Keep Your Program Out of My Game: The Ninth Circuit’s Convoluted Copyright Analysis in MDY Industries, Inc. v. Blizzard Entertainment, Inc

I. INTRODUCTION World of Warcraft ("WoW"), a popular online game, boasts over twelve million users1 and generates more than $1.5 billion annually.2 Blizzard Entertainment, the company that runs WoW, claims in its end user license agreement ("EULA") to grant purchasers "a limited, non-exclusive license" to install and use the game subject to numerous restrictions.3 Besides retaining the ability to terminate the license agreement at will, Blizzard also requires users to agree that any violation of the restrictions on the license agreement constitutes "an infringement of Blizzard's copyrights in and to the Game."4 Under U.S. copyright law, the penalty for copyright infringement can be steep: statutory damages of up to $150,000 for willful infringements, or actual damages if they can be proved.5 With so much risk for so many users, it is critical that courts craft copyright law to account for the realities of the marketplace and the protection of consumers. Additionally, courts should be sensitive to the interests of others trying to lawfully create products that integrate into other digitally based products, such as online games, especially when those integrations do not harm demand for the original product. Unfortunately, the Ninth Circuit has taken a different approach in MDT Industries, Inc. v. Blizzard Entertainment, Inc.6 In that case, the court provided only incomplete protection for consumers and severely punished MDY Industries for providing a product to consumers that arguably added value to WoW without detracting from its demand. This Note argues that the Ninth Circuit's decision in MDT is erroneous for several reasons. First, the court followed an ownership/licensing distinction for software that undermines the "first sale" doctrine, is strongly in favor of copyright holders, and conflicts with consumer perceptions. Second, the court applied a misguided test to determine whether violating a license provision constitutes copyright infringement based on a distinction between covenants and conditions. Third, the court needlessly created a circuit split to hold MDY liable under the DMCA anticircumvention provisions where MDY was not liable for copyright infringement. Part II provides the facts and procedural history of MDT. Part III summarizes the three main holdings of the Ninth Circuit's decision. Part IV analyzes each of the court's holdings, demonstrating the errors in the court's logic and policy judgments. Part V offers a brief conclusion. II. FACTS AND PROCEDURAL HISTORY Blizzard Entertainment is the creator of the massively multiplayer online role-playing game ("MMORPG"), World of Warcraft. In this game, "players control their 'avatar' characters within a virtual universe, exploring the landscape, fighting monsters, performing quests, building skills, and interacting with other players and computer-generated characters."7 As characters perform these tasks, they gain experience and advance levels.8 In March 2005, Michael Donnelly, owner of MDY Industries, developed a software program that would automatically simulate play for some of the lower levels of WoW.9 Donnelly originally designed his software, known as Glider, for personal use, but later began selling the program to other WoW users through MDY's website.10 However, to play WoW, Blizzard requires that a player read and accept two separate agreements.11 When installing the game client on a computer and first running WoW, the user must agree to Blizzard's EULA.12 When connecting to Blizzard's online service to play the game, the user must accept Blizzard's Terms of Use ("ToU").13 At the time that Donnelly began marketing Glider, he reviewed both documents and concluded that bots (software, such as Glider, that automates game play) were not prohibited.14 However, later that year, Blizzard launched a technology known as Warden, which was "developed to prevent [] players who use unauthorized third-party software, including bots, from connecting to WoWs servers. …