Accessibility, artificial intelligence (AI), and hybrid-casual games were among the noteworthy topics at the March 2023 Game Developers Conference (GDC) in San Francisco. Here is Part 1 of our Notes From the Field with a few highlights from the sessions we attended.

Accessibility for Gamers

Accessibility was an issue that featured heavily at GDC this year. According to some estimates, nearly one in five people on the planet lives with some form of physical or mental disability.

These individuals include casual and hardcore gamers who play games and engage in other forms of interactive entertainment on a variety of console, mobile, and extended reality (XR) platforms. To provide great customer experiences more broadly, game developers and publishers are paying increased attention to the needs and desires of gamers with disabilities.

At GDC, speakers offered a number of potential solutions for improving gaming accessibility, including:

• Encouraging game studios to hire full-time staff dedicated to accessibility issues.
• Conducting robust user testing to identify accessibility barriers in games.
• Leveraging middleware-based accessibility solutions.
• Addressing hardware-related accessibility considerations at the beginning of the development life cycle.

Framework for Responsible AI

Although AI tools, like ChatGPT and DALL-E, have been front and center in the news recently, AI has long been a fixture in gaming. That said, the release of new and sophisticated deep learning models has attracted the attention of those who seek to incorporate those models into game development, including by creating more dynamic gameplay and more intelligent nonplayer characters.

However, AI technology poses potential ethical and safety challenges that require careful consideration by businesses and regulators alike. To this end, several speakers shared their views on how best to develop a framework for “responsible AI,” which included increasing product testing and establishing guardrails to facilitate safe player communities.

Popularity of Hybrid-Casual Games

There was buzz at the conference on the continued rising popularity of hybrid-casual games. This trend seems to be a natural progression as the hyper-casual market matures and in light of global economic pressures.

Hybrid-casual games offer deeper gameplay experience than hyper-casual games, while maintaining the easy gameplay loops that made hyper-casual games so popular. Hybrid-casual games are a mix of hyper-casual, casual, and mid-core (but not hard-core) games.

• Hyper-casual or “tap to play” games require no more than one or two swipes or taps to play.
• Casual games are a step up in gameplay but still require little effort to learn and play.
• Mid-core games are a level up from casual games in gameplay and require skill and strategy to play.
• On the furthest end of the spectrum are hard-core games, which involve detailed, intensive gameplay that require practice and mastery.

Hybrid-casual games often incorporate elements which make them more engaging for players.

With this increased user engagement, hybrid-casual games also offer a multichannel monetization strategy for developers. While hyper-casual games often rely on ad revenue, hybrid-casual games offer a mix of in-app purchases and ads. Hybrid-casual games are well positioned to continue the growth trajectory despite current economic headwinds.

Stay tuned for Notes from the Field: Game Developers Conference—Part 2!

Follow us on social media @PerkinsCoieLLP, and if you have any questions or comments, contact us here. Learn more about our Digital Media & Entertainment, Gaming & Sports industry group here, and check out our podcast: Innovation Unlocked: The Future of Entertainment.”

We recently attended the fourth annual Seton Hall Law School Gaming Law, Compliance & Integrity Bootcamp. This in-person conference, which provides compliance and ethics education to professionals working in the regulated gaming space, included attendees and panelists drawn from the entire industry, including regulators, gaming operators and vendors.

The conference addressed the many regulatory changes resulting from the U.S. Supreme Court’s 2018 ruling which allowed states to legalize online sports gambling. Many states with long histories of legalized gambling, such as Nevada and New Jersey, had existing schemes in place to help aid the transition of legalizing sports gambling. However, other states with more prohibitive gambling regimes, such as Tennessee and Kansas, are instituting new laws and regulations without much prior experience.

As more states legalize online sports betting and online interactive gaming, regulators and businesses must address complex, evolving licensing and registration regimes, which vary significantly state-by-state. 

Here are a few key insights captured from the conference related to vendor and gaming supplier licensing issues:

• Open Conversation Among Regulators and Industry Players: In an industry where the regulations are constantly evolving, the barriers between the various gaming industry players (i.e., regulators, gaming operators, and vendors) are quite amorphous. Gambling rules are often complicated and vague, particularly when it comes to the scope of licensing obligations. Regulators not only reach out to other regulators for help regarding the interpretation of their own rules, but they also learn from conversations with gaming operators and vendors. These discussions are integral to a regulator’s decision to rewrite the rules so that they are easier to understand. As a result, advocacy from vendors regarding the interpretation of the licensing regulations (and similarities in the statutory or regulatory regime in other states) can influence and shape the regulators’ view.
• What Gaming Operators Are Looking For: A vendor’s understanding and experience with the licensing process may aid in selection from gaming operators. There are several factors that a gaming operator may assess when determining whether to work with a vendor: (1) if the vendor is a publicly traded company; (2) if the vendor is licensed in other jurisdictions; and (3) if the vendor contracts with companies in other highly regulated industries, such as healthcare and cannabis. These factors provide evidence that the vendor is aware of the requirements and oversight needed to obtain licensing in the gambling industry. Additionally, it is important to the gaming operator that the vendor has its own outside counsel to discuss questions related to its own licensing process.
• Come Prepared: Regulators are faced with many tensions when interpreting and processing licensing applications. They have a responsibility to conduct thorough reviews and to ensure they comply with statutory and regulatory mandates, while understanding the need to be responsive, as businesses often need to license people or companies on a timely basis. As a result, when communicating with regulators regarding any licensing questions, it is important to come prepared and understand the regulatory scheme prior to any contact. Significant delays are caused when licensing applicants do not properly understand the regulatory requirements and do not provide the requisite information.
• Communication With Gaming Operator Is Key: Vendors frequently ask regulators about the status of a gaming operator’s licensing application. Statutorily, regulators cannot speak about the status of or comment on the licensing process for any other applicant. Instead, regulators recommend vendors communicate regularly with their operators throughout the licensing process. Additionally, regulators recommend that vendors and operators use the same outside counsel to streamline the licensing process for all parties involved. 

If any of our readers wish to share insights from the Gaming Law, Compliance & Integrity Bootcamp, we would love to hear them! Follow us on social media @PerkinsCoieLLP, and contact us with questions or comments. We also invite you to learn more about our Digital Media & Entertainment, Gaming & Sports industry group and check out our podcast: Innovation Unlocked: The Future of Entertainment.”

There have been two important developments in recent weeks regarding the U.S. Copyright Office’s position on registering works created by the use of artificial intelligence technology. First, on February 21, the Copyright Office issued its much-anticipated decision regarding the registration of a graphic novel by artist Kristina Kashtanova that included images generated using the AI tool Midjourney. Then, on March 15, the Copyright Office issued a policy statement providing its first guidance on the subject of copyright registration for works generated by AI.

This Update will discuss in detail the Copyright Office’s rejection of Kashtanova’s registration and its subsequent guidance on registration of AI-generated work and will provide important takeaways for creators who are using generative AI tools.

Follow us on social media @PerkinsCoieLLP, and if you have any questions or comments, contact us here. Learn more about our Digital Media & Entertainment, Gaming & Sports industry group here, and check out our podcast: Innovation Unlocked: The Future of Entertainment.”

In early February, following a six-day trial, a jury in the U.S. District Court for the Southern District of New York found in favor of Hermès in its claims of trademark infringement, trademark dilution, and cybersquatting against artist Mason Rothschild, the creator of the “MetaBirkins” non-fungible tokens (NFTs). Even with the First Amendment-like deference afforded to artistic works under trademark law, the jury held Rothschild liable because his “MetaBirkins” NFTs were “intentionally designed to mislead potential consumers.” As a result, the jury awarded the luxury fashion brand a total of $133,000, consisting of $110,000 for Rothschild’s net profits and $23,000 in statutory damages for cybersquatting.

The fashion industry has closely watched this landmark case (see our previous Update), which has real-world implications for all brands seeking to protect their intellectual property (IP) against unauthorized use as NFTs or in the metaverse.

“METABIRKINS” NFTS

In November 2021, Mason Rothschild, a Los Angeles-based “interdisciplinary artist and designer” whose real name is Sonny Estival, created and sold 100 NFTs tied to a digital image depicting a Hermès Birkin bag covered in colorful and hyperrealistic faux fur. Rothschild marketed the NFTs as “MetaBirkins,” registered and used the domain name, www.metabirkins.com, and promoted the NFTs through social media handles such as @metabirkins. Rothschild priced each NFT at $450 and received a 7.5% royalty on downstream sales. Hermès’ complaint claimed that MetaBirkins reached about $1.1 million in total sales, while Rothschild estimated that he made about $125,000, including both initial sales and royalties.

Hermès sued Rothschild in the Southern District of New York in January 2022, asserting that the Birkin-like images and associated NFTs infringed and diluted Hermès’s Birkin trademark, falsely designated the origin of the NFTs, and injured and diluted Hermès’s business reputation. Hermès also asserted a claim for cybersquatting based on Rothschild’s use of the domain name www.metabirkins.com. In contrast, Rothschild claimed that the NFTs were an artistic commentary on animal cruelty and fashion companies’ efforts to “go fur-free,” thus meriting a level of First Amendment-like protection reserved for works with “artistic relevance.”

CRITICAL RULINGS

Judge Jed S. Rakoff made three critical rulings in this case.

First, in originally denying Rothschild’s motion to dismiss, Judge Rakoff held that the “MetaBirkins” NFT met the minimum threshold to be an “artistic work” under the Rogers test (and thus entitled to heightened protection against trademark infringement claims) and that “MetaBirkins” should be understood to refer to both the NFTs and the associated digital images underlying the NFT. Judge Rakoff reasoned that the mere fact that NFTs are code pointing to a digital image’s location and authenticating the image “does not make the image a commodity without First Amendment protection any more than selling numbered copies of physical paintings would make the paintings commodities.”

Second, in denying the parties’ cross-motions for summary judgment, Judge Rakoff reaffirmed his position that the “MetaBirkins” NFTs could be a form of artistic expression and that the NFTs should be evaluated under the speech-protective Rogers test for artistic expression.

Judge Rakoff explained that summary judgment was inappropriate in this case because there were factual disputes centered around two issues. The first was Rothschild’s purpose behind designing his work around the Hermès Birkin bag; in other words, was Rothchild’s intent behind the “MetaBirkins” NFTs a genuine artistic expression or an unlawful effort to “cash in on a highly exclusive and uniquely valuable brand name”? The second was whether, after considering eight highly fact-specific factors, the “MetaBirkins” NFTs were explicitly misleading. The following factors carried over to the trial for consideration:

• The degree to which Rothschild’s use of the Birkin mark is similar to Hermès’ use of the Birkin mark.

• The strength of the Birkin mark.

• The degree to which the Birkin mark is widely recognized.

• Whether Rothschild intended to create an association with the Birkin mark.

• Any actual association by consumers of the “MetaBirkins” NFTs with the Birkin mark.

The third critical ruling by Judge Rakoff was his exclusion of art critic and Warhol expert Blake Gopnik as an expert witness for Rothschild. Gopnik would have testified that “MetaBirkins” NFTs are like Andy Warhol’s “business art,” centering the NFTs at the intersection of art and commerce. As a result of this ruling, the jury did not hear the comparison between “MetaBirkins” and Warhol’s Campbell’s Soup cans, which could have affected its decision.

AFTERMATH

Rothschild’s attorney, Rhett Millsaps, has bitterly criticized the jury’s verdict, stating to a reporter that “Hermès had incredibly weak evidence of confusion” and noting that, while Hermès “can stop someone from selling NFTs that compete with their actual products in the metaverse . . . they cannot stop artists from selling artwork that depicts their products, just like they couldn’t in the real world.”

Hermès, on the other hand, issued a post-verdict statement noting that it felt compelled to act to protect consumers and the integrity of its brand, and observing that, as a creative enterprise itself, Hermès has “supported artists and freedom of expression” throughout the company’s history. Rothschild has announced that he plans to appeal to the U.S. Court of Appeals for the Second Circuit.

CONCLUDING THOUGHTS

Where to draw the line between art and commerce has always been a challenge and may be particularly difficult when it comes to NFTs, which represent a convergence of the creative community with the fintech community. But the tension between art and commerce inherent in NFTs is likely to be heightened in the metaverse, where there is a need to develop endlessly explorable, content-rich virtual worlds that mirror the real world; the sheer volume of in-world content and virtual objects that will be needed to populate multiple metaverses will require that content creators be allowed to monetize their creative works within such metaverses, resulting in the same blurring of art and commerce that gave rise to the Metabirkins dispute. We await to see if the Second Circuit will bring greater clarity to this murky area of the law.  

Follow us on social media @PerkinsCoieLLP, and if you have any questions or comments, contact us here. Learn more about our Digital Media & Entertainment, Gaming & Sports industry group here, and check out our podcast: Innovation Unlocked: The Future of Entertainment.”

The Illinois Supreme Court recently opened the floodgates for class actions under the Illinois Biometric Information Privacy Act and created potentially massive and catastrophic exposure for Illinois businesses. In a close 4-3 ruling, the landmark decision in Latrina Cothron v. White Castle System Inc. holds that every individual scan or transmission of biometric data made without the proper disclosures amounts to a separate violation of BIPA.

Follow us on social media @PerkinsCoieLLP, and if you have any questions or comments, contact us here. Learn more about our Digital Media & Entertainment, Gaming & Sports industry group here, and check out our podcast: Innovation Unlocked: The Future of Entertainment.”

Data security will undoubtedly remain an enforcement priority for the Federal Trade Commission in 2023. A presentation on the FTC’s approach to data security by Deputy Chief Technologist Alex Gaynor at a Commission open meeting on December 14, 2022, highlighted four provisions found in one or more recent FTC consent orders as particularly important, though not reflecting the full array of safeguards the FTC expects organizations to employ.

Read more.

Follow us on social media @PerkinsCoieLLP, and if you have any questions or comments, contact us here. Learn more about our Digital Media & Entertainment, Gaming & Sports industry group here, and check out our podcast: Innovation Unlocked: The Future of Entertainment.”

Uncertainty continues as to whether and to what extent artificial intelligence-generated works can be protected by copyright under U.S. law. The U.S. Copyright Office recently raised the hopes of artists who use generative AI by agreeing to register the copyright in a graphic novel titled Zarya of the Dawn, whose author used the AI tool Midjourney to generate its images. However, the Copyright Office quickly reversed course and notified the applicant that it may cancel the registration because it was not aware that the images were computer-generated. The Copyright Office asked the artist to provide details of her creative process to show “substantial human involvement” in the process of creating the graphic novel.

Continue Reading A New Generation of Legal Issues Part 1:The Latest Chapter in Copyrightability of AI-Generated Works

On January 5, 2023, the Federal Trade Commission announced its proposal of a new rule that would ban employers from imposing noncompete clauses on their workers and invalidate nearly all existing noncompetes currently in effect. According to the FTC, this will affect 30 million, or one in five, American workers currently covered by a noncompete agreement.

This Update discusses the proposed rule, its potential effects, and what steps employers may take.

Follow us on social media @PerkinsCoieLLP, and if you have any questions or comments, contact us here. Learn more about our Digital Media & Entertainment, Gaming & Sports industry group here, and check out our podcast: Innovation Unlocked: The Future of Entertainment.”