My KeSPA v Blizzard Lecture (advice welcome)

Blizzard v. KeSPA: Intellectual Property Rights in Professional Gaming



Professional gaming, or e-sports, is growing in both popularity and profitability around the world. As such, the protracted dispute between Activision Blizzard and the Korean eSports Players Association (KeSPA) over the future of professional StarCraft in South Korea sets an important example for the future of a rapidly growing industry.

StarCraft: Brood War in South Korea is the most developed and successful e-sport in the world. In 2007, Activision Blizzard, the developers of the game, went into negotiations with KeSPA, the governing body of e-sports in South Korea, over the IP rights of their games. The eventual breakdown of these negotiations led to a lawsuit that threatened for a time to bring to an end all televised broadcasting of Brood War in South Korea.

At the heart of this dispute is to what extent Blizzard’s intellectual property rights over Brood War extend to derivative works, in this case the televised matches between the progamers themselves. The legality behind this is both complex and likely to vary according to the copyright laws of the nation where the lawsuit is held.

In the end, the dispute was settled out of court and the lawsuit was dropped. The dangers disputes of this nature pose to progaming include destabilization of established pro circuits, loss of sponsors, and potentially the shutting down of pro circuits altogether. Such disputes, however, are only likely to arise when a conflict of interests occurs, and given that progaming tends to benefit game developers, such conflicts of interests are unlikely. As for its implications outside the world of gaming, this case presents a question of intellectual property rights that has no directly analogous legal precedent in the United States.

The question at the heart of my lecture is how far a game developer’s intellectual property rights extend over their own creation. Where does the creative control of the developer end, and that of the consumer begin? As with most issues relating to intellectual property rights, the question seems abstract to the point of irrelevance in the absence of real world applications. In this lecture I will therefore focus specifically on a legal battle between Activision Blizzard and the Korean e-Sports Players Association that arose from this very question. Before I jump into discussing the lawsuit itself however, there is a lot of context and background information you have to understand to follow the case.

I’ll start with a brief introduction to the world of professional gaming, or e-sports as it is often referred to. Competitive gaming has a long history: as far back as the early 80’s organizations were holding national tournaments for arcade gamers and a few already hoped to go professional. It wasn’t until the mid 90s, however, that videogames achieved the level of sophistication and the online support necessary to sustain a competitive community of high-level gamers. It was around this time that competitive scenes for various pc games such as Quake and Age of Empires started to take off.

Of all these games, the most successful by far was StarCraft, a science fiction real time strategy game developed by Blizzard Entertainment in 1997. The game became wildly popular in South Korea, where a financial downturn coincided with the spread of broadband Internet to make spending time in cheap gaming cafés known as PC Bangs a popular past time. As its popularity grew, major companies began sponsoring tournaments, players, and eventually entire teams.

By the early 2000s, professional StarCraft in South Korea had become a cultural phenomenon and the most successful e-sport of all time. Players earn stable salaries from their corporate sponsors and live and train together with their teammates in company-provided practice houses. They compete in front of live audiences of cheering fans, and their games are broadcast on prime time television by two separate cable stations dedicated to the coverage of professional gaming. There are three main leagues in which professional StarCraft players compete, the most important of which is Proleague. Proleague is a team league organized in the format of a yearlong tournament in which all teams have matches on a regular basis, and is really the bread and butter of the professional StarCraft circuit.

This entire infrastructure was and still is managed and overseen by a governing body formed in 2000 known as the Korean e-Sports Players Association, commonly abbreviated as KeSPA. Despite its name, KeSPA is made up of representatives of the various sponsors involved, and mostly represents their interests.

Now that we’ve established some background information, where did all the trouble begin? Blizzard Entertainment was content for a long time to observe from afar as its game developed into a professional e-sport without involving themselves directly. Then, in 2007, KeSPA claimed the broadcasting rights for Proleague and sold them to the highest bidder, a sports marketing company. The two broadcasting stations objected to KeSPA’s claim on the grounds that they created and ran Proleague almost entirely by themselves, but in the end were forced to give in.

This episode sparked Blizzard’s involvement. They felt that KeSPA had violated their intellectual property rights in claiming broadcasting rights over Proleague. Thus in 2007 Blizzard and KeSPA enter negotiations over the matter.

Nothing more of note is said or heard about these negotiations for three years. 2010 comes around. Blizzard Entertainment is now Activision Blizzard as a result of a merger, and the release of StarCraft 2 is fast approaching. Whereas the original StarCraft’s success was a happy accident, Activision Blizzard is developing and promoting StarCraft 2 as an e-sport. In April 2010, about three months before the release of StarCraft 2, Activision Blizzard breaks off negotiations with KeSPA, claiming in a public statement that their rights were not being recognized and negotiations had gone nowhere.

In response, KeSPA claimed that they had been willing to pay a “reasonable” fee for use of Blizzard games, but that Blizzard had made a series of unreasonable demands, upon which they refused to negotiate. These demands, which KeSPA published in violation of a non-disclosure agreement, included full ownership of all broadcasted materials, the right to authorize all league operations, and ownership of all broadcasted materials.

May 2010, one month later. Activision Blizzard sells the broadcasting rights for all Blizzard games in South Korea – including both StarCraft 1 and 2 – to a smaller broadcasting station, GomTV, and their parent company Gretech. To continue operating and broadcasting StarCraft legally, therefore, KeSPA and the broadcasting companies must now negotiate with Gretech. They are given a grace period until August for all the current leagues to finish. One of the broadcasting companies reaches an agreement with Gretech for a major tournament they are running that extends past the end of the grace period.

Negotiations between KeSPA and Gretech don’t start until late July. They meet four times, and the last meeting goes very poorly. While these negotiations were also conducted under a non-disclosure agreement, it seems that the main point of contention was scheduling. GomTV would be running a new StarCraft 2 league and wanted Proleague to give up prime time slots to avoid competition between the two. KeSPA refused and that was the end of negotiations. Gretech warned that a lawsuit would be unavoidable if Proleague continued to be broadcast. KeSPA had already announced that they intended to start the next season of Proleague regardless of how negotiations turned out.

The off-season ends without a settlement and all of the StarCraft leagues start up again. Activision Blizzard files lawsuits against both broadcasting companies in late October.

The cases are heard together over three court sessions, and both sides offer four main points.

Let’s start with the broadcasting companies. Their first argument was that there are limits to Blizzard’s IP rights over their games, particularly with respect to derivative works. While the broadcasters acknowledged the developers had some claim to broadcast materials, Blizzard could not fairly ask for full ownership of all content produced with their games.

For their second argument, the broadcasting companies pointed to article 29 of the copyright act of South Korea, which grants the right to play recorded materials for a public audience so long as they are not charging listeners or viewers for the performance. They argued that because viewers are not charged for attending StarCraft matches or watching from home, article 29 applies.

Their third argument was that article 28 of the copyright act of South Korea also applies, which allows for the use of quotations of works made public in ways similar to the fair use clause in American law. Additionally, the broadcasting companies point out that Blizzard has already profited greatly from professional StarCraft, and are only now making an issue of it in an attempt to abuse their rights.

Their final argument was that Blizzard’s demands in negotiations went well beyond their intellectual property rights, and that despite having sold exclusive rights to broadcasting their games to Gretech, Blizzard continued to take an active role both in the lawsuit and in negotiations.

On to Activision Blizzard’s and Gretech’s case. Their first argument was this case is without proper precedent, and is a clear violation of their IP rights.

Secondly, Blizzard and Gretech contested the claim that article 29 applies to this case. Article 29 specifically allows the performance of recorded materials. StarCraft broadcasts are not simply the playing of commercially pre-recorded material, but instead include additional features such as professional game play and casting.

For their third point Blizzard and Gretech also argued that article 28 doesn’t apply. Article 28 specifically protects the use of works for the purposes of news reporting, criticism, education, and research. StarCraft broadcasts fall into none of these categories. Additionally, they argued that claiming the broadcasting companies’ use of their game had not contributed positively to the development of the industry, as they were relying on IP violations to sustain their business practices.

For their final point they stressed the fact that one of the broadcasting stations had come to an agreement with Gretech for one of their tournaments over the summer, and thus had previously recognized their rights despite not doing so at present.

So how did all of this play out? Who won? Everybody, in a sense. Gretech washed their hands of the situation and returned broadcasting rights for the original StarCraft to Activision Blizzard, who continued attempts at negotiation. With only a few sticking points left, Blizzard settled negotiations with KeSPA and the broadcasting companies out of court and dropped the case. Essentially, Blizzard backed off from some of their more aggressive demands while KeSPA and the broadcasting stations paid licensing fees to Blizzard and agreed to display the Blizzard logo more prominently.

After the drama of Blizzard v. KeSPA and the fight over the future of the world’s most successful e-sport, the entire conflict was resolved without any definitive answer to the question at the crux of the matter: how far do a game developer’s intellectual property rights extend over the use of their products, specifically in the context of professional competition?

It’s a question with very important implications for competitive gaming. The legal battle alone nearly ended professional StarCraft in South Korea. Bad press is an anathema to sponsors. Even more dangerous, one of the options Blizzard seriously considered was filing an injunction to stop all broadcasting of StarCraft 1 until the court case had been settled. Had that gone through, the injunction alone would likely have dealt a fatal blow to an industry that for all its achievements, is still very fragile.

Blizzard initially demanded 100% ownership of all broadcast materials and the final say in matters ranging from choice in sponsorship to player contracts. If that were set as a precedent, it would grant game developers a monopolistic control over competitive play of their titles. It is worth noting that game developers do have a lot to gain in reputation and sales if their games are successful competitively. At the same time, the ultimate goal of a game developer is to maximize sales, not promote e-sports. These are not always goals that coincide.

This dispute also has interesting implications for intellectual property rights in general. Blizzard was correct that this case is without a clear legal precedent, and the jurisprudence of intellectual property rights is complicated and varies between countries. There are a couple key legal principles that apply, however.

The first of these is to note that the broadcast materials constitute derivative works. Derivative works are works that include copyrighted material as a significant component, but are sufficiently modified as to constitute an original creation. Clearly, professional StarCraft matches fall into this category. The game itself is copyrighted, but the performances of the players are as original as the performances of competitors in any other game or sport.

Under American copyright law, the copyright owner has the exclusive rights to authorize the creation of derivative works. This is fairly cut and dry. In most cases, all this means for professional gaming organizers is paying royalties, and if a game developer makes more onerous demands, organizers can simply not invest.

As demonstrated in this case, however, there does exist the potential for situations in which taking things to court becomes the last option for both parties. As professional gaming grows and becomes more profitable, the likelihood of these situations will only increase. The best hope in American copyright law for the organizers and broadcasters of professional gaming leagues in this case is the fair use clause. Fair use is determined on the basis of four criteria, and qualifies as a complete defense against copyright infringement should it apply.

The first of these for criteria is the purpose and character of a work. Works that are considered transformative in their use of copyrighted material tend to pass this test, whereas works that merely “supersede the objects” of the copyrighted material tend to fail this test. This test is perhaps best known for protecting parodies from copyright infringement suits. In this case everything hinges on whether an individual’s game play qualifies as “transformative,” which is almost impossible to predict. There are no legal precedents for this and there are no explicit guidelines for determining what qualifies as transformative.

The second criterion, the nature of the copied work, protects expression of information that belongs in public domain, and does not protect professional gaming.

The third criterion is amount and substantiality of the portion used in relation to the copyrighted work as a whole. None of these criteria, of course, were designed with professional gaming in mind, but this third one is perhaps the least clear in its application to this issue. What percentage of the videogame is being used when you broadcast a round of multiplayer mode?

The last criterion is the effect of the use upon the potential market for or value of the copyrighted work. This last criterion is especially important. Videos or broadcasts of professional gamers obviously do not act as a substitute for owning and being able to play the game itself, so making the case that broadcasts encroach upon the market for the game they show would be exceedingly difficult. All things considered, no clear conclusion can at this point be drawn as to whether the fair use defense would pass muster if a case like this went to court. The issue is further complicated by the fact that game developers can set stipulations for use of their products in derivative works in end-user licensing agreements, the enforceability of which is still in question.

I opened by asking where the rights of the game developer end and where those of the consumer begin. The legal system does not yet have a clear answer to this question. My personal stance is that there’s a limit to how much control a game developer can rightfully demand over the use of their product, and that Activision Blizzard overstepped that limit. Certainly Blizzard has the right to collect royalties for the use of their games in televised tournaments. That being said, professional StarCraft broadcasts are truly original products that represent a huge amount of time, passion, and hard work on the part of the players, the commentators, and everyone else involved. To demand ownership of and control over these broadcasts is not only a detriment to the professional scene, but also a devaluation of all that time and effort and a violation of the intellectual property rights of the individuals involved.

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