Three Chinese men have been jailed for operating pirate servers of Giant Interactive’s MMORPG ZT Online, according to Pacific Epoch. The men are ordered to pay a total of RMB 60,000 (USD $8,586) in compensation to Giant for the servers that are said to have cost Giant a minimum of RMB 59,000 (USD $8,443…the cost must be tied to lost subscriber fees). Chen Jian was sentenced to one year in prison for building the servers while his accomplices, Shi Zunkai and Sun Jun, were sentenced to 10 months and nine months, respectively.

Pirate servers (actually, server emulators) are unauthorized game servers run by a third-party. The game experience will be similar but not identical to that of official servers but lacks all official technical support. This typically leads to laggy or inconsistent game performance. Pirate servers are usually created by writing or using custom emulation software which mimics the behavior of the official server. Operators of pirate servers are even able to offer incentives to play on their pirate servers rather than the official servers, such as custom or new items, accelerated XP gain, or even the ability to go to war with your own faction.

Wikipedia provides a nice summary of some of the legal issues surrounding pirate servers:

Copyright and Reverse engineering: The first issue is a possible infringement of the game creators copyright. As the case of Lotus v. Borland demonstrates, recreating “methods of operation” is not a copyright infingement. Thus, emulating copyrighted material is not a breach. However, this demands that the complete emulator is a work of its own. Sometimes the original server software leaks out of the company that created the game, for example AEGIS (Ragnarok Online). Use or distribution of this is definitely a copyright infringement. Modified versions of such original server software are not considered to be server emulators. The protocol that is used for communiciation between server and client is not subject to copyright, in contrast it could theoretically be patented, whereas software patents is a disputed field also. There are cases where a game creator effectively shut down popular private game servers by threatening lawsuits due to obvious copyright violations such as offering the client for download, or offering downloads of modified files from the original game package.

End User License Agreement and the Digital Millennium Copyright Act: Another legal issue is the EULA. Today most commercial MMORPGs require the user to sign a clause not to create or use server emulators when installing the client he bought. As shown in the case of Bnetd Vivendi Universal v. Jung, the DMCA can be relied on as well if the lawsuit is in the United States — the DMCA is a US specific law, although there are similar laws in some other countries. They argued that server emulation requires the circumvention of copy protection. The server emulator company lost the suit and the bnetd.org domain was transferred to Blizzard.

Giant Interactive says the recent arrests prove the company’s commitment to the fight against pirate servers, a fight Giant by no means is taking on alone. Everyone’s favorite (ok, at least mine…for now) MMO operator, Blizzard, is no stranger to pirate servers. In fact, it’s pretty simple to find a reliable WoW pirate server…one quick Google search found over 200 of them.

As Playnoevil mentions in their coverage of the arrests, this type of arrest may only prompt pirate server operators to move their servers off-shore to countries that have weaker intellectual property protections, much like the online gambling business has already done in the US. But whereas the government is cracking down on gambling, it’s the game companies who must do the heavy lifting against pirate servers. Especially so in China, where it’s estimated that 90 percent of lawsuits against Chinese copyright and trademark violators are filed by infringed companies.

Obviously game companies should keep an eye on pirate servers, but to what extent? How much of a threat do they really pose? World of Warcraft has topped 10 million paying subscribers despite the proliferating pirates. Isn’t it just as likely that consumers will take the bait and sample the pirate server, enjoy what they’re doing (if you’re a game company with a game that people don’t enjoy, you’ve got bigger problems than a few pirate servers) but tire of the often unstable and buggy experience and therefore decide to become a paying subscriber? That’s free advertising and can only help business. After all, every person playing WoW (even pirated WoW) is a person not playing your competitor’s game and, more importantly, falling in love with yours.

On the other hand, there may be some trademark/counterfeit-like concerns…let’s say a consumer wants to play World of Warcraft but somehow stumbles upon a pirate server. Looks like WoW, plays like WoW, even has WoW trademarks and copyrighted material all over the place? But it’s not WoW?? Alot of that sort of activity and Blizzard’s marks start to lose their source-identifying properties…we’ve seen where that road leads. Blizzard doesn’t want an inferior knockoff on the market, and so that’s why we see Blizzard and other companies taking upon themselves a duty of quality control and enforcement on behalf of their consumer base.

Question for the comment section: Would there be any advantage to doing a similar thing with worlds such as Second Life? Would a pirate server make sense? Probably less if at all, since the experience is defined by being a part of “the grid.”

I’m pleased to announce that I’ll be discussing virtual law (and Virtual Law) with the always-engaged and always-engaging crowd at Sophrosyne’s Salon this Saturday, May 10 from 1:00-3:00 Second Life time (Pacific). This is usually a fairly free-form event, and I am looking forward to an active discussion covering many aspects of virtual law from both a practical and philosophical perspective. Hope to see you there!

Pacific Epoch reports that two Chinese virtual item and currency traders were recently arrested.  The pair had been plying their trade within Blizzard’s World of Warcraft, operated in China by The9 Limited. Chinese police arrested them after one partner reported the other for unfair revenue distribution. In business since last August, the gold farming operation had 20 employees and generated nearly RMB 1.6 million (US $228,915) in only nine months of dealing.

What happens next is up to the Chinese authorities, but we can bet the pair are hoping for just a game ban. Hopefully their penalty is less severe than some of the recommendations for gold farmers that I’ve heard shouted in Ironforge.

I’d say the moral of this story is that crime doesn’t pay, but is gold farming even a crime? Maybe in China. And it also seems to have paid pretty well for this pair. Real moral…don’t forget to share with your partners! Sharing means caring.

Digital rights advocacy group Public Knowledge (”PK”) recently filed an Amicus Curiae (”friend of the court”) brief regarding Blizzard’s copyright claim (.pdf) against MDY Industries, maker of the popular World of Warcarft bot “WoW Glider” (now “MMO Glider”). Although the brief ostensibly supports neither side and is filed “in the interests of preserving the balance between buyer and seller; reader and author,” the core of PK’s argument is that Blizzard’s copyright counterclaim is not justified.

Public Knowledge argues that while Blizzard may have a contract law claim (PK offers no opinion on that), “Blizzard’s attempt to use contract to alter and displace those aspects of copyright law it does not like, while using copyright penalties to construe and enforce the terms of that alteration, is untenable, and the Court should not endorse it.” The brief goes on:

Blizzard has options for addressing cheaters, including disabling their accounts and bringing actions for breach of contract. It may also have remedies against MDY based on tortious interference with contract or other non-copyright causes of action. However, in seeking to curb MDY’s allegedly perfidious behavior, Blizzard may not undo Congress’ work in establishing statutory rights for the rest of the WoW users or for digital consumers more generally.

For the background of this case, see VB’s complete coverage of MDY v. Blizzard. Very briefly, Glider is a program that users run along with World of Warcraft. It automates key tasks in World of Warcraft, making it possible to play the game essentially unattended. Glider users can thus both harvest resources and generate high level characters without actually playing. Blizzard claims that Glider violates Blizzard’s copyright in World of Warcraft when it copies the game into the computer’s memory as part of its loading sequence.

The Electronic Frontier Foundation weighed in this morning as well, with a blog post praising Public Knowledge’s move. From the EFF post:

Blizzard’s theory is wrong, because it confuses a copyright holder’s intellectual property rights in the software it develops with a buyer’s rights in the actual copy of the software. An owner of software has a right to copy it if that copy is essential to the customer’s use of the software. (See Section 117 of the Copyright Act.) This rule is a crucial part of the balance Congress crafted between the rights of the copyright holder to manage and benefit from its expressive work, and the rights of the public to innovate, recreate and otherwise use and build on that work.

Blizzard argues that players aren’t owners but merely software licensees, so section 117 doesn’t apply. But court after court has held that the question of whether a user is an owner for purposes of Section 117 depends the substance of the transaction, not just how one party wants to describe it. For example, if you buy the software, keep it on your own computer and don’t have to return it when you are done, you probably own it.

Public Knowledge is represented on the brief by Sherwin Siy and Jef Pearlman, as well as by Connie Mableson of Phoenix law firm Dodge Anderson.

Kristan J. Wheaton, an assistant professor of intelligence studies at Mercyhurst College, recently published a note regarding original research into potential Jihadist use of virtual worlds at Sources and Methods. The findings are far less hyperbolic than the usual coverage of this subject, and seem sound. From Wheaton’s post:

A group of five students in my winter Strategic Intelligence class were asked to take a look at “the nature, volume, and likely current use of YouTube, other hosted video sites and Second Life by jihadist networks and individuals, and what will the likely future use of these mediums be over the next 12-24 months?”

Interesting stuff here. From the key findings regarding Second Life:

• “Jihadists are likely currently very minimally using Second Life.”

• “…over the next 12-24 months jihadists will likely begin to explore the ability and utility of the virtual world’s applications for money laundering, communication, and recruitment through propaganda…Use will likely be limited to merely exploring due to currently existing alternatives…”
  

• “The most effective countermeasures will likely rely on a close, working relationship with Linden [Lab] due to the systems in place to monitor financial transactions, avatar activity, and communication.”

The students’ original research and analysis is available via a course wiki.

VB has obtained the Temporary Restraining Order against Brock Pierce (.pdf) granted to Alan Debonneville earlier this week.

The TRO prevents Pierce from “failing to comply with the terms of the settlement” of his bitter legal dispute with Debonneville (one of the co-founders of his virtual property company “Internet Gaming Entertainment”) over certain business deals associated with IGE. For the complete background of this at time highly personal suit, see VB’s complete coverage of Debonneville v. Pierce.

Specifically, the TRO states that the court, after reviewing the record, restrains Pierce from “contacting any bank for Debonneville or his attorneys for purposes of reversing any payment Pierce made to Debonneville under the terms of the parties’ settlement agreement in this lawsuit […], attempting to reverse any payment made to Debonneville or his attorneys […], taking any action to sell, assign, [or] transfer […] any asset owned directly or indirectly by Pierce, unless such action is performed solely to raise funds to be paid to Debonneville, [or] filing any suit relating to the settlement, Debonneville or his attorneys, other than a personal bankruptcy suit.”

The court found that “unless Pierce … is immediately restrained from [these] acts, Pierce will commit these acts, thus causing immediate and irreparable injury to Debonneville.” The harm would be irreparable, the court said, because the acts “would be part of a wrongful scheme by Pierce, already commenced, to attempt to illegally recover settlement payments already paid to Debonneville or to avoid paying Pierce’s settlement obligations.”

A hearing as to whether the restraining order should be made permanent is scheduled for May 5 at 10:30 AM.

Blizzard and MDY have filed responses to last month’s Motions for Summary Judgment in their lawsuit over the popular World of Warcraft automation program “WoW Glider” (now “MMO Glider”). Exhibits include an expert report supporting MDY from Koleman Strumpf (PhD, Economics) of the University of Kansas School of Business.

The Strumpf report counters Edward Castronova’s (PhD, Economics) expert report filed with Blizzard’s motion for summary judgment last month. Strumpf concludes that there is no convincing evidence that Glider harms World of Warcraft or Blizzard — and even argues that Glider my actually benefit Blizzard by increasing playing time and subscribers. Blizzard, obviously, disagrees. The responses also address copyright and contract claims, among other issues.

Here are the documents:

• MDY’s Response to Blizzard’s Motion for Summary Judgment (.pdf)
• MDY’s Response to Blizzard’s Statement of Facts (.pdf)

• Blizzard’s Response to MDY’s Motion for Summary Judgment (.pdf)
• Blizzard’s Response to MDY’s Statement of Facts (.pdf)
• Impact of Glider on World of Warcraft, Koleman Strumpf, PhD (.pdf)

VB has also obtained the complete exhibit packages for each of these motions.

• MDY’s Exhibits (.zip)
• Blizzard’s Exhibits (.zip)

For the background of this case, see VB’s complete coverage of MDY v. Blizzard. Very briefly, Glider is a program that users run along with World of Warcraft. It automates key tasks in World of Warcraft, making it possible to play the game essentially unattended. Glider users can thus both harvest resources and generate high level characters without actually playing. MDY originally filed this lawsuit in federal court in Arizona seeking a declaratory judgment that MDY does not violate Blizzard’s intellectual property rights by selling the Glider program. Blizzard counterclaimed, alleging trademark and copyright infringement, as well as a handful of business torts. The case is now at the summary judgment stage, where the judge will decide any issues that are sufficiently established as a matter of law that they need not go to the jury.

I typically run excerpts from documents like these, but I am on the road this week and unable to do the task justice. Rather than do it poorly or wait a week to share these, I’ll post them now and leave picking through the responses and exhibits to readers. I have read the responses though, and I must say that both sides put forth creative, compelling arguments as to why Glider does or does not violate Blizzard’s copyright and why Glider does or does not cost Blizzard money. These are some of the strongest briefs I’ve read since I started covering game and virtual world lawsuits. Additionally, the exhibits contain a goldmine of information — including deposition excerpts, forum posts, and more.

The best way to read these documents is to start with the responses to the motions, and then move to the responses to the statements of facts — those reference the exhibits directly in context. Note that there may be one or two exhibits missing from the exhibit packs — those were filed under seal and not available to the public.

Download the full documents and exhibit packs if you are interested, and if you find anything particularly compelling, please post a note in the comments.

VB has obtained court minutes (.pdf) indicating that the Debonneville v. Pierce court recently granted a request for a temporary restraining order filed on behalf of Alan Debonneville against Brock Pierce.

The request and the proposed order are sealed, so what, exactly Brock Pierce is restrained from doing is not presently known. [4/30/08 update — the final order has been filed publicly, more information here.] Plaintiff Alan Debonneville was required to put up a $10,000 bond, which is fairly standard procedure for TROs because it guarantees that the party seeking the order can pay damages if it turns out that the TRO was not justified. A hearing as to whether the mystery TRO should be made permanent is set for May 5.

Pierce and Debonneville are co-founders of IGE, a virtual property company. They have been locked in a bitter, highly personal lawsuit since last summer.

According to minutes (.pdf) obtained by Virtually Blind, Judge Manuel Real of the Central District of California has, on his own motion, ordered a status conference in Debonneville v. Pierce — presumably to ask why the parties have not yet finalized the settlement they reached last month.

Readers will recall that last month virtual property company IGE founders Brock Pierce and Alan Debonneville — who have been locked in a nasty, often highly personal lawsuit since last summer — told the court that they’d reached a settlement on all essential terms. Magistrate Judge Margaret Nagle (who is handling discovery and some pretrial issues in this case) ordered the parties to file a stipulation of dismissal with the Court by Monday, April 14, or else tell the Clerk of Court why they had not. At that time, VB noted that although settlement seemed imminent, with the parties behaving as antagonistically as they had so far, nothing was certain. As it turns out, no stipulation was filed by that date, and none has been yet.

Today, the Honorable Manuel Real, the District Court Judge assigned to the case, ordered a status conference for Friday (tomorrow) at 10:00 AM. This seems to indicate there is — surprise, surprise — some hang-up with the settlement. That alone would be interesting enough, but what makes this the equivalent of must-see-TV for people following game and virtual world lawsuits is the fact that the Honorable Manuel Real (pronounced as in “real world”) has a reputation for running a, um, rather tight ship in his courtroom, and isn’t likely to be impressed with the history of this case or the parties’ behavior.

It isn’t clear if the status conference is to be held by phone or in person, but either way, status conferences are typically held in open court and on the record. If the parties need to discuss specifics of the settlement, however, Judge Real may hold part or all of the conference behind closed doors. For Los Angeles readers with some time to kill tomorrow (who don’t mind gambling a bit of time against the chance that it’ll be closed to the public) Judge Real is in Courtroom 8 at the Federal Courthouse on Spring Street, and the status conference is scheduled for 10:00 AM. If you happen to attend and anything interesting happens, please drop by afterward with a report.

U.S. District Judge James Cohn (Southern District, Florida) recently issued an Order moving the Hernandez v. IGE trial date (.pdf) pursuant to the parties’ joint request last week. The parties had sought a three week trial commencing February 16, 2009, citing the involvement of new counsel for IGE, the complexity of the case, and the fact that the parties had not yet engaged in significant discovery. Judge Cohn acknowledged the parties’ need to move the trial date, but scheduled the trial for only two weeks and calendered a start date of December 8, 2008 — more than two months earlier than the date the parties had sought. He also expressed some dissatisfaction with the progress of the case so far, and noted his concern regarding key aspects of Hernandez’s claims.

For the background of this suit, see VB’s complete coverage of Hernadez v. IGE. Very briefly, the suit involves a not-yet-certified class of users led by Antonio Hernandez, who are suing virtual property dealer Internet Gaming Entertainment (IGE) for diminishing the intended World of Warcraft experience by spamming chat, farming gold, and engaging in a number of other activities that allegedly violate Blizzard’s Terms of Use.

Judge Cohn’s Order gives a fair bit of commentary on the case’s status, and indicates some unhappiness with the lack of progress so far. From the Order:

This case has been pending for nearly one year, having been filed on June 1, 2007. Plaintiff apparently did nothing for nearly three months, until an amended complaint was filed on August 17, 2007 and the single domestic defendant, IGE U.S. LLC was served on September 4, 2007. On September 26, 2007, this Court reset the trial for August of 2008, a sufficient amount of time even for a class action. The parties sought and received a delay in setting the scheduling conference before Magistrate Judge Seltzer. The parties briefly engaged in motion practice, but the motion to stay or dismiss filed by IGE U.S. was withdrawn on December 10, 2007. The foreign defendant was dropped by Plaintiff on December 21, 2007, and IGE U.S. filed an Answer on January 3, 2008.

Apparently, though the parties should have been engaged in discovery at this point, not much was accomplished during the next three months. On March 31, 2008, IGE U.S. changed counsel. It is this change of counsel that is one of the arguments the parties rely upon in seeking a significant continuance in this case.

While the Court will grant in part the extended continuance as requested so as to not prejudice either party, counsel must be aware that this case did not recently begin, and by the time of the new trial date in 2009, this action will likely be one of this Court’s oldest cases. Thus, additional continuances are unlikely.

Also of note, Judge Cohn signaled that he questions Hernandez’ standing to sue and ability to prove liability in a footnote to this Order, writing:

The Court also notes that based upon the minimal record in the case to date, and without of course prejudging any issue, it appears that liability and standing issues seem the most challenging issues for Plaintiffs, rather than the parties’ apparent focus on class certification issues.

Dropping a footnote like this in a scheduling order is somewhat atypical, and IGE will likely take this as a signal that the Court may look favorably on an eventual motion for summary judgment, particularly regarding standing to sue. To establish standing, a plaintiff must show that (1) he has suffered an injury-in-fact; (2) the injury is fairly traceable to the challenged action of the defendant; and (3) it is likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision. It will be interesting to see how Hernandez handles this, given that the judge has signaled some skepticism.