By Leandro Toscano, Oscar Suarez and Alexia Gkoritsa, WIPO Arbitration and Mediation Center
The video gaming industry has grown rapidly in recent years, surpassing the film and music sectors combined. In 2022, the estimated value of the global video game market was over USD 200 billion. Expansion of the global video game market is set to continue as growing numbers of people turn to video games for entertainment and as the industry breaks into new areas such as virtual reality and eSports.
During the COVID-19 pandemic, the video gaming industry performed better than many economic sectors. With many people working from home, online gaming was a way to compensate for the physical isolation that came with lockdown. During this period, we also saw the emergence of a growing number of eSports competitions.
The growing popularity of video games among consumers and the revenues these games generate are fueling the industry’s expansion, transforming it into an increasingly important economic sector within the global economy. This rapid expansion, however, comes with an increasing risk of disputes. Given the complex and cross-cutting nature of video games and the way they are created, such disputes are likely to revolve around intellectual property (IP) rights and commercial contracts. What then can stakeholders do when disputes arise? Can mediation or arbitration services, such as those offered by WIPO, enable them to avoid lengthy and costly court litigation related to complex IP and tech matters?
The video gaming industry is growing; so is the number of disputes
Given the global nature of video games and eSports, which may be played and broadcast internationally and can involve stakeholders from various countries, disputes inevitably feature cross-border considerations. For this reason, it is important for all stakeholders, including video games producers, publishers, eSports organizers and more, to put into place, from the outset, effective arrangements to resolve any disputes that may arise, especially when IP rights (key assets in this industry) are at risk.
Mechanisms like mediation, arbitration and expert determination, have been gaining ground as alternatives to judicial court proceedings for IP and commercial disputes.
Mechanisms like mediation, arbitration and expert determination, have been gaining ground as alternatives to judicial court proceedings for IP and commercial disputes. The effectiveness of these mechanisms has been demonstrated in areas ranging from brands (designs and trademarks) and technology (patents) to the creative industries (copyright and related rights). These mechanisms also stand to benefit stakeholders in the video games and eSports sectors in resolving the disputes they face.
What are the characteristics of disputes in the video games and eSports sectors?
The video games sector straddles virtual and real worlds and brings together multiple stakeholders. Video games also encompass multiple IP-protected components (e.g., graphic and sound elements, gameplay, software and more). Such complexity is a breeding ground for disputes. Similarly, the dual nature of eSports – as organized competitions and forms of entertainment within the video games industry – makes them prone to disputes.
The specialized nature of these disputes means that going to court may not be the optimal way to resolve them. Such disputes typically involve a combination of tangible/physical elements (such as physical game consoles, peripherals, and merchandise), and intangible/legal issues and information technology (such as IP rights, online interactions, and virtual economies), require a speedy procedure, and can involve conflict-of-law issues, and multi-jurisdiction litigation. By contrast, alternative methods of dispute resolution, such as arbitration or mediation, can offer more tailored and efficient solutions to address the unique combination of conventional and legal elements that characterize disputes arising in the video games and eSports sector.
Moreover, video game-related disputes are typically international in nature. Large gaming competitions draw players and viewers from across the world. As such, organizers of these events need solutions that work across multiple jurisdictions. This is where alternative dispute resolution mechanisms, such as mediation and arbitration come into play. Where court decisions on given legal questions, especially in relation to IP, may vary from one jurisdiction to another, mediation and arbitration offer an effective way to achieve consistency in legal outcomes.
Potential disputes relating to IP and contracts
Over the years, the WIPO Arbitration and Mediation Center (the WIPO Center), a leading provider of alternative dispute resolution services, has handled cases relating to video games and eSports. Such disputes typically cover the following IP-related issues:
- brands (e.g. in relation to the use of trademarks underpinning game logos, merchandizing);
- copyright (e.g. in relation to the storyline, gameplay, music of a video game, user-generated content, video game streaming, including the broadcasting of eSports competitions);
- design rights (e.g. in relation to product packaging);
- patents (e.g. in relation to game hardware, such as consoles and accessories, in-game mechanics, gamepads, and virtual reality headsets);
- trade secrets (in relation to know-how);
- agreements related to IP licensing, research and development (R&D), technology transfer, software and more; and
- infringement of IP rights.
Stakeholders may also be involved in more standard commercial disputes, including contractual disputes relating to the grant of media and streaming rights, misleading or false advertising, the sale of tickets for eSports tournaments, merchandizing of eSports tournaments and related events, the payment of tournament organizer’s fees, royalties, unfair competition and antitrust, and others.
Who may be involved in video games and eSports disputes?
The staging of a successful video gaming or eSports competition depends on a wide range of actors. These include: video gaming and eSports associations, publishers, developers and distributors of video games, as well as eSports tournament organizers, players and teams; fans; content creators, online streaming and social platforms, retailers; service providers, (e.g. production companies, event management companies, network and Internet service providers, equipment and hardware providers, IT and technical support; software developers; sponsors, and telecommunications providers).
In many instances, disputes arise among multiple parties with unequal bargaining power. This reaffirms the need for tailored dispute resolution proceedings, as these can help to mitigate any apparent imbalances in bargaining power.
Alternatives to court litigation
Arbitration, mediation, expedited arbitration, and expert determination are widely used alternative dispute resolution mechanisms. In the WIPO Center’s experience, in all cases, parties agree to use the services of a neutral third party to help them resolve their dispute. In some cases, parties opt for arbitration, which results in a binding and final decision issued by an independent arbitrator. In other cases, parties choose mediation, where a neutral helps them reach a settlement agreement with the binding force of a contract.
Arbitration, mediation, expedited arbitration, and expert determination are widely used alternative dispute resolution mechanisms.
Sometimes, parties opt for a mixture of mediation and arbitration proceedings. Where technical matters are in dispute (e.g., valuation of intangible assets), parties may select expert determination. This allows disputing parties to submit a specific technical question to one or more experts to make a decision. An expert determination is binding, unless the parties agree otherwise.
Eight advantages that arbitration and mediation offer parties to a dispute
Arbitration and mediation are a good option for parties facing disputes in the video gaming and eSports sectors for a number of reasons.
1. Neutral forum
Arbitration and mediation provide a neutral forum for resolving disputes. These services may prevent one of the parties from initiating legal proceedings before their own national courts. Such a move would require the other party or parties to defend their position before a foreign court governed by a different legal system and rules of procedure and a judge that may speak a different language. In contrast, with arbitration and mediation, each party participates equally in the process of selecting the arbitrator(s), mediator(s) or expert(s), who are bound to remain independent and impartial, and who may have a nationality that is different to that of the parties, if so agreed.
2. The parties may choose a neutral with relevant expertise
In arbitration and mediation procedures, parties can opt for a third-party neutral with extensive experience in the area of the dispute. This is a particular advantage for disputes relating to video games and eSports, which may revolve around complex technical issues. Experienced neutrals typically issue informed decisions more rapidly.
3. ADR procedures are flexible
Unlike court proceedings, arbitration and mediation proceedings can be more informal and customized to the specific needs of the disputing parties. The private and consensual nature of proceedings offers parties a greater degree of control over the process and its evolution. Parties are able to decide on the language, the applicable law, where and how (including virtually) the proceedings will take place. Where disputes are straightforward and time is of the essence, parties may opt for an expedited procedure.
4. ADR procedures save time and money
Arbitration and mediation can reduce the time (and money) needed to resolve a dispute. The ability to choose a neutral with specific expertise, and to opt for a simplified procedure, means parties can sort out their differences in a timely and cost-effective way and move forward with their core work.
5. ADR procedures are confidential
Unless the parties agree otherwise, arbitration and mediation are private and confidential in terms of the disclosures made during the proceedings, the resulting award, settlement or expert determination and indeed, the very fact that such proceedings take place. This important feature alleviates any fear among the parties of negative publicity or fall-out from the dispute.
6. With arbitration and mediation, disputes are resolved through a single procedure
With arbitration and mediation, parties can agree to use a single procedure to resolve a dispute spanning multiple jurisdictions, for example, when a dispute involves IP that is protected in multiple countries. As such, parties avoid the expense and complexity of multi-jurisdictional litigation, and the risk of inconsistent outcomes. This is of particular interest to parties facing disputes relating to video games and eSports, which frequently have links to more than one jurisdiction.
7. Arbitration and mediation can help preserve business relationships
Arbitration and mediation proceedings are designed to enable parties to find an amicable solution to their dispute. Over 70 percent of the mediation procedures administered by the WIPO Center result in a settlement agreement. Similarly, many arbitration cases settle before a final decision is made; this has been the case for some 30 percent of the arbitration cases handled by the WIPO Center.
8. Arbitration procedures facilitate cross-border enforcement
Arbitration usually ends with a settlement agreement or a decision in the form of an arbitral award or an expert determination. Arbitral awards are typically final and binding. Once an international award is issued, it is enforceable internationally, under the New York Convention (1958), which recognizes that international arbitral awards are on a par with domestic court judgments without review on the merits. As such, it is much easier to ensure that awards are respected across borders.
Building IP awareness across the video gaming and eSports sector
WIPO has been working very closely with stakeholders in the video gaming industry, including development studios (big and small), publishers and distributors, to foster innovation and protect IP rights in the sector. This collaboration is supporting the growth and development of the industry while promoting creativity and preventing infringements.
An example this collaboration is WIPO’s recent Study on Copyright Infringement in the Video Game Industry identifies, which future trends, emerging practices and enforcement strategies for videogame developers, among other things. Similarly, the cross-regional WIPO-led project, “Level UP your IP: A Videogame Developer’s Quest,” is designed to help small game developers understand how they can use the IP system effectively to create new business opportunities and support business growth.
The WIPO Center’s ADR services for the video game industry is a further example of how WIPO is helping companies and individuals navigate the unique challenges of the rapidly growing video game industry.
The WIPO Center as a specialized forum for resolving video game and eSports disputes
WIPO dispute resolution options come with the advantages outlined above. The international neutrality of the WIPO Center attracts parties from all regions. Parties have access to the WIPO Center’s international list of experts, which includes neutrals from around the world who combine legal, business, and/or technical expertise in video games and eSports. This list is open-ended, meaning that parties can also select a neutral that does not feature in the list, if they so wish.
Examples of video games and eSports disputes submitted to WIPO ADR
A copyright infringement dispute between a North American company and an Asian company. Both parties were engaged in developing and publishing video games. Proceedings were pending before national courts and the parties agreed to refer their dispute to WIPO Mediation.
A dispute between an Asian video game company and a European developer related to copyright infringement, payment of royalties and the blocking of unauthorized streaming of eSports competitions.
A dispute between an Asian video game developer and a North American multinational technology company related to copyright infringement of the scenario of a video game.
A dispute between a video game and online entertainment company and an online gaming company. The requesting party accused the respondent of actively advertising and making available the download of an unauthorized copy of the requesting party’s video game.
A copyright infringement dispute over an online video game between a European video game production and publishing company and another company.
A dispute related to the unauthorized use of IT in the context of the video game industry between a European video game development company and an Asian company.
A dispute between a European software development company and a European retail chain related to whether the requesting party should obtain a trademark license to use a logo within a video game.
In WIPO ADR procedures, in particular in mediation, parties often manage to reach a settlement agreement.
Video games are one of the fastest-growing forms of digital entertainment. The complexity of transactions and contractual relationships, and the multiplicity of potential stakeholders (usually coming from different jurisdictions) create fertile ground for disputes. Disputes already cover wide-ranging areas of expertise, including IP, technology, business and commercial issues. As the market continues to expand, the amounts in dispute and the settlements may also increase.
Having effective mechanisms in place at an early stage to resolve disputes before they escalate is key. As discussed, arbitration and mediation offer a time and cost-effective alternative to court proceedings, enabling parties to avoid lengthy and costly court proceedings, and to focus on advancing their core work. Interestingly, the WIPO Center is already observing an uptick in the use of its services to resolve video gaming and eSports disputes.
ADR options are flexible and can be tailored to the specific needs of the video gaming and eSports sectors. By taking advantage of these benefits, all parties can power up and boost their creativity and innovation processes and support the growth and expansion of the video games and eSports industry.