Understanding the Wizards v. Hex Lawsuit (in plain English)

Hello! In addition to being a director of this site, I also lawyer around. I run my own practice, which mostly involves business law and estate planning. Like you, I heard about the WOTC v. Hex suit yesterday and I’m going to break it down into understandable bits. Let’s set some ground rules first, though:

1. This isn’t legal advice, don’t rely on it as such.

2. I’m not going to entertain discussions of “all IP law is bad/restrictive/awesome/strangling” etc. That’s for another day.

3. In America, you can sue anyone for anything.

4. Although I like IP law a lot and I studied it a lot, I don’t currently practice it and I welcome other informed opinions.

5. Magic and Hasbro and Wizards of the Coast may or may not kill games, actively kill gamers, destroy the industry, spawn irresponsible manchildren, deliberately poison wells or launder cartel money. We’re not going to talk about how evil they are here, either.

6. A great deal of IP law is made in courts, not federal statutes, and different federal courts can decide the same thing different ways.

7. The law is complex. This article is not. I am purposely avoiding throwing intense legal doctrine at you. Please read the words “most of the time, and there are exceptions” into any sentence you’re about to argue with me on.

Great, let’s dig in!

Reading The Complaint

When you file a lawsuit, the “thing” you file is called a complaint. You list out the facts and what laws the defendant has broken. The other side then gets to answer with defenses and denials. Let’s look at the Wizards complaint:

Wizards of the Coast v. Cryptozoic Entertainment et. al

The first section lists out some facts and explanations of just what the heck Magic is. The second and subsequent ones list out why Wizards thinks it’s entitled to win the lawsuit. You’ll note that they cite the Copyright Act, Lanham Act and Patent Act. Those are the laws they’ll be suing under.

When a lawyer reads a complaint like this, they ask “what is the central question of this case?” I think it is the following:

“Can you re-skin/clone a video game legally? If you cannot, why not?”

 

Why did I focus on it being a video game? Simple: the attorneys for Wizards focus on it. You see, Hex is digital-only and Wizards can draw closer comparisons by demonstrating that the digital version of their game is too close to Hex.

Civil Procedure geekery: Wizards requested a jury on this, which is wild. Trademark law depends on “will this confuse a consumer?” so I see the jury selection process (venire and voir dire) may involve a bit of trying to stack the jury with either super-geeks or super-clueless people. Also, Hex is a different company than Crypto, but WOTC wants to join them here – it’s a bit of corporate law litigation attempting to say that two companies are actually operating as one and share all liabilities.

The First Claim: Copyright Violation

Let’s begin with what a copyright is. A copyright is basically a legal protection for an original expression on a fixed medium. So a song on a record, words on a page, ballet steps written down, and paint on a canvas are all copyrightable things. A phone book is not copyrightable (it’s not original). A copyright only protects the expression and not the underlying idea. Marvel does not have a corner on men in mechanical suits who fight crime – they only have the particular expression of that idea in Iron Man comic books.

Confused? That’s okay. Copyrights are pretty complex things. A lot of what can be copyrighted is figured out in court when people fight over it. The basic test that the court will pose in this case is “is the expression original? Does the potentially infringing work actually borrow from the original expression?”

Wizards contends that Hex copied the “cards, plot, elements, circumstances, play sequence, and flow of Magic.” This is tricky to claim, because some of these things are not copyrightable. Remember that idea-expression issue? I cannot copyright the way to play Yahtzee – that’s an idea. But I can copyright the rulebook I write for it. (This may be patentable – we’ll get to that later). So I’d say that the fact that Hex uses cards and has a similar play sequence is not an expression – I don’t see that as deserving copyright protection. I have no idea what “flow of Magic” is and I’ve played for twenty years. Regarding the plot, Wizards will have to show that Hex appropriates copyrighted expressions (things like the Mirran/Phyrexian story arc, the Brothers’ War, etc). I don’t know enough about Hex to say whether it rips off the Magic plot. I’m guessing they were smarter than that.

The complaint goes on: “Cryptozoic copied the physical layout and ornamental aspects of Magic cards.” Hex may not have copied it – they may be paying tribute or building on it. This is what we call a “question for the jury.” Did Unreal appropriate Wolfenstein’s first-person shooter model? The legal phrase is “derivative work” and that means that the piece borrows substantially from a copyrighted work. It may or may not be protected – the piece has to show substantial originality. Hex’s cards look more like a “tribute” to me than a blatant copy. They have the same elements, but they are arranged differently.

The complaint continues: “Players in both games are confined to the same parameters based on an initial dealing of seven cards and play progresses in a substantially identical manner. Players must efficiently use their skill and calculation to assemble their initial decks and then in suitable selection and play of the various cards.”

That’s trying to sneak in patent law into a copyright claim. Good for the lawyers for trying, but there’s nothing in the copyright law that protects games in which seven cards are dealt.

In previous cases, courts have held that some rules and functions of games can serve as an expression worthy of copyright. The important takeaway for you is that this is not a solved matter in the legal system.

The Second Claim: Trademark Violation and Consumer Confusion

A trademark is a distinctive mark (usually a logo) that lets a consumer identify a product uniquely. Recall how the Coca-Cola logo tells you that what’s in the can is a Coke. Problems come up when someone takes that Coke logo and uses it to sell milkshakes – as a consumer, you would probably think that something bearing the Coke logo came from the Coke plant. Trademarks protect consumers from buying ripoff products.

Wizards says that Hex rips off the “trade dress” of Magic. Trade dress is the concept of packaging and the product’s visual aspects. Think of the color of a bottle of Tide detergent, for example. The color has no function for the product – it doesn’t work any better or worse because of that color. It’s only there to catch your eye and let you easily identify the Tide on the shelf. If you grabbed a bottle with that orange color, you might be pretty annoyed when you got back and found out it was something else.

 

I would not be surprised if P&G, which owns Tide, is currently suing the makers of Tandil to get it off the shelves.

With Magic, the trade dress includes the packs. However, with Magic Online and Duels, the trade dress gets a lot murkier. There’s no physical appearance of a product on a shelf; no pack to unwrap.

Wizards contends that the game play, rules, player interaction with the game, layout and arrangement, visual presentation, sequence and flow and scoring system constitute the “overall look and feel” of the game and are trade dress – and that’s ridiculous. Trade dress must have no function to be considered trade dress. Do you get that? Remember that orange Tide bottle. The orange doesn’t add anything to it. That handle on the jug may add function, but it may be ornamental. You could fight on that. But you can’t fight that the scoring system has no function and is merely aesthetic.

See, what Wizards’ lawyers are trying to do is use trade dress as a backdoor copyright. This happens a lot, so don’t act shocked here that good lawyers are trying a good lawyering technique. What I mean about backdoor copyright is that Wizards is trying to assert what should be a copyrightable matter – the aesthetics of the packaging – through an entirely different law. With Tide’s bottle, the orange isn’t copyrightable – it’s not original. But it can be trademarked, since the orange lets consumers know what the brand is.

The ways that trademarks and copyrights intersect is pretty advanced. Let’s break it simply: a copyright protects an original expression of an idea that you have. A trademark protects a customer of yours from buying the wrong thing.

Wizards’ own lawyers blow it in their complaint when they say “The distinctive design of the Magic cards is not essential to the use or purpose of the game nor does the design affect the cost or quality of the cards; the design is merely an ornamental arrangement of features, some of which are functional.”

First, the design of the card – the casting cost and name at the top, for example, serve a function in the game – they let you easily hold the cards in your hand and see what you’re looking at. Second, trade dress can’t have any function – it  ”must not serve a utility or function outside of creating recognition in the consumer’s mind.” So if putting the name of the card at the top has a function (it does) then it’s not part of trade dress. The lawyers really blow it when they admit that some of the features are functional. I think you’ll have a hard time telling a court that several functional features, when put together, make a functionless trade dress. Adding up a bunch of somethings does not make a nothing.

The Third Claim: Patent Wackiness

First, a caveat: I am not a patent lawyer. Patent lawyers are very specialized and intelligent attorneys and the rest of us defer to them just about all the time.

A patent protects a unique invention or process. It protects it by preventing someone else from duplicating your invention/process for a period of time (typically 20 years).

Yes, Richard Garfield patented tapping. The patent, by my reading, runs out on June 22 of this year (2014). Wizards went back and tacked on some other parts to that same patent, which you can read here. The patent covers just about everything you could imagine in a TCG. It covers building decks, casting spells, the process of trading with others and more.

Wizards is saying that Hex violates a lot of its patents. Hex probably does. Here’s the problem:

Those patent claims are beatable.

For example, they might be too abstract. They might be too broad. Having a patent does not guarantee that it will be valid in the face of someone challenging it. And importantly, if they run out when I think they will, Hex/Crypto can limit the damages they pay out to only the infringing time. After that, Hex isn’t infringing on any sort of patents held by Wizards. They’re probably still infringing on all the patents that early adopters lined up on the internet regarding downloads, backups, dropboxes and other horror stories. Litigating patents takes an incredible amount of money, especially when you’re trying to get it declared invalid one way or another.

That said, I feel that Wizards has got a good chance of winning on the patent issue if the court determines that they’re still valid. The patents protect just about everything patentable in Magic and Hex is as close to Magic as I’ve ever seen from another TCG.

Some Excellent Further Reading If You Want To See Legal Decisions Behind These Concepts

I am indebted in this section to my friend and fellow attorney Jacob Johnson, who sent along these links as we were chatting this morning about the case.

Tetris v. Xio Interactive deals with cloning a Tetris game. Xio made a Tetris clone and Tetris sued them and won on copyright infringement and trade dress. Regarding copyrights, the court said this:

“I find the following elements are also protected expression and further support a finding of infringement: the dimensions of the playing field, the display of “garbage” lines, the appearance of “ghost” or shadow pieces, the display of the next piece to fall, the change in color of the pieces when they lock with the accumulated pieces, and the appearance of squares automatically filling in the game board when the game is over. None of these elements are part of the idea (or the rules or the functionality) of Tetris, but rather are means of expressing those ideas. I note that standing alone, these discrete elements might not amount to a finding of infringement, but here in the context of the two games having such overwhelming similarity, these copied elements do support such a finding. It is the wholesale copying of the Tetris look that the Court finds troubling more than the individual similarities each considered in isolation.”

Emphasis is mine. Wholesale ripoffs draw the ire of a judge. Note that this case came from the federal district in New Jersey and the Washington Court does not have to follow their reasoning.

That case has also got a good trade dress breakdown if you’re interested.

Spry Fox v. Lolapps (lolwut?) is in the same district as Wizards’ case and outlines copyright and Lanham Act laws. I’m wagering that it will be cited in the opinion in this case. You’ll see a (poorly-reasoned) Lanham Act claim that the judge threw out and a copyright claim that survived to trial. The copyright claim discusses copyrighting elements of a game. It says, for example, that coins or points in a game are not copyrightable – they are “scenes a faire,” something that a storyteller or game designer needs to include in the genre. The court won’t grant a monopoly on collecting coins or saving princesses. It also contains the phrase “bears and yetis are both wild creatures.” Thrilling to a legal reader!

Use it or lose it.

Wizards may be the bully here, picking on another game designer. On the other hand though, parts of Intellectual Property law requires that you actively defend your property against infringers or else you lose the protections.

If Wizards does not sue here, they may give up substantial rights in the future.

Where It Goes From Here: The Procedural Steps

Wizards has filed a complaint. Hex will file a response, where they raise defenses and deny claims from Wizards. It may read something like “we affirm paragraph 17 and deny all other paragraphs.”

Wizards and Hex will then file for summary judgment. This means that they say “look judge, you don’t need to have a trial – we have the law on our side already!” Hex will say “Wizards doesn’t have any valid claims and they’re reading the law wrongly.” Wizards will say “look at the complaint and rule in our favor.” A court only grants summary judgment when there are no facts that need to be decided in the case – the evidence is already there, in the form of sworn statements and other pre-trial materials.

The Tetris and Spry Fox documents linked above are both rulings on summary judgment. They are not final trial rulings, except where the court has granted summary judgment. That said, they’re great for reading the legal concepts behind the IP issues here.

Where this can all go horribly wrong for Hex is in the discovery phase. Discovery is when you say “okay, opposing party, give me everything you’ve written about this matter.” That means that if Hex has a file with Form of the Dragon in it and a note that says “this is great, let’s copy it!” then they have to turn it over to Wizards. That’s really painful to do and if that kind of evidence exists, it will brutalize Hex’s chances of successfully defending against claims of copying.

Hex may settle with Wizards, but Wizards probably does not want a digital-focus Magic clone that’s leagues better than Magic Online. They want to kill that kind of competition. So Wizards will only accept a settlement that says “we won’t make Hex in its current form anymore.”

If I’m a lawyer for Cryptozoic, I try to get CZE off of the lawsuit and have it only deal with Hex. That way, I don’t lose more than the ~$2mil that Hex has from Kickstarter. This is company-killing litigation if Wizards prevails on its claims AND gets all the damages that it wants. It means that if Wizards wins on either the second or third claim, the court could permanently prevent Hex from making the game.

A victory for Wizards here does not mean that all other TCGs die. It doesn’t mean that Hearthstone goes away. It will probably only mean that you cannot copy Magic’s IP so closely as Hex does.

I predict that Wizards will win on its patent claims, it has a good shot at winning on copyright claims, and it will lose on its Lanham Act claims.

I’m definitely open to discussion!

Douglas Linn

Doug Linn has been playing Magic since 1996 and has had a keen interest in Legacy and Modern. By keeping up closely with emerging trends in the field, Doug is able to predict what cards to buy and when to sell them for a substantial profit. Since the Eternal market follows a routine boom-bust cycle, the time to buy and sell short-term speculative investments is often a narrow window. Because Eternal cards often spike in value once people know why they are good, it is essential for a trader to be connected to the format to get great buys before anyone else. Outside of Magic, Doug is an attorney in the state of Ohio.  Doug is a founding member of Quiet Speculation, and brings with him a tremendous amount of business savvy.

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