How Video Game Mods Are Changing the Intellectual Property Game

Jeffrey N. Rosenthal and Ethan M. Simon

A year ago, the word “fortnight” was relegated to relative obscurity—an archaic way of saying two weeks. In July 2017, however, all that changed. After software developer Epic Games released the blockbuster video game Fortnite Battle Royale—a multi-platform, free-to-play game in which players participate in a cartoonish fight for survival in a post-apocalyptic world—the word “Fortnite” can now be heard everywhere.

Unlike other free games, Fortnite does not include ads; rather, to generate revenue it relies solely on in-game purchases from players to customize their avatar’s appearance (called “skins”) with no other qualitative enhancements. Despite its simple premise and novel business model, Fortnite has been an overwhelming success—boasting 45 million players as of February 2018. USA Today recently reported that in May 2018 alone, Fortnite earned over $318 million, with over $837 million in revenue in the last three months. According to Forbes, the game now earns $1 million a day just on mobile devices.

Fortnite also has an enormous “eSports” following. Generally speaking, eSports involves organized, multiplayer video game competitions, often between professional players. Two months ago, Epic announced it would provide $100 million to fund prize pools for the inaugural Fortnite tournament. But the true legacy of Fortnite’s success might be its impact on the world of user-generated video game modifications—or “mods”—and the resultant intellectual property disputes.

Oh, the Places You’ll Game.

Today, eSports is serious business. Global eSports is expected to generate $1 billion in revenue in 2018, with the number of eSports enthusiasts worldwide reaching 165 million. Commentators predict eSports will be included in the 2024 Olympics.

In the early 2000s, eSports was an obscure, mostly-underground movement. Aside from tournaments built around traditional one-on-one fighting games, certain multiplayer online battle arena games like Counter-Strike and Defense of the Ancients (commonly known as “Dota”) dominated the industry.

Many of these hit multiplayer games shared a common element: they are “mods.” Short for modification, mods change some aspect of a video game, like how it looks or behaves. Mods can vary from minor cosmetic changes to substantive overhauls of preexisting properties. In some cases, mods are authorized by the original game developers; other times they are not.

Mods are not new. Nor is litigation over mods. Take Pac-Man, for example. In the early 1980s Pac-Man consoles sold for $2,500 a unit. Between November 1980 and January 1982 alone, Midway Manufacturing Co. produced and sold over 96,000 Pac-Man games, many to arcades or other businesses where customers paid to play a round of Pac-Man. For many players, a quarter bought a few minutes of gameplay, which ended when a player lost all of his lives.Others, however, became experts—playing for extended periods of time on a single quarter. This game mastery, coupled with waning interest, eventually rendered some machines unprofitable.

In response, owners purchased enhancement kits for their Pac-Man machines. These kits could modify the software, making the game more challenging for experienced players. Some kits also modified the physical appearance of the console itself, making it more visually attractive. But when third-parties promoted and sold these unlicensed kits, copyright and trademark litigation ensued.

As far as software developers are concerned, mods are not always a bad thing. Many players purchase games just so they can have access to the modded version. Consider the original Dota, which was a “modded” version of Blizzard Entertainment’s Warcraft III, an enormously popular game in the early 2000s. Dota had almost nothing to do with the Warcraft III storyline. Instead, it merely recycled some of the characters and landscapes, creating a new game with an entirely new premise. Yet thousands of players purchased Warcraft III just so they could play the Dota mod. That meant success for Blizzard.

The greatest cause for concern, however, arises when a modder creates a standalone game without permission from the developer—and then the new game takes market share away from the original. This is especially critical for games like Dota, where there are numerous, competing iterations and several versions attract significant eSports followings. Not only would a developer in this kind of market lose games sales, it would also lose the attendant eSports revenue.

Given these market forces, game developers often go to great lengths to protect their intellectual property, as Midway did in the 1980s. In 2013, for instance, Valve Corp. released a standalone version of Dota (recall Dota was originally a “modded” version of Blizzard’s Warcraft III). After Valve released its standalone Dota, other developers released similar games. Blizzard and Valve—who had long since settled their own copyright issues over Dota—then turned around and sued some of these copycat competitors. That litigation is still pending today.

Implications: A Mods to an End?

With the advent of games like Fortnite, perhaps concern over unauthorized mods is a thing of the past. Epic does not allow any independent modding in Fortnite. And Fortnite also offers in-game upgrades for purchase, thereby curbing some of the demand for independent mods.

Some in the gaming community have actually expressed disappointment over Fortnite’s mod-unfriendliness. Historically, gamers prefer modded games over their original counterparts; indeed, the collective creativity of millions of gamers may trump that of a single developer.  Take Counterstrike and Dota, for example, both of which are mods that are significantly more popular than their unmodded precursors.

Epic may have found a way to reverse this trend: by selling players what they would otherwise create themselves, Epic has effectively monetizing modding. But by prohibiting independent mods, it may have also opened the door to a mod-friendly competitor. Perhaps Epic will eventually cave to user demands and allow players to make their own mods. If it did, Fortnite could possibly lose its main source of revenue—as players flock to homemade mods, rather than purchase upgrades.

Epic could also consider selling independent game studio mods or player-made mods. But if Epic went that route, who would own the IP rights to a player-made mod? And would modders be paid?  After all, a desirable mod could be quite valuable to Epic, both as a sellable item, and a demand driver for Fortnite. These issues may be on the horizon. They might also be addressed in the next version of the end user license agreement to which many gamers agree (but few read).

The astounding success of Fortnite represents a revolution in the world of video games and the software industry at large. Whether this new paradigm will transform the battlegrounds from which intellectual property disputes are fought over player-driven mods has yet to be seen. For the players, however, until these issues are fully fleshed out their only option is to game on.

“How Video Game Mods Are Changing the Intellectual Property Game,” by Jeffrey N. Rosenthal and Ethan M. Simon was published in The Legal Intelligencer on July 23, 2018. To read the article online, please click here.

Reprinted with permission from the July 30, 2018, edition of The Legal Intelligencer © 2018 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382, reprints@alm.com or visit http://www.almreprints.com/.

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