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AN ARGUMENT FOR EMBRACING THE LEGALITY OF CROWDFUNDED GAME MODS

By: Mikela Gassert

Introduction

            If a movie contains a boring scene, a viewer may fast forward through it using a remote. If a book lacks a satisfying ending, readers are free to write a new one. If a video game lacks some key detail or accessibility feature, players can develop modifications, called mods, to resolve the problem.[1] Unlike the other two options for improving a consumer’s entertainment experience, modifying a video game title requires greater technical knowledge and time investment. As a result, mod creators will often share their creations to improve the community’s collective enjoyment. The community may even want to compensate these mod creators for their effort through paywalls or donation-based funding.[2] Mod creators may face legal consequences when they monetize their creations.

            Mods are beneficial for the video game industry,[3] but mods can threaten a company’s copyright exclusivity because of their status as derivative works. [4]Mods that collect revenue by paywalls are likely to scare copyright holders into litigation.[5] The mere threat of litigation is enough to shut most fan projects down entirely.[6] Mod creators are not always deterred by these setbacks.[7] Many mod creators now prefer a less lucrative method of soliciting donations than paid mods[8]  finance their projects—online crowdfunding.[9] With the explosion of online crowdfunding, these donation systems are now more nuanced and have started hitting levels that might encourage copyright holders to bring litigation to non-paywalled mods.[10]

This blog will argue that copyright law should not be leveraged to destroy donation-based mods the way it has done so to paywalled mods. Additionally, it will argue that threatening mod creators with litigation should be avoided. Instead, the lack of clarity on monetizing fan-created derivatives should be resolved with legislation that matches the current climate, or more likely by having individual game developers adopt universal standards that favor mod creators for mutual benefit. First, this blog will explain the reason that mods have turned to crowdfunding by discussing the history of mod monetization. Second, this blog will provide an explanation for why threats of litigation are damaging to mod communities as well as to the video game publishing companies that employ them. Third, this blog will conclude by explaining differences between crowdfunding and traditional paywalls and then argue that these differences create a basis for an alternative solution to litigation threats.

Why Paywalled Monetization of Mods Makes Copyright Holders Threaten Litigation

            Section 106 of the Copyright Act grants copyright holders an exclusive right to make or license derivative works based upon a previously copyrighted work.[11] Physical mods of game hardware are considered derivative.[12] While not every change to a video game’s function may count as derivative,[13] some software-only mods have been labeled as derivative works since at least 1998 in Micro Star v. Formgen.[14] In Formgen, a third-party company packaged and sold user-created levels as a mod for the game Duke Nukem 3D, which cut into publisher Formgen’s copyright interest.[15] The Ninth Circuit used a two-part test to determine whether or not the video game mod was derivative. First, the derivative work had to exist in a concrete and permanent form.[16] Second, the derivative work had to substantially incorporate protected material from the preexisting work.[17] As the mod was consistent on boot-up compared to manual edits in code on boot-up, the court considered it to be concrete and permanent.[18] Since the game mod relied on story from the Duke Nukem 3D title, the court viewed it as a sequel and thus incorporated protected material.[19] After classifying the mod as derivative, the court rejected other protections such as fair use doctrine as defenses to the paid mod.[20] The court issued an injunction against the third-party, barring further sales and mandating that it bear court costs.[21]

            Formgen has discouraged monetization through paywalls for years. Formgen was the start of the legal system’s interaction with mod communities, but it was not the last. Over time, the climate surrounding mods changed.

Why Litigation Threats Do Not Match Realities of the Mod Community

            While Formgen and other cases like it should foretell doom and gloom for mods, they have not. In practice, the mod community is thriving. Why? Many companies recognize the benefits that mods and mod-friendly cultures can bring to their titles.[22] Access to free mods may enhance users’ enjoyment of the initial software, while shutting down mod projects can evaporate goodwill.[23] For example, the developer of The Sims series has published guidelines to permit unauthorized mod content on selective conditions.[24] Unfortunately, there are no standard guidelines across the industry.[25]

            The most recent example of this lack of clarity hurting or potentially hurting creators comes from a scandal within the RuneScape community. RuneScape is an older PC game by developer Jagex.[26] On September 7th, 2021, a highly anticipated game mod called, RuneLite HD, for an online client that can access RuneScape content was cancelled.[27] This game mod was intended to increase the graphics quality for players free of charge.[28] At the time, the creator, Patreon, generated nearly $300 a month in donations towards this effort, which RuneScape’s developer, Jagex, never sanctioned.[29] Three days after the takedown of RuneLite HD, RuneLite’s development team announced that the fan-made mod would return with support from the copyright holder.[30] The RuneLite HD Patreon now generates nearly $800 per month after the controversy, which it continued to do while the copyright holder was not supporting the project.[31]

            If the RuneLite HD mod creator and the original publisher had not been able to find a compromise, what could have happened to the money that RuneLite HD raised? RuneLite HD’s development team could have faced infringement charges. Infringement penalties often require disgorgement of profits, which likely includes donations attributable to the production of the infringing work.[32] RuneLite HD only shut down in the first place due to a cease and desist letter from the publisher. Closer analysis is needed to determine if this is actually feasible. In any case, donation seizing would be a move reviled by fan communities, and so it’s unlikely to be a smart financial decision overall.

Why the Monetization of Derivative Works via Crowdfunding is Different

            Amidst the current legal justifications that support total developer control, crowdfunding emerged. Initially, mod creators used in-game donation links to pick up the gap between illegal paywalls and unpaid mod creation.[33]

            There are a few key questions that must be answered to defend mod creators’ ability to collect donations. First, are mod creators crowdfunding infringement? Second, if mod creators are crowdfunding infringement, what standards need to be followed to avoid funding infringement?  If the answer to the first question is no, this blog argues that monetization should be allowed to continue. On the other hand, if the answer to the first question is yes, then this blog argues that promulgation of clear standards for monetization can only help all parties involved.

            For now, the answer to the first question is unclear.[34] State laws have not yet evolved to specifically regulate charitable fundraising conducted through the Internet.[35] There may be some basis to link crowdfunded donations to the creator rather than a specific derivative work that the creator makes. In the context of crowdfunding with unsophisticated investors, these limits would be especially important in preventing a disgorgement of donation funds.[36]

            If a developer’s paid mods are found to infringe on developers’ copyright, what damages would be most likely applied? According to 17 U.S.C §504(b), “[t]he copyright owner is entitled to recover the actual damages suffered by him or her as a result of the infringement, and any profits of the infringer that are attributable to the infringement and are not taken into account in computing the actual damages.”[37] In gaming contexts, this has been applied unfavorably, with one case resulting in damage of three times the infringer’s profits.[38] This level of remedy would be grossly disproportionate. Any company would need to be aware of the negative public relationship effect pushing for this against mod communities may have.

            Ultimately, while attempts to pin down the mod community are possible, they are not likely to result in a curbing of long established donation practices. Legal uncertainty in the wake of crowdfunded mod donations harms both developers and mod creators. A cleaner solution to these problems is simply for publishers to author clear community guidelines.[39] A publisher that can understand and engage in mod communities can then continue to gain the benefits of mods.

Conclusion

            Donation based mods have existed in a grey area with few definite boundaries. Mod creators’ hesitancy to fight against copyright holders leads to a lack of caselaw resolving the topic. Potential chilling effects on the mod community may have more effects for the consumer. An attempt at clarity could provide some guidance in this space. Developers especially should work to build awareness of the negative effects of a lack of regulation.


[1] Rishav Medhi, How gaming mods continue to keep gaming interesting, NerdVolume, (May 3, 2020), https://medium.com/nerdvolume/how-gaming-mods-continue-to-keep-gaming-interesting-4820954a23b5

[2] Owen S. Good, Nexus Mods outlines plans to compensate modders, Polygon (Dec. 20, 2017), https://www.polygon.com/2017/12/20/16803278/nexus-mods-donations-pay-modders

[3] Christopher Livingston, The biggest games in the world wouldn’t exist without modders, PCGamer (Sept. 24, 2018), https://www.pcgamer.com/the-biggest-games-in-the-world-wouldnt-exist-without-modders/.

[4] Rishav Medhi, How gaming mods continue to keep gaming interesting, NerdVolume, (May 3, 2020), https://medium.com/nerdvolume/how-gaming-mods-continue-to-keep-gaming-interesting-4820954a23b5

[5] Id.

[6] Alex Seedhouse, Pokémon Prism Cancelled After Nintendo Deliver Cease And Desist Letter, Nintendo Insider, (Dec 22, 2016), https://www.nintendo-insider.com/pokemon-prism-cancelled-after-nintendo-deliver-cease-and-desist-letter/

[7] Austin Wood, Fearing cease and desist from Bethesda, Fallout: New California mega-mod ramps up, PCGamer (Jul. 18, 2018), https://www.pcgamer.com/fearing-cease-and-desist-from-bethesda-fallout-new-california-mega-mod-ramps-up/

[8] Yong Ming Kow & Bonnie Nardi, Who owns the mods?, First Monday, (May 3, 2010) https://firstmonday.org/ojs/index.php/fm/article/download/2971/2529. (Explaining how individual donation links used to provide minimal income)

[9] Colin Sullivan, Crowdfunding Mods, Game Developer (April 29, 2015), https://www.gamedeveloper.com/business/crowdfunding-mods

[10] See Razed Mods Patreon https://www.patreon.com/razedmods (last visited Oct. 14, 2021). (This Patreon is one of the most financially successful donation-based mods and produces a minimum income of $13,960 per month in donations according to its displayed metrics.)

[11] See 17 U.S.C.A. § 106 (“the owner of copyright under this title has the exclusive rights to do and to authorize any of the following” including “to prepare derivative works based upon the copyrighted work”).

[12] Midway Mfg. Co. v. Artic Int’l, Inc., 704 F.2d 1009 (7th Cir. 1983)

[13] Nintendo of Am., Inc. v. Lewis Galoob Toys, Inc., 16 F.3d 1032 (9th Cir. 1994).

[14] Micro Star v. Formgen Inc., 154 F.3d 1107 (9th Cir. 1998).

[15] Id. at 1114.

[16] Id. at 1110.

[17] Id. at 1110.

[18] Id. at 1110.

[19] Micro Star v. Formgen Inc., 154 F.3d 1107 at 1110.

[20] Id. at 1110.

[21] Id. at 1114.

[22]  SimGuruDrake, The Sims 4 General Discussion, The Sims (Nov. 2017), https://forums.thesims.com/en_US/discussion/comment/16175450/#Comment_16175450

[23] u/RS_117, RuneLite HD has been shut down, Reddit (Sept. 7, 2021), https://www.reddit.com/r/2007scape/comments/pjo5mt/runelite_hd_has_been_shut_down/.

[24] The Sims 4 – Mods and game updates, EA Sports (June 15, 2021), https://help.ea.com/en/help/the-sims/the-sims-4/mods-and-the-sims-4-game-updates/; see also SimGuruDrake, The Sims 4 General Discussion, The Sims (Nov. 2017), https://forums.thesims.com/en_US/discussion/comment/16175450/#Comment_16175450 ().

[25] See Edward Baxter, Thinking Before Modding—Players Don’t Own What They Make, Koburger Law, (July 19, 2020), https://www.koburgerlaw.com/blog/2020/7/29/thinking-before-moddingplayers-dont-own-what-they-make (Explaining that EULAs typically govern mods, which are not universal)

[26] JAGEX, https://play.runescape.com/

[27] u/RS_117, RuneLite HD has been shut down, Reddit (Sept. 7, 2021), https://www.reddit.com/r/2007scape/comments/pjo5mt/runelite_hd_has_been_shut_down/.

[28] Id.

[29] See RS_117 Patreon https://www.patreon.com/RS_117 (last visited Oct. 14, 2021). (Showing the Patreon account that earned $300 monthly)

[30] u/RS_117, HD Mode for runelite will be released on monday, Reddit (Sept. 7, 2021), https://www.reddit.com/r/2007scape/comments/ploj1n/hd_mode_for_runelite_will_be_released_on_monday/

[31] See RS_117 Patreon https://www.patreon.com/RS_117 (last visited Oct. 14, 2021). (Showing the Patreon account that earned $300 monthly.)

[32] Carl “Ott” Lindstrom, Mod Money, Mod Problems: A Critique of Copyright Restrictions on Video Game Modifications and an Evaluation of Associated Monetization Regimes, 11 Wm. & Mary Bus. L. Rev. 811 (2020)

[33] Yong Ming Kow & Bonnie Nardi, Who owns the mods?, First Monday, (May 3, 2010) https://firstmonday.org/ojs/index.php/fm/article/download/2971/2529.

[34] Nintendo of Am., Inc. v. Lewis Galoob Toys, Inc., 16 F.3d 1032 (9th Cir. 1994); Micro Star v. Formgen Inc., 154 F.3d 1107 (9th Cir. 1998).

[35] Charitable Solicitations In The Digital Age: Crowdfunding, Social Media, And Compliance/Best Practices (Outline), 20181029p NYC bar 217.

[36] Micah J. Long, Reasonable Approximation and Proximate Cause: How the Disgorgement Elements Are Bound Together, 12 Liberty U.L. Rev. 1 (2017). (Describing disgorgement as “the repayment of illegally gained profits (or avoided losses) for distribution to harmed investors whenever feasible”)

[37] 17 U.S.C. § 504(b).

[38] Nintendo of Am., Inc. v. Dragon Pac. Int’l, 40 F.3d 1007 (9th Cir. 1994).

[39] See SimGuruDrake, The Sims 4 General Discussion, The Sims (Nov. 2017), https://forums.thesims.com/en_US/discussion/comment/16175450/#Comment_16175450 (Providing an example of guidelines for crowdfunding to a community).

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