Monday was the first day of the jury trial in Parrish et al v. NFL Players, Inc. (also referred to elsewhere as Adderley et al v. NFL Players, Inc.) Filed in February of 2007 in the U.S. District Court for the Northern District of California, Parrish is a class action suit brought on behalf of retired NFL players who allege that their union, NFL Players Inc, acted inequitably towards them by entering into an Agreement with Electronic Arts which would allow EA to feature entire teams of retired players in their Madden series of football video games without making payments to the majority of the retired players. In support of their allegations, the retired players point to a number of communications between EA and NFL Players, Inc, which appear on their face to be discussions of how the numbers and other attributes of retired players could be “scrambled” so that retired players could be featured in EA’s games without EA or NFL Players, Inc having to pay them (excerpts available at GamePolitics.com).

The claims brought by the retired players are particularly interesting in this case because they bring up issues in both publicity and agency law. The retired players seek to enforce their right of publicity, an outgrowth of the right to privacy or the “right to be left alone.” What the right of publicity allows people with some level of public recognition to do is leverage it by bargaining away some of their privacy and licensing another person to feature their likeness or other characteristics on a cereal box or in a video game in exchange for money. On this basis, the retired players allege that their right of publicity has been infringed where their characteristics, including their height, weight, statistics, years played, position and team affiliation have been featured in the Madden games without their permission or their receiving any payment. As an aside, California is a particularly strong jurisdiction for bringing right of publicity claims, given that the state’s history with wealthy persons making a living off of their appearance has led to laws and court decisions that are especially kind to right of publicity claims.

So how then does this case involve agency law? The answer lies in the reason the retired players have brought this class action against their union and not against Electronic Arts, producers of the Madden video games. Having less public notoriety than current players, the retired players allowed their union, NFL Players, Inc., to represent them as a group in negotiating the use of their likenesses in video games and other media. By taking up this role NFL Players, Inc. became an agent for the retired players, which required the union to serve the interests of the retirees above the union’s own interests or those of third parties. Instead, the class of retired players alleges that NFL Players, Inc. made arrangements with Electronic Arts which benefit Electronic Arts by allowing them to use characteristics of the retired players in the Madden games and benefit the union through their receipt of millions in fees, but which did not serve the retired players since it did not result in their receiving any payments from the transaction.

Virtual Judgment will keep up with further developments in this case. For more information, the docket in Parish/Adderley v. NFL Players Inc. is available courtesy of Justia.com.

I would like to welcome you all to Virtual Judgment. The intent of this site is to discuss the legal and business issues that are quickly arising from the convergence of videogames, virtual worlds and the real world. The current market for the video game and virtual world interactive media industry is 8 billion dollars and is expected to grow to over 30 billion in the next few years. The largest one day opening in entertainment history was the sale of “Grant Theft Auto IV” ($310 million in its first day) and not any blockbuster movie release (Spiderman 2, made only $52 million its first day and $114 million its first weekend). The more this industry expands the more legal issues are being raised. The industry is advancing technology that is on the bleeding edge and the current legal system is poised to be left behind. At this point there is a dearth of legal voices dealing with video game and virtual world law, which is an area of law that it set to explode in the coming years.

The area of law dealing with video games has been referred to as part of entertainment, IP, technology or even interactive media. Regardless of what you refer to it as there are numerous challenges and a myriad of potential issues. From traditional IP and contract rights to character and music licensing this area deals with various areas of law. Moreover, video game issues are frequently in the news dealing with a panoply of issues. Various states have enacted legislation attempting to outlaw violence or obscenity in video games. Many of the various laws that have been passed have been overturned as unconstitutional, but the states keep attempting to pass different iterations. The storytelling elements of video games have led to its categorization as protected under the first amendment speech doctrine in the same manner as books and movies.

In addition to the market for console, P.C. based and online video games there is an expanding industry surrounding virtual worlds – sometimes also called digital or synthetic. Virtual worlds are online games that have evolved from text-based role playing games such as Dungeons and Dragons. The predecessors of the “Massively Multiplayer Online Role-playing Games” (”MMOs”) of today began for the most part in the late 70s and early 80s when various individuals first engaged in the role-playing game behavior online. In the 90s the current state of online MMOs began offering a real-time socially interactive (i.e. social networking) component which was not available on traditional offline console gamming. While the physical space and landscape is simulated in the virtual environment the social interactions are real since virtual characters or “Avatars” in the digital world are controlled and operated by a real person and not just by strict computer code. While these games were originally used mostly as an avenue for play and social interaction, many are starting to be more focused on commerce, research and work related activities. In the last few years MMOs have exploded in usership with some reports stating that 100 million people worldwide are logging on to play in one of the various digital worlds.

Many individuals do not play the game strictly for its virtual entertainment opportunities, but as a way to make money in the real world. Individuals and virtual businesspeople are able to convert their digital earning into real cash through by using existing virtual currency arbitrage trading, converting digital currency to United States cash at the prevailing rate in the same manner that an international currency exchange would. Multinational companies like IBM, Toyota, Starwood Hotels, Reuters, Viacom and others have created virtual world presences to conduct real world business and advertise virtual and real world products.

Every virtual game world comes with an End User License Agreement (”EULA”) which the players must agree to if they wish to play the game. By accepting the terms of the EULA players may waive significant individual rights. The EULA acts like a system of laws for the virtual world creating a “closed world”. This “closed world” is intended to differentiate the virtual world as a game not subject to the real world laws and other requirements. Under the general terms of these EULA there is no sense of private property since the virtual world is wholly owned by the designers and builders. Most EULAs insist that any intangible property or artifacts that exist in the game world are the property of the designers and not owned by the players. The players may accumulate them in the course of the game but merely use them by license of the game designer. Under this argument, if we cede legal control to virtual world property to the game designers and EULA we essentially negate the need to look to laws and governmental interference to protect players’ rights. The protections the EULA claim to grant to the game designers is currently under attack.

On the other hand “open worlds” like the game Second Life have been designed where the barrier between the real world and the virtual world is much more porous. The creation of these “open worlds” is making the questions of rights and obligations much more difficult to resolve in favor of EULA control. In the “open world” of Second Life individual players retain ownership of all the real world rights to their creations in the virtual world. They are considered the owners of all the IP involved and created by them and can do with it what they will, so to speak. If the “open world” trend continues and is adopted by more and more game designers then there will be a significant need to regulate and protect the IP ownership. Moreover, as stated major corporations like IBM, GM and others have created their own virtual world presence. They are using the virtual world as a place to advertise, market and sell their products, as well as, a meeting place for employees to perform real world work. As this trend continues the legal issues inherent therein will also need to be addressed.

Since intangible intellectual property of all kinds has real world value and can be relatively easily converted, the question arises as to what legal standard should be applied to the virtual world. The growing commercialization of the virtual world will inevitably subject it to real world laws and regulations as players seek protections for their valuable IP. If virtual world currency and goods being traded have a real world value won’t the courts and government eventually step in to protect, regulate and tax these digital assets? Congress is currently looking into the taxing question. The answer will potentially depend on whether a player is allowed ownership of an item they obtained or created in the virtual world. Likewise, if virtual property has real world value, could a game designer be held liable for destruction of property if they pulled the plug on a game due to business or monetary issues without proper compensation to the gamers? Additionally, how would the virtual economy suffer if virtual real estate or monetary assets were taxed by the city, state or federal government? For that matter which jurisdiction would have claim over the assets since they exist in the ether that is the digital world? The US has not dealt with this issue yet, but it has been decided in other countries which may shed light on what the US may find. Moreover, prior decisions (like the Supreme Courts Grokster opinion) and current Acts (like the Digital Millennium Copyright Act) may play a significant role in the outcome of these issues. All of these questions will eventually need to be determined as the virtual systems grow in size, number and membership.

In summary, given the expansive and interconnected nature of the industry Virtual Judgment will include discussions on various areas of law, including Intellectual property, interactive media, contract law, intangible property; communications, technology, licensing, obscenity, employment, defamation, piracy, constitutional rights, tort liability, and more. If there are specific topics that you would like to be addressed by this site please contact me to let me know. I envisioned this site as a useful tool for developers, businesspeople, lawyers, players or other enthusiasts. It can only become such a useful tool if the readers challenge me and let me know what is of interest and importance to them. Therefore, I look forward to our continuing virtual dialogue.

Sean F. Kane