Stephen S. Wu-- SL: Legal Writer,, (408) 573-5737, 50 W. San Fernando St., Ste. 750, San Jose, CA 95113

When Do Violations of Terms of Use Give Rise to a Software Copyright Claim?

Last December, the Ninth Circuit decided MDY Industries, LLC v. Blizzard Entertainment, Inc., which discussed, among other things, the circumstances under which a user’s violation of an online software application company’s terms of service can constitute copyright infringement. In February, the court amended its opinion by adding a footnote. 628 F.3d 928 (9th Cir. 2010), amended and superseded and reh’g denied, 2011 WL 538748 (9th Cir. Feb. 17, 2011). For a copy of the amended opinion, click here.
Blizzard created the popular World of Warcraft massively multiplayer online role playing game. Users take on the role of characters in this online application, allowing them to explore and interact with other characters and non-player characters in the game world Blizzard established. MDY developed and sold “Glider,” a “bot” application that automatically plays the early levels of the game without the user’s involvement to skip the (less interesting) early phases of the game and save the user time.

Blizzard took the position that Glider allows users to cheat in the game, and diminishes the enjoyment of other players and therefore reduces the marketability of the game as a whole. Accordingly, Blizzard implemented a technology called “Warden” to detect and kick off Glider users from the game. MDY changed Glider to attempt to avoid detection by Blizzard’s Warden application.

The district court largely ruled in favor of Blizzard on summary judgment and after a bench trial. The district court entered judgment based on a stipulated amount of damages. MDY then appealed the judgment.

The Court of Appeals decision first addressed Blizzard’s claim for contributory and vicarious infringement (collectively, “secondary infringement”), on which the district court had granted Blizzard partial summary judgment. Secondary infringement presupposes that users are liable for direct infringement if they use Glider. Blizzard pointed to provisions of its Terms of Use document that prohibit the use of bots to contend that their violation constituted direct infringement.

The court ruled that a contractual term that limits the scope of a license in a Terms of Use document is a “condition” to the license, the breach of which constitutes copyright infringement. All other license terms are “covenants,” the breach of which are merely contract breaches. The Court said that since Blizzard did not condition the license on a user’s not using bots, users merely breach a “covenant” when using Glider, and therefore are not directly liable for copyright infringement.

Moreover, even if Blizzard had used the right language to condition its license on the avoidance of bots, the court would not hold that the term constituted a “condition” of the license. To hold otherwise would permit a game company to condition the license on players refraining from conduct having nothing to do with copyright laws, giving copyright owners far greater control than Congress generally imposes. The court held that for a license term’s violation to constitute copyright infringement, there must be a nexus between the condition and the licensor’s exclusive rights of copyright, such as making copies and derivative works.

For example, a license term that allows a licensee to make only one backup copy of software can be a condition to the license. A user breaching the term by making extra copies is violating a term that also violates one of the licensor’s exclusive rights under copyright law—the right to make unlimited copies. Thus, a violation of such a condition can constitute copyright infringement.

The court ruled against Blizzard on secondary infringement, because it held that the violation of the anti-bot provision in Blizzard’s terms of use was merely a breach of a contractual covenant that did not give rise to direct copyright infringement. And without direct copyright infringement, there could be no secondary infringement.

The court’s opinion also included discussions of other issues. Chief among them was the scope of MDY’s liability for using Glider to circumvent Blizzard’s anti-circumvention technology, Warden. The court upheld the district court’s permanent injunction under the Digital Millennium Copyright Act, 17 U.S.C. § 1201(a)(2), ruling that MDY is liable for trafficking in technology that is primarily designed and marketed for circumventing the Warden technology, which effectively controls access to a copyrighted work, namely the “dynamic non-literal elements” of the program. The court, however, rejected liability for trafficking in technology designed to protect against unauthorized copying under Section 1201(b)(1). The court noted that Warden is designed to stop use of bots, not to prevent copying of the game’s dynamic non-literal elements. Finally, the court reversed partial summary judgment for Blizzard on its tortious interference with contract claim, holding that genuine issues of material fact remained for trial.