Since 2013 the video game industry has been competing against the film industry, growing its global revenues and job creation each year. The video game industry has developed into a lucrative commercial market, demanding substantial, and somewhat robust, legal protection in its creative works.
The global market of the video game industry
2017 was considered a landmark in the history of the video game industry, with revenues reaching US$109 billion1, representing a notable growth in the industry of almost 56 per cent in the past five years. This demonstrates how video game companies have forged new ways of engaging and entertaining consumers while simultaneously creating improved business models to suit the ever-changing digital age.
According to the Newzoo Global Games Market Report for 2017 (Newzoo Report)2 consumers are spending more time and money on video games. Gaming companies rely mostly on direct consumer spending, as opposed to an advertisement or broadcast media companies3. As traditional marketing and media companies struggle to keep up with the changing digital age, video game companies are learning more innovative ways to profit from millions of consumers, such as through the use of virtual reality.
The gaming industry already holds key market positions in capturing and entertaining a wider consumer audience than most traditional media companies. However, the growing and ever-changing characteristics of the gaming industry have led to unique commercial risks and legal issues.
The rapid evolution of gaming has seen drastic changes to business models, gaming platforms, game mechanics, marketing and game content4. The biggest challenge the gaming industry faces is primarily its laws and regulations. It takes time for the law to catch up with change and technology. For this reason, gaming companies and independent developers are urged to obtain firm advice to reduce their exposure to legal and commercial risks.
Intellectual property (IP) is a vital component of video game development with regards to contracts, employment agreements, distribution, advertising and licensing. In a video game company, IP is the foundation required to protect its developers’ creative works.
Before the age of digital distribution, a person would ordinarily purchase a video game, including its operating manual and physical CD-ROM, from the local gaming store. Unbeknown to the consumer, upon purchasing the video game, he would have paid for a limited IP licence to use and enjoy the game’s code, game art, story, game world and graphics5.
Digital distribution means that a person is no longer required to purchase a hard copy of the video game. It can be purchased online as a digital copy subject to the same limited IP licence. Due to digital distribution, video gaming companies are now pushing more money into bigger budget games. This is because the video game industry has been pushed into Hollywood movie territory in terms of production and marketing costs. In order to protect its ever-increasing capital investment, it would not make commercial sense for developers not to take active steps to legally protect their IP from competitors or pirates.
Importance of Copyright and Derivative Works
“Copyright” has not been defined in the Copyright Act, No. 98 of 1978 (the Act), but comprises the following video game elements6: musical works; storyline or literary works; artistic works; coding; characters; box design; and website design. It is a negative right that grants the holder the right to authorise others to reproduce a work or prevent them from doing so7. It is the most useful tool to protect a video game’s IP.
Copyright protects the expression of ideas and not the ideas themselves. This often leads to confusion. No game idea is protected by copyright until it is fixed on an expressive medium, such as coding, saved art files or printed artworks8. Even similar game ideas may be expressed in various ways within copyright.
The copyright of a video game comes into existence the moment the original work is fixed in a tangible form and lives long after the creator dies. A copyright, however, is not eternal. For example, Pac-Man cannot be copied for at least 70 years according to the European Union’s Directive 2011/77/EU9. After the expiry of 70 years, Pac-Man will fall into the public domain. It is not necessary to register copyright over a developer’s creative work; however, it is highly advisable to do so in order to enforce ownership should a dispute and/or subsequent litigation arise over such work.
Derivative works are works derived from an existing copyrighted work, such as cartoons, board games or cereals based on an original film or video game. For example, Shrek was originally an animation movie. A derivative work was created by turning the popular film into a video game. The entity that controls the copyright in the film would have granted a copyright licence to make derivative works from it, such as the Shrek board game, PC and Xbox games and replica figurines of Shrek or Donkey10. Each derivative work has its own copyright, and any material in a derivative work that is not confined to the underlying work is also copyrightable as new work.
The rapid evolution of the video game industry has created a growing need for lawyers’ knowledge and skills. The commercial risks faced by the gaming industry have led to a significant need for IP protection. The gaming industry heavily relies on the content it generates, leading to copyright, patent and trademark infringements being the biggest risks facing a company’s revenue. Privacy concerns will continue to grow as games become more interactive with the real world, due to the innovative creations of augmented and virtual reality. The video game industry will continue to push the boundaries of how society interacts with IP and its laws.