Taylor Wessing - Key legal issues for games businesses

More documents

Recommendations

Info

E-Commerce – before the purchase The European market is subject to “distance selling” laws that protect players in relation to purchases online. Prior and after any purchase of games, or in-game items or virtual currency, online-game businesses have to comply with numerous requirements, which include: > The communication of clear terms and conditions at the time and also by e-mail (or at least a “durable medium”) upon order; > Fulfilment requirements in terms of payment; and > A right of refund for some products and services (which may apply to gaming items depending on the circumstances). Unfortunately, these requirements vary to a degree across the Member States. Further, each European Union Member State was required to give effect to the Directive on Consumer Rights (Directive 2011/83/EU) by 13 June 2014. Each country is doing so under its own legislation. This new Directive requires, inter alia, online games businesses to ensure the player, when placing an order, explicitly confirms that the order implies an obligation to pay. If placing an order entails activating a button or a similar function, the button or similar function must be labelled in an easily legible manner only with the words ‘order with an obligation to pay’ or a corresponding unambiguous formulation in the local language. There are also new regulations regarding digital content which will have an impact on games businesses, such as the requirement to obtain express consent and acknowledgment from players that the 14 day cooling off period will not apply after download. The current draft for a European Directive on Digital Content is likely to introduce the concept of “payment by data”, establish significant statutory warranties and retrieval of user content and user data upon termination. As the scope of this directive is broad, it will affect all online and mobile games providers selling to European customers. It is currently expected that the EU will adopt the Directive by the end of 2018. If games businesses fail to comply with the legislation which implements the Directive on Consumer Rights, it is likely that their players will not be legally bound under the relevant end user terms which include, of course, the obligation to pay (e.g. the cost of the game, virtual items and/or currency). It is therefore important that games businesses ensure the information disclosure and other requirements of the implementing legislation are complied with. Online liability To the extent games businesses allow players to communicate with each other/post content or comments on the platform, such businesses run the risk of content liability. European laws do include certain defences around “hosters” and “ISPs” however the applicability of these is dependent on careful consideration in terms of operating model, particularly around moderation and notice and take-down procedures for so called host providers. According to recent case law of the European Court of Justice, internet access providers may be obliged to block content which infringes copyright under certain circumstances. Hosting of tournaments Games tournaments can be subject to various legal requirements. When hosting “offline” tournaments often held at events such as Gamescom or GDC, the host might also have to comply with additional requirements such as in respect of youth protection (e.g. not permitting underage gaming or supplying minors with alcohol), gambling law, advertisement law and entry requirements for players. When streaming a tournament, that streaming may under certain conditions qualify as a broadcast and be subject to a licensing requirement. The same may apply for gamers streaming gaming content on platforms like Twitch. Used games and key selling Recent case law in Europe has confirmed the rights of software licensees to share software which is “sold” and software providers, depending on their licensing model, cannot prevent this. The application of these laws to games software is uncertain but possible. Technical measures can be used and cloud based games are likely to not be caught. Of course the second hand market in disc based games is long established, however the laws present challenges for providers of downloaded games and terms need to be carefully crafted. Similar questions arise in connection with so-called key selling. German district courts ruled that the sale of isolated product keys by a third party infringed copyright and could be stopped accordingly. General additional issues Recent case law in Europe has confirmed the rights of software licensees to share software which is “sold” and software providers, depending on their licensing model, cannot prevent this. The application of these laws to games software is uncertain but possible. Technical measures can be used and cloud based games are likely to not be caught. Of course the second hand market in disc based games is long established, however the laws present challenges for providers of downloaded games and terms need to be carefully crafted. Similar questions arise in connection with so-called key selling. German district courts ruled that the sale of isolated product keys by a third party infringed copyright and could be stopped accordingly. In-game currencies u Issues > Contractual rights to such currency, and what it can buy (meaning the terms need to be very clear on the value and rights relating to in-game currency); > Regulatory requirements around electronic money (which generally will only apply where a currency can be cashed out or used in other games/platforms or can otherwise be converted); > Regulatory issues relating to money remittance and payment systems, and also money laundering requirements in Europe; and > The increasing awareness in the media of the risk of minors running up significant bills through in-game purchases, leading to (i)
complaints by parents/guardians and (ii) in some markets, the threat of government intervention (such as around consent notices, or limits on spend over a fixed period of time). u E-money E-money means any electronically stored monetary value represented by a claim against its issuer which: > Is issued on the receipt for the purpose of making payments and > Is accepted by someone who is not the issuer as valid means of paying for goods or services. Financial regulation is not the most obvious issue in the context of games, but publishers should be mindful of inadvertently issuing ‘e-money’ to facilitate in-game purchases. E-money is regulated throughout the EU under the Electronic Money Directive and requires, among other things, that the issuer be authorised by its national regulator, for funds to be safeguarded and for the e-money to be redeemable on demand. Typically, this could be relevant to any third party issuing pre-paid vouchers or virtual ‘tokens’ that enable customers to make in-game purchases. As always, the devil is in the detail and affected businesses should seek professional advice to ensure they are not carrying on regulated activities without the requisite licence. u Virtual currencies Not to be confused with the regulation of issuing e-money in the somewhat less regulated world of virtual currencies (such as Bitcoin). Bitcoin, in particular, is increasingly accepted by games businesses such as Zynga, and Microsoft recently restored it as a payment option in its Xbox and Windows stores. Virtual currencies have been getting a lot of media attention, not always positive, which may scare off potential users. Any business thinking of accepting virtual currencies must consider how to manage risks including theft, fraud, exchange or marketplace insolvency, hacker attacks and money laundering as well as the risk of serious reputational damage, if things go wrong. Along with the US and other jurisdictions, the UK government has started to consider whether regulation is necessary in this area and there is a risk that fragmented regulatory and taxation frameworks could emerge. Mainstream adoption is hindered by the overall lack of certainty in core areas and, ultimately, we expect legislation to harmonise requirements covering a range of topics, such as refunds, price guarantees, complaint handling, protection schemes and secure IT-Systems. Publishers need to think about how they can design systems to accept virtual currencies – and how to redeem them – in an ever changing regulatory environment. u Market Practice Whilst some games businesses may focus only on the key markets in which they operate in Europe, it is important to note that non-compliance can lead to criminal sanctions. As such, the in-game payment issues should be treated as higher risk. Advertising Law Advertisement in Europe is regulated by several Directives such as the Directive on Misleading and Comparative Advertising and the Directive on Unfair Commercial Practices. There is a strict labelling requirement as all advertisements should be recognisable as such. Subliminal techniques are generally unlawful. Labelling should be sufficiently clear and visible. Advertising directed at children may not contain direct exhortations to purchase. Advertising should be true and not misleading and the advertiser needs to be able to show and prove that his assertions are correct. Specific advertising restrictions apply to certain media (e.g. broadcasting), content (e.g. violence or nudity) and specific products (e.g. alcohol). When using influencers on social media for advertising campaigns, advertisers may also be liable for false or missing labelling by such influencers. Loot boxes The purchase of so-called loot boxes is currently the subject of controversial discussion, in particular, the classification as a game of chance. The Dutch and Belgian gambling supervisory authorities have classified some games (Overwatch, FIFA franchise, CS: GO, Star Wars: Battlefront II) as gambling due to the embedding of loot boxes and found that they violate the relevant gambling laws. Either the loot boxes must be removed or a gambling license must be purchased. In Germany, loot boxes are currently not seen as generally illegal. In addition to gambling law issues, questions may also arise with regard to consumer law and the protection of minors. General additional issues The above issues do not include the general additional issues that any digital business operating in Europe needs to cater for including: > IPR protection including trade mark registration (in each territory or as a European wide Community Trade Mark); > IPR licensing (from partners, to users and across corporate groups); > VAT, corporation tax, transfer pricing and other tax and accounting issues; > Employment and stock options; > Specific issues regarding in-game content such as age-related restrictions, copyright, trademark, design and competition law issues; > Use or selling of cheat bots. Outlook There are a number of upcoming European sets of rules which need to be monitored, such as: > The EU-Geo-Blocking Regulation which will enter into force in December 2018 and will prohibit to block or limit access to online interfaces on the basis of nationality, residence or establishment of the customer; > The EU Commission’s proposal for a Directive on the Regulation of Online Platforms; > Plans by the EU Commission to introduce new tax rules for digital activities; > New rules will be introduced in European Copyright Law by the Directive on Copyright in the Digital Single Market which is currently still being negotiated but expected to become binding law soon.
Page 1: Key legal issues for games business

Taylor Wessing - Key legal issues for games businesses

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?