Attention Patent Arcadians!!! (I just made that up)

I am writing to request your vote for as one of the blogs to be included in the ABA journal's annual list of the 100 best legal blogs. The contest is referred to as Blawg 100 Amici.

As many of you know, I created this blog about 5 or 6 years ago to discuss the cross section of intellectual property law and video games. The Blog/Blawg offers news and updates regarding video game IP law, cases, and patents. Our index of lawsuits is a primary resource for law students, journalists, and attorneys alike. Our index of video game patents continues to develop, with more patents being added routinely.

Please vote for the blog (blawg) and spread the word about the contest (and the blog) to folks in the legal industry. There is a form that has three questions (name, e-mail, and why you are a fan) to be completed. The forms are due (on-line) by September 9. The form is at this site (also linked throughout this post).
The criteria include that you believe other lawyers should know about it, the author is recognizable as a lawyer in the vast majority of his posts, the blog is written with an audience of lawyers or law students in mind, and the blog does not promote the author's products and services. Additional information is provided on the ABA Journal's website.

Hidden Image Technology Solutions v. Thomas L. Barnhart
U.S. District Court, Northern District of Georgia
Case No. 11-cv-02415, Filed July 22, 2011

Hidden Image Technology Solutions, a Georgia company, has sued Thomas Barnhart asserting that he falsely promotes himself as the sole inventor of several patents, and has profited from this false promotion. The lawsuit seeks to remove Barnhart as an inventor of those patents, and to instate his co-inventor, Joel Brooks, as the sole inventor of the patents. The patents in question are:

6,296,900: “Method of making hidden image game piece.” Granted 10/2/2001.
5,984,367: “Hidden image game piece.” Granted 11/16/1999.
7,747,472: “Hidden image game piece.” Granted 6/29/2010.
6,629,888: “Hidden image game piece.” Granted 10/7/2003.

These are physical game patents, consisting of printed pieces, that when held against pre-programmed colors on a television or computer screen, reveal hidden messages. The first use of this patent by Brooks, in the early 1990s, was for a hidden printed message distributed in newspapers, called the “Red Reveal Game Piece.” When held against a red part of the screen set to appear during a Dallas Cowboys football game, the game piece would reveal a hidden message or advertisement. The idea garnered interest from television outlets like MSNBC, and Brooks also worked to adjust the invention to the growing opportunity of the internet. Brooks developed a WebDecoder® based on the patents above, and shared his idea for marketing it with Barnhart. According to Hidden Image’s complaint, Barnhart cajoled himself into the position of co-inventor of these patents by convincing Brooks that this was necessary for Brooks’ own “protection.” In reality, according to Hidden Image, Barnhart was not an inventor of the patents, and Brooks was the true sole inventor.

The complaint alleges that Barnhart not only forced his way into the co-inventor position on three of the patents, but without Brooks’ knowing, he had himself listed as the sole inventor of the ‘888 patent. Barnhart also attempted to license these patents giving Brooks only 10% of the royalties. Brooks in 2003 licensed his rights, title and interest in these patents to a subsidiary of Hidden Images. Hidden Images now seeks to have Barnhart’s name stricken from the records of the USPTO, and to instate Brooks as the sole inventor of all four patents. Hidden Images also seeks an injunction barring Barnhart from using the patents, and to recover damages, profits, and attorney’s fees.

Because this is a physical game patent, we won’t follow this one further. You can learn more about the case filings at PriorSmart.

Ross A. Dannenberg publishes new book: “The American Bar Association’s Legal Guide to Video Game Production

The American Bar Association’s Legal Guide to Video Game Development is published by the American Bar Association (ABA), and is the authoritative handbook on developing a video game. Included in each chapter are the relevant forms, agreements, and contracts for that phase of production, as well as tons of helpful tips on negotiation and decoding legalese. Written by experienced lawyers who work closely with software and video game developer clients, this is the inside guide to the process of taking an idea and creating a product, from beginning to end. You'll learn the in's and out's of the legal aspects of video game production including:
  • Patents, Copyright and Trademarks
  • Business and Finance Issues
  • Risk and Insurance
  • Intellectual Property Agreements
  • The Children's Online Privacy Protection Act
  • Publishing Your Game
  • Licensing and Open Source Material
  • EULAs and Terms of Use
It's a practical, prescriptive book perfect for entertainment and intellectual property lawyers; video game developers; art, design, trade, and law schools; or just burgeoning artists with an idea.

About the author/editor: Ross A. Dannenberg is a shareholder in the Washington, DC office of Banner & Witcoff Ltd., and handles a wide-range of intellectual property issues, with experience in Internet, e-commerce, telecommunications, computer software and video game-related issues. With a background in computer science, Mr. Dannenberg has prepared and prosecuted hundreds of patent applications in a variety of technical fields, including mobile and traditional telecommunications, computer software, video games, and Internet and business method inventions. He has substantial experience with intellectual property protection of video games, including patent and copyright protection, copyright clearance and licensing, and has experience with entertainment, copyright, trademark and domain name related matters.

Mr. Dannenberg is an adjunct professor of copyright law at George Mason University School of Law. Mr. Dannenberg is also the Editor-in-Chief of the Patent Arcade website, a legal blog discussing intellectual property protection of video games.

Please click here for information on ordering The American Bar Association's Legal Guide to Video Game Development.

While not a video game case per se, this will likely affect patents claiming video games because the Federal Circuit (a US appeals court for patent matters, among other things) strikes down a computer readable medium claim (aka, Beauregard claim) as non-eligible subject matter for a patent. They don't strike down ALL Beauregard claims, but they do draw a line in the sand where you simply put a computer-readable medium preamble on an otherwise non-technological method. Relevant text appears below. Claim 3 was a method claim that the court first addressed and found unpatentable under section 101. Claim 2 was the beauregard claim:

Regardless of what statutory category (“process, machine, manufacture, or composition of matter,” 35 U.S.C. § 101) a claim’s language is crafted to literally invoke, we look to the underlying invention for patent-eligibility purposes. Here, it is clear that the invention underlying both claims 2 and 3 is a method for detecting credit card fraud, not a manufacture for storing computer-readable information. This case is thus similar to In re Abele, 684 F.2d 902 (CCPA 1982). In Abele, claim 5 of the patent at issue recited “[a] method of displaying data” comprising the steps of “calculating the difference” between two numbers and “displaying the value.” Id. at 908. The court concluded that claim 5 was not directed to patent eligible subject matter because it claimed an abstract idea. Id. However, claim 7 was argued to be different because it recited an “[a]pparatus for displaying data” comprising “means for calculating the differences” between two numbers and “means for displaying the value.” Id. at 909 (emphases added). Though claim 7 literally invoked an “[a]pparatus,” the court treated it as a method claim for the purpose of its § 101 analysis. Due to its “broad” and “functionally-defined” nature, the court found that treating claim 7 as an apparatus claim would “exalt form over substance since the claim is really to the method or series of functions itself.” Id. (citation omitted). Accordingly, the court placed “the burden . . . on the applicant to demonstrate that the claims [were] truly drawn to [a] specific apparatus distinct from other apparatus[es] capable of performing the identical functions.” Id. (citation omitted).
In the present case, CyberSource has not met its burden to demonstrate that claim 2 is “truly drawn to a specific” computer readable medium, rather than to the underlying method of credit card fraud detection. To be sure, after Abele, we have held that, as a general matter, programming a general purpose computer to perform an algorithm “creates a new machine, because a general purpose computer in effect becomes a special purpose computer once it is programmed to perform particular functions pursuant to instructions from program software.” In re Alappat, 33 F.3d 1526, 1545 (Fed. Cir. 1994). But we have never suggested that simply reciting the use of a computer to execute an algorithm that can be performed entirely in the human mind falls within the Alappat rule. Thus, despite its Beauregard claim format, under Abele, we treat claim 2 as a process claim for patent-eligibility purposes.

The court went on to analyze claim 2 as a process and held it unpatentable under 101. Among other useful info, the court stated:
  • The mere manipulation or reorganization of data, however, does not satisfy the transformation prong.
  • As we stated in Bilski, to impart patent eligibility to an otherwise unpatentable process under the theory that the process is linked to a machine, the use of the machine “must impose meaningful limits on the claim’s scope.” In other words, the machine “must play a significant part in permitting the claimed method to be performed.”
  • Abele made clear that the basic character of a process claim drawn to an abstract idea is not changed by claiming only its performance by computers, or by claiming the process embodied in program instructions on a computer readable medium. Thus, merely claiming a software implementation of a purely mental process that could otherwise be performed without the use of a computer does not satisfy the machine prong of the machine-or-transformation test.
The court went on to contrast this case to SiRF Tech. and Research Corp. Tech. v. Microsoft, where in each case the claims at issue could not have been performed wholly within a human mind, and were upheld as patent eligible under 101. There is much to learn here.

Here is the full opinion: I'm sure many people will be commenting on this case.

In a previous post we reported on the internet buzz surrounding the issuance to Facebook of U.S. Patent No. 7,669,123, entitled “Dynamically Providing a News Feed About a User of a Social Network.” Many users were outraged that the patent system would allow businesses to register such patents. You can read our analysis here.

Facebook has certainly continued to legally enforce its patents, and last November it filed suit against Phoenix Media, a Boston-based alternative newspaper publisher, for infringing one of its database search patents. The patent-in-suit is U.S. Patent Number 6,199,157, which covers a system for configuring an item such as a machine that can have a multitude of optional components. Facebook claimed that Phoenix Media infringed the patent by operating websites that allowed users to search for information by filtering data according to multiple criteria.

Last Friday, July 29th, 2011, Phoenix Media asked a Massachusetts federal court for summary judgment in the case, arguing that the '157 patent is invalid. According to Phoenix, the technology claimed by the patent was widely in use when the patent application was filed in 1998. According to Phoenix's motion, " least in the area of database searching (the field at issue in this case), such methods are anything but novel. The prior art shows they were known and in use long before the application." Phoenix cites several articles that described similar systems before the application for the Facebook patent was filed, including one from 1996 discussing features of then-popular search engines AltaVista and Lycos Inc.

Since this isn't strictly a video game patent case, we won't follow it further, but if you'd like to learn more, visit Law360.
Lodsys LLC. V. Combay Inc. et al.

United States District Court, Eastern District of Texas

Case No. 11-cv-00272, Filed May 31, 2011

Previously, we reported on the ongoing battle between Apple and Lodsys over licensing to app developers. Lodsys claims that its agreement with Apple did not give third-party developers free rein to use the patented technology while Apple insists that the license does cover its app developers. Now, Lodsys has added its most prominent (app developer) defendants yet to the complaint: Rovio Mobile Ltd. (the maker of “Angry Birds”); Electronic Arts, Square Enix, Atari, and Take-Two Interactive.

The lawsuit accuses the mobile app developers of violating two patents that cover a technology which allows users to make in-game purchases through the application. They are U.S. Patent Numbers 7,620,565, titled “Customer-Based Product Design Module,” and 7,222,078, titled "Methods and Systems for Gathering Information from Units of a Commodity across a Network". The '565 patent was issued in November 2009, and the '078 patent was issued in May 2007.

The original lawsuit followed some back and forth between Lodsys and Apple over licensing permissions. There had been private negotiations on the matter, but Lodsys took the issue to court following a letter from Apple apparently asking Lodsys to ease off app developers for the iPhone. It is worth noting that the present suit includes not only developers for the iPhone, but also app developers for Android. "Angry Birds," and another game cited in the complaint, "Labyrinth", both run on the iPhone as well as Android platforms. There has been no word yet from Google on the matter. Lodsys is seeking injunctions, treble damages, and attorney’s fees as relief. For more coverage of this case, see Law 360.
Walker Digital LLC. v. 2K Games Inc. et al

U.S. District Court, District of Delaware

Case No. 11-cv-00649, Filed July 22, 2011

Earlier this year we reported on Walker Digital’s suit against 2K Games, filed April 25, 2011. Walker voluntarily dismissed the April claims against 2K Games and all other defendants on April 28 and May 4. Only to sue them again.

In the present suit, filed July 22, Walker alleges that Take-Two Interactive Software, three subsidiaries, 2K Games Inc., 2K Sports Inc,. and Grand Theft Auto-creator Rockstar Games Inc., infringe on patents for technology enabling electronic tournament game play for multiple players and storing player information for future use.

The patents-in-suit are U.S. Patent Numbers 6,224,486, issued in 2001 and titled "Database driven online distributed tournament system"; and 6,425,828, issued in 2002 with the same title. Walker alleges that at least three video games sold by the companies, Bioshock 2, Top Spin 4 and Red Dead Redemption, infringe the two patents. These are the same patents that were cited in the April 25 complaint.

This suit continues the onslaught of litigious activity unleashed by Walker this year. On April 25, 2011, Walker also filed suit against Google, Amazon and Yahoo alleging infringement of a patent for modifying and displaying a merchant's advertisement to users by associating a data pattern with the merchant. The suit claims that the companies’ advertising programs infringe U.S. Patent # 7,933,893 which had been issued the day before, on April 24, 2011. This follows a January 3, 2011 suit against Activision et al, and Walker’s filing of 15 different suits against 100 different companies on April 11, 2011.

The present complaint echoes previous filings in describing Walker Digital as “a research and development laboratory consisting of a diverse group of innovators who study human behavior and utilize modern information technology to design novel solutions to business problems.” The company says in its complaint that it is named on more than 500 issued and pending patents. These patents cover technology for gaming, publishing, retailing, education and other industries. Walker has supposedly generated more than $200 million in licensing revenue from its patents. The company is headed by Jay Walker, who, according to the complaint, has “twice been named by the editors of Time magazine as one of the 50 most influential business leaders in the digital age.”
A big thank you from the Patent Arcade blog to Maryam Henson, who has been our research intern this summer. Maryam is an evening law student at Georgetown and works full-time training fellowship applicants at Georgetown University. In addition to all of that, this summer she's kept our blog updated by researching cases and writing articles. Maryam also revised our Patent and Lawsuit sections -- we now have searchable tables, with links to patent and lawsuit summaries. We appreciate her hard work and intiative on the blog this summer, and all our best wishes for the coming Fall semester!
Pyramid Holdings, Inc. v. Giant Interactive Group, Inc.
S.D.N.Y., filed Nov. 26, 2007
Case No. 07-CV-10588

I. Nature of the Case

This case is a federal securities class action on behalf of a group of Americans who purchased American Depositary Shares (“ADSs”) from Giant Interactive after the company’s initial public offering (“IPO”) on or about November 1, 2007 through November 19 2007. The group alleges violations of Sections 11 and 12(a)(2) of the Securities Act of 1933.

Giant Interactive is a developer who operates online games in the People’s Republic of China. The company’s most popular games are MMOs. It offers three successful MMO games: 1. Zheng Tu Online (“ZT Online”), a free-to-play RPG set in ancient China where players develop skills, use magical weapons, and team up with other players to fight monsters and players from other kingdoms; 2. ZT Online PTP, where players assume one of five different roles in 10 different kingdoms. PTP requires players to purchase physical or virtual prepaid game cards on an official website or Internet cafes; and 3. Giant Online, where players may assume one of 14 different roles spanning numerous regions. In this game, a player guides his or her character to develop skills and is encouraged to cooperate with other players to fight against players from other regions.

Two of the metrics that Giant Interactive reported for its games were the number of average concurrent users (“ACU”) and peak concurrent users (“PCU”). The rules of Giant Interactive’s games are material to investors because they impact the game play and the company’s ACU and PCU figures. The case here concerns a failure of Giant Interact to disclose a significant rule change to ZT Online (its most popular game).

On September 30, 2007, Giant Interactive completed its third fiscal quarter. A month and a half later (but before the company was required to publicly announce its third quarter earnings), Giant Interactive completed the IPO where the company sold 57 million ADSs, raising more than $886 million. The company announced that the underwriters had exercised their over-allotment option and purchased and sold an additional 8.6 million ADSs at $15.50 per share for an additional $133 million. Its total sales equaled $1.2 billion.

The Registration Statement, which incorporated a Prospectus, was issued in connection with the IPO, but, according to the complaint, contained inaccurate statements of material fact, and misrepresented or omitted the significant rule change to ZT Online that had resulted in declining ACU and PCU figures in the third quarter as opposed to the second quarter of 2007.

The Plaintiffs brought this class action seeking damages and recovery for the investment they had made as a result of Giant Interactive’s concealment of its declining figures because of the rule change. The Plaintiffs, as a class, presented the following questions of law and fact:
  1. Whether the federal securities laws were violated by Defendants’ acts

  2. Whether the Prospectus and Registration Statement issued by Defendants to the investing public in connection with the Offering omitted and/or misrepresented material facts about Giant Interactive and its business

  3. Whether Defendants’ statements issued during the Class Period were materially false and misleading; and

  4. The extent of injuries sustained by members of the Class and the appropriate measure of damages
II. Substantive Allegations

In the Registration Statement and Prospectus filed by Giant Interactive on October 31, 2007, Giant Interactive reported its ACU and PCU figures as increasing when, in fact, they were in the decline. The decline in ACU and PCU was attributable to a significant rule change implemented by Giant Interactive. The rule change discouraged “gold farming activities” in ZT Online. Gold Farming occurs when a MMO player attempts to acquire (‘farm’) items of value within a game, usually by performing some task for an indeterminable amount of time (e.g., killing an important creature). Generally, gold farming is conducted by companies that hire people to play these online games so they can generate online currency which they can then sell to third-party websites for real cash to actual players who will then use the gold coins in the game.

The Plaintiffs alleged that the Registration Statement for the third quarter did not explain or describe the gold farming rule change, did not highlight the negative trend in ACU and PCU, and did not disclose that the negative impact the rule change was having at the time of the IPO. They also claim that the Registration Statement was materially misleading because it omitted the significant effect gold farming activities had on Giant’s previous statistics despite the company’s knowledge of the pervasiveness of the activity.

While the Registration Statement did describe the gold coin currency system in ZT Online and alluded to the company’s efforts to “restrict” the ability of players to sell their gold coins, it failed to disclose that the company had changed the rules to restrict gold farming. In the Risk Factors-Risk Relating to Our Business and Industry-section of the Registration Statement the company described the negative effects of a rule change, but not the rule change relating to gold farming. The excerpted part read:

“To discourage this behavior, which we believe is inconsistent with the basic principles of our gameplaying environment, in May 2007 we changed the rules governing one of our popular promotions that enable a player to purchase virtual “insurance policies” for his or her character that would pay out virtual gold coins valued at up to five times the purchase price of the insurance policy once his or her character reached a predetermined experience level. Some players would use gold coins earned from these pay-outs to obtain virtual products, and then sell these virtual products to other players using auction websites. We changed the rule so that related pay-outs consist primarily of gold coin vouchers, which can only purchase virtual products that are non-transferable. We believe that this change was the main reason for the subsequent decrease in our monthly average concurrent users, which fell by 14.9% from 553,784 in May 2007 to 471,428 in June 2007.”

The Plaintiffs claim that under SEC rules, the Registration Statement was required to disclose that the company had materially changed the rules in ZT Online and that the rule change impacted the company’s continuing operations.

On November 19, 2007, Giant Interactive issued a press release announcing its financial results for the third quarter of 2007. The next day, in a Form 6-K, the company attributed the decrease in ACU and PCU to the June 2007 “gold farming rule.” That same day, Giant Interactive held a conference call with analysts and investors in which it attributed the decline in the third quarter to the rule change. Following the conference call, the price of Giant Interactive ADSs dropped from $14.88 to $11.10.

III. Count I—Violations of Section 11 of the Securities Act

The Plaintiffs alleged the following:
  • The Registration Statement for the IPO was inaccurate and misleading, contained untrue statements of material facts, and omitted necessary and material facts

  • Giant Interactive was responsible for the contents and dissemination of the Statement and the Prospectus and, as a result, were strictly liable for the misstatements and omissions

  • None of the Defendants made a reasonable investigation or possessed reasonable grounds for the belief that the statements in the Registration Statement were true or were not misleading
IV. Count II—Violations of Section 12(a)(2) of the Securities Act

The Plaintiffs, pursuant to Section 12(a)(2) of the Securities Act, 15 U.S.C. §771 claimed:
  • The Registration Statement contained a Prospectus which was used to induce investors to purchase Giant Interactive’s ADSs

  • That Giant Interactive solicited purchases for their personal financial gain through the preparation and dissemination of the Prospectus

  • The Prospectus contained untrue statements of material fact and omitted facts necessary to make the statements not misleading

  • That Defendants were obligated to make a reasonable and diligent investigation of the statements contained in the Prospectus to ensure that such statements were true

  • None of the Defendants made a reasonable investigation or possessed reasonable grounds for the belief that the statements contained in the Prospectus were accurate and complete
V. Prayer for Relief

The Plaintiffs sought the following judgment:
  1. Awarding Plaintiffs damages together with interest (for purchase of the ADSs)

  2. Awarding Plaintiffs their costs and expenses of litigation

  3. Awarding Plaintiffs further relief as may be just and proper under the circumstances
The Plaintiffs also asked for a jury trial. We will continue to track the case as it progresses.

If you are interested in learning more about the ZT Online, there is an interesting article written for the website DanWei that described the underpinnings of the game and the real-life gambling involved when playing. Also, an article on PlayNoEvil delves deeper into the way ZT Online differs from the normal MMO genre. It, too, was a fascinating read.
We've been working on a renovation of our PATENTS link, as well as additional content, which is now live. It's a bit cumbersome, but there is a lot more information there now. We'll continue to work on making it more user friendly. Check it out and let us know if you have any suggestions.
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