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LEGAL CHALLENGES IN E-SPORTS

2016-11-14

Since gaming evolved into e-sports in the early 2000’s and took shape as a real sport for competitors as opposed to mere entertainment, e-Sports has gradually begun to align itself with the structure of conventional sport.

Nobody will be surprised to hear that whenever a major European football club or American basketball club signs contracts with players, lawyers are involved to make sure that all legal issues are taken care of.

If, however, there’s a Playstation 4 - FIFA 16 or Counter-Strike GO tournament on the PC, would anybody find it natural WADA showed up and tested for prohibited substances?

We assume not – but that is what it should be like. Professional cyber athletes (e-sports athletes) are truly beginning to make money. Real money. According to one list, the highest paid player in e-sports in 2015 made more than USD 2.1m!

With recent e-sport sector investments in Denmark from well-reputed investors such as Saxo Bank founder Lars Seier, former cycling pro Bjarne Riis, venture capitalists Sunstone Capital, American and Swedish celebrities like Shaquille O’Neal, Martin Dahlin and Robin Söderling, as well as investments from giants of conventional sport like the football clubs Manchester United, Manchester City, Paris Saint-Germain, Schalke 04, Bayern München, Valencia, e-sports is certainly not just a ‘game’ anymore – it’s a business.

Becoming a professional sport holds challenges for e-sport – not least of all, legal.

In this newsletter Magnusson will address some of the legal challenges concerning the commercialisation and professionalisation of e-sports.

Contracts and transfers

It came as a surprise to many of the cyber athletes (players) we have been in touch with, that in most jurisdictions in the world as well as according to international law, all commercial agreements and contracts are binding. This means that players cannot swap teams as they please if they have entered an agreement with the previous team/club. It would be a breach of contract in most cases to sign with another team, even though there is no international organ like FIFA to enforce the contracts through exclusion from competitions for example.

Surely the breach of contract does not restrain them from competing in tournaments for the new team, but the old team could bring the player before the courts and claim compensation and damages for breach of contract. Once e-sports organizations are formed and become entitled to control the games and tournaments, an unauthorized transfer will most likely exclude the player from competitions within the organization, and compensation for breach of contract may be owed.

The cyber athletes and their new clubs should bear the binding nature of a contract in mind.

Sponsor contracts

E-sports as well as conventional sports is largely funded through commercial sponsors. Teams, organizations, players, tournament organizers and even game developers will sooner or later enter into sponsor contracts, which – compared to employment contracts – have even more complications, because different sponsors might compete externally within their own markets, e.g.: AMD and Intel both produce computer chips (CPU’s), and thus Intel might have vested interest in their e-sports teams not cooperating with AMD. This creates complications when Intel signs with an e-sports team. It is clear that this particular team cannot enter agreements with AMD afterwards without the permission from Intel. However, can one of the team’s players enter a personal sponsorship with AMD? Many of these questions depend on the wording of the particular sponsor contracts, which makes their draft thereof very important.

A related issue regards the names of the players – how can one legally use a player’s name commercially? The player itself can normally use his own name, but may the club automatically use the name of the team players simply through the employment relation? What about the team’s sponsors and personal sponsors?

Dealing with sponsor contracts is a very delicate and complicated matter which can cause very problematic legal challenges if done improperly, and all stakeholders of e-sports should be aware of that.

IP and streams

Making protected intellectual property publicly available (e.g. through the internet) is illegal in most modern countries. You may not upload a song on YouTube without the permission from the rights holder. This is somewhat common knowledge. The same laws of IP (copyright) however, prohibit more or less any form of public sharing of digital content without a valid license.

It is quite common for game streamers to have music playing while streaming. Unless the streamer has bought a license to do so, the stream will constitute an IP violation for which the streamer can be punished and sued for compensation and damages by the rights holders.

This is certainly true for the music, but most likely also for the images of the computer game shown on the stream. Digital, computer-generated images are subject to IP-protection, and thus the game developer has the sole right to make these images publicly available.

Most of the IP-related problems within e-sports relate to copyrights. However, if one forms a team, one has to observe the trademark related challenges too. There is a well-known Counter-Strike team called Copenhagen Wolves. If a new team owner decides to call his team Odense Wolves or Danish Wolves while operating a professional e-sports team, this might be a violation of the rights holder of Copenhagen Wolves.

Cyber athletes as well as tournament organisers and team owners should be well aware of the IP rules governing how they can operate their businesses.

Cheating

While in conventional sports cheating is mostly done through doping, this is different in e-sports. Most cheating is done through third party software (hacks) which enables various possibilities for the player such as the ability to see through walls.

In sports law, cheating i.e. doping as well as technical cheating, is dealt with through exclusion of leading organisations such as FIFA, UCI, ATP etc. Until such organisations are established within e-sports, tournament organisers need different means to deal with cheating, mostly in form of implied regulations or explicit agreements. Such agreements, however, will most likely not exclude potential cheaters from other tournaments, but only seek to recover prizes from the cheating players. But, note that with the monies involved, cheating may be a criminal offence that could subject cheating players to fines or even imprisonment.

Another question to be addressed relates to the rule of law. Who can decide if anyone cheated, and how are players protected against arbitrary exclusions and rulings?

As of today, cheaters are mostly dealt with by game developers (e.g. Valve Anti-Cheat “VAC”) or tournament organisers. It is highly doubtful if these players get a fair “trial” as no uniform rules exist. It may sound amusing to talk about fair trials for players cheating in a video game, but the cyber athletes do it for a living, and should thus have the same treatment and protection given to e.g. football players. If a professional football player is accused of using EPO, he will have a hearing before the relevant body of FIFA with the opportunity to appeal this decision to the Court of Arbitration for Sport – CAS.

Apart from going to court, cyber athletes have no such protection or opportunity.

In conclusion:

The problems mentioned are just some of the many legal issues that exist in electronic sports and in our opinion, e-sport should be no different than conventional sport from a legal point of view. E-sports will gradually experience more and more legal challenges until fully developed as a professional business, at which time we predict it to have at least as many – if not more – legal challenges than conventional sports.

* * *

This newsletter is published for informational purposes and is not and does not replace legal advice. If you need legal advice concerning Danish or international sports law and e-sports law, we encourage you to contact Magnusson.

With former FC Copenhagen General Counsel Jens Vinther Nielsen and Sam Jalaei among its partners, Magnusson is one of the leading sports law offices in Denmark. As a former football player Sam Jalaei has a vast domestic and international network and has for the past 17 years provided legal assistance and services to both major clubs, agents, players and managers and thus works closely with the relevant stakeholders in the business.

Magnusson’s office in Denmark

 

Related People: Jens Vinther Nielsen, Sam Jalaei, Jesper Kragh-Skriver

Downlad PDF

 

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