LGJ: Pirates are grumpy, underutilized customers?

Each week Mark Methenitis contributes Law of the Game on Joystiq ("LGJ"), a column on legal issues as they relate to video games:

This week I've been at the Game::Business::Law Conference, and one of the speakers was Jason Holtman, Director of Business Development / Legal Affairs for Valve. Jason set out a fascinating theory on piracy: The majority of 'pirates' are just underutilized customers.

This certainly sets forth an interesting business proposition, but also interesting possibilities for legal strategies related to piracy management and IP protection. I do want to caveat that this is building on a theoretical basis, and that doesn't necessarily mean any of these strategies is optimal for any given company. I want to summarize Jason's viewpoint to better frame the discussion. His view, and his research suggests, that piracy is heavily mitigated by ensuring worldwide cross-market releases.

"The majority of 'pirates' are just underutilized customers. "

For example, there will be far more piracy in Russia if the Russian release is 6 months after the US release. When there is a delay like that, someone is bound to go take a copy, translate it to Russian and resell it because the market has a heavy PC saturation and a combination of online and television advertising will drive desire to play the game. So, if a game developer takes the effort to have copies in stores in Moscow or available online in Russian at the same time as the US or European release, far fewer copies will be pirated. Beyond that, though, I do think there's a segment of the pirate community who are disgruntled customers, and not simply based on lack of release in the market.

As I do read all of the comments to my LGJ columns, I have noted a good number of comments related to piracy out of frustration. That may be related to older software that didn't run on newer operating systems, or as some sort of misguided protest to, for example, the Spore DRM. Another likely example is that I would imagine piracy is down on NES/SNES titles available on WiiWare. Many had long used the excuse they could not locate the cartridge, which is a limited commodity. WiiWare negates that excuse to the extent titles are released. There is definitely something to be said for piracy being in part driven by frustration, and based on that there is both a business and a legal strategy associated with this viewpoint. From a business side, there is money to be made satisfying this segment. Think of it this way: a grumpy customer would be giving you money if you made them a happy customer.

"Think of it this way: a grumpy customer would be giving you money if you made them a happy customer."

From the legal side, this poses a more perplexing quandry. On the one hand, legal action to prevent piracy will likely turn a frustrated customer to a non-customer. On the other hand, you do want to protect your rights and really there's no downside to pursuing action against other pirates, whether they do it for fun or some other reason, other than potential negative press generally tied to the appearance of being excessive with enforcement. Because of this dichomoty, there are a few possible approaches, each with plusses and minuses.

As a developer, you could just ignore the pirates completely while trying to bring the business side up to speed. As a plus, you won't lose any customers if the theory holds true. In fact, you'll be gaining back the frustrated customers by resolving the issue that frustrated them. On the other hand, there's then no dis-incentive to other pirates, no potential risk, and likely the biggest concern, you risk your trademarks by not protecting them. Copyright, as we've discussed previously, isn't a 'protect it or lose it' system, but trademark is.

Of course, the opposite end of the spectrum is equally problematic. If you pursue action against all pirates, you'll be reigning in those potential customers with the pure pirates, and running off potential business. This strategy, however, is the most secure for trademark rights. Certainly, there are plenty of companies who employ this strategy with success, so it's not completely out of the question either.

The third strategy I want to propose is a bit more radical. Specifically, it's a three part strategy: Choose your battles, Resolve consumer frustration, and Talk to pirates. If you're a developer, that's a strategy you might have paid a consultant six plus figures for, albeit in a far more simplistic form. This isn't anything radical in the grand scheme of things, but it's a shocking idea to a lot of people in IP protection. Rather than a complete distruction or ignore the problem approach, a moderated, strategic approach will maximize the return to the business on all fronts.

"If you are a pirate, there are plenty of ways to voice your opinion anynonomously if in fact you are pirating out of frustration. "

Let's take a look at each step in slightly more detail. First, choose your battles. This more or less speaks for itself. Go for the 'big kill' litigation and don't focus on as much of the small stuff. Much like I've stated before with my 'target the supplier' approach, this focuses on the big part of the problem. More importantly, by action you're showing effort to protect trademarks and therefore acts to protect that IP. This is increased in effectiveness by simultaneously addressing the 'grumpy customer' issue, which ties into the third point of talking to pirates. You can best assess how to move forward with step two by looking at data but also by speaking to those who actually pirate software. Granted, there will be many whose issues you cannot resolve, but for those who have a gripe that is within your realm to fix, there are likely more who share the same opinion. By that token, resolving issues presented by pirates is a piracy control strategy to the extent that these actual or percieved problems can be resolved. On the reverse, if you are a pirate, there are plenty of ways to voice your opinion anynonomously if in fact you are pirating out of frustration.

Jason certainly provides an interesting viewpoint, and the potential ramifications of treating pirates according to that view are huge. Those who are anti-DRM should be paying attention to this kind of viewpoint to further support their view. After all, DRM is in and of itself a response to piracy and the potential for piracy. If, by and large, most piracy can be attributed to the 'grumpy customer' and thereby mitigated, then DRM itself is largely attributable to frustrated consumers, which can be minimized by dialog between the consumer and the developer. I know it's a radical concept to talk to 'pirates,' but sometimes it's the radical concepts that yield the most outstanding results.

Mark Methenitis is the Editor in Chief of the Law of the Game blog, which discusses legal issues in video games. Mr. Methenitis is also a licensed attorney in the state of Texas with The Vernon Law Group, PLLC and a member of the Texas Bar Assoc., American Bar Assoc., and the International Game Developers Assoc., where he is a board member of the Dallas chapter. Opinions expressed in this column are his own. Reach him at: lawofthegame [AAT] gmail [DAWT] com.

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This article was originally published on Joystiq.