A software developer who sold a highly successful bot to automate the playing of the early levels of World of Warcraft is the newest case study in the extension of copyright law along the digital frontier. MDY Industries, LLC v. Blizzard Entertainment, Inc., No. 09-15932 (9th Cir. 2010), is the case, a veritable mashup of cutting-edge copyright issues, ranging from infringement liability for copying a program into RAM to the license vs. sale distinction to whether breaching a license agreement is infringement or not, and finally to the outer limits of the Digital Millennium Copyright Act (DMCA) anti-circumvention clauses.
Hold on, it’s going to be a bumpy ride….
Glider vs. Warden
MDY Industries (MDY) developed and sold Glider, a software “bot” (for the uninitiated, this is a program that “robotically” performs some activity on the Internet, such as repeatedly accessing a website) that automated the playing of WoW’s early levels. (In other words, hard-core gamers could walk the dog while the bot got them past the early, simple levels.) Blizzard then deployed Warden, its anti-bot guard dog, to detect unauthorized third party software accessing the game server. Blizzard used Warden to detect Glider users and ban them from playing WoW.
Not to be outdone, MDY modified Glider to evade detection and promoted the new anti-Warden features to customers. (As the scrivener of numerous cease-and-desist letters, I can vouch for the fact that this sort of thing drives copyright owners stark raving loony-tunes.)
Blizzard allegedly received thousands of complaints about Glider from miffed WoW users and spent $940,000 to investigate and address complaints about this and other bots. Meanwhile, MDY posted on its website that Glider violated the WoW ToU (but kept selling it). Blizzard’s counsel then personally delivered a cease-and-desist letter to the home of MDY’s owner. (At Baer Crossey, we believe we provide our clients with a highly personal quality of service, but if anyone reading this wants me to visit a purported infringer’s pizza-box-strewn condo and personally hand them one of my nastygrams, I will quote you a special rate.)
A “blizzard” of litigation ensued, finally percolating up to the U.S. Court of Appeals for the Ninth Circuit.
Issue #1: Holding MDY liable for its customers’ copying of WoW game software into RAM while using Glider
The U.S. Copyright Act provides lucrative statutory and compensatory damages remedies against infringers (and comping of attorneys’ fees in cases of willful infringement). However, MDY didn’t copy any WoW software itself. Its customers copied the game software into RAM when they played WoW using Glider. Blizzard’s strategy, then, was to attempt to hold MDY secondarily liable (either contributorily or vicariously) for infringements committed by its customers. For secondary infringement liability to exist, there must first be a direct infringement, i.e., somebody must have infringed a copyright.
17 U.S.C. §117(a)(1) provides a specific exemption from infringement liability which permits the copying of software by an owner of a copy of the software when this occurs solely as “an essential step in the utilization of the computer program in conjunction with a machine.” However, if a WoW player was a licensee and not an owner of the game software, this exemption would be irrelevant – that is, it would not apply if the gamer’s activity actually turned out to be infringing.
The ToU contained a section entitled “Limitations on Your Use of the Service” that explicitly prohibited bots, so there was no question that the license terms had been violated. But a breach of a license agreement is not the same thing as copyright infringement. Of course, it was very much in Blizzard’s interest to argue that it was. Under a breach of contract claim, Blizzard would have had to prove its damages from each user’s breach – a frustrating proposition, as the damages would be difficult to quantify and probably negligible in each individual case, and many of the defendants would be judgment-proof. However, by establishing copyright infringement, Blizzard could avail itself of the full copyright remedies against MDY, which had made millions from sales of Glider. Therefore, if a WoW player was deemed to be a licensee and not an owner of a copy of the game software, Blizzard had to be able to argue that the anti-bot language was a license condition (the breach of which translates into copyright infringement) as opposed to a mere contractual covenant (whose breach gives rise to a less useful breach of contract claim).
Makes sense so far, right?
It didn’t take long for the appellate court to conclude that WoW players license, not own, copies of the game software. By coincidence, the court had recently decided Vernor v. Autodesk, Inc., 621 F.3d 1102 (9th Cir. 2010), in which it held that a software user is a licensee rather than an owner of a copy of the software where the copyright owner (1) specifies that the user is granted a license, (2) significantly restricts the user’s ability to transfer the software, and (3) imposes notable use restrictions. (In other words, if the turgid mass of legal verbiage you’re eyeballing walks like a license and quacks like a license, it’s probably a license.)
Applying the Vernor principles to the case at bar, the court found that WoW players are licensees and, thus, the “essential step” defense against infringement did not apply. Blizzard reserved title in the software and purported to grant only a limited license. The EULA contained substantial restrictions on transfer (the transferor must transfer all packaging and delete all copies of the game client, etc.). Blizzard could alter the game client remotely. The agreement (and a user’s ability to play WoW) was terminable for breach of the license. And Blizzard prohibited use of the software in cybercafes and computer gaming centers.
Given that WoW users are licensees, everything hinged on whether the anti-bot clauses in the agreements were license conditions or covenants. The court, fusing together the seams of copyright law and Delaware contract law, held that if a restriction in a license agreement limits the license’s scope and is “grounded in the [licensor’s] exclusive rights of copyright” (e.g, restrictions on reproduction, distribution, etc.), it is a license condition whose breach can give rise to a copyright infringement action.
Under Delaware law, a covenant is a contractual promise, i.e., a statement of intent to do something or refrain from doing something. A condition (or a “condition precedent”, to use the formal legal terminology) is an act or event that must occur before a duty to perform a promise arises.
Despite Blizzard’s attempt to make the anti-bot prohibitions in the ToU look like conditions by grouping them in a section titled “Limitations on Your Use of the Service”, the court found that they were really covenants under the hood. Nothing conditioned the limited software license on the player’s compliance with these prohibitions. Even if it had (and here the court crossed over into the world of copyright law), the anti-bot clauses had no connection with an exclusive right protected by copyright, and, therefore, could not be enforced by an infringement action.
An example cited in the opinion is illustrative. Suppose a license agreement grants the right to make one copy of a book, provided that the licensee does not read the last 10 pages. Making 100 copies of the book would be copyright infringement (because the license restriction breached relates to copying, one of the exclusive rights protected by copyright). However, reading the last 10 pages would not be copyright infringement, but merely a breach of contract.
Unfortunately, the court muddied this clear example somewhat by commenting in one of the case’s endless footnotes: “A licensee arguably may commit copyright infringement by continuing to use the licensed work while failing to make required payments, even though a failure to make payments otherwise lacks a nexus to the licensor’s exclusive statutory rights.” The court characterized payment rights as unique because of “the distinct nexus between payment and all commercial copyright licenses, not just those concerning software.”
Due to the lack of nexus between the anti-bot clauses in the ToU and any exclusive right of copyright, the clauses were covenants, and breaching them did not constitute copyright infringement by WoW players. And because the players committed no direct copyright infringement, MDY was not guilty of secondary infringement.
Glider 1, Warden 0.
Issue #2: Did MDY’s modification of Glider to evade Warden violate the DMCA?
Blizzard also sued Warden for violating the DMCA’s prohibitions against circumventing technological measures designed to protect copyrighted works. 17 U.S.C. §1201(a)(1) and (2) prohibit circumventing a technological measure that “effectively controls access to a [copyrighted] work” and trafficking in circumvention devices. 17 U.S.C. §1201(b)(1) prohibits trafficking in a device intended to circumvent the protection afforded by a technological measure that “effectively protects a right of a copyright owner”.
Importantly, the court interpreted §1201(a) as creating a new type of protection, broader than a copyright owner’s usual rights (because copyright itself doesn’t protect “access” to a work). It rejected the argument that a “nexus” between the access sought to be prevented and a copyright owner’s rights under the Copyright Act is required for protection under §1201(a). In so ruling, the court distinguished Chamberlain Group v. Skylink Technologies, Inc., 381 F.3d 1178 (Fed Cir. 2004), in which another federal appeals court held that a manufacturer of garage door openers that contained copyrighted firmware could not invoke DMCA anti-circumvention to bar the use of alternative devices that required access to the firmware. (The MDY court saw policy concerns over antitrust and copyright misuse being prevalent in Chamberlain, but not applicable in the WoW context.)
Applying these principles to the Glider/Warden face-off, the court observed that WoW software consisted of a game client as well as game elements available only through connection to Blizzard’s server. It divided the protectable elements of the software into three “buckets”: (1) “literal elements” (code on a player’s computer), (2) “individual non-literal elements” (sounds, images, etc., stored locally), and (3) “dynamic, non-literal elements” (the real-time dynamic, interactive game experience, available only when connected to Blizzard’s server).
Warden’s mode of technical operation assumed center stage in an exceedingly complex (and, some might say, impenetrable) DMCA discussion. Warden worked by scanning the RAM of a user’s computer before it connected to the Blizzard server to detect if a bot was running. It also scanned the user’s RAM periodically thereafter to identify code patterns associated with bots and other prohibited programs. If Warden detected a bot before game play, it prevented connection to the server; if it detected a bot during game play, it severed the connection.
The court found no §1201(b) violation. Although Blizzard argued that Warden effectively protected its right against unauthorized copying, the court disagreed because WoW users were authorized to load the code into RAM anyway. In other words, a gamer who used Glider to prevent Warden from interrupting this process was not making infringing copies of the software. Furthermore, with respect to the dynamic, non-literal copyrightable elements of WoW, because Glider users could connect to Blizzard’s server and access these elements despite Warden, Warden did not “effectively” protect against copying. (This pronouncement seems a bit like adding insult to injury: Warden didn’t merit being called a technological measure to protect a right of a copyright holder because it had holes through which MDY could sail a battleship — or fly a Glider.)
The court did grant Blizzard a small victory by allowing its §1201(a) “trafficking” claim to survive with respect to MDY’s evasion of measures to protect “access” to the dynamic, non-literal elements of WoW.
The significant factor in what might otherwise seem to be a highly academic, technical discourse on the DMCA is that the Ninth Circuit interpreted DMCA §1201(a) in a manner favorable to owners of functional software programs who want to use technological protection measures to ward off competition. Moreover, in finding no need for a nexus between the access sought to be prevented and an exclusive right of copyright, the court took a different approach from the Register of Copyrights when it legalized smartphone (iPhone) jailbreaking in 2010. There, the Register agreed with the Electronic Frontier Foundation that modification of the firmware code (technically, the creation of a derivative work) to permit interoperability with unapproved applications is a fair use and, therefore, non-infringing. In so doing, the government repeatedly characterized Apple’s stated reputational and other concerns as non-copyright-related, i.e., not the sort of thing that should be given a lot of weight in fair use analysis.
Score one (barely) for Warden.
What does it all mean?
MDY v. Blizzard is a copyright cornucopia. And despite the mixed result for Blizzard, it is a boon for copyright owners in software. For these folks, there are some useful tips for drafting license agreements (call it a license agreement, let all your restrictions on transfer hang out, and try to relate your licensee no-no’s to sacred privileges of copyright that are purportedly offended by their breach). Even more critical is the court’s decision to recognize non-circumvention of measures to protect “access” as a new right created by the DMCA, even if the unauthorized “access” itself does not violate the traditional exclusive rights of copyright.
Go west, all you manufacturers of garage door opener (and similarly uncreative, functional) software.