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• Late last week,  Judge Louis Stanton of the US District Court for the Southern District of New York ruled that plaintiffs in the high-profile copyright class action case against YouTube could not seek statutory damages for videos that are not registered under US copyright law.   Judge Stanton also dismissed plaintiffs’ punitive damages claim, but did permit claims based on live broadcast footage, which were brought by the English Premier Football League, the lead plaintiff in the case, to proceed. 
• After a lengthy battle, record labels and online radio stations reached an agreement on new royalty rates for music streaming.  The new agreement treats web sites differently based on their size and model.  It only applies to sites making most of their money from streaming music, excluding webcasters that run online music services as a small portion of their total business.  Pure-play internet radio providers will have to pay the greater of 25 percent of revenue or a fee each time a listener hears a song.  The new per stream fees start at .08 cent for each song streamed in 2006 and increases to .14 cent in 2015.  Smaller sites will pay 12 to 14 percent of revenue in royalties.  The new agreement replaces a 2007 royalty rate decision. 
• Rosetta Stone, maker of the popular foreign language software programs, filed a trademark infringement suit against Google alleging that its AdWords program, which lets companies buy advertisements that show up as “sponsored links” next to search results, results in consumer confusion.  The complaint alleges that Google is letting companies attach their ads to trademarked words they do not own, as well as allowing companies to use those trademarked terms in the headlines of their ads.  As a result, a search for a trademarked company name may bring up that company, but it may also bring up results for the trademarked company’s competitors.  In recent years Google has been facing other similar lawsuits over its AdWords program but in April, the 2nd Circuit provided trademark owners with some clarity when it held that Google’s use of the trademarks were “acts of commerce”, reversing a trial court’s ruling and permitting trademark owners to proceed with their suits. 

The tremendous effectiveness of video game product placement and in-game sponsorship is no surprise, with gamers maintaining high and sustained exposure to advertisements. A recent study revealed that gaming audiences are more inclined to remember and positively perceive brands featured inside video games than other advertisements and that this form of advertising is even beginning to trump the effectiveness of television advertisements. Another similar study found that, unlike advertising messages in other media, advertising in video games is seen by gamers as making the games feel more authentic and 65% of players agreed that in-game advertisements made the gaming experience feel more realistic and 55% said the advertisements “look cool”.

In this climate, your decision to dress your main video game character in, for example, a pair of Vans (or even kicks resembling Vans) could earn you a thank you note or possibly a temporary restraining order from Vans which may have an exclusive in-game licensing arrangement with Activision Blizzard, the publishers of the Tony Hawk series of skateboarding games. Make no mistake, the major video game developers and publishers are engaged in a well-funded war for market share, and licensing agreements with real-world content owners have become the norm. Whether you’re creating a sports game, a music title or a first person shooter, there is both tremendous promotional value and legitimacy that accompanies the in-game inclusion of popular names, products and places, and the respective owners now want their say as to the games in which they appear and how and under what conditions their content is featured.

Now that content owners have skin in the game (no pun intended, of course), licensing arrangements are being struck left and right–some exclusive, some non-exclusive, some royalty bearing, some royalty free. From guitar makers to gun manufactures, content owners know that placing, for example, a “Smith & Wesson” gun in the main character’s hands, as opposed to an “ACME” rifle, has the potential to sway consumers inundated with options, especially in the already crowded first person shooter genre, from one title to another. With  in-game asset licensing arrangements becoming more and more common, the traditional test for assessing trademark infringement as it relates to video games—the likelihood of confusion among consumers as to whether the assets being depicted in the video game are endorsed or associated with the title—has and will continue to be an easier hurdle for trademark owners to clear as the amount of licensing agreements pertaining to inclusion of trademarked or copyrighted works in video games increases. In other words, circumventing the licensing process in favor of a “fair use” or First Amendment defense will no longer be a viable position from a risk assessment perspective, as plaintiffs will now have an easier time demonstrating and establishing that in-game licensing arrangements have become industry standard and convey substantial commercial value.

This will be the first of many posts to come on the subject of video game licensing and clearances, as well as the legal principles and case law underlying the topic, including fair use and infringement (both for copyright and trademark) and the building blocks of the licensing agreements required to navigate the interactive gaming space.