Dr Melissa de Zwart takes a fascinating look at the world of online games and claims of internet addiction. Dr de Zwart surveys the media reportage of this phenomenon and looks at the recent US case of Smallwood v NCSoft Corporation where the plaintiff claimed $3million in damages for injuries including severe emotional distress and depression as a result of playing Lineage II.
The dangers posed by online games is a favourite topic of the mainstream media. The US Supreme Court is currently hearing the case of Schwarzenegger v. Entertainment Merchants Association (click here for transcript), concerning the Constitutional validity of the Californian law banning the sale of violent video games to minors.
In addition to the matter of violent content, the media focuses on the horror stories of babies left to starve to death while their parents are busy raising a virtual baby online; the young man who died after enduring a long gaming stint during which he refused the leave the console for 50 hours (click here) and the zombie-like teenagers who don’t sleep, playing World of Warcraft all night long.
But what is the truth about online gaming? Is it truly addictive? And, if so, does it make gamers a danger to others, such as the Otaku panic in Japan in the late 1980s suggested? Do game providers owe a duty to potential customers to warn them of the risk of psychological addiction?
A case currently before the US Courts may give us some of the answers to these questions.
Smallwood v NCSoft Corporation
In October 2009, Craig Smallwood filed a Complaint against online game provider NCSoft in the US District Court, District of Hawaii, alleging that ‘as a direct result of using Lineage II [an online game created and operated by NCSoft and its affiliated companies] and Defendant’s acts and omissions, he has suffered extreme and serious emotional distress and depression, he has been unable to function independently, he has suffered psychological trauma, he was hospitalized, and he requires treatment and therapy three times a week.’ Smallwood claimed $3 million in damages. (Click here for filings)
Smallwood had played Lineage II using three accounts for over 20,000 hours during the period 2004-2009. This level of play, averaging 11 hours per day, left him unable to function in his daily life. Smallwood stated that he ‘experienced great feelings of euphoria and satisfaction from persistent play.’ During this time he claimed that he ‘became psychologically dependent and addicted to playing Lineage II.’ He also claimed that, despite being banned from the game, he continues to experience a compulsive urge to play the game.
At the time of bringing the action Smallwood had been banned from the game due to allegations that he had been involved in Real Money Trade (RMT) in breach of the game rules.
Smallwood claims that had he been warned about the trauma he would experience as a consequence of his addiction and subsequent exclusion, he would not have commenced playing the game and invested so much time and money in it.
The original Complaint had a troubled progression through the Court, due to problems with the drafting of the pleadings, and particularly the issue as to whether Smallwood was an unrepresented (‘pro se’) litigant, or had in fact received significant legal help in drafting his claims. Judge Kay determined that Smallwood had received assistance from legal counsel, but that rather than striking his pleadings, he would not liberally construe them as would normally be done for a pro se party.
In summary, Smallwood claimed that he ‘would not have bought and played Lineage II if he had been aware that he would be subjected to the dishonesty and unfairness described above, or that he would become addicted to the game.’ The specific legal claims related to misrepresentation/deceit, unfair and deceptive practices, defamation/libel/slander, negligence, gross negligence, intentional infliction of emotional distress, negligent infliction of emotional distress, and punitive damages. The Court ultimately dismissed all of the claims except for those in defamation, negligence, gross negligence and negligent infliction of emotional distress.
In assessing the Defendant’s Motion to Dismiss, the Court had to determine whether or not there was a certainty that under existing law (the law of Hawaii) ‘no relief can be granted under any set of facts that might be proved in support of the plaintiff’s claim.’
Validity of the User Agreement
NCSoft sought to dismiss Smallwood’s claims on a number of grounds. Most relevant for our purposes are that Smallwood’s claims are limited by the terms of the Lineage II User Agreement to the $65 account fees paid by Smallwood for the preceding six months. Smallwood opposed enforcement of the terms of the User Agreement on the basis that it not relevant to consider the terms of the User Agreement and that it had not been sufficiently relied upon in his Complaint, effectively disputing the authenticity of that Agreement. In addition, he claimed that as a ‘click wrap agreement’ it should be declared void and unconscionable. The Court rejected all of these arguments in that Smallwood himself had referenced the User Agreement a number of times in his Complaint.
The Court determined that the validity of the Agreement and the limitation of liability clause would be determined under the specified law of the Agreement, ie the law of Texas. A number of decisions of the Texas Courts had upheld the validity of clickwrap agreements. Therefore the Court held that the relevant agreement was valid. In particular, Smallwood ‘had notice of the User Agreement, was required to affirmatively agree to it by clicking “I agree”, and had an opportunity to cease playing Lineage II if he disagreed with it.’ The Court held that Smallwood ‘repeatedly reaffirmed his acceptance of the User Agreement by continuing to play’. Furthermore, and most damningly (and surprisingly) was the fact that Smallwood actually claimed to have read the User Agreement and relied upon it framing his claims.
As noted above, the User Agreement contained a limitation of liability clause. However, the Court held that this clause could not, according to principles of general law, exclude liability with respect to willful or fraudulent behaviour or gross negligence.
A ‘Fair Game’?
With respect to the allegations of fraud the Court held that the claim had not been pled with the required specificity. Smallwood’s claims with respect to fraudulent misrepresentation were as follows, that NCSoft had falsely represented that:
- the three-month automatic payment plan was for the Plaintiff’s benefit, when in fact it was a means to retain the Plaintiff’s money after he was banned. Smallwood claims that there was also a secret strategy to force players to invest more money by moving to the new game ‘Aion’;
- Lineage II was ‘a fair game’. In particular, Smallwood asserted that the Lineage Game Masters did not enforce the game rules fairly;
- Lineage II was a safe product, in particular that there was ‘inadequate advice to plaintiff as to “taking breaks” from play, but not disclosing that lengthy breaks in play were necessary to avoid addiction to the game;
- ‘botting was not allowed, when in fact, it was rampantly obvious during plaintiff’s game play but nothing was done about it’.
However, none of these claims were supported by sufficient detail regarding who made such misrepresentations, where or when they were made.
The only allegation for which sufficient detail was provided was the claim by Smallwood that the reason for banning him from the game was ‘phony and fraudulent’. Importantly, Smallwood alleged that he relied upon NCSoft’s actions to his detriment ‘by investing his time and money playing the game.’ The Court rejected this claim on the basis that Smallwood could not have relied upon his investment of time and money to his detriment once he had been banned from playing the game. The claims in negligent misrepresentation and unfair and deceptive trade practices were also dismissed for lack of specificity.
Further, Smallwood brought a claim in defamation, claiming that he was ‘falsely accused of being involved in real money transfers’ and that such statements were published to other players to his detriment. The Court found that this claim was sufficiently stated but as the claim for defamation was based upon negligence, damages were limited under the terms of the User Agreement.
Smallwood’s claims in negligence and gross negligence were based on the allegation that NCSoft ‘acted with negligence in designing, developing, manufacturing, inspecting, testing, marketing, advertising, promoting, selling, distributing, maintaining, revising, servicing, administering, and overseeing Lineage II’.
The Court found that Smallwood had stated a claim in both negligence and gross negligence, with damages potentially being limited under the Service Agreement (not with respect to gross negligence).
Intentional Infliction of Emotional Distress
Smallwood’s claim for the intentional infliction of emotional distress was dismissed on the grounds he had not pled facts supporting a claim that the relevant act was ‘outrageous’ as required under Hawaiian law. However, the Court was prepared to entertain a claim on the basis of negligent infliction of emotional distress.
In order to bring a claim on this basis, as a general rule under Hawaiian law there must be a physical injury to the plaintiff or another person or property. In this case, Smallwood claimed that he ‘suffered extreme and serious emotional distress and depression’ and as a consequence was ‘unable to function independently in usual daily activities such as getting up, getting dressed, bathing, or communicating with family and friends.’ This also resulted in Smallwood being hospitalized for three weeks and needing therapy three times a week. This is sufficient to constitute a physical injury. Again, if successful on this claim the Plaintiff’s damages would be limited by the User Agreement in case of negligence, but not in the case of gross negligence.
As this was a motion by NCSoft to dismiss Smallwood’s Complaint, the matter will now go ahead for a full hearing of the issues with respect to defamation, negligence, gross negligence and negligent infliction of emotional distress.
Recent discussions in the media have also focused on the question of whether internet addiction, and particularly addiction to online games, should be recognized as a classifiable mental disorder. Some of these discussions have highlighted the question, also at the core of the Smallwood case, of whether game providers should provide warnings to users about their addictive qualities. Others take the view that the internet, and particularly games such as EverQuest and World of Warcraft, satisfy a basic human need for achievement and conquest.
For many players, the online game is their place of socialisation and engagement, this social element is often lost in media critiques of the lonely socially isolated gamer. It is important in any consideration of the impact of online games, that the positive elements are not lost in the sensationalized focus on the negative.
Katy Barnett examines the tragic death of Tyler Clementi – an American college student who committed suicide after his sexual encounters with a man were broadcast on the Internet by classmates. In the United States, the classmates have been charged with invasion of privacy and there are talks as to whether “bias” charges be added. Ms Barnett examines whether the acts of the classmates could found a civil or a criminal action in Australia and whether a penalty enhancement for “bias” is available under Australian law.
In “Storm in a Contour Bottle?”, Amanda Scardamaglia examines a new battle in the cola wars. Coca Cola are suing Pepsi for infringement of their curvaceous bottle trade mark. The case brings up interesting issues in the complex area of “shape” marks.
Jake Goldenfein reports on New York Law School’s “un-conference”. A new type of forum designed to encourage wider participation and IP activism.
By Amanda Scardamaglia
The Coca Cola Company (‘Coca Cola’) has recently brought proceedings against Pepsico Inc, its Australian holding company Pepscio Australia Holdings Pty Ltd and Schweppes Australia Pty Ltd as the manufacturer and distributor of Pepsi and Pepsi Max (‘the Respondents’). In the Statement of Claim dated 14 October 2010, Coca Cola alleges the Respondents have been selling Pepsi and Pepsi Max products in glass bottles that have the same characteristic shape and silhouette as the Coca Cola ‘Contour Bottle’, infringing their intellectual property rights. The case raises a number of interesting issues concerning the often fraught area of shape marks, some of which will be raised here.
Coca-Cola is the registered owner of a number of Australian trade marks that depict its famous Contour Bottle, which were included in the Statement of Claim and shown in Figure 1. The Contour Bottle is a hallmark of Coca Cola’s branding – with its pinched in waist shape and silhouette distinguishing Coca Cola’s products from other sodas on the market. Coca Cola has built a strong reputation in the Contour Bottle through significant promotion and marketing and claims that it has sold its Coke and Coca Cola products in the Contour Bottle since 1916 in the United States and since at least 1938 in Australia.
Figure 1: Coca Cola Contour Bottle Trade Marks
In May 2010, Coca Cola became aware that the Respondents were selling Pepsi and Pepsi Max in glass bottles similar to their Contour Bottle. Images of those glass bottles, as featured in the Statement of Claim are depicted in Figure 2. Coca Cola demanded that the Respondents refrain from what it said was unlawful conduct. The Respondents refused. In response, Coca Cola initiated these Federal Court proceedings.
It’s not the first time Coca Cola have sought to enforce their rights with respect to the shape of its Contour Bottle. Many will recall the 1999 case Coca-Cola Co v All-Fect Distributors Ltd, where Coca Cola successfully brought trade mark infringement proceedings against the manufacturer of a cola flavoured confectionary product which took the form of the shape of its Contour Bottle. Although ‘… a total impression of similarity [did] not emerge from a comparison of the two marks …’ Black CJ, Sundberg and Finkelstein JJ found that the ‘… idea suggested by the mark is more likely to be recalled than its precise details …’ such that consumers might be caused to wonder about the source of the confectionary products as a result. Coca Cola will no doubt seek to rely on this decision, although, as the following summary of the present claim demonstrates, there are some critical points of difference between the two disputes.
Typical of most trade mark disputes, Coca Cola has brought a three pronged claim against the Respondents, namely:
1. Trade mark infringement under section 120(1) of the Trade Marks Act 1995 (Cth) (‘TMA’).
2. Breach of sections 52 and 53 of the Trade Practices Act 1974 (Cth) (‘TPA’).
3. Passing off.
As to the trade mark infringement claim, Coca Cola allege the Respondents have been using the particular bottle shape for its Pepsi and Pepsi Max products within the meaning of use in section 17 of the TMA and that the bottle shape is substantially identical with or deceptively similar to Coca Cola’s trade marks so as to constitute trade mark infringement under section 120(1) of the TMA.
Coca Cola also claims the Respondents have engaged in conduct which is misleading or deceptive or is likely to mislead or deceive in breach of section 52 of the TPA. It further claims the Respondents have falsely represented that they are authorised or have approval or are associated with Coca Cola in breach of section 53 of the TPA.
Finally Coca Cola claims the Respondents have passed off its products as Coca Cola products, or licensed Coca Cola products.
As a result of this conduct, Coca Cola claims it has suffered unspecified loss and damage and seeks to have the Court restrain the Respondents from continuing to sell its products in the said glass bottles.
With respect to the trade mark infringement claim, there are two issues that will likely dominate proceedings.
1. The first is the issue of use as a trade mark, which is likely to be raised in the Respondents’ defence, which is yet to be filed.
2. The other issue which will obviously present itself is the question of deceptive similarity.
Issue 1: Use as a Trade Mark
It is a requirement of registration that the sign, defined under section 6 of the TMA, must be used or intended to be used to distinguish goods or services, consistent with the definition of a trade mark under section 17 TMA. This implies that, with respect to shape marks, merely adopting a particular shape will not amount to trade mark use. And, in the same way that descriptive terms will not normally be registrable as a trade mark because they will fall foul of the use requirement, functional or utilitarian shapes will not be registrable as trade marks if they do not also serve the secondary purpose of distinguishing those goods from the goods provided by others. Of course, the corollary of the requirement of use for registration is that in context of trade mark infringement; there is a requirement that the alleged infringer has used a sign that is substantially identical or deceptively similar sign to distinguish its goods from other goods.
The use requirement can be particularly problematic in relation to shape marks in both the registration and infringement contexts, since all physical things take the form of some shape. Would a consumer, on seeing a product for the first time, think that the shape of the product is a trade mark, that is, an indicator of origin?
In the Statement of Claim, Coca Cola allege that the bottle shape used by the Respondents ‘… would be perceived by consumers in Australia as possessing the character of a brand for distinguishing the Infringing Products from other beverage products. …’ and ‘… have used the bottle shape of the Infringing Products and the silhouette of that bottle shape as a trade mark within the meaning of ss 17 and 120(1) TMA.’
The Respondents will have to address this point in their defence. They will likely argue that their Pepsi and Pepsi Max glass bottles are not being used as a trade mark within the meaning of the TMA and thus their conduct does not constitute trade mark infringement.
In doing so, the Respondents may argue that the glass bottle it has used does not function as a trade mark because the shape it has adopted is functional.
Furthermore, the shape adopted is but one of a number of features on its Pepsi and Pepsi Max products preventing it from functioning as a trade mark. That is, the Respondents would argue that the addition of the ingrained wave pattern on the glass bottle and the use of its other distinctive Pepsi and Pepsi Max marks all have the combined effect of diluting the significance that might have otherwise attached to the shape of its glass bottle and that any distinctiveness that the shape has acquired was likely attributable to its use alongside the other distinguishing trade marks and indicia. As a consequence, it is possible that consumers, on seeing Pepsi and Pepsi Max products for the first time, would not think that the shape of its glass bottle was a trade mark, distinguishing its products from other manufactures, as Coca Coca alleges.
There are a couple of important shape mark cases that are on point and may be relevant here for the purposes of determining whether the shape of the Respondents’ glass bottle constitutes use as a trade mark. The first is the well known Philips v Remington case, where Philips failed to establish trade mark infringement of its triple head shaver shape mark because there had been no use of the trade mark by Remington. The issue of use was also raised more recently in the 2009 case Guylian v Registrar of Trade Marks although in the context of an application to register the shape of a seahorse for use with respect to chocolates. Although it is not possible to go into the details of these cases here, suffice to say the Respondents may be able to draw on these cases and in particular the Guylian case favourably.
Issue 2: Substantially Identical With or Deceptively Similar
The question of whether the Pepsi and Pepsi Max glass bottle is substantially identical with or deceptively similar to Coca Cola’s trade marks will also be hotly disputed. It is unlikely that a Court would determine that the marks were substantially identical comparing the two marks side by side and noting their similarity. The question of deceptive similarity is more contentious.
It is at this point that the present dispute differs from Coca-Cola Co v All-Fect Distributors Ltd. Here the alleged infringer is Coca Cola’s main rival, which has established its own distinct reputation in the cola market, the same market in which Coca Cola operates. The question as to whether consumers would be caused to wonder about the source of the Respondents’ products is therefore more tenuous here than it was in Coca-Cola Co v All-Fect Distributors Ltd, given the level of consumer savviness and the strongly held preference most consumers hold for either Coca Cola or Pepsi products.
However the Respondents decide to frame their defence, the use issue is likely to comprise a key aspect of this dispute and it will be interesting to see what the Court will make of this, if the matter goes to hearing. Similarly, the question as to substantial identity and consumer confusion will also be an interesting point of argument in this battle of the cola giants.
So where to from here? Well, the Respondents will have to file their defence shortly, with the matter due for a directions hearing next week. This is definitely one to watch with interest.
Amanda Scardamaglia is a Teaching Fellow and PhD Candidate at the University of Melbourne Law School.
By Jake Goldenfein
An unconference is not the opposite of a traditional conference, but rather a platform for greater participant contribution within the traditional conference structure. The agenda is established by the attendees as the as the program progresses, enabling a more reflective discussion on the key themes of the event. On the 24th and 25th of September, the New York Law School’s Institute for Information Law and Policy held the world’s first intellectual property unconference – ‘Innovate/Activate’ – on the theme of activism within the IP community. The unconference platform mirrored the growing focus of much IP research, the emergence and re-conceptualisation of participant created content (or user-generated content), by facilitating IP activists to showcase their projects as well as including panel discussions on IP activism within patent, international development, the arts, and digital culture.
The keynote speakers were Amy Kapczynski from UC Berkeley, Lea Shaver from Hofstra Law School, and Niva Elkin-Koren from the University of Haifa. Kapczynski became an AIDS\HIV activist as a law student and campaigned for international IP laws to more equitably reflect the fact that 90% of AIDS sufferers lived in the developing world. In 2001 her campaign resulted in Yale and Bristol-Myers Squibb pledging not to enforce the patent on the HIV drug d4T, substantially lowering the annual cost of AIDS treatment.
Shaver teaches IP and international law, and also worked on ‘access to knowledge’ while a fellow of the Yale Law School Information Society Project. That work intermingled IP, human rights and international development and focused on broadening the concept of innovation ro include information diffusion.
Elkin-Koren‘s research focuses on the growing disconnect between digital culture, digital development and intellectual property regulation, as well as how legal institutions facilitate private and public control over the production and dissemination of information. She writes extensively on the effects of cyberspace on the economic analysis of law, and is increasingly interested in the open content movement.
Speakers discussed IP activism as a combative reaction to the transnational and collaborative nature of incumbent interests that move IP in the ‘wrong’ direction, as well as a response to the transformative nature of information society in terms of economies. When questioned what could be done farther in IP activism the speakers suggested increasing the output of open source technologies to enhance user control, challenging the ideology that markets are the only mechanism to create and distribute information, and developing civil rights frameworks to contemplate access to information.
Apart from the keynotes, various panel Sessions covered a wide range of topics with diverse presentations on issues related to IP activism including reform of IP regulation and strategies, the interaction of innovation systems, and technological progress facilitating access to knowledge. There were some standout speakers. For example, Derek Slater, a senior policy analyst at Google discussed the difficulties, and need to reconceptualise, licensing in the on-line environment. A powerful example was contrasting the ease of obtaining a compulsory licence to create a phonographic recording of a song written by another artist (cover song), against the requirement to obtain a non-compulsory synchronisation licence to upload a video (on YouTube) of somebody performing that song. He also discussed the YouTube ‘content ID’ system which performs rights management for the 24 hours of footage that is uploaded to the website every minute. The system allows content owners to upload their material to a repository which is compared to footage available on the YouTube website. If uploaded content is matched with footage on the content ID database the owners are given the option of removing the content or monetising it through advertising. Content ID is an excellent example of digital content registries preventing infringement while enabling greater distribution and monetisation of material.
Another standout was Laura DeNardis of the Yale Law School Information Society Project who discussed the embedded values and politics of internet ‘protocols’. Her research examines the political infrastructure associated with the fundamental coding and standards setting of the internet. She eloquently explained the influence of commerce and politics intrinsic to the governance of creating the most fundamental elements of cyberspace. She describes how the production of technical architecture remains entrenched in the private realm and argues for increased transparency and democratisation.
Holding an unconference on IP activism reflects the growing participation of the broader IP community in shaping future IP regulation, and hopefully spawns future projects that re-examine the role of intellectual property in innovation and digital culture.
Jake Goldenfein is an LLB graduate from the University of Melbourne Law School.