April 9th, 2020

Interactive Entertainment Alert

Video Game Industry Nets Wins Related to Third-Party IP

In recent years the video game industry has been the subject of several lawsuit trends, including suits related to dance moves within video games and suits related to tattoos on persons depicted in video games. Two recent victories for game publishers have altered the risk calculus for use of third-party intellectual property. Here’s what all game industry pros need to know.

Take-Two Inks Victory in Long-Standing Tattoo Row

One win came in Solid Oak Sketches, LLC v. 2K Games Inc., and Take-Two Interactive Software, Inc., a suit that concerns the use of tattoos on persons depicted in video games.

Background

Solid Oak Sketches, LLC, (“Solid Oak”), purchased the copyrights in the tattoos of several prominent athletes, including NBA players Eric Bledsoe, LeBron James, and Kenyon Martin, with the intent to license these copyrighted tattoos to various media entities seeking to produce materials that depict these athletes. Enter 2K Games, Inc., and Take-Two Interactive Software, Inc. (collectively “Take Two”), who featured these athletes in Take Two’s NBA2K video game, and who also obtained the licenses to use these athletes’ likenesses in NBA2K from both the NBA and the athletes themselves. However, in 2016 Solid Oak brought suit against Take Two alleging that Take Two infringed Solid Oak’s copyrights by publicly displaying these tattoos in the NBA2K video game without a license.

Take Two’s Motion for Summary Judgment and Judge Swain’s Ruling

After four years of litigation and extensive motion practice, including motions to dismiss, Solid Oak and Take Two cross moved for summary judgment and on March 26, 2020 United States District Judge for the Southern District of New York Laura Taylor Swain granted Take Two’s motion for summary judgment holding that Take Two’s use of the copyrighted tattoos in NBA2K was de minimis, allowed under an implied license, and a fair use.

The Court’s Holding Regarding De Minimis Use

The Court held that Take Two’s use of the tattoos was a de minimis use and thus insufficient to support a claim of copyright infringement. For a claim of copyright infringement, Solid Oak had the burden of demonstrating substantial similarity between Take Two and Solid Oak’s copyrighted works (i.e., the tattoos themselves and the depiction of the tattoos in NBA2K). To be substantially similar, the amount copied must be more than de minimis. In holding that Take Two’s use of the tattoos was de minimis, the court found that average game play for NBA2K is unlikely to include the players with the tattoos (only 3 out of 400 players potentially depicted in NBA2K have the tattoos at issue), and even when players with the tattoos are depicted the tattoos are difficult to observe (indeed, the court noted that the tattoos “are a mere 4.4% to 10.96% of the size that they appear in real life”). The Court also found that even if the tattoos were visible, due to game play the tattoos appeared as undefined dark shading and thus unrecognizable. As such, the Court held that Solid Oak failed to prove that Take Two’s use of the tattoos was substantially similar to Solid Oak’s copyrighted works, and thus Take Two’s use of the tattoos was held to be de minimis.

The Court’s Holding Regarding Implied License

In addition to holding that Take Two’s use of the tattoos was de minimis, the Court held that Take Two had an implied license to depict the tattoos in NBA2K. Courts may find an implied non-exclusive license to exist where one party created a work at the other’s request and then provided the work intending that the other copy and distribute it. Here, the Court found that: (i) the players each requested the creation of the tattoos, (ii) the tattoo artists created the tattoos and delivered them to the players by inking the designs onto their skin, and (iii) the tattoo artists intended the players to copy and distribute the tattoos as elements of their likenesses, each knowing that the players were likely to appear in public, on television, in commercials, or in other forms of media. As such, the tattoo artists gave the respective players an implied license to use the copyrighted tattoos as elements of the players likeness in the various forms of media in which these likenesses would appear.

The players then sublicensed this implied license from the tattoo artists to Take Two via Take Two’s license with the NBA (the Court found that the NBA had the power to sublicense the use of the player’s likeness to Take Two) as well as through direct licenses between the players and Take Two for use of the players’ likeness in NBA2K. Notably, these licenses preceded any transfer of rights between the tattoo artists and Solid Oak. As such, following this chain of title the Court held that Take Two had an implied license from the tattoo artists to depict the tattoos as part of the players’ likenesses in NBA2K, and this implied license existed prior to Solid Oak obtaining any copyright interest in the tattoos at issue.

Fair Use

In addition to finding that Take Two’s use of the tattoos was de minimis and subject to an implied license, the Court also held that the use was a fair use, a defense to copyright infringement.

Purpose and Character of the Use

In determining whether the purpose and character of the use is a fair use, a court looks to see if the use is transformative. Here, the Court held that there were several factors supporting a finding that Take Two’s use was transformative. Indeed, the tattoos were originally created as a means for the players to express themselves through body art, while Take Two reproduced the tattoos in NBA2K in order to most accurately depict the players. Take Two also significantly reduced the size of the tattoos in NBA2K (the tattoos appear at 4.4% to 10.96% of their actual size). Additionally, the tattoos were not only difficult to see, they were only a small fraction of content that the user would experience at one time when playing NBA2K. Finally, and interestingly, the Court held the amount of data of NBA2k attributed to the tattoos in NBA2K itself supported a finding of a transformative fair use. Indeed, the tattoos comprised only 0.000286% to 0.000431% of the total game data for NBA2K.

Nature of the Copyrighted Work

In determining whether the nature of the copyrighted work supports a fair use finding, courts look to see if the work is more expressive and creative or if the work is more factual. Here, the Court found that the tattoos were more factual than creative because each of the tattoos was based on another factual work or comprised representational renderings of common objects and motifs that are frequently found in tattoos. In so finding, the Court relied upon the declarations of the respective tattoo artists who stated that the tattoos copied common tattoo motifs or were copied from designs and pictures they themselves did not create.

Amount and Substantiality of the Use

Courts consider whether the secondary use employs more of the copyrighted work than is necessary, and whether the copying was excessive in relation to any valid purpose. Here the Court held that, while the Tattoos were copied in their entirety, Take Two did so in order to effectuate the transformative purpose of creating a realistic game experience.

Effect on the Market

Courts consider whether the secondary use serves as a substitute for the original work. Generally, transformative uses do not cause actionable economic harm because by definition, such uses do not serve as substitutes for the original work.

Here, Take Two’s use of the tattoos in NBA 2K is transformative: the tattoos as featured in NBA2K cannot serve as substitutes for use of the tattoo designs in any other medium. Additionally, the Court found that there is no evidence that a market for licensing tattoos for use in video games or other media is likely to develop. Indeed, Solid Oak failed to proffer such evidence, and further, Take Two proffered evidence that such a market is unlikely to develop and that, if it did, Solid Oak could not capitalize on such a market because the tattoos are imprinted on the bodies of the players and Solid Oak is not licensed to use the players’ publicity rights.

Takeaways

In short, this decision is a big win for the video game industry, who previously had to balance the benefits of accurately depicting persons in video games against the risk of receiving claims for copyrighted works found on such persons’ likenesses. Based on this decision, such uses of persons’ likenesses in video games may qualify as de minimis uses if the tattoos are featured only on a select number of persons in the video game, and more so, if the tattoos themselves are difficult to make out.

Additionally, such uses of copyrighted elements incorporated into persons’ likenesses may be subject to implied licenses. These implied licenses may be contingent upon the respective tattoo artist’s intent in providing tattoos, particularly to celebrities, when the tattoo artist understands that his or her copyrightable work will be featured in commercials and other media in which the celebrity with the tattoo appears. Furthermore, this decision questions the basic economic viability of third-party entities like Solid Oak who purchase copyrights in elements of persons’ likenesses with the intent of extracting licensee fees from content creators and publishers. Indeed, not only did the Court hold that there is not a market for such entities to license such rights, but this decision itself could preclude any such entity from seeking to extract license fees from content creators and publishers.

Finally, this decision was interesting in that when determining whether the use of the copyrighted works in question was a fair use, the Court looked to the amount of data corresponding to the depiction of the copyrighted tattoos as compared to the entire data for NBA2K. While this is a novel twist in the fair use analysis, it should be no surprise that the video game industry has provided the legal community with objective data-driven criteria in what is traditionally a subjective copyright defense analysis.

Epic Games Dances Around Infringement Claims as Court Finds Transformative Use 

Continuing a run of high-profile video game litigation in the United States, an order issued out of the Eastern District of Pennsylvania on March 31, 2020 granted Epic Games Inc. (“Epic Games”) its motion to dismiss the majority of a complaint concerning a Fortnite dance emote.

Background

In Pellegrino v. Epic Games, Inc. filed in April 2019, plaintiff Leo Pellegrino (“Pellegrino”) sued Epic Games for its development and sale of a Fortnite emote called “Phone It In.” In Epic Games’ Fortnite, players can obtain cosmetic animations, called emotes, that allow their character to move or dance in a certain way. Pellegrino, a saxophone player, is known for performing a particular dance move. Pellegrino alleged that the Phone It In emote unlawfully copied his signature dance move and brought suit against Epic Games, relying on right of publicity, trademark, and privacy theories to advance his claims.

Pellegrino’s Suit and Dismissal of Pellegrino’s Claims

Pellegrino’s complaint asserted eight causes of action: (1) a Pennsylvania state law claim for unauthorized use of Pellegrino’s name or likeness; (2) a Pennsylvania common law claim for misappropriation of publicity; (3) a Pennsylvania common law claim for invasion of privacy by misappropriation of identity; (4) a Pennsylvania common law claim for unjust enrichment; (5) a Pennsylvania common law claim for unfair competition for using Pellegrino’s likeness and trademark; (6) a claim for false designation of origin and false endorsement under the Lanham Act (15 U.S.C. § 1125(a)); (7) a Pennsylvania common law claim for trademark infringement; and (8) a claim for trademark dilution under the Lanham Act (15 U.S.C. § 1125(c)). Epic Games filed a motion to dismiss the complaint in its entirety, and the court granted Epic Games’ motion for all but one claim as follows:

The court dismissed Pellegrino’s first three claims applying the “transformative use” test as applied in Hart v. Electronic Arts, Inc. The landmark U.S. Supreme Court case of Brown v. Entertainment Merchants Association established that video games are expressive works protected by the First Amendment, and the transformative use test balances First Amendment protections against a plaintiffs’ publicity and privacy rights. The transformative use test states that an expressive work’s First Amendment protections can outweigh a celebrity’s interest in their likeness if the expressive work’s depiction of the celebrity is so transformed it has become the defendant’s expression rather than the celebrity’s likeness. In applying Hart to dismiss Pellegrino’s right of publicity and privacy claims and finding Epic Games’ use of Pellegrino’s likeness transformative, the court noted that avatars equipped with the Phone It In emote did not share Pellegrino’s appearance or biographical information, nor did they share in Pellegrino’s identity or what he did in real life.

Next, the court dismissed Pellegrino’s claim for unjust enrichment for his failure to allege a relationship between the parties that was contractual (i.e., failure to allege that Pellegrino conferred any benefit upon Epic Games). The court additionally disposed of Pellegrino’s unfair competition claim, noting that as pleaded, the distance between Pellegrino’s profession (live musical performance) and Epic Games’ business as a video game developer failed to establish the two parties as competitors in selling the same goods or services. Similarly, dispatching Pellegrino’s claim for trademark dilution, the court noted that Pellegrino failed to allege that Epic Games used the Phone It In emote to identify Epic Games’ own goods or services in a manner that gave rise to a trademark dilution claim.

Further, the court dismissed Pellegrino’s claim for common law trademark infringement as preempted by the Copyright Act, as choreography and dance are copyrightable subject matter and Pellegrino’s trademark infringement claim asserted rights equivalent to rights granted by the Copyright Act for such subject matter.

Finally, the court dismissed Pellegrino’s false designation of origin claim, noting that while Pellegrino’s allegations state Epic Games copied Pellegrino’s signature dance move, the allegations did not show that there was or could be any confusion as to who produced the emote. As the claim concerned the origin of an idea (i.e., a dance move) embodied in a physical good (i.e., the Phone It In emote) rather than the source of the emote itself, the court found the claim was governed by copyright law, not the Lanham Act.

The only claim of Pellegrino’s that survived Epic Games’ motion to dismiss was his claim for false endorsement.

Takeaway

The court’s memorandum and order in Pellegrino v. Epic Games, Inc. illustrates the difficulty and risk of using principles of trademark, privacy, and right of publicity in an attempt to either stand in for claims better grounded in other principles of law or to overcome the broad First Amendment protections afforded video games.

For more information about video game transactions and other interactive entertainment matters, please contact Gregory Boyd, Sean Kane, Dorian Slater Thomas, or any other member of Frankfurt Kurnit's Interactive Entertainment Group.