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Ninth Circuit Enters Debate on Software Licensing and Copyright Law

By Kristine L. Roberts, Litigation News Associate Editor – March 31, 2011

Technology advances continue to challenge software licensors seeking to control use of their copyrighted works. In MDY Industries, LLC v. Blizzard Entertainment, Inc. [PDF], the U.S. Court of Appeals for the Ninth Circuit weighed in on the claims and remedies available to copyright holders at the intersection of contract and copyright law. The court’s decision has far reaching implications, including expanding the ability to recover damages in cases where there is no copyright infringement.

World of Warcraft and the Glider “Bot”
In 2004, Blizzard Entertainment, Inc. created World of Warcraft (WoW), an online role-playing game. The object of the game is to advance through 85 levels of quests and battles. WoW became wildly popular, gaining more than 10 million subscribers. Blizzard requires WoW players to accept a license agreement.

In 2005, MDY Industries, LLC developed a software robot (or bot) named “Glider” that auto-plays the early levels of WoW and allows players to progress faster through the game’s levels. Blizzard responded by developing its own program called “Warden,” which detects and bans unauthorized software. MDY then modified Glider to avoid detection by Warden.

MDY’s Declaratory Judgment Action Against Blizzard     
After Blizzard sent a cease and desist letter, MDY sued Blizzard seeking a declaration that Glider did not infringe Blizzard’s copyright. Blizzard countersued for copyright infringement, violation of sections 1201(a)(2) and (b)(1) of the Digital Millennium Copyright Act [PDF], and tortious interference.

The U.S. District Court for the District of Arizona granted Blizzard partial summary judgment on the copyright and tortious interference claims, but ruled that MDY did not violate the DMCA when it accessed WoW’s software code. After a bench trial, the court found MDY liable under sections 1201(a)(2) and (b)(1). The court awarded $6.5 million to Blizzard and permanently enjoined MDY from distributing Glider. MDY appealed.

The Ninth Circuit reversed. The appellate court first concluded that MDY did not infringe Blizzard’s copyright. The court held that WoW players are licensees, not owners, of the software. A licensee may be liable under copyright law for breach of any term that limits the scope of the license (a condition). To be a condition, a license provision must be “grounded in an exclusive right of copyright.” The court found that Blizzard’s prohibition on bots was a contractual “covenant,” not a license “condition” that would support a copyright claim when violated.

When it addressed the DMCA, the court held that MDY violated section 1201(a)(2) but not section 1201(b)(1). After a lengthy analysis, the court concluded that the two sections create distinct claims: section 1201(a)(2) is a new anti-circumvention right distinct from copyright infringement. By contrast, section 1201(b)(1) strengthens the prohibition against copyright infringement. The court found MDY liable under section 1201(a)(2) because it sells Glider for use in circumventing Warden.

The Ninth Circuit declined to follow an alternative approach to section 1201(a)(2) adopted by the Federal Circuit in Chamberlain Group, Inc. v. Skylink Technologies, Inc. In that case, the Federal Circuit held that section 1201(a)(2) did not grant a new anti-circumvention right independent of copyright infringement, but instead that the provision requires a plaintiff to show that the circumventing technology infringes or facilitates infringement of the plaintiff’s copyright.

Finally, the court vacated the decision in Blizzard’s favor on the tortious interference claim. The court found triable issues of fact regarding MDY’s conduct and motives.

Analysis of the Ninth Circuit’s Ruling
The MDY decision was one of three technology and copyright cases argued the same day to the same panel. “The Ninth Circuit’s decision to hear three cases on the same day suggests that the court is trying not to address these questions in an ad hoc way,” says Naomi Jane Gray, San Francisco, cochair of the Copyrights Subcommittee of the ABA Section of Litigation’s Intellectual Property Litigation Committee. “The court is trying to enunciate rules that can be applied broadly,” says Gray.

“The decision is notable for creating a potential circuit split with the Federal Circuit’s ruling in Chamberlain,” says Erick C. Howard, San Francisco, cochair of the Section of Litigation’s Intellectual Property Litigation Committee. “There is no definitive interpretation of the scope of the DMCA and what claims can be brought under the Act,” says Howard. “Until the Supreme Court rules on this question, we are likely to see fact-driven decisions and careful distinguishing of the conduct at issue,” says Howard.

Yet MDY may not be the right case to go to the Supreme Court because the cases in this area are so factually distinct, says Richard S. Stockton, Chicago, cochair of the Section’s Technology for the Litigator Committee. The variety of conduct at issue in these cases make it seem like comparing “apples to oranges,” Stockton notes.

The Ninth Circuit’s ruling also recognized that the intersection of copyright and contract law can be thorny. “It is not always obvious what type of claims and remedies may be available,” says Gray.

“The court seemed concerned that MDY not receive any ill-gotten gains but also recognized that there was no infringement of Blizzard’s exclusive rights,” says Howard. “The court found the available remedies for Blizzard to be sufficient,” he says.

“If a case proceeds on contract claim instead of a copyright claim, there is greater uncertainty for the litigants,” says Stockton. A party can always attempt to argue that a contract is ambiguous. “Copyright law provides a more unified corpus of case law [with] more definitive guideposts,” says Stockton.

Keywords: litigation, Ninth Circuit, copyright infringement, intellectual property, world of warcraft

Related Resources

  • » MDY Industries, LLC v. Blizzard Entertainment, Inc., 2011 U.S. App. LEXIS 3427 (9th Cir. Feb. 17, 2011).
  • »  Chamberlain Group, Inc. v. Skylink Technologies, Inc., 381 F.3d 1178 (Fed. Cir. 2004).Division, Family Law Committee, Podcast, Using Social Networking Sites: Opportunities and Pitfalls, Oct. 4, 2010.
  • » Digital Millennium Copyright Act, 112 Stat. 2860, Pub. L. 105-304, October 28, 1998.

  • April 6, 2011 – I agree, the MDY Ind. case offers up a unique fact pattern. However, the Supreme Court does not grant certiorari for a case with a fact pattern dependent on its similarity with other cases. The Supreme Court will grant certiorari if it identifies the need for broad precedent and feels compelled to get involved. Intellectual property cases have been, and continue to be, a hot issue for the Supreme Court; this is very true in patent law cases. It appears to me that MDY Inc. is the ideal case to go before the Supreme Court. It presents the Court with an opportunity to further carve intellectual property law precedent, specifically related to copyrights.


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