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Bypassing EULAs & Legality of Reselling Game Accounts

by Parul Anand


The article intends to explore the legality of the resale of game accounts. The author argues for such a resale's legality in the article by exploring EU HC's landmark judgment of Usedsoft v. Oracle, and the US and India's position on the same question.

Resale of game accounts, or software accounts, in general has had its share of complexities when it comes to its question of legality. It has been involved in various legal actions, the most recent such action being between TenCent and 20 account trading platforms such as Taobao where it had sued them for renting and selling Honor of Kings account. Tencent received $46,906 as compensation from one such game account rental platform operated by Juhaowan and Shuizhu. However, such a result need not be a reflection of illegality of trading game accounts since the ordeal was predominantly driven by the fact that the impugned accounts violated the minor protections contemplated by Tencent, which is in line with the general opinion of the current Chinese regulatory regime. The verdict therefore is no t a reflection of legality, or lack thereof, of accounts trading in general. Since these games are not allowed to be played by minors considering their constituent elements, access to these accounts by minors owing to unsupervised or unregulated game account resale trade becomes concerning. Thereby, this being the primary interest, the verdict, at most, it offers to deter such trading where the interests of minors are violated. Another fairly recent instance involved where a Polish man faced over 9,000 criminal charges for selling game accounts. However, on a closer glance, it is revealed that the charges are not merely for selling game accounts but rather failing to do so when promised as such. The illegality here takes from fraud and not from any inherent illegality in selling of game accounts. Again, a secondary factor in trading and not trading itself like the Tencent tussle.

Apart from the extant legal actions, account trading is quite common despite the developer’s qualms. For instance, HoYoverse’s terms state that selling one’s account or other elated information might lead the company to terminate one’s account; however, such an action remains discretionary as such listings remain visible throughout trading platforms. Such ambivalence remains more or lessconstant when one considers the issue of game accounts trading. Usually, such actions are prohibited under End User License Agreements (“EULA”) but such agreements can be bypassed, leading to a general haze. The most immediate method of such a bypass finds its roots in the EU’s UsedSoft judgement discussed later, where greater intellectual property interests override EULA’s binding contractual obligations.

Since EULAs can be bypassed, them outlawing accounts trading becomes untenable. From the developer’s perspective, the essential contractual dimensions of the current challenge ought to provide them protection against game accounts trading. Usually the EULA or T&C/ToS (“Terms and Conditions”/ “Terms of Services”) agreements explicitly or implicitly prohibit selling game accounts or any such related activity. For instance, see Valorant, and Supercell, both of which explicitly prohibit such a trade. It then becomes a contractual violation when users sell or buy such accounts on a marketplaces like PlayerAuctions, or elsewhere as well. But then again, as remarked earlier and discussed in detail further, such agreements aren’t the end-all developers purport them to be.

The UsedSoft Judgement and EU’s approach

EU’s landmark judgement of UsedSoft GmbH v. Oracle International Corp., tells a different story than the countervailing opinion of game developers about efficacy of their user agreements. Making reselling of “used” software perfectly legal, the court emphasized that a software developer/provider’s EULA could essentially be bypassed to pave way for greater intellectual property rights principle as EU’s principle of exhaustion. Extending the principle to video games, a subset under software, such EULA’s could be similarly bypassed, especially when intellectual property rights are concerned. The judgement elaborated on the principle of exhaustion to emphasize that once the copyright holder had sold a particular copy, such rights were exhausted leading to a possible legal reselling, however, such a resale was precedent upon a ‘perpetual’ license being granted to such a primary buyer. The perpetual license was held to signify transfer of ownership and constituting a “sale for this purpose. Thereby, it is advised to employ such an analysis for any concerning EULA. The same position was held in Aleksander Ranks v. Microsoft, the caveat being that backup copies on non-original mediums cannot be resold to new consumers without permission from the primary copyright holder. Non original medium is a medium different than the one on which the software was actually provided upon.

The developments in the EU market did not merely stop at the UsedSoft and Aleksander case. Three more notable cases point to the legal tenor hereby. The EU case of Nintendo v. PC differentiates between video games with “creative component” as opposed to pure productivity software discussed in UsedSoft case, which has implications for the right to resell not being as directly available as previously contemplated. In October 2015, a German court holds that steam accounts need not be transferrable, supporting its EULA’s legality as opposed to the EU UsedSoft ruling. However, fortunately, a suit was instituted by UFC Que Choisir arguing that steam must provide an option to resell their video games to users in November 2015 which has had comforting implications. In 2019, the Court held that steam must allow such reselling. This is in line with the EU UsedSoft Ruling, which also held that if a software provider offered the license for an unlimited, it would transfer ownership and will not just be a subscription. The same is held to be the case with steam. By holding such 14 prohibitive clauses illegal, far beyond merely the resale restrictions owing to contractual obligations arising out of the ‘perpetual license’, the court demonstrates a theme of protecting overall the intellectual property and consumer rights of gaming users. Such a theme becomes relevant as similar motivations are found in the US’ context of the “extra-element” test explained later. Notedly, if this ruling is adopted by the EU HC, then steam would essentially have to implement the findings throughout the EU.

The American Position regarding UsedSoft and Bypassing EULAs

The view in the US could also be somewhat replicated by the first sale” doctrine. The first sale doctrine of the US Copyright codified at 17 U.S.C. § 109 states that an individual who buys a copy of a copyrighted work from the copyright holder receives the right to sell, display or otherwise dispose of that particular copy, enabling resale. As it can be established that the buyers get ownership over their game accounts, using the “first sale” doctrine in the US can allow them such a resale. However, such an understanding is strenuous, because it only allows for resale to devices which are limited purpose such as computers only designed for playing video games. Generally, courts favour EULAs and are reluctant to allow resale.

As with regards to a potential pre-emption of copyright claim owing to existence of contractual breaches, the US courts’ “extra-element” test gains relevance. The test involves examining whether a breach-of-contract claim includes an “extra element” that makes it “qualitatively different” from a copyright infringement claim enough to pre-empt copyright Act’s application. Notwithstanding, courts favouring EULAs and limited resale under the “first sale” doctrine, the extra-element” test for copyright could be used to fashion a valid remedy much akin to EU’s preference for intellectual property rights over just pure contractual obligations. Such an opinion can also be extended to other agreement types such as T&C and ToS and is not limited merely to EULA’s in US’ case. For the EU as well, there is no reason to believe why the general tenor of protection of intellectual property rights over contractual obligations could not be extended beyond EULAs.

The Indian Position vis-à-vis US & EU for enforcing EULAs

The “first sale” doctrine and one of its attributions, “exhaustion” principle discussed for US and EU, is also applicable for the Indian context. India follows international exhaustion, much like EU, as opposed to national exhaustion exercised by the US. The same was reaffirmed with regards to trademarks in the case of Kapil Wadhwa and Ors. Vs. Samsung Electronics Co. Ltd. ¶ 17Apart from that, Section 30(3) and 30(4) of the Trademarks Act, 1999 also asserts the Indian acceptance of “First Sale” doctrine. Therefore, there is no reason immediately apparent as to why the principles held to be binding in the EU or US with regards to copyright matters gaining precedence over purely contractual obligations are to be unpersuasive. The UsedSoft judgement thus remains potently persuasive. However, India so far