In this article, the second of a two part series (see Part 1 here), we consider trade mark law, unfair competition laws and virtual domiciliary rights.
III. Trade mark law
The use of trade marks on in-game virtual products (e.g. manufacturer logos) is probably permissible in light of the principles established by the German Federal Court of Justice in the Opel-Blitz II decision. According to this decision, consumers perceive trade marks used on virtual products only as details of reality and not as an indication of the origin of virtual products or computer/video games
IV. Unfair competition
With regard to (un)fair trading practices, the following aspects are particularly relevant:
1. Distribution of so-called cheat bots
A recent case involving cheat bots decided by the German Federal Court of Justice (World of Warcraft II) concerned the question of whether the sale of cheat bots for use in games should be considered unfair. The German Federal Court of Justice thought so, and ruled that such sale of cheat bots constitutes a deliberate obstruction of fair competition. It should be clarified that where a developer develops a cheat bot for a particular game in breach of that game’s end user licence agreement, that of itself will not amount to unfair competition, but will be a breach of contract.
To reach the threshold of unfair competition, it would be necessary to show that the cheat bots are circumventing protective measures and impairing players’ equal opportunities. Prohibiting such activity also protects developers as failure to do so may result in honest players not playing the games, which in turn could result in a considerable loss of revenue.
Esports events are regularly broadcast on television or the internet, which means that general advertising principles are applicable.
Anything that is published for marketing purposes must be clearly identifiable as an advertisement. Special attention should be paid to the principle that advertising must always be distinguishable from editorial content. This particularly applies to social media influencers who have to indicate that they are advertising on behalf of companies and must not create the false impression of unbiased reporting. Infringement of this principle is prohibited by competition law, because this type of reporting is likely to reach target groups and have a larger impact on them than advertising that is clearly identifiable as such.
In order not to infringe this principle and to avoid creating the impression of covert advertising, companies must make sure that advertising content is clearly distinguishable from genuinely neutral reporting. In cases where eGamers are sponsored by companies or advertisements are placed in games, these principles against covert advertising must be kept in mind.
Protection of minors
The Law on the Protection of Minors is another set of rules that regulates market behavior and must also be observed by organizers of esports events. In particular, it is prohibited to grant minors access to events that may have a harmful effect on them. This is important to bear in mind for age-restricted games or those with adult content.
As mentioned above, if esports was recognized as “real” sport, it would benefit from financial support granted by governmental or non-governmental organizations. However, this would also mean that anti-doping law would be applicable. Some German commentators argue that under certain circumstances the violation of anti-doping law should be enforceable as an unfair trade practice. Anti-doping law is fundamental in protecting the integrity of sporting competitions as not only does it put all participants on a level playing field, but it also protects economic interests, such as salaries, subsidies or prize money, so this would be a welcome change.
V. Virtual domiciliary rights of the organizers of esports events?
Real sports clubs such as football clubs possess domiciliary rights in relation to their stadiums which controls the behavior of both players and attendees alike. However, esports competitions do not take place in stadiums, but in virtual reality. This raises the question of whether organizers of esports events are entitled to virtual domiciliary rights to control the behavior of participants (e.g. for misconduct) in addition to the contractual controls that they can put place in their participant terms and conditions. The Regional Court of Munich I and the Court of Appeal of Munich are of the opinion that, at least in cases where the hardware on which the game is installed is owned by the organizer, the organizer should have such a virtual domiciliary right. Whether organizers could also be granted virtual domiciliary rights in cases where the software is installed on the servers of third parties has not yet been decided. It would therefore be advisable for organizers to ensure that they enhance the protections in their terms and conditions, when putting on a competition using software on third party servers. This will give them sufficient controls to regulate the behavior of participants and allow them to eject players from the competition for misconduct, if necessary.
Esports is a very fast growing market and the legal questions are numerous. On the one hand, engaging in esports offers enormous opportunities to event organizers, esports leagues, eGamers and sponsors. On the other hand, one needs to be aware of a variety of legal pitfalls, think carefully about the legal and commercial structures of the esports business and seek legal advice if necessary.