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MDY v Blizzard provides one of the hard questions through which I'm framing my thesis. This case concerns how internal rules are going to be able to be enforced in virtual communities, and to what extent copyright is the appropriate vehicle for their enforcement. Virtually Blind had a lot of great coverage of this case until he stopped blogging late last year, and there was a very good amicus brief filed by Public Knowledge. Here's my quick summary of the questions this case raises.

Blizzard makes and operates the hugely popular World of Warcraft (WoW) virtual world. Blizzard has structured the game in a way that rewards long periods of repetitive behaviour, popularly dubbed 'grinding'. MDY made and sold a program, 'Glider', that automates this repetitive behaviour, allowing players to advance in the game with only minimal human interaction. Blizzard prohibits the use of bots like Glider, and routinely bans the accounts of users suspected of using such techniques. There is a suggestion in the community that people who use bots are cheaters or gold farmers – the latter suspected as being responsible for inflation in the virtual economy. On the other hand, there is a contrary suggestion that the use of bots merely lessens the boring, repetitive, and continuous labour that is required in order to enjoy the WoW endgame.

The Glider software interacted with the WoW client software by directly modifying the memory of the client computer. The WoW Terms of Service contains a broad clause that prohibits users from intercepting, emulating, or redirecting the WoW software. Blizzard contended that by using Glider, users were exceeding the scope of their licence to play the game and thus infringing copyright when the game was copied into RAM. Blizzard therefore contended that by enabling and encouraging users to use WoW in breach of the Terms of Service, MDY was liable for secondary copyyright infringement.

Blizzard threatened to sue MDY for copyright infringement if it did not cease selling the software. MDY filed suit in response, seeking (amongst other things) a declaratory judgment that the use of Glider did not infringe the copyright in WoW, and that MDY was therefore not liable in copyright for any acts of Glider users.

The US District court found that the End User Licence Agreement that granted permission to play WoW had to be read in conjunction with the Terms of Service, and that certain requirements of the ToS were to be read as limitations on the licence grant, whereas others would be mere contractual provisions. Because the limitation on emulation was part of the licence grant, users who used emulators were therefore outside the scope of the licence and infringed copyright in the game when they played it. It followed, then, that MDY was liable for inducing or encouraging their users to infringe Blizzard's copyrights.

Blizzard was also successful at trial on one of its DMCA circumvention claims. Judge Campbell found that Warden, a subroutine that checks the RAM of WoW clients, “controls access to the dynamic nonliteral elements of the WoW game environment” within the meaning of 17 USC 1201(a)(2). The District Court found that while Warden did not control access to either the computer code that made up WoW9 or the individual sound and media files that made up the environment, it controlled access to the dynamic experience of the sounds and graphics – the “real-time experience of traveling through different worlds, hearing their sounds, viewing their structures, encountering their inhabitants and monsters, and encountering other players”. This was sufficient for Warden to qualify for protection under the DMCA. Because Glider circumvented the security measures in Warden and MDY knowingly marketed Glider to do so, MDY was liable under 1201(a)(2).

The role of Glider in the WoW world certainly seemed to influence the District Court's decision. At trial, Judge Campbell began his judgment by holding that Glider has substantial damaging impact:

WoW is a carefully balanced competitive environment where players compete against each other and the game to advance through the game's various levels and acquire game assets. Glider upsets this balance by enabling some payers to advance more quickly, diminishing the game experience for other players. Glider also enables its users to acquire an inordinate number of game assets – sometimes referred to as “mining” or “farming” the game. The acquisition of these assets upsets the game's economy, diminishing the value of assets acquired by regular game users.

The MDY case is interesting because it sets up significant penalties for breach of the rules contained in the terms of service. Were damages only available in contract, Blizzard would only be able to claim reasonably small actual losses. Here, however, damages were available as copyright infringement damages, for which the copyright owner does not need to show actual loss (in the United States). Importantly, a permanent injunction is also more readily available under copyright.

Fundamentally, this precedent means that breaking the terms of service or encouraging others to break the terms of service can potentially result in severe damages and a court order to cease the infringing behaviour, without the proprietor needing to show any actual losses. Essentially, this gives certain rules of participation the force of binding law. The US District Court distinguished the rules on interception and emulation, which it held to be sufficiently related to the exclusive rights under copyright to be limitations on a licence grant, from other rules on player interaction and naming policies, which were mere contractual terms. The mechanism through which it did so, however, is not exactly clear. This leaves substantial uncertainty for future cases; if a contract can be written where the internal rules are expressed as conditions to the copyright licence grant, it may well be that these rules will be enforceable by the whole weight of copyright law.

MDY v Blizzard raises questions far beyond its facts. On one level, it is about a proprietor's ability to enforce its rules against not only its users, but those who enable and profit from cheating users. On another level, however, it raises questions about the legitimacy of using copyright law as a means of enforcing internal rules – essentially giving the internal rules the force of law without any of the accompanying requirements of due process or democratic discourse. This is a genuinely hard case – to the extent that internal rules that are important to the integrity of a virtual community are not able to be effectively policed within the community, how ought the law and the state aid in their enforcement? If the law does aid in their enforcement, what limitations should we impose on the ability of the proprietor to set the rules?

( Image from Gaming @ TP. )

Where the proprietor of a virtual community generally fails to enforce the rules, could it be estopped from doing so in any particular instance?

Despite a clear contractual right to terminate, a provider may be estopped from terminating in circumstances where it would be unconscionable to do so.¹⁾ In order to prevent the provider from terminating, a participant would have to show that the provider had represented that it would not terminate, that the participant relied on that representation to his or her detriment, and that it would be unjust or inequitable for the provider to terminate in those circumstances.

The representation that the provider would not rely on the right to terminate does not need to be explicit, but it must be unequivocal.²⁾ The representation does not need to be made to a particular person, but can be made to a class of people.³⁾ Where breaches of a particular rule are widespread, a long-standing failure to enforce the rule could conceivably be construed as a representation that the provider will not enforce the rule in future. However, such non-enforcement could also be construed as not making any representation as to the future.⁴⁾ The requirement that the representation be unambiguous does not mean that “it cannot possibly be open to different constructions, but that it must be such as will be reasonably understood in a particular sense by the person to whom it is addressed.”⁵⁾ Whether a representation has been made is a question of fact, and its existence “must be decided on ordinary common law principles of construction and of what is reasonable, without fine distinctions or technicalities.”⁶⁾ In practice, while possible, it may be quite difficult for a participant to establish that the provider represented that it would not enforce a rule in future or against any particular person.

If a representation can be shown, the participant must also be able to show that he or she reasonably relied on that representation. While showing reliance may be straightforward – in that the participant would not have engaged in conduct that technically broke the rules if he or she did not believe that the rule would not be enforced – showing that the reliance was reasonable may be more difficult. In Galaxidis v Galaxidis, Tobias JA (with whom the other members of the NSW Court of Appeal agreed) held that

the representation is sufficiently clear and unambiguous if it is reasonable for the representee to have interpreted the representation in a particular way being a meaning which it is clearly capable of bearing and upon which it is reasonable for the representee to rely.⁷⁾

Brennan J, in Walton Stores v Maher, held that it was “essential to the existence of an equity created by estoppel that the party who induces the adoption of the assumption or expectation knows or intends that the party who adopts it will act or abstain from acting in reliance on the assumption or expectation”.⁸⁾ Again, whether it is reasonable for a participant to rely on a representation that the provider will not enforce a strict contractual right will depend on the circumstances.

It may be difficult to establish in many cases, but it would certainly be open for a judge to find that a platform owner is estopped from terminating a particular participant's access to the virtual community where it takes no action against others who have habitually broken the same rule. If an estoppel can be established, it is important to consider that estoppel does require that that the representation or promise be fulfilled, but instead only provides a remedy for the detriment suffered as a result of reliance upon the representation.⁹⁾ For this reason, an estoppel, unlike an election, is not permanent – if the detriment to the relying party can be cured, the provider will once again be entitled to exercise its rights. For practical purposes, this means that given sufficient warning, a provider may be able to begin to enforce rules which it had largely ignored in the past.

There is a lot of flexibility in the doctrine of estoppel, and a significant normative question arises as to whether it ought to apply in any given case.¹⁰⁾ In the most extreme cases, it will almost certainly be effective as a brake on the ability of platform owners to rely on strict contractual rights which it has encouraged participants to believe would not be enforced. Its application in other circumstances, however, will depend in a large part on the discretion of the court as to how the alleged representation is interpreted and how reasonable the court believes the reliance on that representation to be. Like the other ways in which strict contractual rights can be read down, I believe that these considerations will depend particularly on the importance which the court attaches to the interests of the participant at issue.