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Copyright’s Owners Must Register Before Enforcing Their Rights. An Enforcement of an Age Old Rule, and the End of a Circuit Split.

Copyright’s holders must register before enforcing their rights.

On Monday, March 4 2019, the United States Supreme Court resolved a long-standing circuit split regarding when a party can sue for copyright infringement. What’s the split? For some time, several United States Circuit Courts allowed a party to bring an action for copyright infringement before the Copyright Office has issued or denied a parties copyright registration application. This was because it takes an estimated 7 months from the date of filing to the date of registration.  The issue is, this circuit split was not supported by the plain text of Section 411(a) of the Copyright Act which states registration is a prerequisite to suit, not merely filing the application.

This was the central issue in Fourth Estate Public Benefit Corp v. Wall-Street.com, LLC, where Fourth Estate sued Wall-Steet.com for copyright infringement as a result of hosting various news articles Wall-Street.com no longer had permission or a license to display on its site.  The kicker here was Fourth Estate had yet to receive a registration certificate for the various articles, and Wall-Street sought to dismiss the case because Fourth Estate had yet to comply with the prerequisite to bring its claim. Justice Ginsburg, drafting the Court’s unanimous ruling stated it’s the role of Congress to correct the long delay at the copyright office and not the Courts.

How Does this Change Effect You?

In the United States once a work of authorship is recorded on a fixed medium you have a copyrightable asset.  To protect that asset from infringement, or to enforce your exclusive rights in that asset you must file for a copyright with the United States Copyright Office.  Now, time is a large factor when thinking about protecting your IP. As a developer or content creator, you will need to factor the additional time required to secure a copyright registration prior to commencing an infringement action.

For Developer Studio’s this enforcement of registration as a prerequisite should shift your thinking from protecting your IP once everything is finished to taking an as we go approach to protecting your copyrightable IP, and planning your developments legal budget for the year. As a studio, as parts of your project reach completion filing registrations in a proactive approach will save you time in the event you are forced to enforce your copyrights.

What if I am suffering from infringement now, do I still need to wait? What are my options?

If you’re currently suffering from infringers don’t worry, there are options and paths for you depending on budget and type of work. The Copyright Act does allow for very limited exceptions applicable to certain categories of copyrightable assets. If you’re a copyright owner who is preparing to distribute work that is vulnerable to predistribution infringement, you may apply to the Copyright Office for preregistration. What type of works are these? Works that are vulnerable to predistribution infringement typically include movies or musical compositions.  Another exception extends to live broadcasts, however, the copyright owner must eventually pursue registration for their claims in order to maintain their suit for infringement.

If you don’t fall into those categories there is another option around the 7 months estimated wait for registration. Copyright owners can opt for an expedited application review process called special handling, that results in the Copyright Office evaluating the if a work can be registered quickly, sometimes in less than 5 business days. To meet this special handling review a copyright owner must: have an acceptable application, an acceptable deposit, and a nonrefundable filing fee of $800 per claim.  If this falls out of your budget, and you’re forced to wait the 7 plus months for a registration certificate fear not. The Court in its ruling recognized this issue and will allow a Copyright owner to recover for both pre and post-registration infringement.

Press Start Legal’s team of intellectual property lawyers advises its clients on a broad range of copyright protection and enforcement strategies.  Are you looking how to best protect your intellectual property within your business needs? Feel free to reach out to Zachary Rich at PressStart.Legal for a free consultation on how we can help you and your business protect your brand and all of your hard work.

 

The Westworld Fallout. A Discussion on Work-for-hire.

In today’s post, I am going to discuss a recent lawsuit filed by Bethesda Softworks versus Behaviour Interactive regarding the new Westworld mobile game and Bethesda popular Fallout Shelter title. We are going to take a look at Work-for-hire agreements, the necessary verbiage required, and why they are both dangerous and helpful to Studios and Publishers. I will not discuss alleged claims Bethesda has against Warner Bros. Entertainment, as it does pertain to the Work-for-hire topic. As always this is my option, and should not be treated as legal advice.

  1. The Setup

In 2014, Bethesda engaged Behaviour to assist in developing the Fallout Shelter mobile game. The parties agreed to a Software Development and Services Agreement that set forth among many things several work-for-hire provisions, assignment of rights, and a multitude of confidentiality and trade secret provisions.  Under the agreement, Bethesda provided the conception, design, and overall direction of the game’s mechanics, and the resulting look and feel of the title. Behavior would provide the implementation of Bethesda concepts and artwork to create what we know now as Fallout Shelter.  Additionally, the Agreement expressly states, “all work product and any other materials created by Behaviour related to Fallout Shelter, including its source doe, content, assets, and associated intellectual property rights, were created as works made for hire for Bethesda.
The game “puts you in control of a state-of-the-art underground Vault from Vault-Tec. Build the perfect Vault, keep your Dwellers happy, and protect them from the dangers of the Wasteland.” Fallout Shelter was released on the App Store and Google Play in June 2015 and within a day of the release, became the most-downloaded free mobile app in the United States. On September 11, 2015, Bethesda was granted a Copyright Registration for Fallout Shelter’s underlying code and game assets. (Reg. No.: TX0008074781)
Around March 2018, Warner Bros. announced the Westworld mobile a brand new mobile game set in the Westworld universe developed by Behaviour Interactive. In Westworld mobile you “Build and control the park, create and evolve Artificially Intelligent Hosts, and indulge the many human appetites of your Guests. Prove yourself as an employee, and you’ll gain access to the park in ways only Westworld’s creators could have designed.” Warner Bros. demoed an early build of the game to overwhelmingly positive reviews at GDC and SXSW. Most if not all publications covering both events and saw the Westworld demo noted how the game closely resembles Fallout Shelter’s art style and gameplay concepts.

  1. The Lawsuit

On June 21, 2018, Bethesda filed suit against Behaviour alleging breach of contract, copyright infringement, and misappropriation of trade secrets. The lawsuit details the overwhelming similarities between Westworld Mobile and Fallout Shelter, even going as far as to call Westworld Mobile “blatant rip-off of Fallout Shelter.” However, similarities are not enough to prevail, meaning just having the same gameplay concepts is not enough for Bethesda to succeed in its claims against Behaviour. This is because concepts or ideas are not intellectual property, and cannot be protected by copyright law.
Bethesda is able to show Behaviour allegedly copied the code they created for Fallout Shelter, and they did this by finding a very particular a bug in Westworld Mobile that was in the early builds of Fallout Shelter. The chance of the two separate games having the exact same bug without the same code being used is almost impossible. Additionally, Bethesda detailed how the movement of the characters from walking around the screen in a 2D space, to how the cartoonish NPC’s drink beer is identical in both titles. Furthermore, Bethesda explains how the camera in both titles works and moves exactly the same way by “double tapping” on an event space. Bethesda claims, these events could only be replicated in such a fashion that Behaviour used the exact code from Fallout Shelter to cut development time and costs for Warner Bros.

  • Work-for-hire
  1. The Work-for-hire Doctrine

Before we can address the Work-for-hire issue at the heart of Bethesda, it’s important to examine the Work-for-hire Doctrine, and the relevant case law that’s evolved the concept over the past 40 or so years.
Generally, under the Copyright Act, ownership if a copyright and its exclusive rights vets in the original “author” of the work, unless they are otherwise properly transferred to another. 17 U.S.C. §106. These exclusive rights vested in the author include These include the right to reproduce the copyrighted work in copies or phonorecords, to prepare derivative works based on the copyrighted work, to distribute copies of the work by sale or other transfer of ownership or by lease, to publicly perform and publicly display the work and, in the case of sound recordings, to publicly perform the work by means of a digital audio transmission. 17 U.S.C. §106.
How does this play out in an independent contractor situation where party contracts to have a copyrightable work created for a particular purpose? For example, a Bethesda contracting with Behaviour to create the code for Fallout Shelter. Enter the Work-for-hire doctrine, where an employer or hiring party under appropriate circumstances acquire the status of “authorship” and entitled said employer or hiring party the exclusive rights that otherwise would belong to the actual creator.
In 1966 the Second Circuit heard the case Brattlebroro Publishing Co. v. Windmill Publishing Corp., one of the first Work-for-hire cases that applied the original work-for-hire doctrine to independent contractors. In Brattlebroro, the Second Circuit explained, the work-for-hire doctrine makes the employer the “author” of the work, whenever the employee’s work is produced at the instance and expense of the employer. Brattlebroro Publishing Co. v. Windmill Publishing Corp 369 F.2d 565 (2nd Cir. 1966). When applying the same principles to independent contractors, the Court held, “it could see no reason why the same principles are not applicable when the parties bear the relationship of employer and independent contract.” Brattlebroro Publishing Co 369 F.2d 565 (2nd Cir. 1966).
Congress sought to codify the existing law regarding work-for-hire under the Copyright Act of 1976. Congress crafted definitional provisions of the statute in response to a carefully balanced compromise between the interest of employees and the actual creators of the various copyrightable works. H.R. Rep. No. 94-1476, 94th Cong., 2d Sess. 121 (1976). Section 101, of the Copyright Act of 1976, Congress set forth a threshold tests stating, “a work qualifies as a work made for hire if its created by an employee within the scope of employment or if its specially commissioned work that falls within one of nine categories and its accompanied by a written agreement signed by the parties that provides that the work is a work-for-hire.” 17 U.S.C. §101. These nine categories include a contribution to a collective work, part of a motion picture or audiovisual work, a translation, supplementary work, compilation, instructional text, a test, answer material for a test, or an atlas.
The most important case that shaped the modern work-for-hire doctrine was Community for Creative Non-Violence v. Reid 490 U.S. 730 (1989). In Reid, the Supreme Court set the work-for-hire test pertaining to independent contractors. The Court held for a work to be considered work-for-hire, it must fall within the range of the nine categories set forth in 17 U.S.C. §101, and there must be an express writing signed by the parties that consider the work to be one for hire. Reid 490 U.S. 730 (1989)

  1. Work-For-Hire in the Interactive Entertainment Industry, and The Rise of Assignment of Rights

The most important thing that Video Game Developers/Publishers need to take away from the Reid case, and §101 is literary works are not considered works for hire. Generally, computer programing/video games code is considered a literary work for copyright purposes. Therefore, a studio or publisher contracting with another to create code, such as the case with Bethesda, simply having a work-for-hire clause in your agreement does not transfer the authorship of said code to the studio/publisher.
So can you do? As a Studio/Publisher contracting with another to create anything outside of the nine categories, you must have an assignment of rights in your agreement. An assignment of rights is a simple paragraph that transfer ownership of any and all works not considered work-for-hire to the party contracting party. A fantastic example of an assignment of rights is the one Bethesda used in its agreement with Behaviour that stated:
“Bethesda owns all intellectual property and rights related to the development of Fallout Shelter, including all associated versions, derivatives, artwork, game designs, gameplay features, programming, trademarks, trade names, copyrights, know-how, patents, trade secrets and other Intellectual Property Rights.  Any rights resulting from the development of Fallout Shelter not automatically vesting with Bethesda under this contract are irrevocably and unconditionally assigned to Bethesda.”
This section of the agreement between Bethesda and Behaviour clearly transfer the ownership of any and all rights in Fallout Shelter to Bethesda. This effectively takes a work not part of the nine categories in §101 and turns it into a work-for-hire by transferring the rights over. Bethesda takes it one step further in the agreement by contracting that Behaviour appoints Bethesda as attorney-in-fact for Behaviour for the right to execute such instruments in the name of Behaviour on Bethesda’s behalf on a work made for hire basis. The goal here is to ensure there is no possible way the rights in the work Bethesda contracted for would ever stay with Behaviour.

  1. So what happened here, and how can I avoid it in the future?

Without knowing all the facts of this case, and only going off of what Bethesda stated in their complaint, I can only speculate. I don’t want to go out and say Behaviour used to knowledge and access to the Fallout Shelter code to create Westworld, but based on Bethesda’s complaint and evidence it’s hard not to. This is the risk you take as a Developer or Publisher contracting with a third party to work on your project. Yes, you can contract to protect yourself and it gives you the legal remedy to file suit, but is that really going to stop your contractor from ripping you off? In some cases, yes, but this is not an uncommon occurrence. There a multitude of the story’s about Studio filing suit against contractors who stole their game assets or copied their code and created a competing product.
How can you protect yourself? This is a challenging question, on one hand, it’s easy to say we have a contract and both parties are bound by those terms, and those terms will protect me from this happening.  As you can see from this present case, that’s just not entirely true. What I always tell my clients in this position is don’t give away your secret sauce. When entering contracts with third parties to provide work on your games, only give them what they need to complete the agreement, nothing more. Don’t give them access to the source code of the game library if they don’t need it Always have a strong contract with very detailed and specific terms in place, and never sign anything with reviewing it or having your attorney review it.
What about works made prior to the work-for-hire? This question was asked by a Client who performs contract work on the side of large studios to fund his projects. This Client was presented with a predicament, one of this contracting studios wants the Client to create some code to complete a battle system in a game the contracting studio is working on. The Client just happens to have exactly what the contracting studio needs as the Client was working on the code for his own project.  Would signing a contract with the work-for-hire provision and the assignment of rights transfer ownership?
The answer… It depends. If my Client created code for his own works and signed a contract with contract studio, then depending on the terms of the contract, the code modified to work for the contract studio could transfer over to the studio. A way to avoid this is by licensing the rights in the code over while retaining ownership. My golden rule for these types of issues is if you paid to create something, and you signed a contract to do so, chances are is going to be a work-for-hire situation, and your rights in what you create are going to vest in the partying paying you.
Press Start Legal is well versed in creating work-for-hire and assignment of rights agreements. If you have any questions about a contract or need a contract drafted for your next project send us an email at Info@PressStartLegal.com
 
 

Think Fair Use Protects you? Think Again…

A topic that comes up fairly often in the development of Video Games is Fair Use. Typically, the discussion starts “can I redesign this famous character and use it in my game?” What proceeds the question is a large number of incorrect answers that range from “yes, it’s fair use” to “yes if you change it enough.”  The issue is, the ones making these blanket statements either don’t fully understand the concept of Fair Use or they are relying on what Wikipedia told them about fair use.  Today’s blog post is going to clear up the confusion for anyone wondering if their use of someone else’s copyrighted work falls under the fair use protection. This post is going to review the Fair Use definition/history, the factors courts consider when weighing fair use, and why your use in your game is not protected.

  1. A History of Fair Use.

Fair Use originated as an equitable concept created by Section 107 of the Copyright Act of 1976. The Fair Use doctrine seeks to advance social interests in having widespread access to works of authorship while preserving copyright owners exclusive rights of control. The original idea of Fair Use dates back to the “Copyright Clause” in the constitution, which purpose is to “promote the Progress of Science and useful Arts.”
One of the earliest cases of Fair Use dates back to 1841 where a Massachusetts court held the use of copyrighted work really and truly passages for the purposes of fair and reasonable criticism.  Folsom v. Marsh, 9 F. Cas. 342, 344 (C.C.D. Mass. 1841) The Folsom Court was reviewing the use of a use of a copyrighted work for criticism in a publication. The court expressed the need to allow those to openly criticize copyrighted works without fear of legal repercussions. Additionally, Fair Use is often referred to as the First Amendment safety valve, as exclusive rights afforded by the Copyright Act are often in tension with the rights of free expression under the First Amendment. Elder v. Ashcroft, 537 U.S. 186, 219-20 (2003).

  1. What is Fair Use?

In Section 107 of the Copyright, Act Congress laid out the framework for evaluating Fair Use. The major issue with Fair Use is no one legal definition exists that Courts can follow, instead, Section 107 sets out guidelines that enable copyright owners, users, and courters to determine whether a particular use may be fair. In fact, Fair Use is one of the most nuanced areas of copyright law as it requires a large degree of subjectivity to determine if the use if protected.
What use falls within the framework of Section 107? Criticism, Comment, News Reporting, Teaching, Scholarship, and Research are some of the non-exhaustive purposes for which use of copyrighted work is likely to be considered fair. However, Congress added a catchall provision which states if the use is deemed sufficiently transformative such that it does not substitute for the copyrighted work than such use may be considered fair. We will examine what is sufficiently transformative later in this blog. Once a determination is made on the type of use, a Court then examines addition factors to determine if that type of use is considered fair. The main four factors A court uses to determine if the use is fair are the purpose and character of the use, the nature of the copyrighted work, the amount and substantiality of the portion used in relation to the copyrighted work as a whole, and the effect of the use on the potential market for or value of the copyrighted work.

  • The Factors and the Balance.

Let’s review how each factor is examined by the Courts in weighing the use of a copyrighted work.

  1. Purpose and Character of the Use.

A Court will review if the use is of a commercial nature and whether the use is transformative.  Non-commercial uses of copyrighted work are, in general, more likely to qualify as fair use than commercial uses.  Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 577 (1994). This analysis could be as simple as, is the person making profits from the use of the copyrighted works. However, use does not have to directly involve financial gain to be considered commercial.  For example, the Court in A&M Records, Inc. v. Napster, held saving users the expend f purchasing authorized copies was considered commercial. Additionally, in Compaq Computer Corp. V. Ergonome, the Court held use is commercial if it’s used to induce the purchase of other products.
What about free to play games with no microtransactions? This was a question recently asked, what if I launch a free to play the game to show off my studio, and we don’t have any microtransactions in the game. The answer is in the use, here the game studio wanted to show off its work by giving away its game for free. The game made use of copyrighted work without expressed permission from the original rights holder.  Although the Studio wasn’t making any money from giving away its game, the fact that its free offering was to promote the studio, that promotion arguably is a commercial purpose as a way to gain more sales for the studio’s other offerings.  Therefore, its use of copyrighted works in the free game would more likely than not fair this factor.
What about transformative uses? A use is considered to be transformative if it either adds something new to the underlying copyrighted work, or has a different function, purpose, or character than the original work.  What this means is the use cannot be seen as competitive with or supplanting the demand for the original. However, the idea being transformative is vastly different among the circuit courts. For example, the Ninth Circuit found that where an internet image search engine displays thumbnail copies of copyrighted photos use is transformative because it serves an informational function and the originals have an aesthetic purpose. The Second Circuit held, a copyrighted work is used as raw material for a new work, the new work must have new information, aesthetics, or understands for the use to be deemed transformative.  In the case Blanch v. Koons, the Second Circuit found the use of a copyrighted image of fashion feature in a lifestyle magazine to be fair as Koons only used the legs and feet from the original photo, showed the image in new context (a colleague of feet) and was a commentary on the aesthetic of mass media.
How does this work in the Video Game Industry? As a developer, you want to use concert posters from a famous band in your scene your building in your game. Arguably the use of these copyrighted concert posters would be considered fair, as the new use would show the posters in a new context and a purpose that was different from the original purposes.  (See Bill Graham Archives v. Dorling Klindersly Ltd., 448 F.3d 604, 609 (2d Cir. 2006))

  1. The Nature of the Work.

Is the use of the work creative or factual? The more creative a work, the closer it is to the core of the scope of copyright protection. (Stewart v. Abend, 495 U.S. 207, 237-38 (1990))  Why? Facts and ideas are not generally protected under the copyright act. The Idea behind the copyright act to protect artistic works, simply using facts or historical settings does not lend its self for copyright protection.  For example, The Second Circuit in The Swatch Group Management Servs. Ltd v. Bloomberg the Court held the use of audio recordings of a company’s earning calls was fair, as it manifestly a factual character.

  1. The amount and Substantially of the Portion Used.

This factor looks to whether the new work uses only as much of the original work as is necessary. The use of a relatively small portion of a copyrighted work, such as just the legs and feet in the Koons case, generally supports an argument that the use is fair. However, even using a small portion of the work can be deemed unfair if that portion is significant or the “heart” of the original work. (Harper & Row Publishers, 471 U.S. at 598-600)  This factor is often examined in cases where copyrighted characters are used for other purposes in other games. For example, when attempts to use a character like Sonic the Hedgehog in a different setting for a different purpose, but they don’t take the gold rings or the red shoes.  The fact that those are not the “heart” of the character but the ionic look and style of the character as a whole would still deem the use of infringement/unfair.

  1. Effect on the Market for the Copyrighted Work

The Fourth Factor in this analysis is one of the biggest factors when dealing with the copyrighted video characters. The Courts consider both the direct market harm from the use at issue and harms that may result from potential, similar infringing uses. Market Harm can include lost or diverted sales, lost royalties or licensing revenue, or barriers to entry in yet-unexplored markets.  Often times I see people discussing using a character’s likeness without permission, and most people without knowledge claim its ok its fair use. What these individuals don’t understand is using that characters likeness in your game is taking away the potential for the copyright holder to gain licensing revenue.
Iv. Why your use isn’t protected.

Now that you have an understanding of fair use, and how a court determines its protections, let’s do a case study of a recent issue.  The other day a Reddit user on the IndieGaming Subreddit posted a question, is the use of this asset in a video game as a skin fair use. As you can tell from the image, the skin in question looks like Sonic the Hedgehog, what I learned after communicating with the poster is they planned on using the asset in an educational game, and they plan on giving away that game for free.  Now that all the facts are laid out let’s do the Fair Use analysis, Note the asset in question is 100% a derivative work from the original Sonic the Hedgehog, and we will address derivative works in a later post.
Question 1. Does the game fall into a fair use category, and the answer is yes. The poster stated the game was going to be an education game. Now we must look at the 4 factors discussed above.
Question 2. Purpose and Character of the Use. The poster stated this was free to play the game, and stated there is no commercial purpose. However, there is an argument to be had that although there is financial gain from sales, there is a huge financial gain from the promotion and use of the game for his studio.  What about transformative use? Yes, it is transformative to an extent, sonic the hedgehog is an adventure game character, use in an educational game is transformative, however, the fact is its still sonic being used in a video game, therefore still within the original purpose of this character.
Question 3.  The Nature of the Work? Sonic is 100% a creative work, therefore its use without permission would fail this prong.
Question 4. The amount and Substantially of the Portion Used.  Again 100% of the character is used, therefore its use without permission would fail this prong.
Question 5. Effect on the Market for the Copyrighted Work.  Let’s look at how the use of Sonic may cause direct market harm from the use at issue, and harms that may result from potential, similar infringing uses. Direct harm is caused as its devaluing the character, and opening him up to future exposure by infringers.  If allowed to appear in your game without paying a royalty or licensing then Sega/Team Sonic are losing out on that revenue.  Additionally, your blocking Sega/Team Sonic from directly entering education games, affecting their business.
Based on the factors above, its use would not be considered fair, and you would be considered an infringer.
That said Fair Use and copyright laws are tricky, and every use requires some type of analysis. The team at Press Start Legal are experts in Copyright and Intellectual Property Law. We always advise you speak with an Attorney regarding your use of copyrighted works without permission. If you have any questions please contact us at Info@PressStartLegal.com for a free consultation.