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Big Fish Casino Ruled Illegal in Washington State

Posted Thursday, May 3, 2018 by Kyle Straughan

Big Fish Casino is a mobile game published by the Seattle company, Big Fish Games, owned by parent company Churchhill Downs. In the game, players spend virtual “chips” in order to play simulated version of various casino games, much like a real-life casino uses chips. Limited amounts of the chips can be obtained in game, or more can be purchased for real money. In 2015, a woman lost over $1000 in the virtual chips while playing Big Fish Casino, and sued Churchhill Downs for the loss, basing her claim on the Washington statute that states that anyone who loses a “thing of value” to an illegal gambling operation has legal ground to recover said losses.

The lower court ruled that the virtual chips were not a “thing of value” under the statute, but the appeals court has reversed that decision. Judge Milan Smith, writing the opinion, noted that Washington’s illegal gambling statute defines a “thing of value” as “…any money or property, any token, object or article exchangeable for money or property, or any form of credit or promise, directly or indirectly, contemplating transfer of money or property or of any interest therein, or involving extension of a service, entertainment or a privilege of playing at a game or scheme without charge.” Thus, because the chips could be used to allow the player to play more games, and were in fact required in order to play the games, thereby “extending” the service, they qualified as a “thing of value” under the statute.

Currently the video game industry remains a hotbed of debate over the legality of various business models, chief of which is the “lootbox” debate. Lootboxes, generally speaking, are virtual containers that contain one or more randomized items or things used in the game. Rather than buying an item directly, the user purchases lootboxes which may or may not contain said item. Currently most video games do not allow users to exchange their accounts, items, or currency for real money, which the Big Fish court noted should be sufficient to prevent them from being viewed as illegal gambling. In other words, the existence of a “black market” for the items or accounts does not inherently grant them value when the owner of the game has contractually forbidden the exchange.

Supreme Court Rules in Major Patent Cases

Posted Tuesday, April 24, 2018 by Kyle Straughan

Today the Supreme Court issued opinions on the two stand-out patent cases on their docket this year. The cases, Oil States Energy Services, LLC v. Greene’s Energy Group, LLC and SAS Institute v. Iancu, Director, USPTO, et al., addressed whether the post-grant inter partes review process created by the America Invents Act was a Constitutionally permissible procedure, and whether the Patent Office must issue a patentability opinion on all challenged claims should the Patent Office agree to initiate an inter partes review respectively.

Oil States easily stole the proverbial show due to its Constitutional considerations and potential impact on the operations of the Patent Office. The crux of the dispute was whether a patent once issued could be removed by a process other than through an Article III court with a jury. If not, then inter partes review would essentially constitute an unconstitutional removal of property. The Supreme Court held that patents fell into a special class of rights called “public rights” which the Supreme Court has held previously that Congress has significant latitude to assign adjudication thereof to entities other than Article III courts. The Supreme Court noted that inter partes review is “simply a reconsideration of that [patent] grant.” The justices however did narrow their decision to inter partes review and cautioned that it should not be construed to suggest that patents are not property for the purposes of the Due Process or Takings clauses of the Constitution.

In SAS Institute, the issue was whether the Patent Trial and Appeal Board, upon making the decision to institute an inter partes review of a patent, must issue a patentability opinion on every single claim the petitioner challenged, or if they may pick particular claims. The Supreme Court held that language of the statute, specifically the use of the word “shall” making the USPTO’s duty a nondiscretionary one, and the use of the word “any” as implying application to every member of a group, means that the Patent Trial and Appeal Board must address every claim challenged. The Supreme Court held that the choice granted the USPTO is whether or not to institute review, not which claims to review once the decision is made.

Oil States: https://www.supremecourt.gov/opinions/17pdf/16-712_87ad.pdf

SAS Institute: https://www.supremecourt.gov/opinions/17pdf/16-969_f2qg.pdf

FTC Warns Manufacturers Against Conditioning Warranty Coverage on Use of Specific Parts or Services

Posted Thursday, April 19, 2018 by Kyle Straughan

On April 10, the Federal Trade Commission sent warning letters to six unspecified major companies that market and sell automobiles, cellular devices and video gaming systems in the United States. The FTC was warning the companies that their statements that consumers must use specified parts or service providers to maintain their warranties are generally prohibited by the Magnuson-Moss Warranty Act.

Pursuant to the act, warrantors can only make such statements if they provide the parts or services for free or receive a waiver from the FTC. The FTC also cautioned that such statements may be considered deceptive under the FTC Act. The FTC provided examples of the behaviors in question, and commentators used those passages to determine that it is likely that among those contacted were Hyundai, Nintendo, and Sony; whose websites use close to or identical language to that provided by the FTC.

As a warning, the FTC has requested that each company review its promotional and warranty materials to ensure that the materials in question do not state or imply that warranty coverage is conditioned on the use of specific parts or services. Any company currently engaged in the practice is advised to revise its practices to comply with the law, and the FTC will be reviewing the companies’ websites after 30 days. Any failure to correct any potential violations may result in law enforcement action.

It should be noted that this does not necessarily apply to situations wherein the DMCA tampering provisions prohibit repair outside of authorized organizations.

Supreme Court Considers Whether USPTO Can Limit Scope of Inter Partes Review

Posted Thursday, April 12, 2018 by Kyle Straughan

While Oil States is drawing most of the attention, the Supreme Court’s docket also has another potentially impactful post-grant patent case on it. Enter SAS Institute v. Matal where the Supreme Court is considering whether the USPTO, in deciding whether to institute an inter partes review after request by a party, can instead choose to only rule on some of the claims in question, referred to colloquially as a partial review. It is understandable then that this case would be somewhat overshadowed by Oil States Energy Services v. Greene’s Energy Group (discussed previously at: http://ruttlermills.com/Blog/Supreme-Court-Considers-Constitutio), given that one result could render SAS Institute’s decision moot. Still, it raises the interesting question of whether an administrative agency given the authority to choose to do something is also intrinsically granted the authority to choose to do that thing in part.

It should be noted that last year in Cuozzo Speed Technologies, LLC v. Lee the court held that the America Invents Act grants the Patent Trial and Appeal Board unreviewable discretion over the decision of whether to institute review. The statute merely bars the board from initiating a proceeding unless it determines that “there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition.” Taking that into consideration, Justice Sotomayor questioned SAS Institute’s counsel, the side opposing partial decisions, on whether this was merely an attempt to get around the Cuozzo ruling by forcing the board to issue decisions regarding the unreviewed claims. Justice Kagan noted that the power already appears intrinsic to the board because it is not required to review cancelled claims, which she noted the statute does not differentiate between.

On the other side, Justices Alito and Roberts stuck to the strict language of the statute which they emphasized refers to claims “challenged by the petitioner,” which thus would logically imply that the board must rule on some if not all of the claims. Justice Gorsuch questioned how the discretion granted on the standards for showing sufficient grounds for instituting a review also includes the authority of whether to grant review to individual claims.

While the fate of this case rests in part on the result of Oil States, it would have a distinct impact on the process and procedure of the USPTO’s decisions on whether to institute inter partes review. Challengers knowing that the USPTO will address the merits of all claims if a review is instituted may feel more confident in challenging, while if the board can pick which claims it reviews challengers may be more reticent because the claims they are concerned about may not end up reviewed.

Lindsey Lohan Loses Misappropriation of Likeness Suit Against Video Game Developer

Posted Thursday, April 5, 2018 by Kyle Straughan

In 2013, video game developer Rockstar Games, through its publisher Take-Two Interactive, released Grand Theft Auto V, the latest in their series of open-world games. The game, set in a fictionalized version of Southern California, included a minor character named Lacey Jonas, a young blonde woman the New York State Court of Appeals would later describe as a “beach-going young woman.” Jonas appears on discs containing the game, in several promotional images, and in-game where she requests the player’s assistance for a brief mission wherein the player escorts Jonas home to help her escape from paparazzi.

Shortly after the game’s release, celebrity Lindsey Lohan sued Take-Two Interactive in New York State for misappropriation of likeness and violation of her right of privacy. The complaint alleged that Lacey Jonas was an appropriation of Lohan’s likeness. Though the case survived a motion to dismiss, the trial court judge ruled against Lohan, who appealed first to the state’s appellate division, and then to the Court of Appeals (1). The primary question the Court of Appeals faced was centered upon whether Lacey Jonas constituted a “portrait” of Lindsey Lohan as defined by New York state law. The court decided that it did not, and determined that Jonas was an “indistinct, satirical representations of the style, look, and persona of a modern, beach-going young woman that are not reasonably identifiable as plaintiff.”

What is noteworthy about this decision is that the court held, in a unanimous ruling, that a video game avatar may constitute a portrait, and thus that if a party used someone’s likeness in a video game without permission they may be afoul of New York law. However, the court did not go into significant detail about what might sufficiently constitute a portrait in the video game context. Instead, the court noted that “legal determination will depend on the court’s evaluation of the ‘quality and quantity of the identifiable characteristics’ present in the purported portrait.” Meaning that any future decisions will be determined case-by-case.

While the precedential value of this holding is currently confined to New York, it may become persuasive authority in other states with similar laws.

(1): The Court of Appeals is the highest court in New York.

Opinion: https://www.nycourts.gov/ctapps/Decisions/2018/Mar18/24opn18-Decision.pdf

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