Exclusivity without Permission?

Last week Richard Lewis broke the story that fantasy eSports platform and former League of Legends team sponsor, Vulcun in conjunction with tournament organizer ESL, Twitch.tv and many top Counter-Strike teams sought to establish a new league for the teams to exclusively play in.  Perhaps not so coincidentally, this negotiation took place at the same time that Counter-Strike developer, Valve, had its annual employee holiday.  This happenstance is not so coincidental insofar as all parties involved reportedly sought no authorization or license from Valve to make this league a reality.  Not much ink has been spilled on discussing this seemingly odd omission, but it should go without saying that Valve owns all intellectual property rights in Counter-Strike: Global Offensive (“CS:GO”).  The implication of that is their ability to insist on having a seat at the table.

Legally, no one that buys a copy of CS:GO owns that game.  “The content and services are licensed, not sold.”[1]  The license confers no title or ownership in the content and to make use of the content you must have a Steam Account and you may be required to run the Steam client while maintaining a connection to the Internet.  Valve reserves the right to terminate any steam account at any time for a violation of the agreement.  Furthermore, Valve retains the right to amend the agreement at any point. 

More than how the game can be played, Valve also controls the means in which the gameplay can be reproduced.  Bringing Twitch into the picture to grant them and a European television station an exclusive license to broadcast games in this league would undercut Valve’s copyright.  Section 106(1) of the Copyright Act confers upon the copyright holder the right to reproduce the copyrighted work.  A simple DMCA takedown similar to what Azubu issued Twitch during the SpectateFaker dispute would suffice.  In essence, Valve controls the ways in which the game it owns will be played and watched.

 In this week’s Loadout, Richard Lewis discussed Valve’s role in this process and added that he does not foresee Valve stepping in to offer any sort of regulation.  Other individuals in the eSports industry whom I have spoken with have offered the same opinion.  Nevertheless, there is money in the industry to be had and though Valve may eventually have a change in heart, the equitable doctrines of laches and acquiescence might prevent it from sitting on rights.  According to Lewis, Valve was approached by MLG shortly after the news of this rumored deal broke.  MLG’s interest in this area is obviously divergent from Vulcun and ESL.  If the North American teams were exclusively bound to playing in one league, MLG would be unable to have any role in the CS:GO North American elite scene and thus unable to share in any potential pot of money.

Lewis’ point was that Valve typically stays out of the management of its eSports franchises.  This is not entirely true.  Valve, which also runs DOTA 2, has adopted an investment strategy allowing its players to watch their eSport and purchase a “Compendium.”  Purchasing a Compendium allows DOTA players to collect player cards, make tournament predictions as well as other interactive features.  A portion of the money earned from the compendium is then reinvested into the tournament prize pool.  DOTA players also have their compendium rewards turn into in-game rewards.  In that sense, Valve incentivizes watching the DOTA finals by offering exclusive in-game payoffs.

 For Valve to be completely shut out of a potential revenue stream when it has already taken an active role in managing another eSport franchise seems unlikely and makes their exclusion from this potential league curious.  It is even more curious when you consider the millions of dollars Vulcun has attracted from venture capitalists who likely did their homework and understand their contractual and intellectual property rights.

Authors Edit:  

Richard Lewis, in his latest edition of Loadout clarified that Vulcun and ESL have all but retracted their plan.  This is hardly surprising given their immediate reconsideration of how "exclusive" the league would actually be.  Lewis stated that while initially the agreement was intended to be for full exclusivity the negotiating parties decided exclusivity was not practical.  A plan was then formulated to decrease the online play of teams in other leagues as a form of partial exclusivity  As interest in the "superleague" surged and more money came in, the league would move closer to full exclusivity.

[1] Steam Subscriber Agreement