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MDY Indus., LLC v. Blizzard Entm't, Inc. - 629 F.3d 928 (9th Cir. 2010)

Rule:

To establish secondary infringement, a copyright owner must first demonstrate direct infringement. To establish direct infringement, it must demonstrate copyright ownership and violation of one of its exclusive rights by users of the allegedly infringing product. A party is liable for contributory infringement if it has intentionally induced or encouraged direct infringement by users of the infringing product. A party is liable for vicarious infringement if it (1) has the right and ability to control users' putatively infringing activity and (2) derives a direct financial benefit from their activity.

Facts:

Blizzard Entertainment, Inc. (Blizzard) was the creator of World of Warcraft (WoW), a popular multiplayer online role-playing game in which players interact in a virtual world while advancing through the game's 70 levels. MDY Industries, LLC and its sole member Michael Donnelly (Donnelly) developed and sold Glider, a software program that automatically plays the early levels of WoW for players. MDY brought the present action for a declaratory judgment to establish that its Glider sales were not infringing Blizzard's copyright or other rights, and Blizzard asserted counterclaims under the Digital Millennium Copyright Act (DMCA), 17 U.S.C. §§ 1201 et seq., and for tortious interference with contract under Arizona law. The district court found MDY and Donnelly liable for secondary copyright infringement, violations of DMCA §§ 1201(a)(2) and (b)(1), and tortious interference with contract. Blizzard appealed.

Issue:

  1. Could MDY and Donnelly be held liable for secondary copyright infringement?
  2. Could MDY and Donnelly be held liable for tortious interference with contract?

Answer:

1) No. 2) To be determined on remand.

Conclusion:

The Court first considered whether MDY committed contributory or vicarious infringement of Blizzard’s copyright by selling its software to players of the online game. The Court determined that the prohibitions against bots and unauthorized third-party software found in the game's terms of use were covenants rather than copyright-enforceable conditions. The anti-bot provisions at issue were similarly covenants rather than conditions. A user of the producer's software would violate the covenants with Blizzard, but did not thereby commit copyright infringement because the software did not infringe any of Blizzard’s exclusive rights. Reversing summary judgment in part, the court ruled that MDY was not liable for secondary copyright infringement, which required the existence of direct copyright infringement. The Court also considered the scope of 17 U.S.C.S. § 1201's three operative provisions, § 1201(a)(1), 1201(a)(2), and 1201(b)(1), determining that subsection (a) created a new anti-circumvention right distinct from copyright infringement. The Court ruled that the tortious interference claim was not preempted by the Copyright Act, and remanded the case for further proceedings.

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