MDY v. Blizzard versus Jacobsen v. Katzer?

In an opinion recently handed down by the Ninth Circuit, the court assessed whether violation of license terms constitutes infringement or breach of contract, and came to the opposite conclusion from the court in Jacobsen v. Katzer.

Blizzard is the creator of the wildly popular World of Warcraft (WoW) massively multiplayer on-line games.  MDY, an alter ego of Michael Donnelly, developed a bot called Glider, which plays the early levels of WoW to help a player “level up” on the game.  (See the complaint for amusing commentary about leveling up while you “eat dinner or go to a movie.”)  WoW players are required to agree to Blizzard’s click-to-accept end user license agreement and terms of use.  Glider did not alter or copy WoW game software, merely interacted with it online as would a live player.  Donnelly originally developed the bot for his own use, then started licensing it to others.  Blizzard then developed a policing technology to identify bots, and identified Glider.  Blizzard also modified its agreements to prohibit the use of Glider and other bots.  At issue was whether MDY had secondary copyright liability for developing Glider, by causing its users to violate Blizzard end user agreements.

The court wrote that this question turned on whether the violated terms were “conditions,” which limit a license’s scope, or “covenants,” which are contractual promises.  The court wrote that state law (in this case, Delaware) governed this question.  Accordingly, the breach of a condition could constitute infringement, whereas violation of a covenant would only be a breach of contract.  “[F]or a licensee’s violation of a contract to constitute copyright infringement, there must be a nexus between the condition and the licensor’s exclusive rights of copyright.”  The court noted that conditions precedent are generally disfavored under law, because they “tend to work forfeitures.”

The Ninth Circuit held that WoW players who use Glider in violation of restrictions contained within Blizzard’s Terms of Use may have been liable for breach of contract, but not copyright infringement.  Therefore MDY could not be secondarily liable for copyright infringement.  The opinion reversed the district court’s grant of summary judgment to Blizzard on secondary copyright infringement claims.

On face, this is a different conclusion from Jacobsen v. Katzer, which concluded that attribution requirements in the Artistic License were conditions, supporting a claim of copyright infringement.  (The court there did not foreclose the possibility of violating those requirements also being a contract claim.)

However, there were two obvious differences.  First, WoW was not distributed software, and its “conditions” were actually an acceptable use policy.  The court’s opinion turned on the fact that the prohibited conduct had more to do with the use of the service than an exercise of copyright.  Second, the court treated the question of license versus covenant was a question of state law.  State law governs contract claims, whereas federal law governs copyright claims.  So if it is a state law question, it is likely to follow the contract rules, disfavoring conditions. 

What does this mean for open source?  Condition versus covenant is a big issue in open source licensing.  Open source licenses, say some, are conditional licenses and not contracts — though not every lawyer agrees with this premise.  The difference is one of remedies.  Copyright claims can more easily result in injunctive relief, and are grounds for statutory damages even when there is no economic harm.