Davidson & Associates v. Jung

The bnetd server was a free program, built by volunteers, that let players of Blizzard games play one another online without Blizzard's Battle.net service. Blizzard, under its corporate name Davidson & Associates, sued three of the project's lead developers and Internet Gateway, the Internet service provider that hosted the project's website. On September 1, 2005, the U.S. Court of Appeals for the Eighth Circuit ruled that the developers had given up their right to reverse engineer Blizzard's software by agreeing to its license terms. The court also held that they had violated the Digital Millennium Copyright Act (DMCA), a 1998 federal law with provisions against circumventing technological protections on copyrighted works.

Jason Schultz, a staff attorney at the Electronic Frontier Foundation (EFF), the digital-rights group that served as co-counsel for the developers, called the ruling "bad for gamers".

Background

Blizzard's Battle.net service

Blizzard launched Battle.net in January 1997 as an online service open only to people who had bought its computer games. The service was free. Players used it to set up and join multiplayer games over the Internet, chat, keep a record of wins and losses, and play in tournaments. In 2004, Battle.net had nearly 12 million active users. The games could also be played together over a home network or a modem link, but Battle.net features were unavailable that way.

Every authorized copy of the games except Diablo came with a CD key, a unique string of letters and numbers printed on a sticker on the game case. When a game logged on, it sent Blizzard's server an encrypted code worked out from its CD key, and the server let the game into Battle.net mode only if the key was valid and not already in use by another player logged on to the same Battle.net server gateway.

Installing a game required clicking an "I Agree" button at the end of Blizzard's End User License Agreement, and first-time Battle.net users were shown separate Terms of Use with the same kind of button. The game would not work unless the "I Agree" button was selected.

Both documents banned reverse engineering. The Terms of Use also banned imitating the communication protocols Blizzard used for Battle.net (the rules for how its software exchanged data) "without the prior written consent of Blizzard", and banned using Blizzard's intellectual property in Battle.net to create any other way for others to play its games, "including, but not limited to, server emulators". The box of every Blizzard game except Diablo said that use of the game was subject to the license and use of Battle.net to the Terms of Use, but neither document's terms were printed on it; a buyer who rejected the terms could return the game for a full refund within 30 days of purchase.

bnetd server

Volunteer game hobbyists and programmers formed the bnetd project, which built a server program that imitated Battle.net and gave it away free to anyone. With the bnetd code, anyone could set up their own server for playing Blizzard games. The server matched up players who wanted to play Blizzard games together over the Internet, and the project tried to copy every feature of Battle.net that players could see. Blizzard designed its games to connect only to Battle.net servers, so connecting to a bnetd server instead meant changing the file that held Battle.net's Internet address; the project's BNS utility program made that easier. Blizzard was a subsidiary of Vivendi. The bnetd software had existed since April 28, 1998, according to a March 2002 letter from EFF to Vivendi Universal. The online magazine Salon traced the software to Starhack, a Battle.net clone written by StarCraft fan Mark Baysinger, who also received a cease-and-desist letter from Blizzard.

Ross Combs, Rob Crittenden and Tim Jung were lead developers for the project. The appeals court wrote that the developers had used reverse engineering to learn how Blizzard's games talk to Battle.net. Jung was also president and co-owner of Internet Gateway, an Internet service provider in St. Peters, Missouri, that hosted the project's website, bnetd.org, and ran a public bnetd server.

Salon reported that Battle.net itself suffered from "[f]requent crashes and slow response times due to a huge crush of players", and Combs told the magazine that Battle.net "just wasn't a fun place to be". The parties agreed in the district court that the developers built the server for "hack value", to address difficulties users had with Battle.net, and in part because some or all of them objected to players being forced to view Battle.net advertisements and accept its Terms of Use. A bnetd server's administrator could configure it to offer options different from Battle.net's, and the appeals court wrote that "Once game play starts, a user perceives no difference between Battle.net and the bnetd.org."

CD-key checking

The bnetd server did not check CD keys. It answered every game's CD-key check with an okay reply, whether or not the key was valid or already in use. The appeals court noted that Crittenden knew unauthorized versions of the games were played on bnetd, and that he had made an unauthorized copy of a Blizzard game to test the server.

Blizzard did not disclose how it generated or validated CD keys, and the undisputed facts in the district court's opinion state that "there is no way that defendants could have implemented a check" for key validity in bnetd. The parties also agreed that the developers "never advised people to play pirated copies of Blizzard games using the bnetd server". Blizzard's own 2002 question-and-answer page about servers imitating Battle.net said that to keep its key algorithms secure, "we cannot allow outside servers to query for the validity of CD keys".

Jung said in March 2002 that Vivendi objected to the missing CD-key check, and that the developers had asked for the information to add one:

We asked them to give us the information we needed to do the checking, but they refused.

Salon reported in April 2002 that the developers would like to offer Blizzard a concession, code that would make bnetd servers work only with legitimate copies of the games, which Salon noted would require Blizzard's cooperation.

Takedown notice and lawsuit

Blizzard e-mailed Internet Gateway a notice under the DMCA on February 19, 2002, demanding that it remove or disable access to bnetd.org. The notice, which the technology news site Linux.com reprinted, told Internet Gateway to "act expeditiously" to remove or disable access to the page in order to claim a "safe harbor under the DMCA from liability for contributory and vicarious copyright infringement". It alleged that the site hosted or distributed software that "illegally modifies and/or alters Blizzard Entertainment copyrighted software or bypasses anti-circumvention technology". By February 21, bnetd had closed, leaving only a brief good-bye message on its website. Salon reported that the bnetd team, "unable to face the legal costs of contesting Blizzard in court", removed the code.

EFF agreed to represent the bnetd team. It answered the demand by calling the claims unfounded and saying the software would be reposted in 10 days.

Blizzard sued Internet Gateway and Jung on April 5, 2002, in federal court in St. Louis. It sued under its corporate name, Davidson & Associates, doing business as Blizzard Entertainment, together with its parent, Vivendi Universal Games. The appeals court's caption lists Davidson & Associates first among the plaintiffs and Tim Jung first among the defendants. The appeals court's opinion is reported as Davidson & Associates v. Jung, 422 F.3d 630. Activision Blizzard was formed in July 2008 by combining Activision with Vivendi Games, Vivendi's game business, which the companies said included Blizzard Entertainment's World of Warcraft.

According to EFF, the first complaint did not claim DMCA violations and instead added trademark claims never mentioned before. Blizzard's second amended complaint, a twice-revised version of its complaint, alleged copyright infringement, trademark claims, circumvention of copyright protection systems and trafficking in circumvention technology under the DMCA, and breach of Blizzard's license agreements and Battle.net Terms of Use.

On March 18, 2004, the court entered a consent decree and permanent injunction, a settlement agreed by both sides and entered as a permanent court order. The court wrote that the decree "constituted the full and complete relief on" Blizzard's copyright infringement and trademark claims, which it resolved. The decree also resolved the developers' counterclaim asking the court to declare that they had not infringed Blizzard's copyrights and that Section 1201(a) of the DMCA was unconstitutional. The decree "constitutes the full monetary relief, costs, and fees related to this action", and neither side sought money on the claims still left: Blizzard asked only for injunctive relief (court orders requiring or barring conduct), and the developers asked only for declarations in their favor. Those remaining claims were Blizzard's DMCA claims and its claims that the developers had broken the license and Terms of Use, plus the developers' counterclaims asking the court to declare that the developers had not circumvented copyright protection and that Blizzard's license and Terms of Use could not be enforced.

District court ruling

Judge Charles A. Shaw of the U.S. District Court for the Eastern District of Missouri ruled for Blizzard on September 30, 2004. He found that the license agreements were enforceable contracts under both California and Missouri law, and that the developers had agreed to them by clicking "I Agree" and "Agree".

The developers argued that it was unfair for them to pay $49.99 for the games and then be unable to install them or access Battle.net without agreeing to the license and Terms of Use. Shaw rejected the argument:

When defendants purchased the games, they bought a license to use the software, but did not buy the software.

For that reason he held the first-sale doctrine "inapplicable here". Under that doctrine, as the court described it, the sale of a lawfully made copy ends a copyright holder's "authority to interfere with subsequent sales or distribution of that particular copy".

Shaw agreed that the two sides had unequal bargaining power, because Blizzard was the only seller of its software licenses. He still upheld the terms, finding that the developers "had the choice" to pick a different game or return the software for a full refund, and that they were not "unwitting members of the general public" but "computer programmers and administrators familiar with the language used in the contract". He also held that the terms were not "harsh or oppressive". He accepted that reverse engineering as a fair use, a use of a copyrighted work that the law does not count as infringement, is "firmly established" under copyright law, then held that the developers gave up that right when they agreed to the license. He concluded that Jung, Crittenden and Combs breached the license agreements.

On the DMCA, Shaw held that the developers violated its anti-circumvention and anti-trafficking provisions. He found the DMCA's Section 1201(f) exemptions unavailable to them, in part because their development and distribution of bnetd counted as copyright infringement.

Appeal and outcome

On November 4, 2004, EFF announced that it had appealed. Paul Grewal of the law firm Day Casebeer argued for the developers on June 20, 2005, assisted by EFF staff attorney Jason Schultz. Stephen H. Rovak argued for Blizzard.

Judges Murphy, Bye and Smith heard the case, and Judge Smith wrote the opinion. The video game news site GameSpot reported the result as a 3–0 decision. The court upheld the judgment for Blizzard and Vivendi. In October 2005, Linux.com reported that Combs had been "banned from further distribution of BnetD".

Consumer-choice arguments against the decision

After the district court ruling, EFF staff attorney Jason Schultz said:

Consumers have a right to choose where and when they want to use the products they buy. This ruling gives Blizzard the ability to force you to use their servers whether you want to or not.

EFF's statement after the appeal said:

The court also ruled that clicking on a EULA's "I Agree" button, common when installing almost any software product purchased today, can be used to force both consumers and competitors out of the marketplace for add-on innovation.

EFF's case page says the ruling has been "widely criticized" for making it impossible to create new programs that work with older ones.

The Linux news site LWN.net's weekly edition of October 7, 2004, in a rundown of recent court decisions, said of the bnetd ruling:

The end result is that Blizzard is able to place strong restrictions on the users of its games, preventing them from communicating via any sort of alternative service.

Phil Albert, an intellectual property attorney at Townsend and Townsend and Crew, told Linux.com in 2005 that companies could combine the DMCA with licensing terms to "create exclusivity beyond what copyright law would provide them".

EFF's 2004 appeal announcement hoped the Eighth Circuit would follow the Lexmark and Skylink cases, which it said held that the DMCA "cannot be used to limit the aftermarket sales of printer cartridges and garage door openers". In 2003, Schultz linked reverse engineering to independent repair, saying it had "allowed independent and home mechanics to fix our cars". EFF's 2013 report on 15 years of the DMCA said:

It is hard to see why a competitor should have to solve Blizzard’s piracy problem before it can offer innovative products for legitimate owners of Blizzard games. Nevertheless, Blizzard prevailed on its DMCA claim, and the bnetd developers ceased distributing the software.

Reactions

Blizzard

In a statement e-mailed to Salon and quoted in its April 18, 2002, article, Blizzard president and co-founder Michael Morhaime wrote:

We further believe that emulators damage our efforts to prevent piracy, and they create safe havens for players using illegal copies of our products.

The same 2002 question-and-answer page answered hobbyists who used alternative servers without pirating: "Unfortunately, software pirates have spoiled this situation for hobbyists." After the district court ruling, GameSpot reported a statement from Morhaime: "We consider this ruling to be a major victory against software piracy". After the appeal, chief operating officer Paul Sams gave GameSpot this statement:

By again ruling in our favor on every count, the court is reiterating the message that creating unauthorized servers which emulate Blizzard's Battle.net servers is without question illegal

Electronic Frontier Foundation and bnetd developers

When Blizzard filed suit in 2002, EFF legal director Cindy Cohn said:

Suing your customers for making your product more fun to play is a poor use of corporate resources, as well as unfounded by law.

After the 2005 ruling, Schultz said the decision "could also be terrible for the software industry". Combs told Linux.com he believed the ruling was "detrimental to creators of add-ons, replacement parts, and other interoperating technologies". He said the ruling meant most software and some hardware could not be reverse engineered in the Eighth Circuit, which he said was "likely to allow vendors to lock users to their products, resulting in higher prices". He also said, "The decision is only in one circuit and it isn't set in stone."

Friend-of-the-court briefs

Six groups filed friend-of-the-court briefs supporting the developers: the Computer & Communications Industry Association, the Open Source & Industry Alliance, Consumers Union, Public Knowledge, a group of intellectual property law professors and the Institute of Electrical and Electronics Engineers. Supporting Blizzard were the Entertainment Software Association, the Recording Industry Association of America, the Motion Picture Association of America, the Software & Information Industry Association and four other companies and organizations.

The Samuelson Law, Technology & Public Policy Clinic at Berkeley Law, the University of California, Berkeley's law school, filed the brief on behalf of Consumers Union and Public Knowledge. The clinic summarized its argument this way:

The Samuelson Clinic’s amicus brief argues that click-wrap licenses that divest consumers of rights designed to benefit the public, including the rights to engage in reverse engineering and lawful competition, contravene public policy and warrant special scrutiny.

Ric Hirsch, senior vice president of intellectual property enforcement at the Entertainment Software Association, said the appeals judges "did a very good job in their analysis of the legal issues".

Eighth Circuit opinion

The opinion took up the contract claims first and the DMCA claims second.

Contract claims and copyright preemption

In their briefs, the developers argued that the federal Copyright Act preempted Blizzard's state-law breach-of-contract claims. Footnote 9 records how they narrowed that argument:

However, at oral argument, Appellants conceded that the only remaining issue was whether the breach of contract claims conflicted with the interoperability exception contained in the DMCA.

The court analyzed the question as conflict preemption, which applies when there is no express preemption but it is impossible to comply with both state and federal law, or when a state law "stands as an obstacle" to the full purposes and objectives of Congress. The developers relied on Vault v. Quaid Software Ltd., a 1988 Fifth Circuit decision holding that a Louisiana statute enforcing software license terms conflicted with 17 U.S.C. § 117. The Eighth Circuit distinguished it:

Unlike in Vault, the state law at issue here neither conflicts with the interoperability exception under 17 U.S.C. § 1201(f) nor restricts rights given under federal law.

The court then quoted Bowers v. Baystate Techs, a 2003 Federal Circuit decision:

[P]rivate parties are free to contractually forego the limited ability to reverse engineer a software product under the exemptions of the Copyright Act[,]

It followed with a passage it cited as "Id. at 1337 (Dyk, J., dissenting)", from Judge Dyk's dissent in the same case:

a state can permit parties to contract away a fair use defense or to agree not to engage in uses of copyrighted material that are permitted by the copyright law if the contract is freely negotiated.

The court wrote that Bowers and a 1993 Eighth Circuit case, Nat'l Car Rental Sys. v. Computer Assocs., were express preemption cases, but that "their reasoning applies here with equal force". It concluded: "By signing the TOUs and EULAs, Appellants expressly relinquished their rights to reverse engineer."

Circumvention and trafficking under Section 1201(a)

Section 1201(a)(1) provides:

[n]o person shall circumvent a technological measure that effectively controls access to a work protected under this title.

The court held that Blizzard's games, through Battle.net, used the CD-key handshake as a technological measure controlling access to the games, and that bnetd let games reach Battle.net mode "without a valid or unique CD key".

The developers cited Lexmark Int'l, Inc. v. Static Control Components, Inc., a 2004 Sixth Circuit printer-cartridge case holding that the purchase of a Lexmark printer, and no authentication sequence, controlled access to Lexmark's programs. The Eighth Circuit answered that "Battle.net's control measure was not freely available", because Battle.net mode code could not be reached by buying a game or logging on without some type of circumvention.

Section 1201(a)(2) bars trafficking in, among other things, technology "primarily designed or produced for the purpose of circumventing" such a measure, or with only "limited commercially significant purpose or use" beyond it. The court applied that provision to bnetd:

The bnetd.org emulator had limited commercial purpose because its sole purpose was to avoid the limitations of Battle.net.

Interoperability exception in Section 1201(f)

The court described Section 1201(f) as an exception for people using circumvention technology "for the sole purpose" of trying to achieve "interoperability" of computer programs through reverse engineering. Subsection (f)(4) defines interoperability as:

the ability of computer programs to exchange information, and such programs mutually to use the information which has been exchanged.

The court required the developers to show four things: that they lawfully obtained the right to use the program; that the information they gathered was not previously readily available to them; that the sole purpose of their reverse engineering was to identify and analyze the elements of the program necessary to achieve interoperability of an independently created program with other programs; and "(4) the alleged circumvention did not constitute infringement". It then held: "Appellants's circumvention in this case constitutes infringement." The court pointed to bnetd's missing CD-key check and wrote that "unauthorized copies of the Blizzard games were freely played on bnetd.org servers".

Scholarly criticism and later cases

Law review commentary

David Brett Kinitsky, writing in the Cardozo Arts & Entertainment Law Journal in 2006, argued that the court's reading of Section 1201(f), the DMCA's interoperability exception, was circular:

the court circularly determined that the interoperability exception to DMCA infringement did not apply because there was DMCA infringement. Such an application of the DMCA renders its interoperability exception superfluous ...

Kinitsky also wrote that whether the developers' actions should have been permitted "was an easy one; they should not have been", while calling the published opinion "possibly dangerous".

Dennis S. Karjala, in a 2008 article in the John Marshall Journal of Computer & Information Law, concluded that "the § 1201(f) exemption should have been available" to the developers. He wrote that the decision conflicts with Lexmark, which he called "an earlier and better reasoned decision". Reuven Ashtar, in the Yale Journal of Law & Technology in 2011, wrote:

whereas Lexmark effectively ignored its shrinkwrap license, Davidson and subsequent decisions took such licenses as gospel

Court decisions and government reports citing the case

• 2007: Craft & Associates v. College America, a case in a federal district court in South Dakota, cited the Eighth Circuit opinion for its two-part test of when the Copyright Act expressly preempts, or overrides, a state-law claim.
• 2009: RealNetworks v. DVD Copy Control Ass'n, a case in a federal district court in northern California, held that the movie studios in that case could bring both DMCA claims for circumvention of Content Scramble System (CSS) technology and breach-of-contract claims under the CSS License Agreement, citing the ruling as "affirming breach of software license and circumvention under DMCA".
• 2010: MGE UPS Systems v. GE Consumer & Industrial, decided by the federal appeals court for the Fifth Circuit, cited it for the statement that "One of Congress’ purposes behind enacting the DMCA was targeting the circumvention of technological protections".
• 2012: Out of the Box Developers v. Logicbit, decided by the North Carolina Business Court, described it as "upholding breach of contract claim for copying of licensed software" against preemption and fair use arguments.
• 2017: the U.S. Copyright Office's report on Section 1201 cited the Eighth Circuit as having "identified four elements required to prevail on a section 1201(f) defense".
• 2021: TruLogic, Inc. v. General Electric Co., decided by an Ohio appeals court, quoted the holding that the defendants "expressly relinquished their rights to reverse engineer" in discussing end-user license agreement claims.

See also

• Reverse engineering vs illegal hacking
• Digital rights management