The esports industry is expected to exceed $1 billion in revenue for 2021. Intellectual property is a crucial element of the esports industry and is associated with not only ownership of the games themselves, but also the advertising and licensing agreements that allow stakeholders to monetize their brands. Particularly, as the industry continues to grow, following proper guidelines in advertising becomes essential. This article explores the types of intellectual property that are relevant to esports, important guidelines for the increasingly important world of endorsement advertising, and discusses how players and teams can protect their brands.
What requirements exist for something to be copyrightable?
In order to be protected by copyright, a work must be:
- a "work of authorship" – for example, a book, a piece of music, a film, a photograph, an artwork, a sculpture, software, HyperText markup language or a website, a separable design element or an architectural work;
- original – it must be an independent creation and involve creativity; and
- fixed in a tangible medium of expression – it must be written, recorded, or otherwise captured.
Which elements of esports are copyrightable?
Video games are eligible for copyright protection. This may include audiovisual elements of the game (e.g., maps, sound effects and characters) and literary elements (e.g., the underlying source code). Copyrights in these elements can raise questions of authorship as there tends to be several parties involved in, for example, game designing, sound engineering, programming, and developing a user interface.
Match footage of games is also generally protectable under copyright. The tournament organizer or broadcast service typically owns the copyright in match footage; however, individuals who are casting or commenting on a match may have some IP rights in their own cast, depending on the agreements in place.
What is not copyrightable?Copyright does not cover ideas, such as general game concepts or ideas. While musical or dramatic performances can be covered by copyright, sports performances are generally not recognized as a copyrightable work. This is because they are not scripted and cannot be reproduced and therefore do not meet the third requirement for copyright protection – that the work must be fixed in a tangible medium of expression. As a result, there are no performance rights in players' performances in an esports match.
What rights do copyright owners have?
A copyright owner has the exclusive rights to:
- reproduce the work;
- make derivative works of the work;
- distribute copies of the work to the public;
- perform the work publicly; and
- display the work publicly.
What rights do copyright owners have in the context of esports?
In most traditional professional sports, leagues and teams own and license their own intellectual property. In esports, however, the copyright in any given game is owned by the developer or publisher of that game.
Video game creators have broad control over how video games can be exploited, including the creation of video media, the streaming of gameplay and in-person tournaments. Because publishers own a substantial portion of the intellectual property associated with esports, they have a great deal of control over not only the games themselves, but also the rest of the esports ecosystem, including:
- who can compete (i.e., the teams, players, and leagues);
- how the choice of who can compete is made;
- who organizes the competition;
- how it is advertised; and
- how it is broadcasted.
Because of this, the esports ecosystem has a "top heavy" IP power structure. The publishers' control is typically effectuated through contracts – either end-user licenses or terms of service. As a general matter, end-user licenses limit an individual's right to publicly perform the video game online either in a recorded video or via a live stream. However, these agreements usually have carveouts to enable individuals to incorporate gameplay into video content for non-commercial uses. They may also include exceptions to enable individuals to earn partnership revenues from streaming platforms.
For esports tournaments, publishers enter into agreements directly with the tournament organizers.
What requirements exist for something to be protected by a trademark?
A trademark can be:
- a word;
- a phrase;
- a symbol;
- a design;
- a combination of the above elements;
- a sound; or
- a scent.
Trademarks serve to identify and distinguish a provider's products or services from those of its competitors. They can act also as a marker of reliability, dependability, or quality, building up goodwill in the provider's products or services.
Trademarks are registered in specific classes for different types of goods and services and they last for as long as they are used.
Registering a trademark gives the owner:
- the legal presumption of ownership;
- the exclusive right to use the mark nationwide; and
- the ability to bring an infringement action in a federal court.
What elements of esports can be protected by trademarks?
Companies and players can trademark their brands. This might include:
- the title of a video game;
- a gamer tag or nickname (Figure 1);
- a team name (Figure 1);
- a logo; or
- a jersey.
Figure 1: examples of trademarked esports team names and gamer tags
Esports players can establish rights in trademarks by using them in commerce – for example, by participating in sports competitions.
Other forms of intellectual property
Various other forms of intellectual property may be applicable in the context of esports:
- the right of publicity – this generally protects a person's right to control the commercial use of their name, voice, image or likeness;
- domain name rights; and
- trade secrets – these last as long as they are protected and have commercial value.
Leveraging intellectual property
The explosion of the esports industry in recent years, and the resulting increase in investment, has led teams and individuals to seek ways to monetize their success. Esports players are generally compensated in the form of winnings and endorsements. Endorsements can be broad and limiting, depending on the scope of the contract. However, in order to receive endorsement compensation, players must own the intellectual property that they are using.
Players and teams looking to attract sponsorship or other forms of funding must protect their brands by developing their IP portfolios apart from the game itself. It is important to develop an IP and brand protection strategy early: companies will want to see that the intellectual property has been secured and registered before it can be licensed for merchandising deals.
Advertising regulation in the esports world
The exponential growth of the esports industry, and resulting corporate interest in engaging players, teams, and influencers for product endorsements has consequently brought greater scrutiny, particularly from the Federal Trade Commission (FTC). The FTC has taken a particular interest in endorsements, which comprises "any advertising message (including verbal statements, demonstrations, or depictions of the name, signature, likeness, or other identifying personal characteristics of an individual or the name or seal of an organization) that consumers are likely to believe reflects the opinions, beliefs, findings, or experiences of a party other than the sponsoring advertiser . . ."
To avoid issues with the FTC that may negatively impact your business, it's crucial to follow the FTC Endorsement Guides. The guide states that 1) endorsements must be truthful and not misleading; 2) the endorser and the marketer must disclose any connection between them that would affect the consumer; and 3) the endorsement must represent generally expected results.
Some disclosure best practices include:
- Place disclosures in hard to miss places near the endorsement message.
- If the endorsement is on platforms like Instagram or Snapchat where advertisements may appear temporarily, a good method may be to superimpose the disclosure over the picture and ensure it appears long enough for a viewer to read it.
- If the endorsement is in video form, then the disclosure should be in the video itself and not just the description. Best practice is to use both audio and visual disclosures!
- If livestreaming on platforms such as YouTube or Twitch, then the disclosure should be repeated periodically.
- Simple clear language is best.
- On platforms where you need to save space, including simple terms like "ad" "advertisement," or "[Company]Ambassador" is adequate.
- Do not use confusing abbreviations e.g. "sp" or "spon"
When in doubt, it's best for all entities involved to disclose endorsements clearly and conspicuously, and explain any benefit provided to the endorser which affects their credibility. Companies who hire third-parties to find their endorsers, such as an advertising agency, can still be liable for misleading endorser statements and be on the hook for violations and/or civil penalties.
Potential Pitfalls in Esports Endorsements
In this evolving industry, it's easy for even the most observant endorsers and advertisers to get caught in pitfalls. When in doubt, players, teams, and influencers can protect their brands by routinely referring to the FTC's Endorsement Guides, and avoid potential pitfalls that include:
- Posting content supporting a game, gaming product, or gaming company without disclosing the ownership interest or sponsorship.
- In 2017, Trevor "TmarTn" Martin and Thomas "Syndicate" Cassell settled FTC charges that they deceptively endorsed the online gambling service CSGO Lotto, while failing to disclose they jointly owned the company. This led the FTC to send warning letters to another 21 social media influencers and to update its guidance.
- Paying influencers to post endorsements on social media supporting a game console without disclosure.
- In 2016, a popular media company settled FTC charges that it deceived consumers during a marketing campaign for a video game by failing to adequately disclose that it paid online "influencers" thousands of dollars to post positive gameplay videos on YouTube and social media. The company instructed influencers to place the disclosures in the description box appearing below the video, resulting in the majority of sponsorship disclosures visible only if consumers clicked on the "Show More" button in the description box.
- Paying popular influencers to post gameplay videos on YouTube or Twitch without disclosure.
- In 2016, the FTC approved a final consent order with Machinima, Inc., requiring the company to disclose when it has compensated "influencers" to post YouTube videos or other online product endorsements as part of "influencer campaigns."
We will continue to monitor legal developments in both intellectual property and endorsement advertising in the esports space to offer guidance on how players and teams can protect their brands, and for any questions, please contact the authors.