MDY v Blizzard: Terms of Use and copyright infringement

The U.S. Court of Appeals for the Ninth Circle has decided on the interesting and important case of MDY v Blizzard.

First some background information. In December 2006, Blizzard, the makers of World of Warcraft, sent a cease-and-desist letter to MDY, the makers of a cheat program called Glider. This program allows users to run the game on autopilot by becoming a bot that allows the user to kill monsters and farm their loot without having to spend hours in front of the system. You just install Glider, leave the computer running, and see the Gold rush in. Blizzard argued that MDY was in breach of their Terms of Use, which is a condition which would translate into a termination of the licence. The ToU states clearly:

“You agree that you will not (i) modify or cause to be modified any files that are a part of the Program or the Service; (ii) create or use cheats, bots, “mods”, and/or hacks, or any other third-party software designed to modify the World of Warcraft experience; or (iii) use any third-party software that intercepts, “mines”, or otherwise collects information from or through the Program or the Service. Notwithstanding the foregoing, you may update the Program with authorized patches and updates distributed by Blizzard, and Blizzard may, at its sole and absolute discretion, allow the use of certain third party user interfaces.”

MDY’s actions seem to be unequivocally a breach of these terms and conditions. However, it must be stressed that the above is not the licence itself. WoW’s End-User Licence Agreement (EULA) is a separate document which grant the user the right to perform actions which otherwise would be infringing, in this case, install the program into a computer. Under normal circumstances, a breach of licence usually translates into the termination of the agreement, and therefore, the termination of the licence to use the work, but it does not immediately translate into copyright infringement. Breach of licence will normally herald the termination of the permission to use the work, and further uses would be infringing. Does a breach of the Terms of Use mean that the licence has also been breached? Blizzard’s EULA clearly states that the user must comply with theToU, but nowhere does it say that breach of those terms will translate into a breach of the licence! Similarly, it seems clear to me that the licence was drafted to accomodate the theory of termination described above, as it sets out the effects of termination:

“Blizzard may terminate this Agreement at any time for any reason or no reason. In such event, you must immediately and permanently destroy all copies of the Game in your possession and control and remove the Game Client from your hard drive. Upon termination of this Agreement for any reason, all licenses granted herein shall immediately terminate.”

As we know, a copyright licence is an agreement that allows a user rights which they would otherwise not have. In this case, if the licence is removed, the user would be infringing copyright. MDY initiated an action to try to obtain a declaration that Glider does not infringe copyright.

In first instance, the United Stated District Court of Arizona decided on the case. The case hinged on the question of whether a breach of terms of use constitutes copyright infringement. Blizzard argued to the court that it did, while MDY on the other hand argued that even if their actions breached the TOU, this would not constitute copyright infringement because MDY’s actions are not infringing an exclusive right protected by copyright; copyright does not prohibit cheating in a game. MDY presented Storage Technology v Custom Hardware Engineering as a relevant authority that explicitly recognised that there cannot be copyright infringement on rights that do not exist, but the court dismisses this claim. Similarly, the court agreed that existing licensing law in the United States admits that granting a licence usually innoculates users against copyright infringement claims. The Court cites Sun Microsystems v Microsoft:

“Generally, a copyright owner who grants a nonexclusive license to use his copyrighted material waives his right to sue the licensee for copyright infringement and can sue only for breach of contract. If, however, a license is limited in scope and the licensee acts outside the scope, the licensor can bring an action for copyright infringement.”

Similarly, this case is not only about MDY, it is about all MDY users. Blizzard’s argument is that each user who is installing MDY’s cheating software are in breach of their ToU, therefore in breach of the licence, and therefore are infringing copyright. MDY therefore is guilty of contributory and vicarious copyright infringement, akin to Grokster and other P2P providers. The District Court of Arizona therefore ruled in Blizzard’s favour, and MDY was held accordingly liable.

MDY appealed the decision and the Ninth Circuit Court of Appeals reversed the Arizona ruling. The Appeals Court agreed with MDY, and has declared that MDY are not liable for secondary copyright infringement, but might be held liable for circumventing technological protection measures. The Appeals Court explains on the important interaction between contractual covenants and copyright licence conditions:

“To recover for copyright infringement based on breach of a license agreement, (1) the copying must exceed the scope of the defendant’s license and (2) the copyright owner’s complaint must be grounded in an exclusive right of copyright (e.g., unlawful reproduction or distribution). […]

Here, ToU § 4 contains certain restrictions that are grounded in Blizzard’s exclusive rights of copyright and other restrictions that are not. For instance, ToU § 4(D) forbids creation of derivative works based on WoW without Blizzard’s consent. A player who violates this prohibition would exceed the scope of her license and violate one of Blizzard’s exclusive rights under the Copyright Act. In contrast, ToU § 4(C)(ii) prohibits a player’s disruption of another player’s game experience. Id. A player might violate this prohibition while playing the game by harassing another player with unsolicited instant messages. Although this conduct may violate the contractual covenants with Blizzard, it would not violate any of Blizzard’s exclusive rights of copyright. The antibot provisions at issue in this case, ToU § 4(B)(ii) and (iii), are similarly covenants rather than conditions. A Glider user violates the covenants with Blizzard, but does not thereby commit copyright infringement because Glider does not infringe any of Blizzard’s exclusive rights. For instance, the use does not alter or copy WoW software.

Were we to hold otherwise, Blizzard — or any software copyright holder — could designate any disfavored conduct during software use as copyright infringement, by purporting to condition the license on the player’s abstention from the disfavored conduct. The rationale would be that because the conduct occurs while the player’s computer is copying the software code into RAM in order for it to run, the violation is copyright infringement. This would allow software copyright owners far greater rights than Congress has generally conferred on copyright owners.”

This is the right decision. While as a gamer I never liked what Glider is doing, their actions never amounted to copyright infringement, even if the licence itself would have been void. There has to be a clear distinction between copyright licences and contractual obligations, and thankfully MDY has clarified the important distinction.

However, this ruling comes at a bad personal time. I quit WoW earlier in the year, and with Cataclysm out, this decision has reminded me that I miss playing my mage.