to hit $4.8bn by 2016

In fact, a study released yesterday from Juniper Research predicts that the amount of money being spent on virtual currency in mobile apps is going to more than double in the next four years, going from $2.1bn last year to $4.8bn by 2016.

Bethesda Buys Interplay’s ‘Fallout’ Rights, Ends IP Suit

Interplay Entertainment Corp., original developer of the “Fallout” line of video games, on Monday forfeited its rights to continue work on the series — resolving a trademark dispute with former business partner Bethesda Softworks LLC.

Domino’s Pizza uses augmented reality offers to boost food sales

Domino’s Pizza, which has already been testing the waters of mobile marketing for some time now, has started a new campaign that includes the use of augmented reality, to add a whole new dimension to its latest 555 pizza offer.

CES: Better augmented reality with high-tech contact lenses

Augmented reality has made progress on smartphones, with apps letting people layer information and graphics over a view of the real world. A startup from the Seattle region is looking to take the next step toward an AR future with special contact lenses that make it possible to view objects projected onto glasses a short distance away from the eye.

Banks start playing games with your money

A new video game has gotten its hooks into Brian Kealer, a 26-year-old San Francisco software engineer. He’s not killing birds or using his vocabulary to impress his friends. No, Kealer is after real prizes, like the iPad2 he just scored. And he’s playing with his bank account. 

8K69Q43F7MWC

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MP900395954.JPGSocial Media usage in the financial services industry is on the rise, which is now putting many registered investment advisers (RIAs) under the microscope for potential federal securities laws violations. RIAs that have not taken the time to review and update their social media policies and procedures may soon find the Securities and Exchange Commission (SEC) knocking on their door. Just recently, the SEC charged
an Illinois-based investment adviser with offering to sell fictitious securities on LinkedIn.

On January 4, 2012, the SEC also released a National Examination Risk Alert addressing investment adviser use of social media. This alert outlines the specific factors that need to be addressed by RIAs who wish to remain in compliance with federal securities laws. The SEC’s guidance could be particularly important given the “crowdfunding” legislation Congress is currently considering.

For a full breakdown and analysis of the SEC’s alert, please click here.

8K69Q43F7MWC

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

 

Will 2012 be the year of virtual worlds?

What got me thinking about this was a blog post by Maria Korlova over at the HyperGrid Business Blog. In it, she maintains her firm conviction that businesses will soon come around to using these virtual worlds as business tools. Just as the nay-sayers were wrong about the Internet, Software as a Service, and Lady Gaga, we will eventually integrate this technology into how we work.

Courts, Sports And Videogames:
What’s In A Game?

Although one of the clearest legal thinkers, Louis Brandeis, conceived the modern right of publicity,[1]
“unclear” would be an adjective all lawyers would apply to the current state of right of publicity law, regardless of which side of the issue they usually argue. Indeed, although the right of publicity concept was further developed by another very clear legal thinker, William Prosser,[2] he himself alluded to it as the concept “that launched a thousand lawsuits,”[3] few of which can be reconciled with one another.

Insurers Can’t Join Coverage Suit Over Athlete Image Use

A Georgia federal judge said Wednesday that four insurers can’t intervene in a coverage suit in California over underlying antitrust class actions concerning the use of college athletes’ likenesses in video games.

What the Copycat Saw: Creative Theft in Mobile and Social Games

The distinction between theft and inspiration is often unclear in video games. Traditions are formed,
broken down, and remade every few years. The most successful ideas are eagerly absorbed by others, from regenerative health in first person shooters to the subdivision of platformer levels into world and stage.

Virtual worlds training for federal cyber pros in the works

After finishing a successful year of training the federal cyber workforce, the government is taking another step toward cultivating better-prepared digital defenders.