In this edition #20…

December 9, 2010

We kick off our law and literature summer series.

Thomas Vranken reviews Mark Twain’s newly released “Autobiography vol 1”. As many of you know, Mark Twain was a copyright agitator and his estate has released the book for free online as well as in a hard copy version.

In Food Fight – Who Owns “My” Chilli Crab? Vicki Huang looks at the explosion in cookbooks and food writing and the copyright issues that apply to those works.

Amanda Scardamaglia reviews the CMCL conference held on 25-26th November 2010.

And, from that conference we present “Copyright: The Next Generation” in which Matthew Nicholls discusses the National Broadband Network and the impact digital expansion will have on copyright piracy.  Mr Nicholls outlines international approaches to the piracy issue and contrasts Australia’s current position. Mr Nicholls also discusses “the next generation” of commoditisation models which leverage rather than deny the proliferation of music on the Internet.


Law and Literature: Mark Twain’s Autobiography, Volume 1, Mark Twain Foundation, 2010

December 9, 2010

By Thomas Vranken

‘No happy phrase of ours is ever quite original with us … [being] old, mouldy, antique, and smelling of the breath of a thousand generations’ proclaimed Mark Twain in a 1904 instalment of his recently published Autobiography (2010, 226) – some fifty years before postmodernists expressed similar sentiments about the impossibility of originality. Here lies one of the Autobiography’s central features. For, even when denouncing originality as an historical construct that history itself undermines, Twain’s distinct voice comes through. At the same time, the memoir which looks back over Twain’s life and beyond is also remarkably forward-looking.

In terms of content, this prescience is most apparent in the Autobiography’s political views. Twain is an author known for his progressive opinions including on race, colonialism, gender, treatment of animals, general humanitarianism and religion. If one of the great advantages – to Twain’s mind – of publishing his Autobiography posthumously was that he could enlarge his copyright term until even longer after his death to provide for his children than the law currently allowed for material published in an author’s lifetime, another was that it freed him from the necessity of self-censorship.

Quite often the Autobiography’s revelations are less than sensational – as when Twain permits himself to present, unedited, the letters of his bad-spelling mining friend as they ‘will not see the light of day until Higbie and I are in our graves’ (445). However, there are also some passionate passages, including one wherein Twain rails against the massacre of Filipino civilians by America’s colonial army (‘Christian butchers’, 404). Regardless of his opinion of originality, such sentiment could hardly have been the norm in the times in which Twain was writing.

Peculiarly, while Twain may have believed that what one expressed at least in terms of language could never really be original, there were other elements of a book that could be new. In a moment of (mock) arrogance he declares that:

The form of this book is one of the most memorable literary inventions of the ages … I am the only person who has ever found out the right way to build an autobiography. (29)

As it turns out, this ‘right way’ is to ‘talk only about the thing which interests you at the moment’ (220). The result is a rather rambling book which indulges in frequent diversions and digressions. Indeed, it is a text which reads a little like a more coherent form of the Surrealist’s automatic writing: fragmentary and flagrantly non-chronological, it seems to prefigure the modernism already beginning to emerge in the period 1906-1910 when the book was being written. Similarly, in its smatterings of nihilism – ‘what is it all for[?]’ (419) – there lies an anticipation of post-War malaise.

Mark Twain was sceptical when it came to prophesies – as he wrote in one sketch, ‘there are not books enough on earth to contain the record of the prophesies Indians and other unauthorised parties have made; but one may carry in his overcoat pockets the record of all the prophesies that have been fulfilled’ (‘Burlesque Biography’ in Writings of Mark Twain, Vol 24). However, in this large volume of his Autobiography - the first of three, the droll grandfather of American literature captures something of the despair that would be shared by many authors in the decades to come.

Thomas Vranken is a literature student at The University of Melbourne.

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Food Fight – Who Owns “My” Chilli Crab?

December 9, 2010

By Vicki Huang

The Australian cookbook industry seems totally immune to the tendrils of the GFC.  Sales over the past 2 years are reported to have grown by over 35%. By the end of this year, Australians will have spent $90 million dollars on cookbooks which represents sales of 4.5 million titles annually. At least 10% of these sales are spinoffs from the Masterchef juggernaut. For example, 2009 winner Julie Goodwin has sold $3.7 million worth of her book “Our Family Table”.

There has also been an explosion in food blogging. (Click here for Paul Best’s summary in The Age). Food bloggers themselves can become as famous as celebrity-chefs.  For example, net-sation Julie Powell’s blog (which outlined her efforts to cook Julia Child’s “Mastering the Art of French Cooking”) was turned into a film starring Meryl Streep.

Our own net-sation “Not Quite Nigella” has recently reported that her blogging exploits have been optioned into a book. The Australian Association of Food Professionals in their Food literati awards have begun to award prizes for the best food website and the best food blog. There are also websites that review both cookbooks and food blogs! See www.cookmybooks.com.au

The food revolution in Australia and the food writing it produces shows no signs of slowing down.

But just as there are only “seven stories”, are there only a handful of ways to roast a loin of pork? What kind of copyright issues come up with cookbook writing and food blogging?

Earlier this year the saga of the Seinfeld v Lapine “You stole my recipes!!” case came to an end in the US 2nd Circuit Court of Appeals. In the case, Jessica Seinfeld (wife of Jerry) published “Deceptively Delicious”, a celebrity (by proxy) cookbook that was hugely successful (i.e. was shown on Oprah) that tricks kids into eating vegetables.

Missy Chase Lapine claimed that Seinfeld had infringed the copyright of her book “The Sneaky Chef”. Both books share the central idea of using vegetable purees for use in children’s food. The Federal Appeals court rejected the claims that Seinfeld infringed the copyright and trademark in Lapine’s book, upholding the lower court’s decision. The court held “…Stockpiling vegetable purees for covert use in children’s food is an idea that cannot be copyrighted”.

Having read both the Seinfeld and the Lapine cookbooks, I would say that had the case been in Australia, the outcome would be the same. They look nothing alike, and there don’t appear to be any images or recipes reproduced in Seinfeld’s book. In Australia, as in the US, there is only very thin copyright over recipes and certainly no copyright over ideas. A recipe is also not patentable under s50(1)(b) of the Patents Act which precludes claims that are a “mere mixture of known ingredients”.

The fight over the ownership of recipes goes beyond the courtroom and can have can have geo-political significance. Last year the Malaysian Tourism Minister started a major food fight when she claimed that Singapore staples – Chilli Crab and Hainese Chicken Rice, were indeed “Malaysian”. Singaporeans who are probably the world’s biggest foodies (this comment may start its own food fight) were naturally outraged. The statements caused a flurry of comments in the press across the region.

So what copyright can exist in a cookbook, and relevantly to bloggers, what copyright exists in a recipe that is reproduced online?

A recipe in its written form is likely to be protected by copyright. However, to infringe the copyright, you would probably have to copy and reproduce the recipe verbatim. This is because there is no copyright in a list of ingredients. Nor is there copyright in ideas. There is also no copyright in the expression of a method of preparation unless it qualifies as a literary work i.e. it has to be more than just a list of steps.

Artistic works such as the photographs and illustrations are a different issue and are likely to be separate copyrighted works.

Regardless, numerous fair dealing exceptions to copyright infringement exist, in particular, fair dealing for criticism or review. In this context a user can reproduce the cookbook or recipe so long as there is genuine criticism or review of the work.

So what is a cookbook author or blogger to do?

If taking a “substantial” part of a work, then permission from the copyright owner is required. However, it is arguable whether taking one recipe from a cookbook is going to be considered taking of a substantial or essential part. Moreover, if the recipe was slightly modified e.g. the method re-worded, then the “new” recipe may not be considered a taking at all, rather a new literary work in itself.

It seems however that an attribution protocol has emerged amongst food writers online. I would have to say it is a conservative and polite approach that is probably going to keep most food writers out of trouble. Perhaps this is an example of moral rights applied defacto in cyberspace?!  Here is what I see as the netizen rules of food writing:

1.      When in doubt, seek permission;

2.      If reproduction of the recipe is for criticism or review then it is “fair dealing” but always give an attribution;

3.      If you slightly modify a recipe, then preface your version with “adapted from” and add an attribution;

4.      If you modify the recipe significantly i.e. about 10% of it, then it’s likely that the recipe can be called your own.

Copyright protection on cookbooks and especially individual recipes is very thin. Despite this, cookbook publishing is reaching a high point. This is probably because production values have improved to meet discerning customers who understand the beauty in a coffee table cookbook.

At the same time, food writing is having its own “salad days” and with the plethora of food blogs there has been a lot of recipe reproduction on line. To keep food writing on the Internet at its interesting pace, it’s probably a good thing that recipes attract little copyright protection.  The copyright gods have probably got the balance right.

Vicki Huang teaches at the Melbourne Law School

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Media, Communications and Public Speech: The 2010 Conference of the CMCL

December 9, 2010

By Amanda Scardamaglia

Melbourne Law School’s Centre for Media and Communications Law hosted its annual conference, Media, Communications and Publish Speech on the 25-26 November, 2010. The conference was well attended by over 100 local and international participants from various backgrounds including academics, PhD students, researchers and those working in industry, including media lawyers and publishers. Please click here for conference notes.

The conference had three keynote speakers. The first keynote speaker was Professor Peter Yu, Kern Family Chair in Intellectual Property Law at Drake University Law School and founding director of the Intellectual Property Law Center at Drake University Law School. Yu is also a Wenlan Scholar Chair Professor at Zhongnan University of Economics and Law in Wuhan, China.

The second keynote speaker was Associate Professor Lisa Austin from the University of Toronto Law School.  Researching and teaching in the area of property, privacy and legal theory, Austin’s publications include the co-edited Technology, Privacy and Justice (2007) and Information Sharing and the “Reasonable” Ambiguities of s 8 of the Charter (2007). Austin has also co-authored the report Model Policy for Access to Court Records in Canada (2005), in collaboration with Judges Technology Advisory Committee for the Canadian Judicial Council.

The third keynote speaker was Professor Eva Hemmungs Wirtén, Professor in Library and Information Science and also an Associate Professor (Docent) in Comparative Literature at Uppsala University, Sweden. Her area of research is international copyright and the history of the public domain, writing extensively on the area, including her books, No Trespassing: Authorship, Intellectual Property Rights and the Boundaries of Globalization (2004) and Terms of Use: Negotiating the Jungle of the Intellectual Commons (2008).

The conference was opened by Professor Peter Yu, who gave an entertaining and fascinating presentation on Internet Freedom and Intellectual Property Rights. Yu’s paper highlighted how although Internet freedom and intellectual property rights are complementary in nature, they can also conflict with each other.

Yu positioned this discussion in light of countries that heavily restrict information, where there is a greater potential for conflict between Internet freedom and intellectual property rights. In describing the difference between high content and low content cultures, Yu explained that as a consequence of this conflict, high controlled societies have to communicate through parody, satire, euphemisms, literary allusions, vague, coded phrases and graphics, providing some entertaining visual examples of this in China.

Yu concluded by foreshadowing some ways to resolve the tension between Internet freedom and intellectual property in information regressive societies including by providing limitations and exceptions such as fair use, the right to parody, compulsory licenses and the use of open content/creative commons.

Lisa Austin closed the first day of the conference, with her engaging paper on Privacy: Rights, Risks and the Rule of Law.

The second day of the conference was led by Professor Eva Hemmings Wirtén who gave a keynote paper titled Scandal, Slander, and Science: Duelling over Marie Curie, 1911. Wirtén, who is currently writing a biography of intellectual property through Marie Curie’s career entitled The Intellectual Properties of Marie Curie (due for publication in 2013), presented an outline of what is to be the second chapter of her book. She focussed on the year 1911, which Wirtén called Marie Curie’s annus horribilus.

Wirtén gave a compelling and insightful account of the scandal of the Langevin affaire, and the five duels that ensued as a remedy to slander, even featuring some archival reel footage of those duels, much to the amusement of the audience.

Several panel sessions were conducted around these keynote papers, covering a wide range of topics, including politics and power; arts, texts and broadcasts; defamation reform; defamation and public debate; social comment, as well as a panel considering new commerce issues.

The second day’s panel sessions included discussions on freedom of information and expression; user generated content; government information, Internet; privacy, secrecy, publicity. There was also a panel dedicated to the issues surrounding the National Broadband Network and another on extreme speech.

This was one of the most successful conferences to date with new frontiers in media and Internet law well canvassed. Speakers from the EU and China also served to bring valuable insights into this dynamic area of law. Selected papers will be published by the Media and Arts Law Review.

Amanda Scardamaglia is a Teaching Fellow and PhD Candidate at the University of Melbourne Law School.

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Copyright: The Next Generation

December 9, 2010

By Matthew Nicholls

The rise of the Internet, and in particular peer-to-peer file sharing has had a significant impact on the incidence of copyright infringement, particularly in relation to works such as sound recordings and films.

Importantly, in Australia, a person who authorizes the infringement of copyright is treated as if they themselves directly infringed copyright: Roadshow Films Pty Ltd v iiNet Ltd (No 4) (2010) 269 ALR 606 [iiNet] (note the appeal in this case was heard by Full Federal Court in August; judgment is still reserved). Click here for earlier FR post on the case.

Justice Cowdroy at first instance in the iiNet case re-affirmed the traditional approach that:

  • providing Internet access is not the same as “providing the means” to infringe copyright. In that case, the “means” by which the applicants’ copyright was infringed was not by the iiNet Internet service, but by the iiNet user’s use of the BitTorrent system;
  • having regard to the factors set out in section 101(1A) of the Copyright Act, iiNet had not authorized the users’ infringements. Specifically, his Honour found that a scheme for notification, suspension and termination of customer accounts was not a relevant power to prevent copyright infringement pursuant to the Act; nor in the circumstances was there a failure to take reasonable steps within the meaning of the Act; and
  • an ISP in iiNet’s position could not be said to formally or officially “sanction, approve or countenance” the copyright infringement.

The National Broadband Network

The Australian Government’s proposed National Broadband Network (the “NBN”) should it proceed, and Australia’s growing digital economy pose significant challenges to our system of copyright law.

The NBN will create unimagined opportunities for the infringement of copyright.  Emerging digital technology and increased broadband capacity mean that the marginal cost of reproducing and disseminating exact copies of protected digital works is rapidly moving towards zero.

As the cost of reproduction moves towards zero, the cost of enforcement of copyright escalates. With sites such as YouTube boasting 24 hours of new video footage being uploaded every minute, the problems with identifying and pursuing individual copyright infringements make the value of copyright seem hollow. Click here for an earlier posting on Viacom v YouTube).

International Responses to Copyright Infringement – “Three Strikes” System

How Australia deals with online copyright infringement may be referred to the ALRC, but how have other jurisdictions dealt with this issue?

In recognition of the inability of traditional mechanisms of copyright enforcement to address peer-to-peer copyright infringement, several countries, including France, the UK and New Zealand have implemented (or have attempted to implement) a “three strikes”, or graduated response system. Essentially, the three strikes system shifts some of the onus of the enforcement of copyright onto Internet service providers (“ISPs”). (Click here for an earlier report on the UK three strikes system).

However, the three strikes system is highly controversial and has consistently been opposed by interest groups such as the IIA (the Internet Industry Association) and ISPs (such as TalkTalk, the second largest ISP in the UK).

In the Australian context, commentary surrounding the NBN has emphasized the fundamental importance of Internet access. In light of this, the question arises as to whether severance of a person’s Internet account is a proportionate response to copyright infringement.  Note, for instance, the Australian Minister, Senator Conroy’s frequent references to the Internet as being as important as electricity.

Certainly, it is strongly arguable that disabling Internet access is not a proportionate response when one considers the impact that Internet disconnection may have on:

  • students (where many resources are online or where studying by correspondence);
  • the elderly or disabled (who use the Internet for services such as online grocery shopping and banking);

The issue is further complicated in cases of shared living or families where the entire household is disconnected, so it may not only be the person who commits the copyright infringement who is punished.

Does a 3-strikes system fit with iiNet?

Finally, the three strikes system does not sit comfortably with the Federal Court decision in Roadshow v iiNet.  The IIA argues that

“The recent iiNet case established the principle that an ISP who is merely providing the means of access should not be liable for the acts of their users where those users abuse facilities to breach third party rights.  ISPs believe they should not be required to act as enforcer of those rights.”

Is legal intervention the appropriate response?  Changing business models and commoditization

“Commoditization” of copyright works refers to a phenomenon whereby the industry’s mode of competition moves away from innovation of the underlying product (the copyright work) and towards alternative methods of building value.

Under this analysis, as the market matures and barriers to entry erode, competition intensifies and prices for the underlying product are pushed down.  As a result, rights holders look for new ways of leveraging the value work itself to create new revenue streams.

The IIA stresses the need to ensure that policy does not damage Australia’s capacity to innovate and compete in the global digital economy.  It says, “to the extent that Internet users, mainly the young, engage in infringing activities, we suggest the causes may be rooted in market failure more than they are in any regulatory shortfall.”

A recent report by the UK Intellectual Property Office found that, “digital technologies have altered the value chain.  Authors can publish directly in the online world: commercial rights holders can sell product in new ways, and consumers have an enormous quantity of legitimate content at their fingertips, both free and paid for.  For many creative businesses, the changing value chain is making the situation more complex as it is more difficult to realise economic benefits with digital technology, but there may be new opportunities to do so.”

The IIA states that it, “supports the development of new models to facilitate maximum access to content and innovative content based services.  Possible examples include; revenue sharing arrangements with ISPs, ‘hyperdistribution’ where, for example, advertising is embedded in the content, and arrangements like those between YouTube and Warner Music which now permit users (who now number in the tens of millions) to upload self created video content with commercial soundtracks, owned in this case by Warner, in return for a revenue share arrangement on advertising.”

Examples of commoditization of digital content

Not surprisingly, then, business models have emerged which allow the user to use a copyright work for free and rely on advertising, or generating a massive, loyal following (rather than the worth of the product itself), to create revenue.

These models may be contrasted with traditional revenue-generation models, such as buying a CD, or downloading songs from iTunes.

Google (including Gmail, YouTube, etc.) and Android phone technology

Essentially, under the Google model, advertisers pay to be the top hits (“sponsored links”) in any combination of search words (this is done through auction every time a search is conducted) as well as paying for ads in side bars.

This has proved to be a highly effective model, to the point where an estimated 60% of Internet users use Google. This has earned Google billions of dollars in annual revenue and being declared “an economy unto itself”.

And Google has taken the concept further with its Android technology, which is offered as “less than free” to phone companies. That is, Google actually pays phone manufacturers to use the Android operating system, because Google potentially makes money from every click on Google (as advertising is sold on every click).

Guvera – “paid for” (by advertisers) music downloads

Guvera is an Australian initiative (it is an unlisted Queensland-based public company).

Under the Guvera model, advertisers create channels for specified groups of consumers, and then pay for music on behalf of targeted consumers. The initiative is still in its infancy, but Guvera hopes that its website will be “a piracy killer”, emphasizing that its Website was designed in recognition that a whole generation of Internet users believes that downloaded music should be free. (Click here for AFR reportage).

Radiohead – free music downloads

In 2007, British alternative rock band Radiohead offered the entire album In Rainbows through their website: fans were asked to pay whatever amount they wanted to digitally download it.

According to Internet marketing blog DoshDosh, this “donation-style” system is significant because of Radiohead’s reputation and the size of their fan base, which easily reaches into the millions globally.

The band is able to offer their songs in a digital rights management-free mp3 format because they do not have a record label; hence they own complete distribution rights over their music.  This essentially bucks the industry trend of reliance on record companies and marketing teams to produce, commercialize and promote music records.

Alongside the digital download of their album, Radiohead is also selling a £40 box-set which consists of the CD album, vinyl records, additional songs as well as artwork and lyrics.  Whilst this “viral” marketing assault by Radiohead clearly resulted in massive foregone album sales revenue, it also reportedly resulted in enormous revenue in other areas, including a sell-out concert tour, as well as unquantifiable augmentation to their fan loyalty, reputation and brand awareness/strength.

Similarly, rock band The Smashing Pumpkins released their Machina II album for free on the Internet by sending 25 physical copies of it to fans active in the online music community, with explicit instructions for re-distribution.

This approach has been successful for a number of (already highly popular) bands and contrasts with the approach taken by rock band Metallica, who sued Napster in 2000, thereby distancing them from fans and leading to a major public relations disaster for the band.

The following table summarizes some of the models for commercialization of copyright material (music), both traditional and new.  Of particular interest is the fact that not all successful (or potentially successful), non-traditional sales models involve copyright infringement (note that the copyright is held by the musician/record label etc):

Model 

Issue

Licence to use paid for by… Copyright infringed? Encourages artistic innovation? Value lies in… Issues?
Trad. online sales model (e.g. Sony, iTunes) Consumer No Yes The song itself Goes against developing social expectation that Internet materials should (and can) be free
P2P file sharing No-one (no licence to use) Yes – by the person making the song available via P2P and by each person who downloads it No No value Illegal; no reward for those who are creative
New Model (Radiohead) Musician chooses to make music available for free but (in some cases) charges advertisers to place ads on the page where the song is available No Yes – if the song is a success then people will pay more to advertise (analogous to ad breaks in a successful TV show) The sheer number of people d/loading (ad potential) Arguably will only work for bands that are already successful
New Model (Guvera) Advertisers on behalf of consumer No Yes – copyright owner still receives $$$ The sheer numbers of people d/loading (ad potential) Untested as yet; needs industry support to succeed

Conclusion on protection of online copyright works

Policy in relation to the protection of online copyright works is currently in a state of flux. This is largely because the advent of broadband (and projects such as the NBN) is a game changing development and policy-makers are still in “catch-up” mode.

Legislatures and courts in Australia and abroad have so far taken a fairly traditional approach to dealing with the protection of online copyright works. Some novel measures (such as the “three strikes” approach) have been touted, although it is yet to be seen what impact such measures will have, and indeed what counter-measures might be adopted by ever-exuberant copyright users.

Ultimately, however, it is expected that creative creators will continue to think outside the square to develop new business models – and that this group will manage to stay “ahead of the curve” when it comes to generating value (and new revenue streams) from their creative efforts.

This paper is amended from a conference presentation given by Mr Nicholls at the CMCL Conference, Melbourne, November 25-26, 2010

Matthew Nicholls is a principal of Nicholls Legal, contact: matthew@nicholls-legal.com.au.

The assistance of Rebecca Measday, Law Clerk at Nicholls Legal, in preparing this paper is gratefully acknowledged.

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In this edition #19…

November 19, 2010

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.


Are you addicted? Online games and internet addiction

November 19, 2010

By Dr Melissa de Zwart

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.

Defamation

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.

Negligence

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.

Conclusions

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.


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