Supreme Court Interest in California Game Law Worries Industry Lawyers

SEATTLE -- The future of game distribution online could be imperiled if the Supreme Court reverses the tide of court decisions slapping down state laws restricting the sale of videogames to minors, speakers said at the Penny Arcade Expo over the weekend. It’s “a bit unsettling” that the nation’s highest court will hear EMA v. Schwarzenegger, a challenge to California’s videogame law, with no “circuit split” that would justify intervention, said attorney Tom Buscaglia, who’s writing a friend-of-the-court brief for the International Game Developers Association in support of the Entertainment Merchants Association.

"Usually appeals courts don’t work any harder than they have to,” but the 9th U.S. Circuit Court of Appeals faulted every point California made in defense of the law, said Davis & Gilbert attorney Greg Boyd of the New York Law School. The game industry has won every case against similar state laws, sometimes in “heroic, trashing fashion,” receiving attorney’s fees from states that put up a poor defense, Boyd said. The industry is hoping that the Supreme Court’s interest is “the metaphorical equivalent of mom and dad wanting to smack down” states that continue to pass content-based restrictions, he said.

The core of the dispute is whether game content comes under a “rational basis” standard, which governs age-based restrictions on pornography, or “strict scrutiny,” a legal test that states say they could never meet in tailoring regulations to children, said Dan Rosenthal, an analyst at Game Politics. He criticized “sensational headlines” for implying that a Supreme Court reversal would mean that some games couldn’t be sold to anyone.

What’s at risk is the future of game sales outside retail stores, where clerks judge who is old enough to buy games, Buscaglia said. Digital distribution increasingly is the way that players buy games, and a company like Microsoft won’t offer a game with an age-restriction sticker through the Xbox Live Arcade if it can’t tell who has put money into a player’s account. Ross Dannenberg, a partner at Banner & Witcoff, said game sellers could require a credit card for purchases online to verify the buyer’s legal status. Buscaglia said that’s not enough: In Xbox Live Arcade, players buy points that are used to acquire games, clouding who eventually bought the game. “Big publicly traded companies can’t take big risks,” such as incurring a $1,000 fine for each sale prohibited by the California law, he said.

The ages of the Supreme Court justices could make them receptive to California’s claims that mature videogames aren’t artistic and they appeal to a “deviant or morbid interest of minors,” language that parallels the Supreme Court’s Miller test for judging obscenity, Buscaglia said. A recent FTC report finding that children for the most part can buy M-rated games in stores doesn’t help, he said. The game industry has an inherent tension between games that are useful as “teaching tools” and those that are purely fictional or mindless fun, Boyd said. If mature games were “photo-immersive and completely real,” not graphic representations, that might change views of their appropriateness for children, he said. Fortunately for the industry, many of the top game lawyers have clerked for appeals court and Supreme Court judges, and trade groups are splitting up subject areas to make a stronger argument in filings, Buscaglia said.

The financial and creative dispute between Activision Blizzard and former executives of its Infinity Ward business, which developed the Call of Duty: Modern Warfare franchise for Activision, shows that developers need to keep much tighter reins on their intellectual property, lawyers said. Activision fired the two chiefs at Infinity Ward for insubordination and breach of contract shortly before it was scheduled to pay them “substantial” royalties on the billion-dollar franchise, and the company pressured Infinity Ward to crank out games annually, a “breakneck pace,” according to a civil complaint by the executives.

For some executives, “there’s no difference between a toaster and a videogame,” Buscaglia said. “The company doesn’t value the geese as much as the egg,” which is the brand, he said. If Activision’s “B team” -- other studios contracted to develop Call of Duty games halfway through Infinity Ward’s two-year cycles -- can design games nearly as good, “then who needs the A team?” he said. Activision definitely rewarded its shareholders, Buscaglia said. A few million dollars spent on litigation is a drop in the bucket for a billion-dollar franchise, and Activision hasn’t suffered any noticeable gamer backlash, he said. “The level of rhetoric is crazy” between the sides, Boyd said. Even before the lawsuit, an Infinity Ward creative strategist publicly called his Activision colleague in charge of a different Call of Duty game a “douche,” he said.

Developers need to drop their aversion to patents and to working only on games in which their code remains open source, unless they want similar legal headaches down the road, Buscaglia said. “Even if you don’t want to exploit your rights,” filing a patent can prevent others from misusing code or harassing other developers. Most patents filed in the game industry, which lagged the larger software industry in seeing patents as legitimate, are purely defensive and will only be deployed against those who pirate games, Dannenberg said. Epic Games, which owns the underlying IP for its Unreal Engine, provides a good example, Buscaglia said. Studios that sign over IP rights to publishers generally struggle from game to game, he said.