World of Lawcraft: Breach of EULA is infringement

(via B2fxxx and Terra Nova) Back in March we reported on an important suit involving World of Warcraft and software developers MDY (I don't know why I'm using "we", it's only me writing this). The suit involved cheating autopilot exploit which allows a player to gather gold automatically by using intelligent agents and bots to control an avatar. MDY distributes software advertised specifically to serve as an exploit, which represents a serious problem for WoW developers Blizzard Entertainment because it affects legitimate players who put time and effort into levelling and gathering gold.

Blizzard's Terms of Use (ToU) clearly prohibits such practices, by stating that:

"You agree that you will not (i) modify or cause to be modified any files that are a part of the Program or the Service; (ii) create or use cheats, bots, "mods", and/or hacks, or any other third-party software designed to modify the World of Warcraft experience; or (iii) use any third-party software that intercepts, "mines", or otherwise collects information from or through the Program or the Service. Notwithstanding the foregoing, you may update the Program with authorized patches and updates distributed by Blizzard, and Blizzard may, at its sole and absolute discretion, allow the use of certain third party user interfaces."

MDY's actions seem to be unequivocally a breach of these terms and conditions. However, it must be stressed that the above is not the licence itself. WoW's End-User Licence Agreement (EULA) is a separate document which grant the user the right to perform actions which otherwise would be infringing, in this case, install the program into a computer. Under normal circumstances, a breach of licence usually translates into the termination of the agreement, and therefore, the termination of the licence to use the work, but it does not immediately translate into copyright infringement. Breach of licence will normally herald the termination of the permission to use the work, and further uses would be infringing. Does a breach of the Terms of Use mean that the licence has also been breached? Blizzard's EULA clearly states that the user must comply with theToU, but nowhere does it say that breach of those terms will translate into a breach of the licence! Similarly, it seems clear to me that the licence was drafted to accomodate the theory of termination described above, as it sets out the effects of termination:

"Blizzard may terminate this Agreement at any time for any reason or no reason. In such event, you must immediately and permanently destroy all copies of the Game in your possession and control and remove the Game Client from your hard drive. Upon termination of this Agreement for any reason, all licenses granted herein shall immediately terminate."

Blizzard sued MDY for selling the exploit, but not for breach of Terms of Use, but for copyright infringement. This is why I believe that this case is so important. Blizzard's lawyers are claiming something that rests at the heart of the interaction between contract and copyright law. Does breach of licence mean copyright infringement?

The United Stated District Court of Arizona has just decided on the case of Blizzard Entertainment v MDY, and it's a doozy. As explained above, the heart of the question is whether a breach of terms of use constitutes copyright infringement. Blizzard argued to the court that it does, and presented two cases that supported this assertion. MDY on the other hand argued that even if it is in breach of the TOU, this would not constitute copyright infringement because MDY's actions are not an exclusive right protected by copyright; there is no right not to cheat in a game. MDY presented Storage Technology v Custom Hardware Engineering as a relevant authority that explicitly recognises that there cannot be copyright infringement on rights that do not exist, but the court dismisses this claim. Similarly, the court agreed that existing licensing law in the United States admits that granting a licence usually innoculates users against copyright infringement claims. The Court cites Sun Microsystems v Microsoft:

“Generally, a copyright owner who grants a nonexclusive license to use his copyrighted material waives his right to sue the licensee for copyright infringement and can sue only for breach of contract. If, however, a license is limited in scope and the licensee acts outside the scope, the licensor can bring an action for copyright infringement.”

Similarly, this case is not only about MDY, it is about all MDY users. Blizzard's argument is that each user who is installing MDY's cheating software are in breach of their ToU, therefore in breach of the licence, and therefore are infringing copyright. MDY therefore is guilty of contributory and vicarous copyright infringement, akin to Grokster and other P2P providers. The District Court of Arizona therefore ruled in Blizzard's favour, and therefore MDY will be held liable accordingly.

I must say that I do not like MDY, and my initial reaction was to wish Blizzard the best. However, this is a diabolical ruling. The actual effect of the court's argument is that if any user is in breach of the Terms of Use, they will also be liable for copyright infringement. To put this in other terms, if I let you into my house, I am giving you a permission to enter. I cannot just decide to revoke my permission unilaterally (which is what Blizzard's EULA says), and while you're inside call the police alleging that you broke in. No wonder EFF have flipped over the story (although I do not agree with their provoking title). William Partry is also befuddled by the strange decision.

So, next time I see someone misbehaving in Ironforge's bridge, I can say in the chat box: "Pardon me chap, but are you aware that your actions may constitute copyright infringement?"