IP and Business: IP in the Brave New World of User-Created Computer Games

This article, first published on November 14, 2006 in GameDaily BIZ, a division of AOL Entertainment was written by Gabriel M. Ramsey and Michael W. Trinh at the Silicon Valley office of the international law firm, Orrick. Mr. Ramsey specializes in intellectual property (IP) litigation involving high technology and entertainment industries. Mr. Trinh, who is also focused on IP litigation, has a background in information technology and Internet policy issues. The article is reproduced with the permission of the authors.

User-created content is a significant force in the online economy. People create and share video sensations on YouTube, publish their thoughts on blogs and collaborate to create online resources such as Wikipedia or open source software. With Microsoft's beta release of its XNA Game Studio Express, this trend will reach the console gaming industry. The XNA Game Studio Express is a suite of programming tools which enables users with relatively basic skills to develop "home-brew" games and run them on an Xbox 360 or Windows-based PC.

Development tools for video game hobbyists are not a new idea. In 1997 Sony released its "Net Yaroze" development suite, enabling user creation of games on the original PlayStation platform. The difference today is the advent of business models which make it possible to capitalize commercially on user-created content by leveraging the deep talent and varied works that flow from a worldwide body of creators. While harnessing collective creative powers is potentially lucrative, intellectual property (IP) rights issues quickly arise as these models develop.

User infringement of third-party rights

The most publicized legal question concerning user-generated content is the infringement of third party copyrights by users. For example, users sometimes include in the games they create film footage or music that belongs to large movie studios and record labels. User-developed video games face similar issues. Individuals may copy code or content, such as characters, textures, models or other game elements, which are owned by others – particularly large game companies. Beta-testers, under non-disclosure agreements, for commercial game studios may be tempted to misappropriate trade secret elements of the next big game in their own creations. Moreover, because development of video games is often collaborative, ownership disputes between multiple user-creators may arise.

The providers of development tools are potentially exposed to claims of indirect liability based on their users' conduct. If a user's game infringes a third-party copyright, the provider of the distribution tool used could face claims for "contributory" or "inducing" copyright infringement. The risk of liability is probably lower for a company that simply provides tools for creating games than for a company that hosts or distributes them. With greater knowledge of – and control over – the games, a company's liability risk increases. If the providers are online, the Digital Millennium Copyright Act in the U.S. provides some protection in cases where a distributor promptly removes an infringing user-created game.

Dividing the pie: ownership of user-created games

Another key IP issue is balancing the division of ownership rights between the user-creators and the development tool providers.

There may be reasons why providers of development and distribution tools will not place high value on rights in the games themselves. A large user-creator community will expand the platform user base and strengthen the platform against competitors. However, the growth of a large user-creator base will likely be stunted by the negative user community reaction to licenses that give development/distribution tool providers strong rights in user-created games. Not surprisingly, the current XNA Game Studio Express license accords users ownership of their creations.

Instead of relying on a license that grants Microsoft strong rights in user-created games, the XNA Game Studio Express takes another approach by using certain technical restrictions to limit development to non-commercial efforts. An additional subscription is required to play these "homebrew" games on an Xbox 360 console. Users are unable to share created games, and can only share their source code.

But what of user-generated video games that become extremely popular and valuable? Under some models, the creation/distribution tool providers might use strong IP rights in order to benefit from popular user-created games. However, this issue is likely moot, because user-developed games enabled by current tools probably lack the sophistication to be the next Grand Theft Auto or Halo. Once more advanced technology becomes widely available, a robust market for rights in user-created games is conceivable.

The industry focus has been on the rights to extract value from the popularity of the content, not rights in the sale of content. Development tool providers may develop revenue from advertising placement in connection with user-developed games. Another less obvious benefit is the use of these tools to identify talented novice developers as potential partners or employees.

Risks to IP within the development platform

Development tool providers face IP issues in the tools themselves, namely licensing user access to proprietary software application programming interface – a set of software routines, protocols and tools for building software – and tools. Development tool providers will have to decide how much development capability to make available to user-creators as opposed to professional developers. Restricting key technologies to licensed developers under non-disclosure agreements may protect the most valuable trade secrets. Yet, this approach may conflict with goals of enabling valuable games from user communities.

Regardless of what is considered proprietary, merely providing any tools to the user community will pose some risk. This was illustrated in one dispute in the mid-1990s, in which Sony sued Connectix over Connectix's PlayStation emulator. Sony alleged that Connectix had used Sony's Net Yaroze user development tools, which Sony asserted were trade secrets, in order to create the emulator. This kind of dispute could arise again. Fundamentally, once the door is opened and development tools are provided to users, it may be impossible to close the door.

End game

Video game platform owners face unique challenges in developing business models that leverage the potential popularity of user-created game content. Game developers should allocate users enough control in order for the user-created content market to grow, but retain enough control to protect their IP rights and business. Doing so without overly restraining a promising nascent user base is the key to success.

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