Case Summary: MDY Industries, LLC. v. Blizzard, Inc., 2011 U.S. App. LEXIS 3428 (9th Cir. Ariz. Feb. 17, 2011)

Category : Case Summaries, Infringement v. Breach

KEY HOLDINGS: In the absence of direct infringement, one cannot be found liable for contributory or vicarious infringement. Generally, a copyright owner who grants a nonexclusive, limited license waives his right to sue a licensee for infringement, and may sue only for breach of contract. Nevertheless, a licensee may be liable for copyright infringement where the licensee’s action exceeds the scope of the license in a manner that implicates one of the licensor’s exclusive statutory rights (i.e., copying, distributing, making derivative works, etc.).  A contractual term that limits a license’s scope is a “condition,” the violation of which constitutes copyright infringement. All other license terms are considered “covenants,” the violation of which give rise to suit for breach of contract. Conditions and covenants are distinguished by state contract law, and to the extent consistent with federal copyright law and policy.  Section 1201(a)(2) of the DMCA provides for an anti-circumvention right, distinct from infringement.

BACKGROUND: Blizzard Inc. is the creator of the popular online videogame, World of Warcraft (“WoW”) which came on the market in 2004. Each WoW player was required to accept Blizzard’s End User License Agreement (“EULA”) and Terms of Use (“ToU”) at various stages throughout the gaming process.

MDY Industries, and its sole member, Michael Donnelly (collectively “MDY”), developed and sold Glider, a “bot” that automatically played the first few levels of the 70-level-WoW game for players. Glider did not copy or alter the game client’s software, did not prohibit a player from paying its monthly subscription to WoW, and had no independent use separate from WoW. Continue Reading