The Xbox One-Eighty and Licensing: Was the Outrage Worth It?

Since the initial reveal of the Xbox One about a month ago, a single question has dominated the majority of gamers’ minds:

What is Microsoft thinking?

The revelation of the Xbox One, while attempting to build off the success of the Xbox 360, was met with extreme criticism and downright outrage from some gamers. Not only did it seem like Microsoft was putting the media aspect of the Xbox One ahead of its core gaming functionality (If you look at the Xbox One reveal press conference, the two most used words in that roughly hour and a half conference were “TV” and “Sports.”) but what really rubbed gamers the wrong way was the inability to let friends borrow games, in a traditional sense, and the inability to resell Xbox One games.

Following the original design of the system, when someone purchased a new game for the Xbox One the game would have to be installed on the purchaser’s Xbox One and tied to the purchaser’s Xbox Live account. While such association between games and accounts is currently common practice for games that are bought through online marketplaces like Xbox Live (and the PlayStation Network and other PC platforms like Steam), it is not necessary for games bought physically on the current generation of consoles to be installed on the hard drives of the machines nor tied to a purchaser’s online account. The new framework on the Xbox One would render physical discs rather useless as all games would need to be installed on the system and authenticated. Giving that used disc to a friend or selling it back to Gamestop would transfer the game physically, but the friend or the person who buys the disc from Gamestop would still have to pay a fee to authenticate the game on their own personal Xbox One.

Microsoft did not abandon used games or the sharing of games though and developed at least two new features that would have changed the way games were resold and shared. Microsoft stated that there would be a way to resell games installed on an individual’s Xbox One through some sort of online storefront owned and operated by Microsoft. While the details of that storefront were never quite fleshed out, this feature looked to be Microsoft’s attempt at becoming the Gamestop of the Xbox One, that is, Microsoft wanted to dominate the Xbox One’s used game sales market. As for sharing, one of the most interesting features that did not seem to get much attention during the first few weeks after Microsoft had introduced the system was the Shared Library feature.

The Shared Library feature would have allowed a purchaser of a game on the Xbox One to authorize up to ten friends to have access to that purchaser’s personal library. What this would mean is that if I bought a game and had a friend whom I listed as one of my ten authorized friends, my friend would be able to play that game at his home on his Xbox One without having to purchase the game. I would be able to share that game with my friend without ever having to see him or give him anything and the sharing would all be done electronically. Further, my friend and I could both play the multiplayer aspects of the game together even if he did not purchase the game, so long as my friend was authorized as one of my ten friends. Put simply, both he and I could play multiplayer online at our respective houses even though only one copy of the game was purchased. Such a sharing scheme really is unique and would have been a very interesting innovation.

The industry, however, did not respond as enthusiastically as Microsoft would have liked it to. Many gamers, and others in the industry, saw the inability to let friends borrow games, in the traditional sense, and the inability to resell games through any storefront other than a Microsoft storefront as extreme measures that were supposed to protect the Intellectual Property Rights of Microsoft and the games on the Xbox One. Such measures are generally called Digital Rights Management, or DRM for short, and are a hotly debated topic in the arena of software and video games. Regardless, the new framework that Microsoft introduced was not popular, to say the least.

First Sale and Licenses

The war cry from most gamers and the industry seemed to revolve around the idea of “I bought this game; I should be able to do what I want with it.” Purchasers did not want to be restricted in doing what they wanted with the physical media that they would buy. Generally, such a position seems to make sense. If someone were to buy a music CD or a movie on DVD, it would seem natural for the purchaser to use it to their content and then dispose of it as they see fit without the band, artist, or anyone involved with the movie meddling with the resale of the media. In fact, The Copyright Act recognizes this theory under the First Sale Doctrine.

To paraphrase, 17 U.S.C. § 109 states that once a sale of copyrighted material is made, the original copyright holder’s rights are extinguished in the piece of work. This means that the purchaser can resell or give the piece of work to whomever they deem appropriate without having to give a cut to the original creator. This provision allows the purchaser to transfer the piece of work as they see fit. The key to triggering the First Sale Doctrine though is the word “SALE.”

Nowadays, as online purchasing has become much more prevalent, no longer are things “sold” to purchasers, but purchasers are granted a license to use the media they buy. Such a license is very common in regards to computer software and restrictions on the transfer of licenses have been upheld in the court system (See Vernor v. Autodesk, 621 F.3d 1102 (2010)).

This scheme of selling and licensing puts video games in a very interesting position. While consumers generally tend to see video game consumption as more akin to the CD and DVD purchases described above, the people who create and produce games generally tend to see games more like computer software licenses that can be subject to the court-approved restrictions.

What do we get when we buy a game?

So with gamers and the industry fired up about what gamers own, what exactly do we get when we purchase a video game? According to the End User License Agreement (“EULA”) for the game “Injustice: Gods Among Us” developed by NetherRealm Studios and Published by Warner Brother’s Interactive Entertainment, a player agrees to the “Software License” by playing and/or installing the game. The “Software License” states:

WBIE grants you the non-exclusive, non-transferable, revocable, limited right and license to use one copy of this product solely and exclusively for your personal use. All rights not specifically granted under this Agreement are reserved by WBIE. THIS PRODUCT IS LICENSED, NOT SOLD… (emphasis added).

According to WBIE, what gamers get when they purchase a game is a license to use the game. They make it rather clear and explicitly state that WBIE does not believe that purchase of the game to be a sale of any sort. Therefore, purchasers are restricted to the terms of the license. And, according to the terms of the license, the license is non-transferable. This theoretically means that letting a friend borrow a game is against the license agreement. Further, it would seem that selling a copy of “Injustice” to Gamestop would also be a breach of the License Agreement.

Getting Mad Over Old News

So with the new features that Microsoft attempted to implement in the Xbox One, it seems like gamers and the games industry were lashing out about rights that publishers seem to think that purchasers have not had for a while. But yet, there is an unsurprising lack of lawsuits regarding publishers or developers suing individuals for lending their games to friends. Nor do there seem to be any suits between publishers and developers against companies like Gamestop whose business model is based on the purchase and resale of used video games. Even though these actions by purchasers technically violate the End User License Agreement that they agree to when they play and/or install the game, it does not seem like enforcement of these aspects of the EULA are important to publishers or developers.

Which begs the question: Why is this language still even included in the EULA? Short of bringing actions against individuals who sell their games at yard sales or off Craigslist, what other situation would require such language other than lending games to friends and selling them to companies like Gamestop? Further, by keeping such language in the EULA, publishers and developers are showing that they selectively enforce parts of the EULA and may not even attempt to enforce other parts of it creating a high amount of uncertainty regarding the rights of the purchaser in regards to their game.

When Microsoft revealed the aspects of DRM on the Xbox One that actually gave teeth to the terms of the majority of EULAs that are accompanied with the purchase of video games, gamers were rather upset. But what most did not realize is that, according to the EULAs on games now, gamers would have no more or fewer rights to their games then they currently do. They would still be licensees of their games and have no more “ownership” rights than those they currently enjoy. As it stands, ownership rights of gamers is uncertain as the contract language still appears in the EULAs of video games, yet it seems to be rarely enforced. The outrage that gamers felt has caused the industry to continue moving forward in this legal grey area regarding licensing and ownership.

So while the so-called “Xbox One-Eighty” may have placated fans of ownership rights, such a directional choice by Microsoft ended up removing some truly interesting and innovative features from the Xbox One without doing anything except maintain the status quo for gamers.

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