The Internet has had a profound impact on how gaming companies communicate with existing and potential customers, as well as on how gaming companies compete with one another for business. An online presence is practically mandatory in order to succeed these days. However, all too often companies rush in and create a website without paying heed to a number of intellectual property and privacy concerns that could result in expensive litigation to cure what otherwise could have been addressed had a bit more attention been paid to these issues. Gaming companies should therefore be attentive and vigilant in developing and/or maintaining websites so as to guard against trademark and copyright infringement, as well as ensure that website visitors and customers are properly informed of and bound by reasonable policies.
Protecting Your Trademarks
Trademarks are used to identify and distinguish goods or services in the marketplace and to indicate the source or origin of the goods or services. Trademarks consist of words (such as MGM Grand), slogans (such as “City of Entertainment”), logos (like the MGM Grand lion), numbers, letters, the unique appearance of a product or packaging, shapes, sounds, colors, and combinations of these elements. Trademarks identify corporate brands and/or specific individual products offered by the company. The rights to a trademark are dependent upon use of the mark, but are certainly enhanced by being registered at the federal or state level, or both.
On the Internet, trademarks are used on websites to promote the company’s brands and products to the consumer, in hidden text to drive traffic to a website, as key words that can be purchased from search engines, and as domain names to create an address and/or location on the Internet. Companies must be diligent in protecting their trademarks, which includes seeking and obtaining registrations on their marks and diligently policing the Internet for infringing uses of the marks. The onus for protection lies with the mark owner, and the strength of the brand is usually dependent upon, or correlates to, whether thorough searches of the Internet are done on a consistent basis and the degree to which a company aggressively pursues infringing uses of its marks.
Domain names are particularly problematic. The domain name system is largely unregulated, which means that trademarks are susceptible to being registered by someone other than a trademark owner (including disgruntled former employees or a competitor). Most companies register at least the name of the company and/or the company’s most important brand(s) as domain names, but fail to consider defensive registrations to stop cybersquatters, “typosquatters,” “cybergripers” from using valuable Internet “real estate” to harm the company’s good will. Unfortunately, given that there are a myriad of permutations of one’s brand and trademarks that could be registered as domain names, coupled with the variety of generic top level domains (gTLDs) such as .com, .net and .biz, as well as country code top level domains (ccTLDs) such as .us, .uk and .au, attempting to register every permutation could become cost prohibitive. Moreover, the domain name landscape is about to become even more complicated now that the Internet Corporation for Assigned Names and Numbers (ICANN) has authorized a process that will provide for an unlimited expansion of the gTLD field to include any string of letters, including generic terms such as .casino and .poker, or brands such as .hitachi and .canon.1
With this development, gaming companies are going to have to determine whether they are going to operate their own gTLD or protect their brands defensively against gTLDs that may infringe their marks or allow a competitor to corner the market for an industry-related word. It is therefore imperative that a gaming company evaluate and adopt a strategic plan governing its domain name registration and enforcement practices that is effective without being too costly.
Protecting Against Copyright Infringement
Copyright is a form of protection provided to authors of “original works of authorship” fixed in a tangible medium, which, in the gaming arena include music (including sound recordings), photographs, visual art, text, source code and audiovisual works.
Copyright protection in these works is automatic—registration is not required, but it is encouraged. In fact, if a copyright owner does not use the © symbol in connection with the copyrighted work, it does not mean that the work is not protected by copyright law. Unauthorized use of copyrighted works on the Internet, or on goods imported into the United States, can result in liability for copyright infringement. However, unlike trademark law, the United States Copyright Act casts a wide net and protects almost all copyrightable works, irrespective of whether the work is first published in the United States or a foreign country.
The consequences of using copyrighted works without permission can be substantial and severe. Under the Copyright Act, the owner of a copyrighted work can recover damages arising from the use of the copyrighted work. Copyright infringement is a strict liability tort—an infringement, no matter how innocent, is still an infringement. If the work was registered prior to the infringement, the owner of the copyrighted work has the option to elect statutory damages, which can be as high as $150,000 per infringement when the infringement is willful. The copyright owner may also be able to recover attorneys’ fees and costs.
To clear copyrighted works and avoid infringement, a company should first identify all of the copyrighted works it uses or intends to use on a website and evaluate the products it sells, including the website itself. If the copyrights of others are used, the company should first identify who owns the copyrights in question. This can be a difficult and sometimes impossible process if the source of the copyrighted work is unknown or the work is old and the owner cannot be located. If and when the copyright owner is located, then, for most types of works, the company must negotiate a license to use the copyrighted work or an assignment of all of the exclusive rights. Any transfer of rights must be in writing. If the company’s website is designed by a third party developer, for example, the company must take care to ensure that the copyrights in the website are transferred to it by way of written agreement between the company and the developer.
A copyright owner has the right to control use of the copyrighted work and, therefore, can refuse to allow use of the work by another. Moreover, under the Digital Millennium Copyright Act (DMCA), a copyright owner is entitled to send a “take down” letter to the owner and/or hosting company of any website that uses, displays or transmits the copyright owner’s work, which could result in immediate loss of the offending website. However, if the company includes the appropriate DMCA notice in its terms of use and properly identifies a “designated agent,” it is entitled to invoke a safe harbor provision that exempts it from the consequences of infringement when infringing works or materials are posted to the site by a third party. Unfortunately, the safe harbor is not available for works or materials posted by the owner of the website.
Additionally, most states in the U.S. recognize the right of a person to protect his or her own name, voice, signature, photograph or likeness for any commercial purpose. Although the laws differ from state to state, gaming companies are well advised before using a person’s likeness for any commercial purpose to obtain the person’s written authorization. Without prior written permission, a company may be subject to an injunction and damages.
Effective Use of Website Policies
Many gaming companies fail to appreciate the fact that terms of use for a website actually create an enforceable contract between the company and the visitor/customer. “Terms of use” or “terms and conditions of use” should be viewed as a vehicle whereby the company can set forth what behavior is expected of those who visit and/or purchase products through the website and to what terms the company is willing to obligate itself. Although courts have recently started trending toward striking onerous or oppressive terms (which seemed to dominate the landscape only just a few years ago), well-crafted terms of use are an effective means of protecting a company’s investment in its website, in addition to its good will.
Additionally, most gaming companies are interested in gathering as much information about their customers as possible, usually with an eye toward wanting to provide better or enhanced service, but it comes at some cost. Although in its infancy, there are a growing number of privacy laws that affect or are implicated when gathering data about website visitors or customers. In order to avoid liability under these laws, the best practice is to provide as much transparency as possible to the consumer, giving them the ability to control what happens with their personally identifiable information (PII). To minimize its exposure, a company should develop and post a privacy policy that details what information is collected, how it is collected, how it is protected and what is done with it. Under California law, which applies to any company that does business with a consumer in the state of California, any company that collects PII data via a website must post a privacy policy and must include a link to it on the homepage of the website. Even though there is no federal privacy law per se, the Federal Trade Commission deems a violation of one’s own privacy policy (e.g., failure to protect information as represented) to be a deceptive and unfair trade practice under Section 5 of FTC Act, a violation of which could result in millions of dollars in fines and FTC scrutiny for years to come. When it comes to privacy policies, it is best to “do what you say and say what you do.”
Conclusion
Websites are an effective means of reaching out to customers and potential customers, but they can also be liability traps for the uninformed or unwary. An audit of the company’s website (or planned website) by an intellectual property attorney will help ensure that the company has identified and addressed the “traps” so as to avoid the potentially costly and embarrassing consequences of a lawsuit, an injunction and possible liability for damages and attorneys’ fees and costs later on down the road.
1 Applications for the new gTLDs will be accepted beginning Jan. 12, 2012. The application fee will be approximately $185,000, but the operation of a new registry is expected to cost the owner several million dollars over the first few years. Hitachi and Canon have already announced they will be applying for “.hitachi” and “.canon,” respectively.
John L. Krieger, Esq. is a partner in Lewis and Roca’s Intellectual Property and Technology Practice Group and concentrates on intellectual property litigation in both state and federal court. He has extensive experience litigating cases involving the infringement of intellectual property rights over the Internet. He can be reached at JKrieger[at]LRLaw.com.
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