February 7, 2002 4:25 PM PST

Game exchange dispute goes to court

A specialty barter site has sued the creator of a popular online game over the right to swap virtual items from the game, setting the grounds for a decision that could have far-reaching copyright implications for the game industry.

The founders of BlackSnow Interactive, which runs the CamelotExchange Web site, filed the suit Tuesday in the U.S. Court for the Central District of California against Mythic Entertainment, developer of the game "Dark Age of Camelot" (DAOC).

DAOC is an online role-playing game (RPG) in which players spend many hours developing their characters and acquiring virtual items such as weapons and armor.

Like most RPGs, players can swap items within the game using the game's virtual currency. But many players prefer to get real money, selling items and characters on auction sites such as eBay or specialty barter sites, including CamelotExchange. A search of eBay showed more than 150 DAOC items available Thursday, including online accounts with several highly developed characters selling for $300 or more.

The suit alleges that Mythic representatives spurred eBay to shut down several auctions of DAOC accounts being conducted by CamelotExchange's founders, saying the auctions infringed on Mythic's copyrights. The plaintiffs charge those actions constitute an unfair business practice and interfere with "prospective economic advantage" to the plaintiffs. BlackSnow sells game currency and characters at a fixed price on its CamelotExchange site and also sells in-game items through eBay.

Along with unspecified punitive and compensatory damages, the suit seeks a court order declaring that the sale of items and accounts outside the game does not infringe on Mythic's copyrights.

A representative of Mythic and DAOC publisher Vivendi Interactive did not respond to requests for comment.

Lawyer Steven Krongold of Arter & Hadden filed the suit on behalf of BlackSnow. He said the action is the first of its kind and could have far-reaching implications in the game industry, where some companies permit out-of-game sales of characters but others block them on grounds of copyright infringement.

"It's basically seeking a judicial declaration as far as the rights of online gamers to trade outside the game," Krongold said.

Copyright laws don't apply, the lawyer said, because no actual goods change hands. And any license terms restricting such behavior would violate basic rights to free speech.

Players who trade outside a game "are not doing anything that would contradict copyright protections," Krongold said. "And I don't think you can use a license agreement to restrict activity that's permissible under copyright law."

Sony has been one of the most aggressive game companies in restricting outside sales, insisting that all material related to its game "EverQuest" belongs to the company. It has shut down numerous "EverQuest"-related auctions on eBay and Yahoo.

"EverQuest" items and characters continue to be sold on smaller auction sites, however. Edward Castronova, associate professor of economics at California State University at Fullerton, recently completed a study of the "EverQuest" economy.

Based on a review of thousands of completed auctions for "EverQuest" items and in-game currency, he concluded that players collectively produce annual gross "exports" of more than $5 million. If the game's fictional universe of Norrath were a country, its per-capita gross national product would be $2,266--making it the 77th richest country on Earth and ranking it between Russia and Bulgaria.

Castronova said the trading outside the game is inevitable because prices set in the in-game barter system don't match players' expectations, resulting in high "transaction costs" that spur players to look elsewhere. The upshot is a Cuban-style system where a moribund official economy is overshadowed by a vigorous underground economy based on U.S. dollars.

"It's absolutely supply and demand at work," Castronova said. "I don't think they (Sony representatives) realize they're confronting the same problems that have confronted real-world policy makers for years. When the government becomes so powerful it can control an entire economic system, how do you do that fairly?"

 

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