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The Key Masters: Reselling and the Games Industry

A comprehensive look at the state of key reselling, including comments from G2A as well as a range of indie developers...

Last year, after something Proteus developer Ed Key mentioned on Twitter, we noticed that copies of our game Frozen Synapse were being sold on several sites that we didn’t recognise.

That’s not a pleasant moment for any developer: it instantly feels like someone is making a cheeky profit at your expense. The persistent background buzz of piracy is one thing but another company profiting from our games without our knowledge is an entirely different sensation.

It’s important to check these things out, though, so we emailed the sites in question to ask them if they had a valid distribution agreement with us and if they could show us a copy.

Fast2Play, Kinguin and G2Play are sites which are all owned by a company called 7 Entertainment. Fast2Play is a store where keys are sold to customers, whereas Kinguin is a “marketplace” which allows users to sell keys between themselves. G2A are a separate entity: their business also has both store and marketplace components.

All of these sites had listings for the game but were unable to supply any proof that they were genuine copies that we had authorised. We had never received a share of sales from any of them.

Fast2Play immediately responded to our enquiry by saying simply, “Product has been disabled on the store.” I asked them if this constituted an admission of illegal activity, to which I received no reply.

Frozen Synapse remained on sale on the rest of their sites until several days later, when more unanswered emails prompted its short-term removal.

It was at that point that Game Informer decided to write about the story, interviewing Ed Key and I about it:

http://www.gameinformer.com/b/news/archive/2014/03/28/retailer-scam-resells-humble-bundle-games-reaps-profit.aspx

7 Entertainment then responded to the article:

http://www.gameinformer.com/b/news/archive/2014/03/29/7-entertainment-updates-terms-to-prohibit-the-resale-of-humble-bundle-keys.aspx

It was at that point that I decided to leave things. We’d achieved a commitment from them to stop selling keys from Humble Bundles for profit, a concept which was pretty much universally panned by customers and developers alike. The traditional indie response to situations like this is to spend our limited resources elsewhere, specifically on things which directly benefit legitimate customers.

However, some recent developments have caused me to renew my interest.

G2A and 7 Entertainment have taken out some very high-profile sponsorships, with a particular focus on esports and Twitch streaming. This kind of activity can be profoundly powerful in establishing the legitimacy of a brand; it seems to partially explain G2A’s rapid growth:

It’s not just indies who have tangled with the key resellers. Ubisoft got into a difficult situation with Far Cry 4 keys which were purchased with stolen credit cards and then resold via Kinguin and G2A. Kinguin responded by effectively blaming EA and then appealing to gamers “who simply don’t want to pay publisher suggested prices”. As many players had bought their keys via reselling sites, believing that they were legitimate, Ubisoft were then forced to backpedal.

Polygon published a comprehensive look at the matter and revealed the confused, chaotic nature of key marketplaces. Apparently, nothing has changed since the original Game Informer article: publishers and developers ignoring the situation has simply allowed these sites to grow.

I’ll begin by taking a look at the legality of reselling, then move on to some developer perspectives and finally conclude with a few thoughts of my own.

Is it legal?

The question of legality here is paradoxically simple and complex.

If you believe that the EULA’s which Valve, Humble and other distributors use are valid and enforceable, then reselling is clearly prohibited. If not, then the situation is far more vague.

If you’re content with that as a summary then please feel free to skip this long section and continue at “The Indie Perspective” below! If you’d like a full exploration of the legal issues then read on…I now wish I’d written this in Twine.

I spoke to Tilly McAdden and Alex Tutty from Sheridans law firm in the UK. Tilly and Alex specialise in games and technology; they deal with these issues on a daily basis.

Could you give me a general summary of the issues here?

For the purposes of these answers we will use the terms “sell” and “sale” etc. but in fact what we are talking about is paying money for a key which provides access to a piece of software which is covered by a licence.

More specifically, in relation to downloads and software keys, when you buy these in order to use them you need to download the software, which involves making a copy of it.

The unauthorised reproduction or copying of proprietary software products in most cases amounts to copyright infringement. This is because, generally speaking, all uses of the software like many other copyright protected products (physical and digital) require the express permission of the rights holder. So it follows that if the desired use of the game (such as reselling) is omitted from the End User Licence Agreement (“EULA”), then it cannot be used in that way without further authorisation from the rights holder. Or alternatively, where the EULA does include terms which permit the further reproduction of the software or game, you can indeed make a further copy as long as it is used within the prescribed terms of the EULA.

At the end of the day, any use of the software or game outside the specific terms of the EULA would not be permitted and in the instances of any transfer, which involves making another copy, would amount to copyright infringement.

It is more akin to lending something under certain conditions rather than having outright ownership. It is possible to sell physical software but this is not the case in these examples of digital downloads of games.

What is the current legal status of reselling (defined as buying from a legitimate distributor and then selling the key elsewhere) game keys or licenses in the EU?

What we are talking about here is the reselling of a licence to use game software. The current status in the EU is that the terms of the End User Licence Agreement and under which the game is “sold” govern what you can do with it unless the terms are invalid due to being contrary to current law.

If you have a physical product like a book once you buy it you do own it and then you can resell it (otherwise car boot sales would be even more dodgy). What you cannot do is make a copy of that book and sell that. You cannot also copy your book, destroy the original copy and then sell the new copy. Also you do not have rights in other versions of that book or other copies of it. You just have your one copy.”

How would you respond to people citing news posts from the gaming press as a counterpoint to that? For example, the cases cited by Engadget and Destructoid in 2012?

These cases do not support this. When they were first published there was a suggestion that they might, but in the technical (and relevant) legal bits of the judgements it is not there. In these examples, the exact cases are not mentioned, so I have answered the question but I have also included the most recent and important cases, as they make a special case for games.

“EU Court Rejects EULAs, Says Digital Games Can be Resold”

(Destructoid, 2012)

This case is very specific to its facts. It involved non-games software that could be freely downloaded but needed to be activated via a code. The defendant was selling licences including the codes that it had bought it bulk and passing on the discount. The court said that it could resell these licences but interestingly it explicitly stated that where it had bought in bulk for its own use it could not sell on separate licences which were part of this block.

“EU Court Rules it’s Legal to Resell Digital Games and Software”

(Engadget, 2012)

The case we should be talking about here concerns Valve (VZBW v Valve). After the case described above which stated that “resale was allowed in certain cases” VZBW tried (again) to have a court decide that games could be resold. Specifically VZBW asked the court to find that Valve’s terms which banned the trading of games between users were unenforceable.

The German court did not agree that they were unenforceable and therefore held that Valve could ban the resale of games in its terms.

In another related case (PC Box) the European Court also decided that games software should also be dealt with separately to more functional software as it contained graphical works. Personally I think that this complicates the issue (and in the favour of those who want to restrict software reselling) and will probably be ignored in subsequent judgements.

There are cases and statements that suggest the EU is trying to get to a position that might allow reselling but as it currently stands this is not the case if it is prohibited under the terms.

If a distributor’s EULA or Terms and Conditions doesn’t explicitly prohibit reselling, is reselling allowed then?

If there are no restrictions e.g. it says “you are granted a licence” and there is no mention of “limited, non-transferable” or similar i.e. it is silent on the issue. In this instance then the licence would be transferable unless it could be implied that it was necessary and obvious that it would not be a transferable licence. When this would be would depend on the circumstances surrounding it and the sale.

What do you think of claims that the prohibition of reselling is “unenforceable”?

As described above I do not believe that prohibiting reselling is unenforceable and would say that the opposite has been stated to be the case in the German courts (but interpreting EU law). Of course the law may change and each case will turn on its own facts but it is certainly not unenforceable. It may be difficult or impractical to enforce but that does not mean that it is unenforceable.

If a site set itself up as a marketplace for individual sellers to connect with individual buyers, requiring the sellers to sign a disclaimer saying that they had full rights to sell the game, what would be the legal position there for both the site and its users?

This makes the case to be very similar to eBay or other marketplaces. If a user states it is legal then the marketplace can rely on it. However, if they have actual knowledge that this is not the case (either before or during the sale process) then they are required to remove it, which is the case for infringing items for sale on eBay.

It is also worth noting that should the sale in fact not be legitimate the user may be targeted by the rights holder directly of the products and they in turn would have to take action against the online seller.

How about other territories? Does it matter where the site is based, or where the customer is based? Is there any way that reselling can possibly be legal?

For other territories I am not aware if it is legal. In the US the position is very similar to the EU and it is going through the same process as the EU as it tries to decide how to move forward.

If a site is based in another territory but is making infringing content available in the UK (for example) and advertising to UK residents, then it does not matter where it is based. There is an infringement going on in the UK which would be actionable in the UK courts.

Any response to this Gamezebo article, which asserted that “while initially it sounds illegal, there is no concrete court ruling that says it is, in fact, illegal”?

As explained above, the sale of the product is in the firstly subject to the terms of the EULA or the terms of the original contract for sale in the circumstances of bulk purchases. There have not been any cases before the courts in respect of this practice for games, however, in the case mentioned above regarding non-gaming software (“Court Rejects EULAs, Says Digital Games Can be Resold”) the court was very clear on the issue of licences bought in bulk.

It stated that where the original software was bought as part of a large bulk sale for one particular entity and that was the basis of the unit price in the first sale, such products cannot be unbundled and sold on. Since this is a similar practice at hand here, subject to the original terms of the sale, should some rights holders take it upon themselves to challenge such sales, the parties doing the unbundling and reselling may find themselves liable for breach of contract and/or copyright infringement should this approach be upheld in respect of gaming software.

Is there anything that developers can do to prevent these sites from distributing their games if they would like them to be taken down?

If developers are concerned about the resale of the products then it would be worth speaking with the original distributors of the products in the first instance to see if any restrictions where included in the original sale. Should concerns remain, they should contact the website/reseller and query the resale products. Humble have changed the way that they sell bundles and we would expect further changes to be made to make it more difficult to resell keys.

If a developer’s game is being resold and it is prohibited under the EULA then it would be sensible to contact the marketplace where the games are being sold and demand that they are removed. If that market place does not expeditiously then they may find that rather than being able to rely on the protection offered by law and their reliance on their terms with the seller that they become liable.

Finally what would you say to people who still believe this is a grey area?

As outlined above, the outcome of cases involving the resale of licences and codes will be determined by the individual circumstances of each case. I am aware that this sounds like a lawyer’s response but unfortunately since each sale will be subject to differing terms or EULA’s that is the reality.

Unfortunately, the main consequence of the uncertainty impacts the buyers of used or unbundled games and keys. Many will not be aware of possible restrictions and they may find that when they try to access the games that the keys are not useable or valid.

In order to ensure that buyers are getting a legitimate sale it is best to ask questions of the seller to ensure that they are entitled to sell the product in that particular way. This will assist should the issue of the buyer’s knowledge become relevant at a later stage.

G2A's Perspective

I spoke to several representatives from G2A, including their Head of Global Business Development Tomasz Lagowski and Head of Global Public Relations Jacqueline Purcell.

G2A agreed to consult among themselves and prepare statements responding to my questions. I allowed them first to reply to some of the issues raised by Sheridans.

What is the current legal status of reselling (defined as buying from a legitimate distributor and then selling the key elsewhere) game keys or licenses in the EU?

Legal, there is no case on point that would be binding in the EU that addresses the current legal situation. To take a position that the digital marketplace is anything other than legal is a very, very large stretch. The Court of Justice of the European Union’s (CJEU) ruling in UsedSoft v. Oracle (2012) clearly allowed reselling. To take a position to the contrary based on a low-level German court case VZBW v. Valve, which is still on appeal, is not in accord with current CJEU, the highest court in the European Union, and its legal interpretation.

If a distributor’s EULA or Terms and Conditions doesn’t explicitly prohibit reselling, is reselling allowed then?

The Court of Justice of the European Union (CJEU) answered this question clearly in UsedSoft v. Oracle (2012) — Yes reselling is allowed.

If a site set itself up as a marketplace for individual sellers to connect with individual buyers, requiring the sellers to sign a disclaimer saying that they had full rights to sell the game, what would be the legal position there for both the site and its users?

Much like any marketplace the responsibility for the legality of the product being sold rests with the actual seller — it is the seller’s duty to ensure that he can legally sell the product he has listed on the marketplace. This is the way all marketplaces operate, for example eBay, G2A, Alibaba or Amazon.

Would it be accurate to state that you’re currently refusing to remove our games from your store?

We are a conduit, a marketplace, for digital sales and are not responsible for the products listed by sellers, however, if we have knowledge that a product was illegally obtained we take action to investigate the matter and act appropriately. If infringement is found by providing a notice and takedown procedure just as on eBay, Amazon and Alibaba.

Alex Tutty from Sheridans responded to this:

“Usedsoft concerned a very specific case and set down certain criteria if reselling was to be allowed. These criteria are unlikely to be met by resellers of keys (which requires the deletion of all copies of the software by the original purchaser and other such things).

Also they are maintaining the relevance of VZBW v Valve in which the court indicated games were to be dealt with separately.

Finally there’s the point that Usedsoft obviously did not think that even with its procedures in place that it has a strong case to continue and withdrew its appeal and settled by signing a cease and desist to stop reselling.”

I relayed this response to G2A and also asked them some follow-up questions.

Can you describe how your marketplace works?

G2A’s marketplace, much like any similar marketplace such as eBay, brings together buyers and sellers of goods. G2A’s marketplace is primarily focused on facilitating the growing demand for digital games and allows over 50,000 sellers to list digital games that they own for sale.

G2A in continuing to lead the industry in distributing digital content is opening a “Brands Direct” portion of our marketplace to assist all game developers and publishers, big and small, to instantly tap into G2A’s preexisting network of over 6 million users.

Would you agree that the use of game’s intellectual property on your site is contingent on the legality of that marketplace?

The G2A marketplace is legal. As in any reputable marketplace, such as Amazon or eBay, the responsibility for the legality of the product being sold in the marketplace rests with the individual sellers on that marketplace. G2A’s Terms and Conditions, just as Amazon’s and eBay’s Terms and Conditions, require that any item listed by a seller is legal.

Would you also agree that if you had knowledge of users frequently reselling games when they had no right to do that, that would invalidate the legality of the marketplace?

We at G2A are firm believers in the universally held axiom that one should not punish all for the transgressions of one. Much like eBay’s marketplace would not, and in fact has not, been rendered illegal by the sales of unscrupulous users selling items that are illegal, neither would such an act render G2A’s marketplace illegal. When G2A is made aware of a user violating the law G2A, pursuant to its notice and takedown provision, takes appropriate action against such users in order to ensure the integrity of G2A’s marketplace.

What protection do you have against that?

G2A takes great pride in ensuring that transactions on the marketplace are safe and secure. As such, to prevent against instances of illegal or fraudulent conduct G2A has a well-established notice and takedown procedure. If a party feels that a product being offered for sale has violated an established law, the aggrieved party may contact G2A at [email protected] with the item details and the alleged law violated and G2A will investigate the matter (for full details please review our notice and takedown provision found in section 10 of our terms and conditions https://www.g2a.com/terms-and-conditions). Additionally, G2A complies with all legal regulations such as the Anti-Money Laundering requirements and Hong Kong Money Services Operator requirements.

So, can you tell me which EULA’s from major game distributors that you know of do permit resale?

Since you are based in London, we shall focus on European Union law. G2A’s position is that EULA’s that prohibit users from reselling items that they have rightfully obtained is not compatible with the ruling of the Court of Justice of the European Union’s (CJEU) ruling in UsedSoft v. Oracle (2012) clearly allowing reselling. Moreover, such a restrictive EULA that prohibits a user from reselling an item that he possess is not compatible with the European Union’s intent of creating a single European market with the free movement of goods.

Section G of the Valve EULA states: “you may not distribute the Content and Services or any software accessed via Steam.”

Humble’s EULA “prohibits exploitation of products in any manner other than for your own private, non-commercial, personal use.”

So that would mean that no keys purchased via Steam or Humble are sold on the marketplace?

G2A’s position is that EULA’s that prohibit users from reselling items that they have rightfully obtained is not compatible with the ruling of the Court of Justice of the European Union’s (CJEU) ruling in UsedSoft v. Oracle (2012) clearly allowing reselling. Moreover, such a restrictive EULA that prohibits a user from reselling an item that he possess is not compatible with the European Union’s intent of creating a single European market with the free movement of goods.

This is from G2A’s user agreement:

“6.b the Selling User are entitled to place and sell such products or services, especially by way of copyrights possession, and that it has all the necessary licenses, rights, permits and consents to their use, distribution, posting, publication, sale etc., in particular the right to sale through the Internet, online system, as well as that the rights are not limited in any way”

How is this compatible with the EULA’s I cited above?

G2A firmly believes that users who own a product should be allowed to decide if they want to keep it or resell it, just as the Court of Justice of the European Union’s (CJEU) ruled in UsedSoft v. Oracle allowing for reselling.

Can publishers or developers check the validity of individual sellers?

G2A has a rating system in place where any user of our marketplace can quickly review a seller. At G2A we believe in protecting the personal information of all our users, and as you are undoubtedly well aware there are complex data protection laws that prohibit any organization from disclosing personal information of users. If a publisher feels that an item listed by a seller is violating the law, they may contact G2A at [email protected] with the item details and the alleged law violated and G2A will investigate the matter (for full details please review our notice and takedown provision found in section 10 of our terms and conditions https://www.g2a.com/terms-and-conditions).

What is to stop a user buying a key on Steam, claiming a refund and then selling the key on your store?

G2A has built a robust and customer service driven marketplace having invested over 20 million Euros over the course of the last two years to ensure a secure environment for all our users. If a seller has obtained title to a product illicitly and G2A’s investigation confirms this we will take appropriate action against the seller and ensure that the buyer has a working product or a refund. Sadly, much as in any marketplace occasionally such incidents do occur but buyers are backed by our G2A Shield and our proven track-record of making things right with buyers. In fact, in January, Origin and Ubisoft were struck by criminals who obtained keys illegally. Some of those illegally obtained keys breached our marketplace and were purchased in good faith by our users. When we were made aware of the situation we promptly reached out and either issued refunds or working codes to the affected buyers.

If I have a distribution agreement with a retailer, it would allow me to have my game taken down. What recourse do I have to get a game taken down from G2A?

G2A has a well-developed notice and takedown procedure for products that violate established laws. If you feel that o

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