[IP Law] Titans videogame’s fight: a copyright and antirust case

Source: Netease

Chinese “tech-titan” Netease has recently won anti-monopoly and copyright cases launched by Guangzhou Huaduo Network Technology Co., Ltd., the operator of huya.com, one of the largest game streaming platforms. Netease is the second game developer in China, only having Tencent in front of it.

As the first anti-monopoly case in the gaming industry in China, this judgement is interesting to keep in mind for future reference in this particular market in China.

Two issues presented in current cases.

Whether Netease with its game Fantasy Journey to the West had a dominant market position from which they could restrict or exclude competition.

Huaduo argued that the relevant market shall be the “after-sales market” only for the game Fantasy Journey to the West while Netease argued that relevant market shall be the “after-sales market” for all videogames in China. 

The court stated that the market for gaming is broader than just one game, even if that one game has a large following. The gaming market has to be seen in its total. As such, Netease does not have a dominant market position.

Whether streaming games would be deemedfair use of the copyrighted work.

The court deemed that the use of the game during streaming constitute material use of the copyrighted work. In the meantime, market for streaming is a potential market for copyright owners. 

Though streaming is somehow transformative use for the work, yet the value created by such transformative use does not exceeds the damage made to the copyright owner – the general artistic value of the game would not be materially transformed during the process of streaming, and the value created during streaming would highly be sourced from the creative work of the copyright owner.

Source: Netease

In the judgement the court also noticed that streaming is creating extra values based on the game itself. Though streamer and streaming platforms are making contribution in creating such value, the copyright owner of the game shall have a share in it. Encouraging the value created by streaming shall not be curbed by the so-called “free competition” that ignores others' copyright and enjoys others' works at will.

The present case is interesting not only for its technical-legal aspects, but also for its relevance for the future business development in the gaming industry.  

As of 2020, Huya and Douyu are two of the largest game streaming platforms in China, taking up a market share of over 80%.

Interestingly, these two platforms both have Tencent as shareholder since April 2020, who at the same time operates most of the popular games in China. 

The judgement in present case, ruling that the copyright owner of the game have exclusive right in the streaming market without constituting monopoly, basically gives Tencent a golden ticket for integrating its market for game production till streaming.

As we might know, IP laws are created for promoting the progress of science and arts by granting monopolies to certain companies. On the contrary Anti-monopoly laws tend to avoid abuses given by a dominant market position. 

If most of the resources in one industry are owned by one single entity, the pressure and interest for innovation would be reduced, and such entity would start using its exclusivity for suppressing competitors.

Well, only time will tell us if Netaease by winning this battle, the litigation against Huaduo, has lost the videogame’s battle in China.

Fredrick Xie

HFG Law&Intellectual Property