The EULA Working Against You
by Pamela Chestek • June 12, 2017 • copyright • 2 Comments
GC2 Inc. v. Int’l Game Tech, PLC is a fairly unexciting copyright ownership case. The main argument involves construction of an ambiguous contract. (What other kinds are there?) GC2 provided “video graphics and artwork” for IGT’s gaming machines and conversion kits. The agreement had a license grant and it defined certain devices and fields that were licensed and some that were not. The agreement said that GC2 and IGT would each own their independently-developed “Intellectual Properties,” except that per section 4.2 “ownership of the copyrights in and to the software for the GC2 Projects developed by or on behalf of IGT shall remain the sole and exclusive property of IGT.”
As day follow night, IGT used the GC2 works beyond the scope of the license grant, licensing the CG2 works to end users and to other companies for further distribution. GC2 sued everyone.
IGT claimed that, based on section 4.2, it owned the artwork. The court held, on a motion to dismiss, that CG2 unambiguously owned the works: artwork is not software, and if there had been an assignment the contract wouldn’t have needed a license grant.
But what I thought worth writing about was the court’s discussion of the vicarious copyright infringement theory. IGT had licensed the GC2 artwork to defendants Masque and WD Encore, whose customers downloaded the IGT games from their websites or from Amazon, or purchased them on CD/DVD. GC2 alleged that the end users of the games were infringers and thus Masque and WD Encore vicarious infringers.
End users who bought the games from Masque or WD Encore had to agree to a EULA before being given access to the games. The EULA’s, as they always do, said things like
- “The Software is licensed, not sold. By installing, copying, downloading, accessing or otherwise using the Software, You agree to be bound by the terms of this SOFTWARE LICENSE.”
- “Masque Publishing, Inc.  grants to you a nontransferable, right to use the copy of the software program being installed[.] You may not copy the Software or any accompanying materials , except that you may make one copy for backup purposes. You may not place the Software on a computer that would allow multiple users to access it. You may not reverse engineer, disassemble, decompile, modify, adapt, translate, or create derivative works of the Software or Documentation. MASQUE retains all rights, title, and ownership in the Software. MASQUE may terminate this license immediately if you fail to comply with its terms.” (Brackets in original.)
- “This Agreement will terminate automatically without notice from Encore if You fail to comply with any provision of this Agreement.”
One will be a vicarious infringer where there is a right and ability to supervise the infringing conduct and a direct financial interest in the infringing activity. Masque and WD Encore argue that they did not have the ability to control the end users. And that’s where “it’s a license, not a sale” cuts against the interest of the software licensor. Software companies have successfully avoided having to tolerate the transfer of copies under the first sale doctrine, or even the creation of a copy of the software in RAM, by claiming that the work is only licensed and therefore there is no transfer of title that is a necessary predicate to the defenses. Here, though, because the companies defined the relationship as a licensing one, and in particular gave themselves the authority to terminate the licenses, they had the ability to control the end user. And of course the companies had a financial benefit; they earned income selling the games. The vicarious infringement theory therefore survives.
Bonus material: A trademark can be content management information.
CG2 Inc. v. Int’l Game Tech, PLC, No. 16 C 08794 (N.D. Ill. June 5, 2017).
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