Changing the rules of the game: how video game publishers are embracing user-generated derivative works.

• Author: Hayes, Christina J.

2. THE NEW RULES A. Microsoft's Game Content Usage Rules B. Blizzard Entertainment's Letter to the Machinimators of the World C. Comparison of the Rules III. ANALYSIS OF THE NEW RULES A. The New Rules and Creators of New Works B. The New Rules and Current Content Owners C. Expanding the Role of Machinima Licenses IV. CONCLUSION I. INTRODUCTION

   It was the kind of Cinderella success story of which most people can only dream. A group of friends turned their short, unfunded films into a genre phenomenon, with nearly one million viewers eager to watch each new installment as soon as it was released. (1) They received critical acclaim from sources such as the BBC and The Village Voice, (2) held sold out screenings at Lincoln Center, (3) and were hired to create a series of broadcast commercials for Electronic Arts based on their films. (4) They made enough money to quit their day jobs and support themselves as full-time artists doing what they loved. (5) The group of friends, now known as Rooster Teeth Productions, (6) became one of the first breakout stars in a relatively new art form called machinima--a portmanteau of machine and cinema, pronounced maSHEEN-i-ma--that re-imagines video games as a filmmaking medium. (7)

   Rooster Teeth's breakthrough hit was a surrealist comedy series entitled Red vs. Blue, created using Microsoft's hugely successful (8) first-person shooter video game, Halo. The main story of the Halo series features human soldiers with an array of weapons and transport vehicles battling their alien enemies. (9) Red vs. Blue largely eschewed the dramatic interstellar storyline of the game in favor of an exploration of the relatively mundane interactions among the human soldiers during their down time. (10) The episodes feature existential arguments and an absurd sensibility that drew comparisons to Samuel Beckett, the playwright of Waiting for Godot, (11) while simultaneously winning the approval and praise of soldiers deployed in Iraq. (12) Rooster Teeth developed episodes by first writing and recording dialogue, then animating the video by networking multiple Xbox game consoles, each running a copy of Halo. (13) One actor simulated a camera, composing the shot by manipulating his game character's point of view and then recording what appeared on the screen. (14) The other game characters were manipulated like puppets, moving in synchronization with the pre-recorded dialogue. (15)

   By using an existing video game's graphics and characters, and sometimes its sounds and music, an amateur machinimist can create what looks like a reasonably high quality, computer-animated film at a relatively low cost. However, this powerful mechanism is also machinima's greatest liability: by incorporating existing copyrighted assets, machinimists are creating derivative works, and thereby possibly infringing the copyright holders' rights under the Copyright Act. (16) While some machinima may be protected under the doctrine of fair use (17) (a highly fact-specific affirmative defense), the economic risk inherent in relying on the doctrine--not to mention the up-front costs of defending a lawsuit or seeking a declaratory judgment--would require most machinimists to yield to a cease and desist notification if a copyright holder objected. (18) Alternatively, fear of liability could cause budding machinimists to abandon their work altogether.

   Fortunately for machinima, video game publishers seem to have recognized that suppressing machinima would not be in their best interests. Microsoft even allowed Rooster Teeth to continue producing Red vs. Blue without paying licensing fees. (19) However, the majority of Machinimists--who had not negotiated individual licenses--continued to create under the specter of legal uncertainty. For many, this changed in August 2007, (20) when Microsoft issued the Game Content Usage Rules, which unilaterally licensed the limited use of copyrighted content from many of their video games to create new derivative works. (21) Soon after Microsoft issued its new rules, Blizzard Entertainment followed suit with its Letter to the Machinimators of the World, which also licensed the limited use of their game World of Warcraft for the creation of machinima. (22)

   This Note describes and analyzes these new rules. Part II introduces Microsoft's and Blizzard's new rules for the creation of machinima and concludes with a comparison of the two documents. Part III offers an analysis of the new rules. Part III.A considers the effect of the rules on creators of new works, arguing that while the new rules may be beneficial to new creators from a legal standpoint, they may not have a substantial effect on the creation of new works as a practical matter. Part III.B considers the effect of the new rules on current owners of copyrighted works, arguing that the new rules benefit current rights holders by entrenching, and perhaps extending, the owner's control over her works. Part III.C concludes that the new rules are ultimately imperfect, and proposes the creation of a more universal licensing system.

2. THE NEW RULES

   1. Microsoft's Game Content Usage Rules

      In August 2007, Microsoft released the first version of the Game Content Usage Rules ("Microsoft Rules"). (23) Some members of the machinimist community initially misunderstood the legal significance of the original Microsoft Rules and responded with anger and frustration. (24) Microsoft then chose to redraft and clarify the rules; the company posted a revised version later that year after consulting with Hugh Hancock, co-author of Machinima for Dummies, and Fred von Lohmann, a senior staff attorney at the Electronic Frontier Foundation. (25) The current version of the Microsoft Rules is available at Xbox.com. (26)

      The Microsoft Rules purport to make it easier for fans to make "Items," which is loosely defined as "things like machinima, videos, and other cool things," from "gameplay footage, screenshots, music, and other elements of our games ('Game Content')." (27) Under the Microsoft Rules, Microsoft grants a "personal, non-exclusive, nontransferable license to use and display Game Content and to create derivative works based upon Game Content," so long as the use is noncommercial. (28) Microsoft has reserved the right to revoke this limited use license at any time, for any reason. (29) Licensees must include with their works a Microsoft copyright notice that explains that the Item was created under the terms of the Microsoft Rules. (30) The license extends beyond the Halo games to include many other Microsoft games, although the Microsoft Rules carefully note that the license does not include non-Microsoft intellectual property. For instance, the Microsoft Rules note that the individual vehicle designs in Forza Motorsport, a racing simulation that features models of real cars, do not belong to Microsoft and require "permission from their manufacturer." Similarly, they caution that soundtracks and audio effects from some games may not be owned by Microsoft and are therefore not covered under the license. (31)

      Other restrictions on the license include: prohibitions against "reverse engineer[ing] our games to access the assets or otherwise do[ing] things that the games don't normally permit in order to create your Items"; (32) infringing any entity's intellectual property rights in the Item, including Microsoft's own trademarks; and using Game Content to create pornographic, obscene, "vulgar, racist, hateful, or otherwise objectionable content." (33) The Microsoft Rules also contain a clever solution to the "fan fiction problem." (34) They include a provision that distribution of a derivative work that adds to the game universe or the story constitutes a "royalty-free, non-exclusive, worldwide, license to Microsoft" and its partners. (35) Licensees may grant other people the right to build on their Items, but the Microsoft Rules cover anything built by such third parties. (36)

      Microsoft clarifies its noncommercial limitation by stating that licensees cannot "sell or otherwise earn anything from [their] Items," which includes: using an Item to solicit donations, using it to enter a contest or sweepstakes, and placing the Item on the same web page as other, unrelated items that are for sale. (37) However, pursuant to the Microsoft Rules, licensees may post their works on web pages with advertising, or enter their works into film festivals for prize consideration. (38) Licensees may also store their Items on third-party sites, (39) which, according to Microsoft legal counsel Don McGowan's personal blog, would include video-sharing websites such as YouTube or the Microsoft-owned Soapbox. (40) The Microsoft Rules inform creators that activities they currently do not cover can be negotiated in a commercial license, and provide a dedicated e-mail account by which to contact Microsoft for that purpose. (41) The Rules end with the comment that Microsoft is also willing to negotiate with festival organizers who create and distribute festival DVDs. (42)

   2. Blizzard Entertainment's Letter to the Machinimators of the World

      Within a few weeks, Blizzard Entertainment ("Blizzard") joined Microsoft in authorizing some machinima with its Letter to the Machinimists of the World ("Blizzard Letter"), (43) which is posted online on WorldofWarcraft.com. (44) The Blizzard Letter begins by stating that Blizzard "strongly supports the efforts [of] its World of Warcraft community members who produce 'Machinima[]' movies ... using video images, footage, music, sounds, speech, or other assets from its copyrighted products." (45) The Blizzard Letter then sets out "The Fundamental Rule," specifying that "Blizzard Entertainment requires that the use of World of Warcraft and other Blizzard products must be limited to noncommercial purposes." (46)

      Under the Blizzard Letter, the creation and distribution of machinima is permitted so long as "viewers can freely view" the work without...