The esports industry is in a period of rapid growth. The 2017 International (Dota 2 Championship) alone offered a $10 million title purse, a number since eclipsed at events across the market. According to a recent report published by Newzoo, total revenue across the industry is expected to exceed $900 million in 2018, up from $493 million in 2016. As the esports industry has solidified itself as a major sports market both in the United States and internationally, various legal issues have arisen, ranging from developing governance and regulation framework to concerns about gambling, doping and match-fixing.
Central to the esports industry are novel intellectual property issues arising from the structure of the esports ecosystem, which differs in critical respects from those of other professional sports. In most traditional professional sports, leagues own and license their own intellectual property. In esports, however, the copyright in any given game is owned by the developer or publisher of that game. That difference has widespread implications.
THE IP POWER STRUCTURE
Copyright is designed to protect the economic interests of an author of an expressive work, by securing that author the exclusive right to copy, distribute, publicly perform and otherwise exploit that work. Video games are eligible for copyright protection as audiovisual works (as is the code underlying a game as a literary work); the authors or creators of video games possess the copyright in the audiovisual content of the games. This means creators can limit how a video game is exploited in online video, streaming gameplay, at in-person tournaments and otherwise. Any individual engaging in those actions without the appropriate permission from the creator is arguably committing copyright infringement.
This top-heavy power structure, in which all IP is owned and licensed by a few, gives game publishers a great degree of control over esports teams, players, leagues and broadcasting deals. Currently, that control is exercised by way of contract. In the world of online video and streaming gameplay, individuals typically license the right to play a video game from the game publisher by way of an end-user license agreement or applicable terms of service.
Typically, these license agreements do not give an individual the right to publicly perform the video game online in recorded video or on live streams. Many publishers, however, have developed policies to accompany their license agreements that allow individuals to incorporate gameplay into video content as long as that content is available without charge, and as long as the use of the game is non-commercial. These policies typically include an exception allowing individuals to earn partnership revenue from streaming platforms. In the context of esports tournaments, publishers typically enter into agreements with the tournaments that govern exploitation of the game at the tournament
A COMPLICATED PARADIGM
These contractual solutions ultimately sidestep the larger intellectual property question at issue: whether the assumption that game publishers have complete, unfettered control over the exploitation of their games in these contexts is legally sound. This question has not been tested in courts, but IP disputes have arisen in this context elucidating the complexities that could arise if this paradigm were challenged
For instance, a three-way copyright dispute arose in 2015 in connection with a Twitch channel called “SpectateFaker,” which broadcast a publicly available spectator mode of the games of a popular player, Lee “Faker” Sang-hyeok. Abuzu, another video game streaming service, had secured from Sang-hyeok the exclusive right to stream his games. When Abuzu discovered the SpectateFaker channel, it issued a Digital Millennium Copyright Act (DMCA) takedown notice to Twitch on the grounds that Twitch was infringing Abuzu’s IP rights.
Twitch complied with the takedown notice, despite the fact that under the current understanding of IP in the context of video games, the rights Abuzu claimed to have acquired from Sang-hyeok were not his to grant, but rather were owned exclusively by the game publisher at issue, Riot Games. This dispute raised the issue of whether a player of a game may have an IP interest in his game play, for instance – as a derivative work of the underlying game. Ultimately, the issue was never addressed. Riot Games eventually filed its own DMCA complaint against the channel.
A similar issue arose in 2010, when Blizzard Entertainment got into a dispute with the Korea e-Sports Association (KeSPA), which managed tournaments involving its game StarCraft. KeSPA had been running StarCraft tournaments for years before Blizzard decided to leverage its IP rights in the game and demand licensing fees. After years of failed negotiations with KeSPA, which argued that Blizzard’s IP rights were not as expansive as Blizzard contended, Blizzard elected to license the exclusive right to broadcast StarCraft gameplay to another South Korean group. Blizzard then brought lawsuits against South Korean networks broadcasting StarCraft tournaments, setting the stage for a challenge to its IP rights in South Korean courts. Ultimately, the dispute was settled outside of court.
Litigated esports disputes have not yet resulted in a meaningful challenge to the current structure of the esports industry. Until a copyright dispute on such questions makes its way through the courts, it is unlikely that the degree of control publishers enjoy over the operation of the industry will erode in any significant respect.
Find out more about this rapidly evolving area of law by contacting either of the authors.
Back to IPT News Q3 2018