eSports are becoming increasingly popular, which means a lot of monetary investment and intellectual property rights are at stake on the part of eSports organizations. These organizations must keep in mind certain intellectual property issues to avoid potential liability. This analysis is based on German law, but similar questions are being considered in other jurisdictions, so it’s important for organizations to take these into account, especially if they are thinking of creating their own sports divisions.
eSports generally refers to a competition between people by means of computer or video games of different genres (e.g., real-time strategy games, ego-shooters, or sports simulations). Given the growing number of viewers and rising profits, eSports are becoming increasingly interesting for event organizers, sports leagues, sponsors, and traditional sports clubs that are establishing their own eSports divisions. Popular eSports games include Counter-Strike, League of Legends, and FIFA, where numerous organizers distribute six-digit cash prizes at competitions every year. In this context, intellectual property law plays a key role in the eSports arena, and there are some crucial elements that businesses should keep in mind when becoming active in in this sector.
The global eSports audience reached 323 million viewers in 2016, and increased to 385.5 million viewers the following year, according to the 2017 Global eSports Market Report. It is expected that the number of viewers will grow to a total of 589 million by 2020. Simultaneously, annual revenues generated by eSports have been growing continuously. While the global revenue amounted to a total of approximately $325 million in 2016, it was already at $696 million by 2017. Experts estimate this amount will increase to approximately $1.49 billion by 2020. Professional eGamers can also win a tremendous amount of money: Prizes of more than $1 million are no longer exceptional.
Like traditional sports, eSports competitions have become major sporting events. The final of the League of Legends Championship, for example, took place at the Beijing National Stadium, which can hold up to 80,000 spectators. The finalists were competing for prize money of almost 2 million euros ($2.45 million).
Despite the fact that eSports are becoming increasingly more prominent in the sports arena, they are not regarded as ‘‘real’’ sports on a global scale. In Germany, as in most European countries, governments or sports associations do not consider eSports ‘‘real’’ sports. In contrast, eSports are officially recognized as sports in Asian countries and will — just like badminton, tae kwon do, or boxing — be part of the Asian Games in 2022.
Nonetheless, publishers of games, organizers of eSports events, eGamers, teams, and sponsors would be best placed to prepare for legal questions arising in relation to intellectual property issues.
Are organizers allowed to make copies or reproductions of a game for their eSports events or any other purpose?
In general, computer and video programs are capable of being protected as linguistic works (e.g., Section 2 (1) in combination with Section 69a et seqq., German Copyright Act). However, only the specific manifestation of a computer program is capable of being protected — e.g., the source code and the object code. Besides that, audiovisual elements of a computer or video game (e.g., landscapes, game characters, and other contents) can be protected by copyright law provided they exceed the threshold of originality. Under copyright, the various components can be protected individually in one of the work categories (e.g., as cinematographic works) or together with the overall work.
Against this background, the permanent or temporary reproduction of a computer or video game is subject to authorization by the rights owner (see, for instance, Section 69 c (1), German Copyright Act). Usually this is the publisher. End user license agreements commonly used by publishers on the market generally exclude the commercial use of computer and video games.
Organizers of eSports events, therefore, have to ensure that they obtain the necessary usage rights to make the respective computer or video game publicly available at their events or through other distribution channels (e.g., online streams).
Is there a performance right for participants?
This topic is being heavily discussed at the moment. According to Section 73 of the German Copyright Act, performers (singers, actors, etc.) shall have the right to their performances being recognized as their own. For example, performers shall have the exclusive right to record their performances on video or audio recording media (Section 77, German Copyright Act) to make their performances available to the public or to broad- cast them (Section 78 German Copyright Act).
The question is whether eGamers are to be regarded as performers in the same sense as singers, authors, etc., and consequently have copyright protection for their style of play. The prerequisite for a corresponding ancillary copyright would be that eGamers create an individual interpretation of the work when playing a certain computer or video game. ‘‘Real’’ athletes, such as football players, are not regarded as performers within the meaning of Section 73 of the German Copyright Act because the focus lies on exertion and the course of the game is overall rather spontaneous or influenced by coincidence.
By contrast, computer and video games can principally be regarded as works within the meaning of Section 2 (2) of the German Copyright Act. In this case, it could be argued that an ancillary copyright subject to the respective computer or video game should be granted (at least to professional gamers). For example, strategy games require eGamers to develop comprehensive strategies to be successful, which might be considered sufficient for granting an ancillary copyright. On the other hand, classic ego-shooter games only require a certain degree of dexterity and responsiveness. Therefore, it might seem rather uncertain that they could be interpreted in individual ways, especially as the boundaries seem to be quite blurred.
The question as to whether or not a corresponding ancillary copyright for eGamers’ performance should be recognized has yet to be decided by German courts. With this in mind, those involved in eSports events are well-advised to address the legal implications in their contractual terms. For example, organizers of eSports events should consider including provisions in their terms and conditions, which authorize them to make use of the performances of the eGamers participating at their events.
Are competitors allowed to bring their own elements, such as skins?
Competitors would often like to use their own elements such as skins in a video game. A skin is a graphic or audio file, which, for example, can be used to change the appearance of the user interface to a program or for a game character, weapons, and other elements shown in the video game. Normally, skins don’t affect the game or the game play.
Obviously, if a competitor would like to use his/her own skin, he/she must possess the necessary usage rights. He/she would generally not be allowed to make use of third-party intellectual property rights without obtaining the right owner’s consent first. This is apparent for skins portraying another person (e.g., celebrities). Using such a skin would generally be deemed an infringement of the person’s privacy rights. However,
competitors should also be aware that real products such as cars, jerseys, etc., might be protected by design or copyright law. Using virtual copies of these products as skins might constitute an infringement if the competitor failed to ask for permission.
Perhaps not quite as obvious but equally relevant is another aspect. As mentioned above, computer and video games and their elements — for example, audio-visual elements such as landscapes, game characters, and other contents — can principally be regarded as works within the meaning of Section 2 (2) of the German Copyright Act. Adaptations of audiovisual elements can be protected under copyright law as independent works without prejudice to the copyright in the adapted work, provided that they exceed the threshold of originality and fulfill all further requirements for copyright protection.
However, adaptations or other transformations of the work may only be published or exploited with the consent of the author of the adapted or transformed work.
Competitors who intend to bring their own skins or elements into a computer or video game should carefully revise the end user license agreements of the publisher. If no consent is included, it is highly recommended that competitors ask the publisher for its explicit consent.
Is there an issue with cheat bots?
Particularly in the fields of copyright and unfair competition law, there are several issues with cheat bots. A cheat bot is software that autonomously processes certain tasks in a computer game. For example, cheat bots are used to advance the skills of game characters by taking on time-consuming or dull activities while the player can attend to other things.
In its judgment of World of Warcraft I, the German Federal Court of Justice discussed the legal permissibility of cheat bots. The defendant in the World of Warcraft I case downloaded the plaintiff’s client software required to install the plaintiff’s video game on their business computers where the game was played. The defendant then developed a cheat bot while using the video game (i.e., testing the cheat bot while playing the video game).
According to Section 69 d (3) of the German Copyright Act, authorized persons shall be entitled, without the right owner’s authorization, to observe, study, or test the functioning of said program to determine the ideas and principles which underlie any element of the program if these acts are carried out while performing any acts of loading, displaying, running, transmitting, or storing the program, which they are entitled to do. However, Section 69 d (3) of the German Copyright Act justified the defendant’s (commercial) acts only to the extent that the computer program itself was concerned, according to the German Federal Court of Justice. With regard to the client software’s audiovisual content, Section 69 d (3) of the German Copyright Act could not be invoked by the defendant.
Another case involving cheat bots decided by the German Federal Court of Justice (World of Warcraft II) concerned the question of whether the sale of cheat bots for use in games should be considered unfair. The German Federal Court of Justice ruled that such sales of cheat bots constitute a deliberate obstruction of fair competition. It should be clarified that if a developer creates a cheat bot for a particular game in breach of that game’s end user license agreement, this act itself is not to be regarded as unfair competition, but only as a breach of contract.
To reach the threshold for an act of unfair competition, it would be necessary to show that the cheat bots are circumventing protective measures and impairing players’ equal opportunities. Prohibiting such activities also protects developers, as failure to do so may result in honest players no longer playing the game, which, in turn, could result in a considerable loss of revenue.
Are there any virtual domiciliary rights of the organizers of eSports events?
Traditional sports clubs, such as football clubs, possess domiciliary rights in relation to their stadiums to control the behavior of players and attendees alike. In principle, the clubs might prohibit attendees from taking photographs in their stadiums, and they can decide whether a match shall be broadcast or not.
However, eSports competitions do not only take place in stadiums, but in virtual reality. This raises the question of whether organizers of eSports events are entitled to virtual domiciliary rights to control the behavior of participants (e.g., misconduct) in addition to the contractual controls that they can include in their participant terms and conditions. The Regional Court of Munich I and the Court of Appeal of Munich are of the opinion that, at least in cases where the hardware on which the game is installed is owned by the organizer, the organizer should have such a virtual domiciliary right. Whether or not organizers can also be granted virtual domiciliary rights in cases where the software is installed on the servers of third parties has not yet been decided.
It would therefore be advisable for organizers of eSports events to ensure that they enhance the protection mechanisms in their terms and conditions — especially when putting on a competition using software on third-party servers. This will give them sufficient control for regulating the behavior of participants, and it also allows them to ban players from the competition for misconduct if necessary.
What should sponsors keep in mind in relation to their advertising activities at eSports events?
Sponsors of eGamers, teams, etc., normally pursue certain economic interests through their sponsoring activities. They would like to benefit in increased awareness for their products and receive a return on their investments. For this purpose, they usually use their sponsoring activities in their advertising campaigns. An efficient way to reach their target groups is to get the sponsored competitors involved — e.g., through social media influencing.
However, what sponsors should always keep in mind is that they are generally responsible for social media activities of competitors induced by them. They must observe all legal requirements themselves, especially unfair competition law, and need to ensure that the competitors do the same. Covert advertising is prohibited under German law. Otherwise, consumers might believe that the statements of the competitor are purely objective, although they are not. The promotional activities of a competitor need to be clearly identifiable as a promotion.
eSports is an exciting new area — not only in the sporting industry but in legal terms. There are various key players such as eGamers, game publishers, and organizers of eSports events, who are facing the challenge of sufficiently protecting their rights. Organizers need to ensure that they obtain all necessary usage rights from the game publishers and the participating eGamers, and these parties need to be aware of their possible ancillary copyrights and should take appropriate precautionary measures to protect them. They should also keep in mind that the use of cheat bots might be illegal and sanctioned by courts and organizers of eSports events on the basis of their possible virtual domiciliary rights. There is still a considerable amount of legal uncertainty when it comes to IP in the world of eSports, so it’s vital that all parties involved in this space protect their interests though adequate contractual provisions.