Video game development has nowadays become an immensely profitable business, with budgets running to hundreds of millions of dollars for the largest projects and profits that are comparable to those in the film industry. Since large profits mean risky investments, development studios have also become exposed to ever greater business losses. The recent bankruptcy of Telltale Games is just one example. The demise of the iconic studio that was responsible for games based on licensed films, series and comic books (such as The Game of Thrones, The Walking Dead or Batman) led to mass layoffs of around 250 employees.

Despite such a dramatic downfall, the recent weeks’ discussions have been dominated by a different subject: a letter sent by attorneys of Andrzej Sapkowski (author of short story collections and a pentalogy about Geralt the witcher) to Polish development studio CD Projekt RED (“CD Projekt”), in which Sapkowski relies on Article 44 of the Copyrights Act to demand a 6% share in CD Projekt’s profits on its worldwide hit game The Witcher 3:  Wild Hunt (PLN 60 million). The article in question states that “in the event of a gross disproportion between the remuneration of the author and the benefits of the copyright transferee or licensee, the author may request that the court should appropriately increase his remuneration.” This article has introduced what is called a “bestseller clause” into the Polish legal system (K. Włodarska-Dziurzyńska [in:]  T. Targosz, K. Włodarska-Dziurzyńska, Umowy przenoszące autorskie prawa majątkowe, Warszawa 2010, p. 239). The bestseller clause applies both to copyright licenses and transfers. It seems that Sapkowski’s attorneys will be facing an incredibly demanding challenge in proving that it was Sapkowski’s oeuvre precisely that had a significant impact on the sales success of CD Projekt’s game. It suffices to recall that the Polish film depicting Geralt’s adventures enjoyed neither artistic acclaim nor financial success. The court will have to consider the total degree in which the development studio has contributed to shaping the Witcher brand throughout the world for 11 years (as 2007 saw the release of the game’s first instalment), as well as the game’s artistic aspects (the visual representation of the character, their development throughout the game’s three instalments, and the plot) and the whole of the programmers’ work. This will be essential for determining whether there is indeed a gross disproportion between the profits from exploitation of the work and Sapkowski’s remuneration, which, unofficially, is said to have amounted to PLN 35,000. In both the game and the film industries, it is not unnatural for profits of those with the right to communicate the work to the public to exceed the author’s remuneration, sometimes multiple times. It is worth remembering that, in the case in question, Sapkowski had been offered profit sharing, which he declined in favour of a larger contractual lump sum. This is a situation in which the relation between the contractual remuneration and the profits of exploitation is in manifest imbalance.

CD Projekt did not accept the author’s demands, calling them “groundless”. The studio also published a letter to Sapkowski’s attorneys on Twitter etc. together with an official statement. The statement reads that “[i]n the Company’s opinion the demands are groundless on their merits and as to the amount. The Company had legitimately and legally acquired copyrights in Mr. Andrzej Sapkowski’s work, including insofar as is required for its use in games developed by the Company. All contractual remuneration has been properly paid. (…) Given the author of the demand, the Company considers that receipt of the demand meets materiality criteria.” The Company is convinced that it owes the success of its Witcher game trilogy solely to its work and expenditures, bearing in mind that it was on the verge of bankruptcy after creating the first instalment of the game and investing majority of its capital in the development of the second instalment, The Witcher 2: Assassins of Kings. Should Sapkowski’s attorneys succeed, other authors might feel encouraged to act. This, without a doubt, would be a heavy blow not only to licensees but to the whole creative industry, especially since contractually excluding the application of Article 44, just as requiring the author not to rely on it, is unacceptable (Flisak Damian [ed.], Prawo autorskie i prawa pokrewne. Komentarz, Warszawa 2015, p. 677). What is an open secret, however, is the fact that a large number of licenses and copyright transfer contracts contain gaps and inconsistencies which, once reviewed, can be exploited by the authors in their demands of additional royalties.

Sapkowski’s case is not the first in which a public figure demands compensation from a video game development studio. In 2014, American actress Lindsay Lohan sued Rockstar Games, Inc., the studio behind the iconic Grand Theft Auto series, for the purported use of her image which was supposed to have served the purpose of creating one of the characters in the game. The New York Court dismissed Lohan’s lawsuit, saying that although there were certain similarities between the actress and the game character, the video game image could not be considered the portrait of a person and so there could not be an infringement of the related advertising laws. Lohan’s lawyers appealed to New York’s Court of Appeals but it upheld the ruling of the trial court.

Infringement disputes between the developers themselves are not uncommon, too. The most notorious dispute of 2018 involves a lawsuit brought by PUBG Corporation and PUBG Santa Monica, Inc. (“PUBG”) against NetEase, Inc. and NetEase Information Technology Corp. (“NetEase”). PUBG is the developer of PlayerUnknown’s Battlegrounds, a game based on what is now an immensely popular game format called battle royale. Battle royale is a multiplayer mode in action video games in which at least several (and often dozens or hundreds) players fight one another individually or in small teams until the last man or team remains standing. The match takes place on a map, with weapons and other items for survival scattered around. The pace of the game gradually becomes faster as the play area becomes ever more restricted in a random fashion. In their complaint running to over 150 pages, PUBG alleges that NetEase, the studio behind Rules of Survival and Knives Out, has infringed upon PUBG’s copyright and engaged in acts of unfair competition, such as copying the game’s setting, the architecture of the buildings found in it, the models of weapons used by players, and individual gameplay elements. Furthermore, in both games, NetEase used the iconic phrase “Winner Winner Chicken Dinner!”, which appears on the player’s screen when they win a match of PlayerUnknown’s Battlegrounds. The phrase has been known in America since the Great Depression, and thanks to PUBG’s game it became a part of pop culture. NetEase did not acknowledge PUBG’s claims, stating that a single development studio cannot monopolise an entire video game genre based on copyright, as copyright protects only the expression, whereas many of the elements NetEase used are standard to the genre, to which PUBG has no exclusive rights. PUBG intends to prove that it is a combination of the above elements that as a whole constitutes an original copyrightable work (even though PUBG has no such right to the individual elements) which has been copied by NetEase. The case is pending and both lawyers and video game enthusiasts eagerly await its resolution.

Another example of a dispute between developers is the case of Tetris Holding LLC, the company that owns the iconic Tetris game. The company managed to win a dispute with Xio Interactive, Inc., the developer behind a mobile app game that was an imitation of Tetris. The developers of Tetris accused Xio Interactive, Inc. of infringing upon copyright and trade dress (the features of a product’s look or packaging – or even of an architectural design – that point to a specific undertaking as their source), as the developers of the game in dispute recreated the colour, shape and size of the iconic blocks, as well as the play area itself and a part of the game’s interface. Though the Court claimed that “[t]he game mechanics and the rules are not entitled to protection, (…) this principle does not mean, and cannot mean, that any and all expression related to a game rule or game function is unprotectable”. Given the above, Tetris Holding LLC was “as entitled to copyright protection for the way in which it [chose] to express game rules or game play as one would be to the way in which one chooses to express an idea.” The court thus held that Tetris Holding LCC’s copyright was infringed upon not due to Xio Interactive, Inc.’s direct use of game elements but due to their copying of artistic products developed by the Tetris programming team.

 

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Check what we refer to:

  • the Copyright and Related Rights Act of 4 February 1994 (Journal of Laws of 1994, no. 24, item 83);
  • the Industrial Property Law Act of 30 June 2000 (Journal of Laws of 2001, no. 49, item 508);
  • the Unfair Competition (Combating) Act of 16 April 1993 (Journal of Laws of 1993, no. 47, item 211);
  • https://law.justia.com/cases/new-york/court-of-appeals/2018/24.html;
  • https://dockets.justia.com/docket/california/candce/5:2018cv02010/324724;
  • https://law.justia.com/cases/federal/district-courts/new-jersey/njdce/3:2009cv06115/235418/61/.