Mdy Industries v. Blizzard Entertainment: Preventing the Use of Software Robots in an Online Game With Copyright Law

• Publication year: 2008
• Citation: Vol. 10 No. 2008

Satish Chintapalli⁰

In MDY Industries v. Blizzard Entertainment, the United States District Court of Arizona had an opportunity to clarify the concept of ownership in software copyright law. The MDY court held that users of Blizzard's computer video game do not own the physical copies of the game software and thus can only load the game software into their computer's memory, subject to Blizzard's license. Several players of Blizzard's computer video game used software manufactured by MDY Industries in conjunction with the game—a use prohibited by Blizzard's license. The MDY court held that, by violating Blizzard's license, these users committed copyright infringement. MDY Industries was also found liable for contributory copyright infringement. Although the MDY court stated that they were applying Ninth Circuit precedent, the court actually applied a significantly more expansive test for determining ownership.

I. Introduction

The recent decision of the United States District Court of Arizona, in MDY Industries v. Blizzard Entertainment,¹ examines whether players of Blizzard Entertainment's ("Blizzard") video game, World of Warcraft ("WoW"), which use MDY Industries' ("MDY") software robot in conjunction with WoW, are liable to Blizzard for copyright infringement if WoW's license prohibits the use of such software robots.² This issue turns on whether the purchasers of Blizzard's software are owners of their software copies under 17 U.S.C. § 117(a)(1) or licensees, as the statute exempts purchasers from liability for copyright infringement—but only if they own the copy of the software they are using.³ Because software transactions typically involve licenses,⁴ determining whether the software license conveys ownership of the software copy is an inquiry that bridges both copyright and contract law.⁵ The Ninth Circuit has examined this issue before,⁶ and the MDY court purportedly based its finding that purchasers of software subject to "a license . . . [with] significant restrictions on . . . use"⁷ are not owners under 17 U.S.C. § 117(a)(1) upon the test stated in Wall Data, Inc. v. Los Angeles County Sheriff's Department⁸ This Recent Development will argue that MDY's application of the Wall Data test was overly broad and departs from Ninth Circuit precedent.

Part II of this Recent Development outlines the relevant statutory and case law. Part III summarizes the pertinent facts of MDY. Part IV shows how these facts, coupled with Ninth Circuit precedent, support the conclusion that the MDY court improperly expanded the Wall Data test. Finally, Part V concludes that MDY's holding is too broad and should not be followed when applying the Wall Data test.

II. Background

A. The Difference Between Copies of a Work and the Copyright

The Copyright Act distinguishes between a "copy"⁹ embodying a creative work and the work itself.¹⁰ For example, the purchaser of a copyrighted book has a copy of the copyrighted work, not a copyright in the underlying creative work.¹¹ Similarly, in the software context, each physical object containing the software is a "copy."¹²

B. Loading Software into RAM Creates a Copy Under 17 U.S.C § 101

Computers function by loading software from "long term memory ( . . . disk) into . . . short-term memory" ("RAM").¹³ Under copyright law, the software that exists in RAM is a copy.¹⁴ The "copyright owner" has the exclusive right to make or authorize copies,¹⁵ including those in RAM.¹⁶ These temporary copies are byproducts of the user's interaction with the computer.¹⁷ Although the user may not even be aware of these temporary copies, they are unavoidable.¹⁸ Because software in RAM is a copy under copyright law, the user must have statutory authorization or obtain permission from the copyright owner for each use which results in a RAM copy.¹⁹ This requirement differentiates the use of software from that of other creative works—where copying and use are not so closely intertwined.²⁰ In the context of MDY, each time a user loads Blizzard's software into RAM, a copy is created—which requires permission by license or statute to be lawful.²¹

C. 17 U.S.C. § 117(a)(1) Allows Owners to Make RAM Copies Without Risking Infringement

According to the MDY court, 17 U.S.C. § 117(a)(1) allows owners of software copies to make RAM copies, if the use causing the copy is "an essential step in using the computer program,"²² without risking infringement.²³ Because RAM copies must be made before software is used,²⁴ this statutory exception gives users that own their copy of the software the right to actually use the copy without requiring additional licenses.²⁵ Such federal protection helps maintain a workable balance²⁶ between "copyright holders' " rights and the right of users, who own their copy, to use software.²⁷

Because the statute only applies to owners, determining whether a user is an owner or a licensee is critical.²⁸ This is problematic in practice, as noted by the United States District Court for the Eastern District of New York, because users often license software "and the license[] . . . [may] not . . . distinguish between the copyright and the copy."²⁹ Ninth Circuit courts have differed on the degree to which the license should be scrutinized and which factors should be used to determine whether the license conveys ownership of the software copy.³⁰ MDY is important because it adds the presence of "significant restrictions on . . . use" as a factor sufficient to classify the user "as a [mere] licensee" of their software copy.³¹ Because use is such an expansive concept, this holding threatens to render the statute useless.³²

D. Users as Licensees of the Copy, Prior to MDY: MAI, Triad, and Wall Data

1. MAI and Triad - Precedent, but No Principle for Determining Ownership

The MDY court based its 17 U.S.C. § 117 analysis on three Ninth Circuit cases: MAI Systems Corp. v. Peak Computer,³³ Triad Systems Corp. v. Southeastern Express Co.,³⁴ and Wall Data.³⁵ In MAI, the court did not explore the possibility that a software licensee could own their copy of the software and thus claim an exception under 17 U.S.C. § 117(a)(1).³⁶ Although commentators have been critical of the MAI court's lack of analysis regarding the applicability of 17 U.S.C. § 117(a) to software licensees,³⁷ the MDY court nonetheless cited MAI as supporting its holding that Blizzard's licensees do not own their copies.³⁸ The Triad court merely confirmed the essence of 17 U.S.C. § 117—that the statute applies to "outright" owners of software copies.³⁹ These cases, on which MDY relied,⁴⁰ do not clearly distinguish between licensing a copy and licensing the copyrighted work.⁴¹

2. Wall Data Provides a Test to Determine Ownership

In contrast, Wall Data provides a more substantial analysis of the extent to which a user's license conveys ownership to the copy of the software, as opposed to the software itself (the copyrighted work).⁴² The Wall Data court cited MAI as precedent for holding that the defendants were licensees and not owners, but also noted the criticism surrounding MATs treatment of 17 U.S.C. § 117(a)(1).⁴³ More importantly, the Wall Data court took a step beyond MAI and articulated a two-part test that clarifies when a purchaser is an owner and when a purchaser is a licensee of the software copy: "Generally, if the copyright owner makes it clear that she or he is granting only a license to the copy of software and imposes significant restrictions on the purchaser's ability to redistribute or transfer that copy, the purchaser is considered a licensee, not an owner, of the software."⁴⁴ The second prong of the Wall Data test is critical. It requires "significant restrictions on the purchaser's ability to redistribute or transfer that copy."⁴⁵ The mere existence of terms restricting other uses or the description of the agreement as "a license to the copy of software" does not satisfy the Wall Data test.⁴⁶ The MDY court expanded the Wall Data test by adding "significant restrictions on . . . use" to the set of factors that should be considered when deciding ownership of a copy of software.⁴⁷

III. The Facts of MDY v. Blizzard

Blizzard and Vivendi run the popular online game World of Warcraft ("WoW").⁴⁸ MDY created and sold a "bot"⁴⁹ program called WowGlider ("Glider").⁵⁰ A "bot" is "a word derived from 'robot' " referring to programs that can emulate certain user actions in the game.⁵¹ WoW players use bots while they are unable to play the game themselves, for example, while sleeping or at work.⁵² This allows players to advance more rapidly in the game than they would have otherwise.⁵³ WoW players use Glider in conjunction with WoW—in violation of WoW's Terms of Use ("TOU").⁵⁴ Basing its holding on the Wall Data test, the MDY court found that the users held licenses, limited by Blizzard's TOU and End User License Agreement ("EULA"),⁵⁵ to their copies of the software.⁵⁶ Because Glider creates an "unauthorized"⁵⁷ copy of Blizzard's software in RAM, Blizzard can hold users of Glider liable for copyright infringement.⁵⁸ Furthermore, MDY, as Glider's owner and distributor, faces liability for contributory copyright infringement.⁵⁹

IV. Analysis: MDY Expanded The Wall Data Test To Encompass User Cheating With Robots

A. The MDY Court Expanded the Scope of the Wall Data Test

Instead of merely following the Wall Data test, the MDY court expanded it. The MDY court stated the second prong of the Wall Data test as follows:

Wall Data provides a . . . test for determining whether the purchaser of a copy of a software program is a licensee or an owner: if the copyright holder . . . imposes significant restrictions on the use or transfer of the copy, then the transaction is a license, not a sale, and the purchaser of the copy is a licensee, not an "owner" within the meaning of section 117.⁶⁰

Wall Data does not specify use as a factor of the test.⁶¹ The second prong of the Wall Data test is limited to "redistribut[ion] or transfer" of the software copy...