Comments on the Broadcast Case of Fantasy Westward Journey II Online Game —From the Perspective of the Fair Use of Copyright

Comments on the Broadcast Case of Fantasy Westward Journey II Online Game —From the Perspective of the Fair Use of Copyright

Xie Lin, Lecturer and Master Supervisor for Law School, of Sun Yat-sen University


In October 2017, Guangzhou Intellectual Property Court made the first instance judgment on the case of Guangzhou NetEase Computer Systems Co., Ltd. v. Guangzhou Huaduo Network Technology Co., Ltd. on copyright infringement and unfair competition disputes. The court held that, online games belong to the work created through the method similar to filming; online live game shall be restricted by “other rights enjoyed by the copyright owner”, and shall not constitute fair use. As for the aforementioned first two steps of judgment, although there are disputes, this is merely a problem about classification of work and right types, and will not influence the affirmation whether online l i ve game constitutes infringement. The key for judging whether the defendant of this case constitutes infringement relies on the step 3: judgment of “whether it constitutes reasonable use”.


Focus of dispute: Whether it constitutes reasonable use


As for this controversial question, the academia has formed two schools of opinions. For instance, Professor Wang Qian believes that, online live game is transformative, “It is not simply for the objective of representing the beauty of the picture itself or the thoughts and feelings expressed thereby, instead, it is to show the game skills and achievements of specific users”, and it is hard to form market replacement, and can be identified as fair use.1 Professor Li Yang, on the other hand, holds the opinion that, “without game images, skills and commentaries of game hosts as well as bullet screen texts interacting with audiences and other elements are l ike water without source, and trees without roots”, and “when audiences watch the game live broadcast pictures, it is quite difficult to judge whether they merely enjoy the playing skills of game hosts, the commentaries and appearance of hosts, excluding wonderful game pictures, game plot, game scenario or other creative and personalized elements.”2 


The court finally judged that this cannot constitute fair use. The court held that: “For users (players) and audiences, their experiences may come from the perception of consecutive images, the pursuit of ‘level completed’ preset in the game or ‘upgrading’ and other operation results. In the follow-up experiential activities, the value of game pictures seems to be transformed, but under such condition, the game picture play is still the precondition, and is inevitable; The operating result of ‘level completed’ or ‘upgrading’ can be regarded as the progressive pursuit of game presenting pictures, which can jointly reflect the diversified value of electronic games with the presented pictures. Therefore, from the perspective of legal theory, even if the game picture is used as one of game tools, it is the result of difference among focusing and analyzing perspective, and this will not cause the loss in the value of game picture.”


The main reason why the aforementioned contents cannot constitute transformative use is that the value of game pictures "seems" to be non-transformative no conversion. This dispute arises is because the definition of transformative use in American copyright system i s unclear. Professor Wang Qian advocates that “ i t is not simply for the objective of representing the beauty of the picture itself or the thoughts and feelings expressed thereby, instead, it is to show the game skills and achievements of specific users”, which means that i t has realized different functions, and constituted the transformative use in functions. However, the transformative use in functions finally uses the work for information transmission, and if we want to know whether there are transformation in functions on this basis, it is relatively difficult to make a clear definition. This is also the reason why the court cannot sufficiently support the constitution of transformative use.


Judge of fair use from the perspective of market failure


If we can further analyze from the protective essence behind the transformative use, a clearer interpretation about the problem can be provided. I specifically discussed about it in my article called A study on Non-transformative Character of Transformative Use in Copyright.3 


Cases that a rejudged as constituting transformative use and then constituting fair use are mostly accompanied by the phenomenon of market failure. Market failure theory was put forward by American Professor Gordon in the article named Fair Use as Market Failure: A Structural and Economic Analysis of the Betamax Case and Its Predecessors in 1982, which has generated a profound influence on the followup court judgment.4 According to the theory, when market failure and transaction failure occur, judgment of constituting fair use can be more beneficial to promotion of work utilization; besides, because of transaction failure, relevant licensing market can not be formed, there will be no market damages to the original author. American Campbell case in 1994, introducing transformatie use, is a typical case of market failure, and the court has pointed out in the judgment of the fourth considering factor--market factor that nobody wants his work to be criticized by others, so the criticism license market cannot be formed.5 For another example, in American thumbnail searching series cases which constitute transformative use, due to a large mount of information, it was impossible to obtain the permission of copyright owners one by one;6 In American eBay case , sales of second-hand magazines via eBay used the cover of magazines, because of its small market but excessive transaction cost, it formed market failure.7 


As for cases that form market failure, I argue that defendants who cannot easily form common permissible practice shall be judged as the using behavior constituting fair use. Although the fair use clauses stipulated in the Copyright Law of China adopt the open and closed model, when it comes to the juridical practice, the court has implemented the breakthrough application i n certain market failure situations, and judged as the constitution of fair use. For instance, the relevant judicial interpretations released by the Supreme People’s Court in 2012 have also stipulated that thumbnail searching service shall not violate the copyright.8 Being quite similar to the American eBay case, in our country, there is a lawsuit case filed by Qin Shaoyin against Beijing Rongbao Auction Co. , Ltd. considering violation of copyright; the court judged that the behavior of using the work for auction constituted reasonable use.9 I also analyzed in the article called The Expansion of Fair Use in Copyright: Towards a Market-centered Approach- - returning the Market-centered Judgment Route, and pointed out that, although the judgment of these cases failed to mention market failure theory, all of them had market failure situation i n f a c t . 10 It is worth noting that, the judgment of market failure isn’t analyzed from the details of a single case, because plaintiff is often requested to pay licensing fees when files a lawsuit, although it may not be supported; market failure shall be treated as a whole from the entire industry conditions, i.e., When the defendant’s behaviors have become extensive practice of the industry, whether licensing market has the possibility to develop.


So does online live game belong t o market failure ? It is applicable to get game live broadcast licensing transaction. The licensing market has huge profits, and in fact, it is also applicable to obtain license. Game copyright owner can directly conduct group permission via broadcast platforms with no need to gain license of game player hosts one by one, and there is no trade barriers faced by new technologies. As can be seen from the legislative model of fair use in the Copyright Law of China, although fair use clauses have been made breakthrough use for relevant cases in juridical practice, this means the court will be quite cautious when expanding applicable fair use, except for “special situations with necessity”, or court won’t easily implement applicable laws with breakthroughs. According to judgment o f Guangzhou Intellectual Property Court, “from the perspective of the applicability of existing laws, it doesn’t belong to any right restriction situations stipulated in Article 22 of the Copyright Law, and the defense of fair use put forward by Guangzhou Huaduo Network Technology Co., Ltd. is false”, which is also in expectation.


Consider space of fair use from the perspective of public interests


For further discussion in this problem, although live broadcast of games isn't in a sense of typical market failure, Professor Gordon held that although there is no situation of transaction failure, due to considerations about subsidy of public interests, it can also be judged as constituting fair use. Even Professor Ginsburg, who has always been advocating strong protection of copyright, also agrees with this point.


When measured from the perspective of public interests, this can be quite subtle . The boundary of public interests isn' t clear as market failure, so in more cases it's analyzed from the perspective of interest balancing and public policy. The significance of transformative use is the division of the new and old markets. American court held that, the more transformative use, the fewer possibilities of replacing the original market, and the more possibilities of constituting fair use. Apparently, game live broadcasts won ’ t replace the original game market. The key problem is how to distribute the profits of broadcast licensing market promoted via online live game.


Reasons supporting constitution of fair use are mainly considerations about the development o f new industry. Whenever new type of use promotes generation of new licensing market, original copyright owner shall not definitely enjoy all the interests of new licensing market. The reason includes two aspects: First, new industry belongs to market interests beyond the expectation of copyright owner.


Under utilitarianism, objective of copyright protection is to provide enough creation incentives to copyright owners, while unpredictable market interests during creation cannot provide more incentives to copyright owner itself. Second, original copyright owner isn’t the best executor for developing new industry, through endowing copyright owner with relevant control rights; this can bring potential copyright hold up treats and improve transaction cost, and even prevent generation of new using mode.


This is why most American scholars claim that the copyright holder shouldn't enjoy all the benefit based on licensing fees of the work.11 Throughout the development history of copyright laws, this is still the fact. Even derivative rights in copyright, which is widely recognized today, are still not protected by copyright laws in early stages. Along with multi-party legislative lobbying of copyright owner, the derivative works market has been gradually included in the market where the copyright owner can enjoy profits.


As can be seen from current industrial conditions, online live game have not formed any licensing market yet. Since online live game exerts a huge promotion effect on games, game copyright owner welcomes live broadcasts of their games, but most copyright owners haven’t signed copyright licensing contract with the live broadcast platform. Actually, copyright owner also hopes to reserve the right to execute the copyright, if necessary. This means that, there is still the possibility of copyright owner using rights to restrict competitions. Besides, licensing rejection is not advocated by copyright laws, just like the freedom of expression emphasized by Amendments to the Constitution of the United States; in American Case Law (such as Campbell, Cariou and Kienitz case), certain licensing rejection situations may be decided as fair use judgment by the court.12 Thus, there are still certain room for discussing of the problem. I have pointed out in the article called A Study on Copyright Fair Use of Live Broadcasting the Online Game, if the judgment is constituting fair use, and permits free online live game without any restrictions, it is beneficial for cultural development of broadcast industry.13 


To sum up, online live game isn't the typical situation of market failure resulting from transaction failure and it doesn't inevitably constitute fair use. However, considering the public interest in development of new industry, there is some certain room for fair use. The original market has provided valid creation incentives to copyright owner, and copyright owner is not the best executor for developing the emerging market, and shall not enjoy all the relevant control rights on the emerging industry. As for new use, it is requested not to regard it as constitution of fair use without any doubt; instead, potential hold up threats from original copyright owner should be taken into further consideration.


1 Wang Qian: Research about the Electronic game live broadcast Copyright Problems, Electronic Intellectual Property Right, Period 2, 2016, P15-18.

2 Li Yang: Copyright Issues in the Live Broadcast of Online Games, recorded in Intellectual Property Right, Period 1, 2017, P21-24.

3 Xie Lin: A study on Non-transformative Character of Transformative Use in Copyright, recorded in Academic Research, Period 9, 2017, P61-67.

4 Wendy Gordon, “Fair Use as Market Failure: A Structural and Economic Analysis of the Betamax Case and Its Predecessors”, Columbia Law Review, vol.82, no.8, 1982, pp.1600-1657.

5 Campbell v. Acuff-Rose Music,Inc.,510 U. S. 569 (1994).

6 Kelly v. Arriba Soft Corp.,336 F. 3d 811 (9th Cir. 2003); Perfect 10, Inc. v., Inc., 508 F. 3d 1146 (9th Cir. 2007).

7 Rosen v. eBay, Inc., No. CV 13-6801 MXF (Ex), 2015 WL 1600081 (C.D. Cal. Jan. 16, 2015).

8 Article 5 in the Regulations of the Supreme People's Court about Several Problems of Applicable Laws for Hearing the Civil Dispute Cases Infringing the Information Network Transmission Right.

9 Beijing No. 1 Intermediate People's Court (2003) YZMC Zi No. 12064 Civil Judgment.

10 Xie Lin: The Expansion of Fair Use in Copyright??Towards a Market-centered Approach, recorded in Journal of Sun Yat-Sen University (Social Science Edition) Period 4, 2017, P162-174.

11 Rebecca Tushnet, "Content, Purpose, or Both?", Washington Law Review,vol.90,2015,pp.891-892.

12 Campbell v. Acuff-Rose Music,Inc.,510 U. S. 569 (1994); Cariou v. Prince,714 F. 3d 694(2d Cir.2013); Kienitz v. Sconnie Nation LLC,766 F. 3d 756(7th Cir.2014).

13 Xie Lin: A Study on Copyright Fair Use of Live Broadcasting the Online Game, recorded in Intellectual Property Right, Period 1, 2017, P32-40.