Trying Their Luck With Loot Boxes, Betting on Microtransactions

Almost exactly three years ago, I explored the question of whether loot boxes might be considered gambling (under a specific federal statute). Despite my analysis, the controversy has not abated. Either my earlier writing was insufficient, or I am not the final authority on all US law. Or both. In any case, I am revisiting this topic.

We have a long history of kids buying an unknown, unidentified, or concealed thing and not calling it gambling: baseball cards, gashapon machines, Kinder Eggs, mystery figurines etc. We also have an established tradition of letting children play games of chance for the opportunity to gain rewards at carnivals and arcades. But stories of kids bankrupting their parents to buy baseball cards are… rare. People have ruined their lives in pursuit of many things (one psychologist admitted to having an addiction to collecting classical music). However, there seems to be an ample stock of stories of people meeting financial hardship after engaging in microtransactions of video games.

Societies make laws and institutions to mitigate the extent to which people can harm themselves and each other. Do the practices of the video game industry cause the kinds of harms that run afoul of these laws and institutions when they make it easy for a customer to bring about self-ruin (and extend that ruin to others)?

 

I. Definitions

I will define the following terms based on my understanding and experience:

Loot Box:  In-game items, conditions, or abilities available to a player, initially concealed from players when obtained. These can be given to players by the game (often for completing particular objectives) or they may be purchased, either with in-game currency or legal tender (“real world money”).

Microtransaction: The option to translate legal tender (“real world money”) for objects or conditions in the game. Although these are often near a $5 price point, it is not uncommon to see options for $30 for a single item, and many games provide bundled options for over $50 or $100. The implied predatory tactic at work in this mechanic is “nickel-and-diming” the customer: the company wants the player to perform repeated small transactions so that the player does not recognize the aggregate amount spent, and therefore spend more than the player would if the player were presented with that aggregate amount.

Pay-To-Win: The design of a game to be unreasonably difficult without the use of microtransactions. This is often combined with games with very low or no cost to play the game, then a significant escalation in game difficulty. Notably, the game does not cease to function, nor become unplayable from a programming perspective.

Cosmetic: An item, feature, ability, or condition in a game which does not affect the mechanics of the game, or the mathematics that calculates the success of the player in the game (or the ability of the player to progress in the game). Some microtransactions are argued to be less predatory because the possible outcomes are cosmetic, and the lack of an impact on game mechanics precludes an assertion of pay-to-win design.

Shareware: The business decision for a company to provide a substantial portion of a game free of charge, often to generate awareness and word-of-mouth advertising. The company expects that the success and appeal of the free portion of the game will lead customers to purchase the full game.

Demo: A small portion of a game available for customers to sample the general style, art, user interface, and gameplay experience, typically for free. In the last 10 years, it has been more common for demos to be available only by watching others (often employees of the company) play the game. Some recent demos have been criticized for misrepresenting the game they purport to demonstrate.

 

II. The Controversy

The largest looming question is whether loot boxes constitute gambling. This question has the biggest legal ramifications, particularly because many of these games and transactions are available to (if not also marketed towards) minors, for whom gambling is illegal.

The second biggest legal question is whether the practices surrounding these microtransactions (advertising, communications, implementation, functionality, etc.) comport with relevant laws and regulations, particularly those set forth and enforced by the Federal Trade Commission (FTC).

Another important question is whether these practices are ethical, dangerous, predatory, fair, or are otherwise positive for the entertainment software industry, developers, publishes, and customers.

 

III. The Analysis

Issue One: Is it gambling?

I still find my previous analysis on the gambling question relevant. However, I don’t know how it would be received by a court or administrative agency. Under my analysis, the issue turns on whether the contents of the loot box are determined before or after the transaction is made. I think the strength of this analysis is that it help to delineate between the purchasing of unknown items available to minors (e.g., baseball cards, Kinder Eggs, etc.) and conventionally understood gambling (sporting events, slot machines, blackjack, etc.) I think the weakness of my analysis is twofold: 1) it may be too technical for some adjudicating bodies to appreciate, and 2) it fails to address the unsavory impacts of loot boxes and microtransactions.

It has become popular to declare loot boxes to be a form of gambling (and some games aren’t exactly shying away from that accusation or the image).  However, I am still unconvinced that any purchase of an unknown item falls under the legal definition of gambling. It may be true that it can be called “gambling” in a cultural sense, but this uses the term to mean “any taking of risk or a confronting of uncertainty.” This use of the term is unsatisfying because it also describes going to a new restaurant (and hoping the food is good) or ordering a shirt online (and hoping it fits well).

I have not yet heard a persuasive explanation that distinguishes buying a pack of Magic: The Gathering cards at my local game store from buying a pack of Hearthstone cards in Blizzard’s digital store. There might be an important distinction. There might not be one. Maybe the purchase of sealed packs of trading cards (Pokemon, YuGiOh, MTG, etc.) needs to be restricted. Maybe Disney needs to put the “mystery figurine” boxes in the “Adults Only” section of stores at Disneyland. However, if the sales of concealed items to minors are permissible, it isn’t clear why purchasing concealed outcome in a game’s loot box is necessarily legally different, in and of itself.

 

 

Issue Two: Is it unfair or deceptive?

The FTC has sometimes found a great deal of latitude in its statutory jurisdiction over “unfair and deceptive trade practices.” The task before the FTC is to determine whether the entirety of the game and microtransactions are designed in a way that is unfair or deceptive to the customer. There is a snag, however: the terms “unfair” and “deceptive” are not clearly defined. Even a sciolistic understanding of advertising in the US shows that there is a lot of distance between an advertisement and the reality of a good or service. The FTC has the responsibility to determine when advertising and marketing tactics (which are frequently adversarial, treating the customer either as a target or an enemy) become unacceptable in the eyes of the law.

Any evidence of companies’ deliberate efforts to obfuscate the amounts spent is likely to earn umbrage from the FTC. I’m fairly confident that the FTC will be displeased with implementation of microtransactions by many companies, and not just because they have addressed a similar issue already.

I’m less certain as to how the FTC would react to the concept of loot boxes. The FTC would examine the implementation of the loot boxes—not just the mere concept of them. The recent decision by several game platforms to require disclosures regarding the probabilities of outcomes for loot boxes will probably please the FTC, because the FTC likes it when useful, relevant, complete information is put in the hands of the consumer. However, some companies are not even putting truthful information in the hands of the consumers. Additionally, the FTC would still take seriously the claims that companies rely on the same tactics as those used by casinos, and the same psychology behind gambling addiction to advance their products. The many stories about the disastrous effects of these strategies on people’s lives would also hold significant weight in the judgment of the FTC.

I think it is likely that the FTC would find some practices by some companies to be unfair or deceptive. Crucially, this would almost certainly lead to a new promulgation of guidelines (and maybe codified regulations) that detail specific requirements for game developers who wish to implement microtransactions, loot boxes, or similar structures.

 

 

Issue Three: Is it good for the industry?

Ostensibly, these strategies have been good for the bottom line of some major companies. But let’s reflect on a very different business strategy. In 1993, Doom was the most popular game of its era and genre, and the developers gave away 1/3 of it for free, as shareware. That is an astonishing truth. It was free and the developers encouraged the unregulated sharing and spreading of it. This is a complete reversal of the current marketing strategies in the video game industry. In every way, this is the opposite of a loot box. And the bottom line did just fine: the developers still made enough money to buy ostentatious sports cars and the company survives to this day. I think there is a lesson for developers from the successful marketing of Doom: Make a game so good that people are happy to play it.

Sure, shareware didn’t always work. Apogee could have been the poster child for shareware. Now Apogee games are the poster child for orphan works. But in fairness: not every loot box game turns a profit, either.

It really goes without saying that loot boxes and microtransactions are designed to make more money for the companies that make and publish the games. I suspect they have been profitable strategies up to this point. However, if you have to spend one hundred million to defend your company’s strategy for making seventy million, that strategy isn’t so good for the bottom line—and that’s not to mention the impact of the negative public image of being perceived as predatory or dishonest.

 

 

IV. CONCLUSION: Maybe Legal, Likely Unethical, Definitely Unnecessary

Loot boxes and microtransactions may very well be legal—but that doesn’t mean that they’re “good” in any sense of the word. There are urban legends of drugs that are so addictive that dealers give away the first dose for free, because they know that the user will immediately become addicted and begin paying. They lower the barrier so that more people will ultimately become customers.

There are two options for developers who crave financial eminence: make a game so good that people want to play it, or make a game so addictive that people struggle to stop playing it. The two games may look similar, but the core functions are opposites. One is a positive experience that works to enhance the player’s life. The other is an effort to remove autonomy and destroy the player’s life. One is giving. The other is taking.

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Making Offensive Trademarks Legal, If Not Fashionable (Incau v. Brunetti)

Some of the most challenging cases in law (and in political philosophy) are questions about the limits of freedom. It is generally accepted by all but the most extreme anarchists that some level or order and constraint on behavior must be maintained in a society. Opinions differ greatly as to methods, reasons, and applications more specific than this.

For Americans, finding the limits on the freedom of speech found in the first amendment is a perennial challenge.

 

I) The Case

Brunetti makes a clothing line called “Fuct.” Like many people who make something, he wanted to register a trademark for his brand. However, the 1946 law that governs trademarks in the US (the Lanham Act) prohibits “immoral… or scandalous” trademarks. The US Patent and Trademark Office rejected Brunetti’s application for a trademark because they found that the mark “Fuct” is “scandalous or immoral.” Brutnetti brought the USPTO to court (the court case is named for the director of the USPTO, Andrei Incau). The Supreme Court found that Brunetti cannot be denied his trademark registration on the grounds given by the USPTO, and declared that the section of the Lanham Act that prohibits immoral or scandalous trademarks is unconstitutional as a violation of the first amendment.

This case follows a previous ruling on disparaging trademarks. In 2017, the Supreme Court decided that an Asian-American music group called “The Slants” could not be denied their trademark on the grounds of the offensive nature of the name. This ruling found that another part of the Lanham Act was unconstitutional: the prohibition of trademarks which are disparaging.

Unsurprisingly, it has been difficult to apply a law that relies on such an amorphous and malleable concept as “offensive.” Since the Lanham Act was passed over 60 years ago, the USPTO has accepted and rejected trademarks that could be considered immoral or scandalous.

 

II) Potential Problems and A Public Safety Possibility

With disparaging and offensive trademarks no longer prohibited by the Lanham Act, what constraints remain?

One of the few things that consistently beats out freedom of speech in American law is public safety. The iconic example from a case in 1919 is that the act of shouting “fire!” in a crowded theater (where there is no actual fire) and causing a panic in which people could be injured or die is not an act protected by the first amendment.

One of the foreseeable problems with opening up trademarks to offensive and scandalous terms is the potential for trademarks which seek to harm people (for example, promote violence). There are already restrictions on trademarks that prevent some confusion with official government symbols. I think there is a line of reasoning that such existing restrictions serve the purpose of promoting public safety, and therefore rejecting trademarks that threaten public safety may be permitted.

Trademarks which are grossly offensive but do not threaten public safety may be more difficult to oppose or cancel. The 2017 Matal v Tam case ended the litigation around the cancellation of the trademark for the Washington, D.C. football team. Such is the difficult and challenging nature of creating and applying law: it is always a balancing act of various competing interests, and it is very difficult to create winners without creating losers.

 

III) You Can’t Be Refused Your Trademark, But I Can Refuse To Say It

I think there’s an Easter egg in this case: a hidden, subtle lesson that I’m not sure I fully grasp. As far as I can tell, for the entire proceeding of this case, none of the justices actually used the word that “Fuct” imitates. They did not say it during oral arguments and it does not appear anywhere in 44 pages comprising five different opinions.

That word, and the use of it, is fundamental to this case. The Court handed down an opinion that required the government to not prohibit the use of a word that the Court thoroughly (almost pointedly) declined to use. This suggests interesting things about language, culture, and law. Maybe this lack of usage underscores a point about the chasm between what is legal and what choices people can make. Maybe it illustrates a kind of objection-by-performance, demonstrating that people can act and speak in ways that differ from mere legal requirement.

Although this case changes the law to permit offensive language in trademarks, the cultural sensibilities and sentiments that once prohibited such speech remain. Tension between culture and law is rarely sustainable.

 

 

The Very Hungry Caterpillar: Is Caterpillar Going Too Far To Protect Its Trademarks?

A thousand years from now, the legends will say that cats invented the internet as part of their plan. Of course, sophisticated scholars will snort, scoff and explain, “Actually, cats only invented the meme.”

If that is funny, it’s mostly because of the ubiquity of cats in 21st century culture. Domesticated felines have been a dominant, widely-recognized force on the internet. My evaluation of the Caterpillar v Cat & Cloud trademark dispute is that it shows how the internet affects trademark strategies (a break from the persistent and well-established analysis of how the internet has affected copyright strategies). I think it also raises an interesting, esoteric question about truncated marks and interpretation of meaning.

I think Caterpillar has two problems: 1) Cat is a really terrible mark in a cat-crazed culture, 2) The truncated mark foists cat troubles on them

Caterpillar’s Trademarks

It’s important to protect trademarks. Trademarks, arguably more so than other IP, have a way of slipping away if you leave them unattended. Copyrights and patents eventually expire, but trademarks last as long as they are used, maintained, and defended. A trademark can become generic, or it can be slowly encroached on in ways that make it harder to defend later. Caterpillar understands the importance of trademark vigilance, and has initiated at least two major trademark proceedings in the last few years, following a significant number of new trademark registrations in 2015. (See CAT Registrations: 4804263-275. All filed in 2014 and issued in 2015.)

PetraCat, An Energy Services Company

In April 2015, Caterpillar and PetraCat argued before the Trademark Trial and Appeals Board (TTAB) on the question of whether PetraCat’s trademark was too close to Caterpillar’s trademark. Caterpillar opposed the registration of PetraCat’s mark out of concern that consumers would be confused by the similarity of the marks. It was an interesting question with reasonable arguments from both sides, but the TTAB ultimately concluded that there was enough similarity to be concerned about consumer confusion.

 

Cat & Cloud, a Coffee Shoppe

In August 2018, Caterpillar filed a cancellation proceeding against Cat & Cloud, a coffee shop based in Santa Cruz, CA. The easy criticism to make is that there is no likelihood of confusion between the goods or services of these companies, but that criticism would be misguided. Trademarks are registered with the USPTO according to categories (called “classes”). Caterpillar is not concerned about the use of trademarks with respect to providing beverages; Caterpillar is concerned about the class of goods that the two companies share: shoes, hats, t-shirts, and other merchandise. This at least establishes some overlap about which there is even fathomable confusion or contention—but is Caterpillar reasonable for pursuing a cancellation proceeding?

 

When discussing any trademark dispute, two subjects are virtually unavoidable: the strength of the marks and the likelihood of confusion.

 

Trademark Strength: Ranking Your Advertising Department’s Imagination

Trademark strength (or distinctiveness) can be thought of as existing along a spectrum that runs from “weak” on one end and “strong” on the other.

Fanciful – When you make up a word that has no other meaning in the language (Xerox, Frisbee)

Arbitrary – When you pick a word that already exists and has a meaning, but has nothing to do with your goods or services (Apple, for a computer company)

Suggestive – When you use words that are related to your goods or services, but don’t quite describe them.

Descriptive – When your trademark more or less describes your goods or services.

————————————————–

Generic (no protection) – When your trademark is the word everyone uses for your product, and then you lose trademark protection because the language has claimed your trademark as its own. This happens most tragically when a fanciful mark dominates the market too well. Aspirin is the seminal example of a trademark lost to genericism. Xerox corporation fights this risk, as does Google. Marks frequently at risk for this include Band-Aid, Frisbee, Velcro, and anything that everyone you know calls by its trademark name even when referring to the general good or service.

So, how do we rate these marks?

I would argue that Caterpillar’s full mark is descriptive, as it describes a style of tread-and-wheel movement for heavy machinery. (I could also see the argument that Caterpillar is a suggestive mark, because it could be said to suggest to the mind the slow and steady motion of a grub… but I’m not entirely convinced.) On the other hand, the mark “CAT” is… well, truncated. It wouldn’t even be part of Caterpillar’s trademark portfolio if it weren’t for the fact that it’s just the first three letters of the word “caterpillar.”  But “cats,” conceptually, have nothing to do with Caterpillar’s business.

And this is where Caterpillar’s problems start.

Caterpillar is not interested in aligning their branding with felines- Caterpillar is interested in the first three letters of their company name. As a mark, it’s arbitrary (insofar as cats have no conceptual relationship with bulldozers or cranes—though maybe there’s a long-shot argument that cats sometimes dig, and some of Caterpillar’s machines dig). But it’s only an arbitrary mark if Caterpillar can claim the feline meaning of “cat.” The recurring question that determines a lot about Caterpillar’s mark is what the mark actually means.

Here’s the most interesting question in this dispute that I’d like to see the USPTO answer: when a truncated mark happens to spell a new word that has no common meaning with the original mark, does the truncated mark adopt the meaning(s) connected with the truncated mark as though that mark was not a truncated mark? To put that in context: does Caterpillar’s “CAT” mark mean “a feline” or does it mean “short for caterpillar”? If Caterpillar can claim the new meaning, this could elevate their mark strength from “Suggestive/Descriptive” to “Arbitrary.”

On the other hand, “Cat & Cloud” is either arbitrary (because neither cats nor clouds have anything to do with coffee) or suggestive (because cuddly cats and cloudy, overcast whether evoke an image that seems more complete with a warm cup of tea or coffee). If it is suggestive, it is one of the most abstractly suggestive marks I’ve seen. If it is arbitrary, it is one of the more thematically-attuned marks I’ve seen.

 

Likelihood of Confusion: The Quintessence of Trademark Disputes

Almost every trademark dispute comes down to an examination of the likelihood of consumer confusion.

The Likelihood of Confusion Factors Are:

Relatedness of Goods or Services

Similarity of Marks

Similarity In Appearance

Similarity In Sound

Similarity In Meaning

Design Marks

Likely to Deceive

The actual goods and services of these two companies are far apart. However, the subject matter at issue is the merchandise that is ancillary to both businesses. As far as the trademark analysis is concerned, a shoe is a shoe, and a t-shirt is a t-shirt, so the goods are considered related for the purposes of this analysis. I think there is still some argument to be made for Cat & Cloud that the shoes themselves might be very distinguishable (as I understand it, Caterpillar shoes tend to be steel-toed boots designed for rough construction work, while Cat & Cloud makes lighter-wear, everyday walking shoes). A significant distinction between shoes might be enough to argue that there is less likelihood of confusion.

The marks display a weak similarity. Both marks contain the word “cat,” though the shortness and commonplace nature of the word make this barely noteworthy. The inclusion of a substantive element with “Cat” is sufficient to establish the marks as dissimilar. This also addresses questions regarding similarity in sound and in meaning.

Similarity in appearance only seems plausible if the words “& cloud” are significantly smaller than the word “Cat” in the mark of the defendant. Furthermore, to address the design elements, Caterpillar has carefully cultivated a stylized typeface and design that is distinct and recognizable and, to my understanding, this has not been remotely imitated by Cat & Cloud.

To the factor of similarity in meaning: this is sufficiently addressed in my analysis regarding mark similarity, but I think there is an additional point to be made. Given the context of the trademark “CAT” for the company Caterpillar, it is not clear on its face that the plaintiff’s truncated mark is actually intended to mean or signify a member of the taxonomic family felidae. I don’t think this matters much because of the dissimilarity of the marks, but I am not convinced that there is actually any similarity in meaning. I bring this up because I think it points to the central, recurring problem for Caterpillar’s trademark.

Finally, it seems profoundly unlikely that either mark will serve to deceive consumers. It is truly difficult to imagine a serious scenario in which a consumer seeks out a hat or t-shirt sporting the trademark of one company and mistakenly purchases a product from the other company.

 

Bonus Find: Google Hints at a Huge Branding Problem for Caterpillar

While researching for this blog post, Google offered me additional helpful information regarding other inquiries about Caterpillar, Inc. Google indicates that the number one question that average users have about Caterpillar is whether it is also Cat:

 

Caterpillar problem

 

That is a huge problem. That is a failure of branding. That is the “Where’s the Beef?” advertisement all over again. (An enormously popular advertisement, yet consumers failed to correctly identify the advertisement with the correct brand, product, or company.) Maybe Caterpillar is scrambling to bat down other trademarks in the hopes that consumers will know who they are if they are the only company left with a cat-related trademark.

This is a bitterly ironic discovery. This lack of brand understanding isn’t Cat & Cloud’s fault. It isn’t anyone fault besides Caterpillar’s. If consumers don’t connect a trademark to a company, it doesn’t matter how thoroughly that company defends the trademark. Caterpillar doesn’t have a likelihood of confusion problem with competitors or other companies outside of their industry. Caterpillar has a likelihood of confusion problem with itself. Maybe marketing should work on reconciling the “CAT” and the “Caterpillar” before the company invests in aggressive trademark protection.

Perhaps this confusion is the effect of Caterpillar’s own identity crisis: Is this a Caterpillar company or is this a Cat company? Caterpillar might resolve a lot of its problems if it picked one animal and stuck to it. Perhaps Caterpillar set itself up for an IP portfolio headache by stretching its trademarks as far as its goods when it decided to become a clothing and heavy machinery company that is known as two completely different kinds of animals.

 

The Charitable Interpretation

Despite the bad press Caterpillar is getting, I think there is an empathetic viewpoint: Caterpillar is actually in a very weak position, and they are compensating with an aggressive strategy. “CAT” is actually a sub-optimal trademark, and Caterpillar feels stuck with it.

Caterpillar has two facts against them:

1) Their truncated mark spells “cat”

2) Cats are exceptional popular, wide-spread, well-liked, and generally excellent subjects for brands

I don’t think Caterpillar ever wanted to be a cat company; they didn’t name their company after anything remotely feline. The irony is that Caterpillar probably doesn’t want to be defending “cat” as a trademark — after all, the company never really picked it. Caterpillar is unlucky to have a truncated mark that happens to spell “CAT,” and the company is concerned about how difficult that mark is to protect. After careful consideration, the company has decided that their best chance at protecting their truncated mark is to aggressively seek out trademarks that involve the word “CAT” and pursue actions against those trademark holders.

Caterpillar seems to be leaning into the hand they’ve been dealt: the company applied for two more trademark registrations last August that incorporate some honeycomb design into the mark (Serial numbers 88080972 and 88080934). I think we’ll know that Caterpillar has gone too far if the company pursues actions against other companies that make any use of honeycomb lattice designs in their logos, marks, such as Post Foods (for their Honeycomb cereal) or the American Beekeeping Federation.

 

Conclusion: Can’t Own Every “Cat”

The troubling fact for Caterpillar’s IP management is that their truncated mark happens to be an entirely different English word—an extremely common, extremely brand-able (because of the American fondness for cats) English word.

This accidentally expands the range of what Caterpillar has to consider when thinking about IP protection. It turns out that Americans like cats, and associating with something positive is a classic brand-building technique. So a lot of companies are prone to incorporating felines into their branding. This shouldn’t have anything to do with a company named after a butterfly larva, but trademarks are more about language than they are about zoology.

There are 2459 results for live marks in the USPTO Trademark Database with the word “CAT.” Caterpillar can’t deny IP ownership of every “cat.” But Caterpillar can’t idly sit by and let their trademark fade into oblivion because cats got a popularity boost from social media.

The central battle in IP is defining the boundaries of ownership (this is what it has in common with other types of property law). Caterpillar surely understands that no single company can own every instance or usage of the word “CAT.” But Caterpillar just as surely understands its risks: that a mark like “CAT” is extremely difficult to protect, and is likely to become a weak mark without constant vigilance.

There are strategic reasons for defending IP aggressively. But somewhere, there is a line between an aggressive defense and an offensive offense. Although Caterpillar’s strategy is understandable, there has to be a limit to a trademark portfolio. If Caterpillar hasn’t crossed that line with its cancellation action against Cat & Cloud, it surely must be getting very close.

 

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I have to include the caveat that there may be more to this particular case than is apparent. Research on open litigation is challenging. Seemingly insignificant or unimportant details can completely alter the course of a legal analysis. As always, nothing in this post constitutes legal advice and is for educational purposes only.

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Fun Fact: Caterpillar owns the second oldest “Cat” mark in the TESS database.

Second oldest CAT mark: 0564272, issued Sept 1952

Oldest Mark: TOMCAT:  0552420, issued Dec 1951.

***

Bonus Background Trademark Knowledge: Two Types of Proceedings

What is an Opposition?

An opposition proceeding is when one party applies for a trademark, the USPTO says, “If anyone doesn’t think we should approve this trademark, speak now or … well, file a cancellation proceeding later.” An opposition is another party speaking up just before a trademark is granted.

Trademark owners sometimes file oppositions that sound egregious. But filing an opposition is sometimes just a way of announcing that you care about your trademark; in some of the more outlandish cases, the opposing party doesn’t really expect the USPTO to deny the application—the opposing party is just establishing a record. Other times, the opposing party really does think that there is a legitimate concern with the applicant’s trademark. The proceeding between Caterpillar, Inc. and PetraCat was an opposition proceeding (and as a result, PetaCat was not granted a registration for their trademark).

 

What is a Cancellation?

After the USPTO has approved an application and given a certificate of registration to a trademark holder, sometimes another party realizes that there is some reason that the trademark registration should be cancelled. A cancellation is different from an opposition in the fact that the defendant has already received a trademark registration. This gives a little bit more of a presumption of legitimacy to the defendant than the applicant has in an opposition proceeding. The proceeding between Caterpillar and Cat & Cloud is a cancellation proceeding.

 

What Slay the Spire can Teach About Digital Media Access Decisions

When I heard that iTunes was scheduled for destruction, I was baffled and alarmed. I have since learned that the service is being split and re-branded, in a sort of platform-mitosis. But I had several conversations in which my interlocutors were not persuaded of the merits of media ownership over streaming media. Having collected my thoughts, and faced with Google’s Stadia announcement as well as even the phantasmal threat of an iTunes closure, I hope to make a case here that media ownership reduces wildly unpredictable and uncontrollable elements of media consumption.

Slaying The Spire, With Just a Little Luck (Or a Lot of It)

Slay the Spire is a rare case in which combining a lot of ideas into a game doesn’t make the game feel chaotic and confusing. The game consists of progressing through the levels of an eponymous spire, each level consists of some encounter or event—very, very often, a combat event. Combat in this game is a resource-management card game: using a limited pool of “energy,” cards are played that either deal damage or prevent damage from being taken. Each card costs a different amount of energy, so strategic choices have to be made to optimize offense and defense. At the end of a combat, the player is presented with three choices for a new card to add to the deck. The same deck is carried through the spire, so each completed combat presents an opportunity for new cards for future encounters.

Slay the Spire gets its replay value from the unpredictable factors that permeate the game. There is randomness within the combat encounter, as a player’s options are defined by the cards that are drawn from the deck on any given turn. Then there is further randomization in the events themselves (what enemies you fight, if any, on any particular level of the Spire). Slay the Spire adds randomness in the building of the player’s deck: there are no guarantees that you will even have the option to add a certain card to your deck in a particular run of 50 levels in a Spire. (I once spent an entire run through a Spire trying to assemble a deck centered around one specific card that would greatly amplify my defensive capabilities—I never even saw that card, and inexplicably still got to the final level.) And I haven’t even discussed the role of Relics in the game, which can provide small bonuses or fundamentally alter game mechanics. All of these unpredictable, randomly-generated chances and choices give the game replay value and make it interesting, fun, and challenging. Putting choices out of a player’s control can be an element of a great game, but it’s not a part of a great day.

 

Unpredictable Elements

There are a lot of components involved in the everyday digital tasks that fill (and sometimes sustain) our lives. The device has to work properly, it has to connect to a network, the network has to function, and we also rely on the server that hosts the data we want. Anything from dropping a cell phone to a power outage to an unplugged cable somewhere in a distant city can cause the entire process to fail. It is really amazing and awe-inspiring that the entire system works as well as it does. Of course, sometimes, something goes wrong.

For purposes of today’s discussion, I think it’s helpful to divide the possible problems into two categories: those in the user’s control, and those outside of the user’s control. So, whether I charge my cell phone, whether I spill water on my computer, whether I use a program correctly—those are, practically speaking, in the domain of the user. However, the city’s electrical power grid is not something a user can single-handedly maintain or repair. Similarly, the user cannot control conditions at a distant server farm, or control the telecommunications network that links the user to those servers.

This, it seems, is where I diverge from so much of my demographic cohort. I don’t want my access to media to rely on these two additional components (telecommunications and data-holding servers). Maybe I would feel differently if I had better experiences, but I have repeatedly been unable to play games or watch movies because at least one of these components has failed. I have encountered this setback for over a decade- in some cases, I have experienced it daily, over the course of months. In contrast, when I think back to those halcyon days in which I owned my media, the only obstacle was a scratched DVD or a VHS tape that was just too-well-loved (we all have a childhood story of the tape that we watched so many times that the playback became warped and distorted).

Conclusion

The unpredictable nature of the available choices in Slay the Spire keeps an otherwise repetitive game novel and engaging. By forcing the player to consider various probabilities and possibilities, the game creates challenge and the kind of frustration that invites a player to learn, try again, and do better next time. I cannot understand the kind of person who willingly invites this kind of challenge and frustration into the process of trying to listen to music or watch a movie. Conversely, if a player had control over any of these random elements in Slay the Spire, the game would be easier. For both Slay the Spire and media access, generally, the same rule applies: the more control one has over the variables, the less challenging the experience.

There are other issues implicated in this debate that I didn’t touch on: the data privacy questions that come with streaming and DRM protections, the reasonable efforts of artists and publishers to protect their copyrights and profit from their works, the legal status of digital goods, etc. Those issues deserve consideration (which is why I have written about them before and will do so again), but I wanted to keep my focus narrow for the sake of clarity. My perspective on this question can be distilled to one personal point: I do not feel that there is evidence to support the claim that US telecommunications networks are more reliable than I am. I simply trust myself more than I trust those corporations, their services, and their infrastructure. Likewise, I trust myself more than I trust the media companies that provide the platforms and media. This is true on a day-to-day basis (for telecom), and it is true for long-term planning (media providers make no promises that they will last longer than my interest in the media they provide).

I can trust electricity providers—they have proven themselves. Power outages certainly do occur, but their frequency, cause, and duration are within acceptable parameters.* Maybe it comes down to what inconveniences, unknowns, and probabilities we are willing to accept. I can live in a world where my electricity is out for maybe 30 minutes per year. I’m not excited to choose a world in which I can access my own leisure at the leisure of so many other people.

 

 

 

 

*The fact that power failures necessarily cause network failures would be a meaningful riposte if my point were strictly confined to unadjusted uptime comparisons.

How Pirates Change Games (It’s Usually Not An Improvement)

Sea Of Thieves: It’s Not Called “Sea of Cool Guys” – Mike Krahulik

Sea Of Thieves is a game where people who want to be pirates can be pirates. Some players really, really  get into the role. Every online game community has experienced some trolling and griefing; there are always players who invent their own game, though it’s always the same game, in which the objective is to make other players unhappy. The developers of Sea of Thieves specifically designed space for that kind of player—unlike other games which seek to curtail negative behavior and ban players who ruin a good time for others. In a game about pirates, wanton aggression has a place.

 

When You’re a Professional Pirate…

It took me a while to understand how copyright infringement (and counterfeiting) came to be called by the same term that was previously reserved for attacking a ship, killing the crew, and stealing their stuff. The two crimes don’t really look similar: copying a digital file rarely involves a cutlass or a flintlock pistol, taking barrels of rum or chests of gold, and typically doesn’t involve boats at all (except when moving a lot of counterfeit goods internationally, I guess).

I think the term makes more sense from the perspective of the owners of the rights. Pirates of the 15th-19th centuries were hard to find, hard to predict, and hard to pursue. Sometimes their attacks wouldn’t be noticed for months, as it was hard to get good cell phone reception in the mid-Atlantic in the 1600’s. So, when music, movies, books, and games started getting copied and distributed, and rights owners struggled to identify who was doing it, where they were, or what they might do next, as they completely disrupted the industry’s ability to sell and distribute their wares, I imagine pirates came to mind.

 

Countermeasures

Media industries reacted to piracy differently, as best fit the particular medium. The music industry moved away from physical goods and into the digital marketplace. The iTunes Music Store was, in many ways, like the P2P networks that had threatened the industry, except that Apple was the only one seeding and they charged for each song.

The video game industry took a different approach. After a short-lived effort to encrypt physical copies, the industry moved to a digital distribution system. This was easy enough, and platforms like Steam and the Play Station Store were already moving the industry in this direction. The next move, however, was for the internet to start shaping the way games were played: online gaming became increasingly popular, and developers and publishers realized that it was easier to keep track digital copies if devices had to connect to the company’s servers. It was a natural fit: the games already involved internet connection, so it wasn’t much more work to have the serves check to see if players had authentic copies of the games. Because the game required player to be always online, this method became known as Always-On DRM. When it worked well, it was something that honest players would never notice or think about. But it didn’t always work so well.

Rebellion

The new system worked well for some games. Other games… well, suffered. Sometimes, the online connection requirement was obviously completely artificial and frustrated players because the setup made no sense. This exacerbated problems in cases of poor execution: when a server couldn’t connect, it was even more frustrating when the server wasn’t necessary for the game experience. Even today, not everyone has a consistent, stable, high-speed internet connection (especially in the US). Many players just wanted a simple, single-player experience, and Always-On DRM interfered with that. The method created an environment that only allowed players to play when the company was able to facilitate it; if the server was down, or the connection was slow, the game was unplayable. This upset people who paid for a leisure product and then found out they could not use it at their leisure. By increasing friction and fuelling resentment against the game industry, some game companies suffered as they tried to implement Always-On DRM. The artificial inclusion of Always-On DRM to the reboot of the incredibly popular and successful video game SimCity is credited with its failure (notably, the execution of the Always-On DRM was sub-par, as the server was frequently down or buggy).

 

Pirate By Design

Sea of Thieves found success as a game by embracing a certain attitude that the rest of the industry had been fighting for decades. The developers made a space for people who want to undermine the work of others. So far, it’s been an interesting experiment that I can only predict will culminate in the coagulation of that particular kind of trolling, griefing player. I see it as a kind of prison in which the inmates believe they are at a theme park. Maybe the game will eventually give us some kind of data about trolls who revel in ruining the joy of others. Maybe it will teach us something about pirates.

There is already a lesson about piracy for video games. In the early 90s, piracy was built into the business model of some companies. They called it “shareware,” and the idea was that people would copy and distribute a portion of a game. The developer hoped that this would serve as a sort of advertising, and people who enjoyed the shareware portion of the game would then purchase the full game. In 1993-4, idSoftware proved that this model was feasible with one of the most popular games of the 90s: Doom was distributed widely as a shareware product and the company made enough profit for the head programmer and the lead level designer to each purchase a high-end sports car. This year, idSoftware released Rage 2; unsurprisingly, the new parent company, ZeniMax, did not opt for a shareware distribution model. The video game industry has changed over the last 30 years. It takes a special combination of product, customer, and ecosystem for it to be a smart choice to give away a third of your product for free—but it’s not an impossible dream.

Today, piracy remains a problem for the video game industry, but new legal challenges (some with more legitimate basis than others) have proven more urgent: legislation of loot boxes, esports contracts, prosumer sponsorship deals and disclosures, copyright infringement within the game, and copyright infringement for streaming and video uploads.

Maybe that’s the best reason to keep the term “piracy” for copyright infringement that involves copying the entire work and distributing for consumption as a counterfeit or inauthentic product: there are so many ways copyright can be involved in a video game in the current digital ecosystem, have different terms for the different infringements is nice.

Meme Collective: A Strange Hope

Steve Jobs always wanted Apple to be a large, powerful force. Mark Zuckerberg wanted a way for students at Harvard to know who was single and a way to make plans for parties. Some tech companies, products, and platforms, were made with an eye to global scale—but some weren’t. Because the internet has always been a collection of people forming communities, it has always had hallmarks of organic growth—specifically, it has always had surprising, unplanned successes. In many ways, the internet itself is something of a surprise, unplanned success: it went from a science project, to a nerd hobby, to a general luxury, to a utility. Unplanned success can bring a lot of problems. As the internet got popular, copyright law suddenly took on entirely new scope, meaning, context, and purpose. But just like some tech products and companies struggled under the weight of their own popularity, copyright law has struggled to bear the weight placed on it by an internet of creative, collaborative users.

Meme Union

Instagram is a cultural surprise (except perhaps to Jean Baudrillard) in and of itself, but it’s still surprising to read that the creators of memes are banding together to form a union. The underlying reasoning is understandable: these creators: 1) Make a living by creating content that is uploaded to Instagram, 2) Bring in significant advertising revenue to Instagram as a result of this content, 3) Have no kind of guarantee or assurances regarding Instagram’s behavior. It’s an incredibly interesting scenario that has happened with professional content creators: the overall structure of employment has happened without any agreement or discussion. I interpret the effort to unionize as an effort to formalize an informal, de facto employment.

There is one other very unusual wrinkle regarding this informal, organic employment: a lot of it is probably illegal, and almost no one takes that seriously.

 

Are Memes Legal?

In a TED Talk, Lawerence Lessig pointed out that remix culture that is so prevalent online is a violation of copyright law. Among other problems, he feared that the generation primarily involved with the creation of this media would develop a callous indifference towards the law as that generation became accustomed to ignoring laws that failed to keep up with technology and culture.

Memes function on the idea that a copyrighted work is a blank canvas. The problem behind remixes and mashups is that these new works use existing works of others. I don’t see the distinction between a meme and a remix, except maybe for two things: 1) minimal use, and 2) original additions. However, there are problems with both of these potential justifications for memes. The uses rarely qualify as minimal, and copyright law is unclear (at best) about what kind of original additions would be enough to allow the new work to be declared non-infringing.

Of course, it is possible to make a meme without infringing copyright: using photos from the public domain, or photos to which the creator also owns the copyright, for example.

 

Will Unions Like This Modernize Copyright Law?

This strange moment is exciting because it’s a moment of cultural evolution. The unionizing effort may or may not work out in this case, but that’s almost irrelevant to the larger picture. This is a significant step toward an internet that blends user-generated-content and ecommerce (arguably, two of the biggest buzzwords and applications for the internet from the ‘90s and ‘00s). It’s also exciting to see how quickly new media is commanding economic force. The concept of watching professionals play video games is still surprising and baffling to millions of people—while streamers and pros sign sponsorship deals with Fortune 500 companies.

The most exciting prospect is the effect that the increased economic attention could have on changing copyright laws. Copyright policy has really struggled to find a powerful force that advocates for user-generated-content accommodations. Indeed, the fiercest advocates for copyright policy have been major copyright holders (movie and music studios). Non-profit organizations have made noble efforts to present counter-arguments to the interests of the major copyright holders, but there has not been a concerted effort of content creators on new media to affect policy change. An Instagram Meme Union is a surprising starting point, but it might be a good starting point.

EU Directive On Copyright in the Digital Single Market: Three Not-So-Scary Possibilities

When evaluating the EU Directive on Copyright in the Digital Single Market, there are three general categories of outcomes: Little/no impact, Moderate-but-endurable Impact, Apocalyptic/Catastrophic. It turns out that there are pros and cons to each.

NOTE: Here I consider the DCDSM in the context of arts and entertainment, with a particular focus on user-generated content production. I note at the outset that I suspect there is a very different analysis for the impact of this directive on news media and news dissemination.

 

1. Little-To-No Impact

EU Implications

As a directive, this passing of the DCDSM does not accomplish much. The directive is only an edict that member states must pass their own laws that accomplish the general purposes of the directive. The first question the DCDSM poses, then, is how different nations will approach this directive.  Some nations might do very little, passing only milquetoast legislation and then neglecting to enforce it. Other nations may openly and pointedly refuse to comply with the directive, daring the EU to take punitive measures  against the non-compliant nation. Each country will have to decide how to balance the force of the directive (which is, itself, of debatable strength) with the risks of losing access to some major technology platforms.

Each nation is surely aware that there is a question of whether companies would rather cease operations in countries whose requirements are too onerous. Twitter or YouTube may find that the cost of meeting a nation’s copyright requirements outweighs the benefits to the company of continued operations in that nation. There is a bold example of this behavior in recent memory: When China demanded too much from Google with regard to censorship, access to user’s email and other data, Google simply decided to discontinue operations with the largest consumer base in the world. If Germany asked Twitter to pay for each link that users disseminate through their service, Twitter might prefer to avoid that tax by no longer offering Twitter to Germany.

 

US Implications

Another of the looming questions that this directive poses is whether there will be implications for non-EU jurisdictions. When the EU passed a law that increased user data protections, many companies restructured their data privacy systems across all regions. Some companies might consider a similar approach when faced with the DCDSM—it is sometimes easier to structure a business model to meet the highest requirements placed on the business. Many companies have struggled to navigate copyright claims (and data privacy, consumer protection, and advertising laws) in the wild frontier of user-generated content and digital media. They may see new, stringent laws as an opportunity to approach these problems with new tactics—though companies will have to consider whether their tactics will obliterate their business.

2. Moderate-But-Endurable Impact

In some ways, this is the worst for users and the best for large stakeholders.  This outcome keeps YouTube and Twitter afloat, imposes inconvenience and malcontent on users, but the obstacles are just minor enough to navigate. Maybe YouTube and Twitter charge a small subscription fee to cover their increased costs (not unlike Netflix or Hulu). Maybe the large, familiar platforms lose some of their functionality, but not so much functionality that the platform feels entirely transformed. Under this scenario, most of the things that most users do still mostly work, and therefore the overall satisfaction of the user base is only slightly lessened.

 

 

3. Apocalyptic, Catastrophic Annihilation of Social Media As We Know It

Histrionic

People who have the most to lose in the worst-case scenarios are beyond deeply concerned. The reaction of content creators on YouTube seems to be that this is among the worst things to ever happen for their business model. These people consistently cite existing problems with YouTube’s ContentID system and the copyright strike system as the basis for their concern (and moderating content on a social media platform is no easy task), and predict that this law will exacerbate those existing problems. Their reasoning is that YouTube has already demonstrated the challenges involved in trying to regulate copyright claims on YouTube: algorithms get things factually wrong, there is no presumption of de minimis use, journalism and parody uses are rarely recognized, etc.

The Way Forward

The worst case scenario that content creators fear is the death of the major platforms: YouTube, Twitter, Facebook (and subsidiaries like Instagram), will all lose economic viability or become so difficult to use in meaningful ways that users will abandon them, and the internet itself will die as a direct result. I see plenty of alternatives to the death of the internet (that’s something I expect the telecommunications industry to achieve before anyone else), even granting a severe impact to the operations and function of major (and minor) platforms.

A key fact about the internet is that users will always find ways to navigate the new space. The internet is a battleground for a particular kind of warfare: a fight in which new strategies are always being discovered. New platforms rise to replace old ones (no matter what the reason for the death of the last one was).  New methods and systems are born out of the effort to get around whatever obstruction frustrated the users.

Users will find ways to continue their current behavior, working around the impositions of the new laws. Not allowed to Tweet a link? Users will develop a new system for pointing people to information (humans have been creating systems for this purpose for millennia). Not allowed to stream a video game with a song it? Sing over it. Users are creative: successful content creation in the new environment makes creativity an imperative. The large copyright holders may one day (if not this time around) live to regret promulgating too draconian of an edict of creativity.

 

3A. The Backfire Scenario, Or, The Poetic Justice of Getting What You Ask For

“Success is a menace. It fools smart people into thinking they can’t lose.” – Bill Gates, as depicted in Pirates of Silicon Valley

One likely response to the DCDSM is that users will create more of their own content. If using existing content becomes prohibitively difficult, more users will create what they cannot afford. This will have a detrimental effect on the stakeholders who expect to gain the most from the new laws: the rights holders of existing popular works. These stakeholders have felt for decades that the internet was undermining their profits by allowing people to access movies and music without paying for it. As users create original content instead of incorporating these existing works, the works of the larger establishments will enjoy less dissemination and recognition by the public. The audience for these works will shrink as fewer people are exposed to their works. Large corporate stakeholders will need to invest more in advertising campaigns to acquaint the public with their products; they will try to replace what content creators were doing (for free and more effectively) for them.

For most of the 20th century, large corporate rights holders had every reason to think that they were indispensable—that they were the only way that people could access arts and entertainment. The Napster case demonstrated that the internet had the power to undermine their channels of distribution. User-generated content is the current argument that the content itself can also be produced outside of the control of these large stakeholders. If the DCDSM sparks an apocalypse of the current generation of UGC platforms, the phoenix that rises from those ashes is surely the end of the 20th century entertainment business model. In this scenario, users truly leave the large rights holders behind.

 

Conclusion: Probably Not Really That Bad For Art and Entertainment

Everyone will have to wait and see what form the Directive takes as it influences national laws. I think this is the kind of law that the internet is ready to work around. If it has devastating effects on existing platforms and services, I am quite sure that new platforms will emerge that promote entirely original content, unshackled from existing copyrighted content. The emergence of new solutions is the story of the internet.