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Emily Xiang is an is an IPilogue Writer, President of the Intellectual Property Society of Osgoode (IPSO), and a 2L JD Candidate at Osgoode Hall Law School.

There is no question that the virtual gaming and e-sports industry has seen exponential growth in the last decade or so. In 2021, global e-sports revenue is said to have reached a whopping USD, and is projected to increase to $1.6 billion USD by 2024. Moreover, there are currently about who are said to be following e-sports worldwide, with that number expecting to climb to 577 million in the next few years.

Part of what makes the question of intellectual property in e-sports so unique is the myriad of overlapping rights that exist, being held by a including game designers, sound engineers, programmers, user interface developers, the players themselves, broadcasters, event/league organizers, advertisers, sponsors, and even spectator fans. But among these actors, whose rights can really be enforced? E-sport tournaments are an amalgamation of various intellectual contributions from a variety of actors. This is in stark contrast to traditional sporting events—after all, it cannot be said that !

It is accepted that the copyright (or the to the source code, maps, sound effects, and characters of a game is . As a result of the considerable power held by video game publishers in the e-sports industry, the associated IP regime is often considered as having a , in which a few actors own all the IP. Game publishers can decide what teams/players may compete, who may host tournaments, and how tournaments are advertised and broadcasted.

However, much of this power is effectuated through end-user license agreements or applicable terms of service with individuals and tournament organizers. Moreover, these rights can then be further assigned to others through contractual means. For instance, in 2015, a Twitch streaming channel named , another video game streaming service. SpectateFaker had broadcasted games played by popular e-sports player Lee Sang-hyeok. Azubu, having contractually obtained the exclusive streaming rights for Sang-hyeok’s games, filed a complaint against Twitch alleging copyright infringement. Interestingly, Riot Games—the publisher who owned the copyright to the game—was not involved in the dispute at the time. The matter never ended up being litigated.

Other disputes have arisen involving video game copyrights, though none such matters have yet to meaningfully challenge the status quo of the “top-heavy” e-sports regime in the courtroom. For instance, in the late 2000s, , including from Korea e-Sports Association (KeSPA). After years of failed negotiations, Blizzard decided to license the exclusive right to broadcast its game StarCraft to another South Korean organization and brought lawsuits against KeSPA.

The matter was ultimately settled outside of court, but it calls into question whether any other actors in the e-sports industry can assert some kind of right to their content. For example, can players enforce some kind of copyright or performer’s right in their gameplay? Many argue that mere gameplay or one’s “style of playing” is comprised of , that it , or that it is to be protected by copyright. That being said, it may also be argued that skilled gamers employ the use of considerably nuanced , which ultimately dictate how the game will go.

The gaps and barriers between IP and e-sports certainly will stop at copyright protection. As the industry continues to grow, we can expect to see more IP-related disputes, including ones involving for things like game titles, gamer tags, team brands and merchandise, or even popular characters, as well as protecting gaming consoles, software programs, and user interfaces. Several gaming patents have already been filed, such as U.S. Patent No. 8,882,576, or , which denotes an algorithm that evaluates the proportionate dependence of an outcome on skill versus chance. And while traditional sports and entertainment industries have long been regulated by established rules and best practices, Canada in particular has (as stated by Erika Carrasco, partner and chair of Field Law’s Emerging Technologies Group). Having a robust IP strategy in place for such a rapidly developing industry with enormous economic prospects makes the most sense.

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As previously mentioned, esports share many of the common elements found in traditional sports. There are professional leagues, teams, sponsorships, media deals, agents, and fans. However, unlike traditional sports, esports differ most significantly in the proprietary nature of the activity. Major League Baseball does not own baseball, the National Hockey League does not own hockey, the National Basketball Association does not own basketball, but in the Overwatch League (OWL), someone does own Overwatch. Overwatch is, therefore, eligible for copyright protection as an audiovisual work. In Canada, the does not identify video games as a specific category of work. However, the courts have recognized  video games to be protected by copyright, both as a whole and in its individual elements such as the soundtrack, voice acting, character design, and level design. For the most part, the owner of the copyright in a video game is the game’s producer.

Similarly to most copyright owners, game producers assert their exclusive rights by controlling reproductions, distributions, public performances, and creations of derivative works that involve or stem from their copyright-protected work. In esports, these exclusive rights provide game producers with significant power over the direction of the industry. Game producers possess the ability to dictate not only the use of their games in tournaments, but also the way the tournaments will function, and even who can participate in the tournaments. Game company Activision Blizzard’s recent decision to switch from a merit-based league to a franchised league for its game Call of Duty is one recent example of a producer exercising this control. This decision was ultimately met with criticism after the iconic Call of Duty World League (CWL) team backed out of the estimated $25 million franchise fee required to join the new franchise league. Their decision effectively concluded their participation in the game Call of Duty for the time being.

Given that tournament organizers, teams, players, broadcasters, spectators, and advertisers all rely on access to a publisher’s IP to participate in esports markets, there is a concern that a publisher’s behaviour could constitute anticompetitive IP exploitation. As one , a game publisher’s IP in a game effectively grants them a permissible monopoly, and publishers will rationally seek to minimize competitive pressure from other entities in the market through vertical integration of the downstream market. However, the issue of whether a single videogame could constitute a relevant market under competition law is unclear. Currently, there are many different esports leagues, numerous publishers, and countless current and emerging games, as opposed to just a single league with monopoly power. Moreover, it would be difficult for any would-be plaintiff to demonstrate that a publisher’s actions were anything not otherwise already afforded to them through federal IP protection. While it’s unlikely there would be any clear violations of competition law, those within the esports industry need to be cognizant of these issues, particularly in an era in which publishers are demanding franchise fees in the tens of millions of dollars for games yet to be released.

While publishers will often flex their IP muscle at the expense of tournament organizers, leagues, teams, advertisers, and broadcasters, there is one particular area where publishers typically turn a blind eye – streaming. When a user purchases a game, what they are buying, in addition to the physical copy, is a copyright licence to make use of the game subject to certain terms and conditions. Generally, streamers receive a “carte blanche” from publishers when it comes to streaming on services such as YouTube and Twitch because it makes commercial sense given the promotional value that streamers provide to the game.

The recent launch of the game Apex Legends is a testament to the influence that streamers have on the industry. Much of the game’s early success can be attributed to clever marketing on behalf of the publisher. s indicate that the game’s publisher, Electronic Arts Inc (EA), paid a number of streamers, including a reported $1 million to top streamer Tyler (Ninja) Blevins, to play the game for the week. The game was an instant success, the game generated over 25 million players, with nearly 64 million hours of live viewership on the streaming site Twitch. All this success occurred even though the game was not announced to the public until a day before it was actually released!

While the gaming community is certainly capable of giving a game life, it also possesses the power to take it away. In 2017, fans organized a of EA’s Star Wars Battlefront II to protest the game’s unfair use of “”. As a consequence of the boycott, EA failed to meet sales targets by roughly one million copies, their stock price fell, and their reputation was permanently damaged. Needless to say, the gaming community plays a significant role in this emerging industry, acting as a type of de-facto regulator in a mostly unregulated industry. 

From an outsider’s perspective, there often appears to be unbridled control on the part of game producers in the esports industry. Still, it should not be forgotten that a game’s real success depends on its reception in the gaming community. If a game producer chooses to deploy exploitative IP strategies, copystrike its players, or engage in manipulative profit-maximization, the community will be aware, and a game publisher will suffer.

Written by Alexandre Dumais, IPilogue Editor and JD Candidate at Osgoode Hall Law School. Alexandre is also the Director of Sports, Osgoode Entertainment and Sports Law Association.

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Fortnite, the video game that has been taking the world by storm over the last year and a half, is set to take centre stage at New 91ŃÇɫ’s Arthur Ashe Stadium from July 26-28 in what will be the largest video game tournament in the world to date. Up for grabs? A chance at a share of the $30 million prize pool, with the winner of the solo match receiving $3 million. The inaugural Fortnite World Cup not only boasts the largest prize pool in esports so far, but it is also one of the largest prize pools throughout all individual sports. Comparatively, the was the most lucrative tournament on the PGA this season with the winner Gary Woodland taking home $2.25 million. Tennis’ recent featured the winners of the men’s and women’s singles earning just under $3 million.

Since the release of its battle royale format over a year and a half ago, Fortnite has become a cultural juggernaut. In less than a year after its launch, the game had 125 million registered users, and a few months later that number doubled. The game also blew past the competition in viewership hours on the streaming service Twitch, reaching , compared to runner-up League of Legends at 862.7 million hours watched. It is estimated that the game’s creator, Epic Games, grossed $3 billion in profits in 2018, leading to a $15 billion valuation. 

Fortnite has quickly developed into one of the most popular video games in the world, but it is only a small part of the rapidly growing industry of esports. Esports describes the world of competitive video gaming and has come a long way since groups of friends hosted LAN parties playing Halo 2 in their parents’ basements into late hours of the night. Following the basic structure of traditional sports, the world of esports includes leagues, teams, sponsorships, media deals, and increasingly, money. Games range from first-person shooter games like Call of Duty or Overwatch to multiplayer online battle arena games like League of Legends or DOTA 2. There are even leagues for mobile games such as Clash Royale and Mobile Legends.

With revenues set to in 2019, exceeding $100 million, and players , esports is now big business. Notable celebrities like Drake, Steph Curry and Michael Jordan have all . Traditional sports team owners such as Dallas Cowboy owner Jerry Jones and New England Patriot owner Robert Kraft have . Bell, a Canadian telecommunications company, with Toronto-based OverActive Media Group. Founded in 2017, Overactive Media has quickly developed into an industry-leading esports organization, and the world’s only esports organization to own teams in the three biggest franchised leagues – Overwatch League, League of Legends European Championship, and Call of Duty League.

Currently, sponsorship and advertising make up the largest source of revenue in esports, this year, and non-endemic brands are beginning to play an important role. Brands like Sephora, Nike, and Hershey’s are all entering into the game because they see the opportunity to reach a new demographic of passionate and loyal consumers. In May, Puma announced a , an esports organization, estimated to be worth at least eight figures. In traditional sports, athletic program, one of the largest in college sports, runs an average annual value of over $11 million. Other ways in which brands are entering the esports space is through the sponsoring of tournaments, leagues, and players.

Other companies are going a step further and attempting to maximize their brand outreach by acquiring trademarks. In June, the world’s largest brewer, Anheuser-Busch InBev, filed for trademark protection of “” with the US Patent and Trademark Office. Meanwhile, trading card company Upper Deck will also be looking to move into the esports space after they filed for trademark protection of “” in early July.

Accompanying esports’ shift from niche to mainstream is also a new set of legal issues, in particular, issues relating to intellectual property. Intellectual property lies at the core of esports, from the software and hardware upon which the games are built and played to the content created by leagues, players, and streamers while playing the game. As such, the rest of this series will explore the various ways intellectual property is affecting esports.

Written by Alexandre Dumais, IPilogue Editor and JD Candidate at Osgoode Hall Law School. Alexandre is also the Director of Sports, Osgoode Entertainment and Sports Law Association.

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Online gambling platforms, however, present a major regulatory problem. Gambling websites are often hosted in countries with lenient gambling regulations. This allows gamblers to skirt local prohibitions like cash gambling on sports events, which is banned in Canada and parts of the United States (US). In the eSports context, online gambling regulation is further complicated by the fact that not all betting sites use real money. Instead, they use in-game decorative items called skins as virtual currency for wagers. This is known as “.”

But if there is no real money involved, is skin gambling technically gambling? The short answer is yes. Although the law on eSports gambling is still being developed, a recent case involving game developer, Valve, and their highly popular game, (CS:GO), illustrates the problems that arise when applying traditional gambling laws to eSports gambling.

What happened with Valve’s CS:GO?

In 2013, Ěýreleased the “Arms Deal” Collection, a set of decorative skins that players could apply to their characters and in-game weapons in CS:GO. Many games release limited edition skins that are confined to the game. What made CS:GO skins unique was that they could be sold and traded amongst players outside of the game platform. This allowed players to use their skins like casino chips on third-party eSports gambling websites. A whopping Ěýwere reportedly gambled worldwide in 2016. And what’s more, there were no age checks on any of these sites, which meant that minors could participate freely.

In June 2016, an was reportedly brought against Valve by a US resident, alleging that Valve “knowingly allowed, supported, and/or sponsored illegal gambling.” Later that year, the Washington State Gambling Commission, which operates in the same state as Valve’s headquarters, demanded that Valve stop transferring CS:GO skins outside of the game environment. In response, Valve sent numerous cease-and-desist letters to stop online gambling sites from using their CS:GO skins. Unfortunately, this caused many gambling sites to go underground to avoid detection by Valve and other regulators.

The risks of skin gambling

Gambling is heavily regulated to protect minors and to promote responsible gambling. In Ontario, for example, section 3.8(1) of the requires strict standards for protecting players and their assets. But because skins are not real money, online gambling using these virtual currencies is compared to traditional forms of online gambling. The use of virtual items as wagers also makes it difficult for children and parents to recognize skin gambling as actual gambling.

The role skin gambling plays in facilitating under-aged gambling was recently addressed in the United Kingdom (UK) when Craig Douglas and Dylan Rigby, owners of the gambling site FUTgalaxy, were reportedlyĚý under the UK Gambling Act. FUTgalaxy held lotteries using in-game items from the soccer games developed by EA Sports. However, their site was unlicensed and, therefore, illegal under UK gambling law. In February 2017, Douglas and Rigby were for promoting FIFA lotteries on their respective YouTube channels and encouraging minors to gamble. The case focused on how the two defendants “” to the use of their gambling site by children.

Are game developers liable?

While there is little question that gambling sites are responsible for facilitating skin gambling, it remains unclear whether game developers are also to blame. For example, in the FUTgalaxy case, only the owners of the gambling site were named in the lawsuit. But both gambling site owners and Valve were named in the CS:GO case.

An important consideration is the developer’s level of involvement. Game developers create skins to enhance a player’s in-game experience, not to create an external gambling market. So in that sense, only third-party gambling sites should be liable for their “” activity. But it has been argued that developers should be in monitoring and preventing the use of their in-game items on gambling sites.

The future of eSports gambling

Unfortunately, the CS:GO case provides little guidance for future eSports gambling cases. It was dismissed from the US District Court for the Western District of Washington and sent to arbitration, as per Valve’s service agreement[1]. However, Valve recently the use of their game data for illegal gambling in another one of their games, .

Many questions have yet to be answered in this emerging area of gaming law. The UK Gambling Commission recently published a following the FUTgalaxy case, where they take a strict stance against skin gambling. The good news is that, as the position paper reports, the video game industry is “committed to working with [the UK Gambling Commission] to prevent customers experiencing gambling-related harm through their platforms.”

Alexandria Chun is an IPilogue Editor and a JD Candidate at Osgoode Hall Law School.

[1] GG v Valve Corporation, 2017 WL 1210220.

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