With millions of players around the world, there’s a good chance that many video game fans enjoyed a round of Epic Games’ “Fortnite” or Bluehole’s “PlayerUnknown’s Battlegrounds” (“PUBG”) with their Memorial Day hamburger. But in South Korea, “Fortnite” fans suddenly need to worry if they’ll lose access to the world’s biggest game. A copyright lawsuit filed in January (and first reported yesterday) by Bluehole subsidiary PUBG Corp. in the Seoul Central District Court in South Korea might put Epic’s runaway success on ice.
The suit, which was first reported by The Korea Times, is an attempt at an injunction. If successful, PUBG Corporation copyright claim could block Epic and partner Neowiz from distributing “Fortnite” in South Korea.
Why are PUBG Corporation and Epic at odds?
The feud between these two companies has been waging since September 2017, when Epic Games announced “Fortnite Battle Royale.” While the Battle Royale concept isn’t new for anyone who has read or seen “Battle Royale” or “The Hunger Games,” “PUBG” developer Bluehole bristled at the announcement.
“We’ve had an ongoing relationship with Epic Games throughout PUBG’s development as they are the creators of (Unreal Engine 4), the engine we licensed for the game,” Chang Han Kim, Bluehole’s vice president, said in a prepared statement. “After listening to the growing feedback from our community and reviewing the gameplay for ourselves, we are concerned that ‘Fortnite’ may be replicating the experience for which ‘PUBG’ is known.”
While no suit was filed immediately, Bluehole leveled an ominous warning at Epic Games. The company suggested it was considering “further action” against Epic to protect its interests. (Fast forward to this lawsuit filing.)
Just two months later, in November 2017, Epic announced that “Fortnite Battle Royale’s” popularity had rocketed to 20 million players. Massive streaming audiences and a $100 million esports prize pool suggest that the number has continued to grow at breakneck pace since then.
In December 2017, “PUBG” creator Brendan “PlayerUnknown” Greene called for stricter intellectual property protections in the video game space.
“You’re protecting the work of artists basically. Games are art for a large part, and so I think it’s important they’re protected,” Greene said on Radio 1’s “Gaming Show.” “I want this genre of games to grow,” Greene said. “For that to happen, you need new and interesting spins on the game mode. If it’s just copycats down the line, then the genre doesn’t grow and people get bored.”
The question at play here (and in PUBG Corporation’s lawsuit) hinges on Greene’s perspective that “Fortnite” doesn’t “spin the game mode” and is, instead a “copycat.” U.S. law would tend to disagree with Greene’s take.
“Generally, game mechanics are not protectable under U.S. law,” attorney Ryan Morrison explains. “There are, of course, exceptions, but I would be very surprised if a court found that a shrinking map, a skydiving start to a map, or having 100 players at once were protectable. Genres are not copyrightable, and just because you created a new genre, does not mean you get to police it forever. That would be awful for all of technology and all of innovation.“
Those same copyright laws have allowed multiple games from different developers and publishers to include “capture the flag” modes, jumping on enemy heads to defeat them, and even aiming down the sights of guns. United States intellectual property protections are extended to expression of ideas, rather than ideas themselves. Sound and art assets can’t be copied, but concepts like driving a vehicle are fair game for replication and iteration.
There is a big difference between PUBG Corporation’s copyright infringement lawsuit filed in the Northern District of California against NetEase over two mobile battle royale games: “Knives Out” and “Rules of Survival.” An amended filing shows comparisons of weapons, buildings, and equipment that PUBG Corporation alleges were misappropriated for “Rules of Survival” by NetEase. In addition to claims about play modality, PUBG Corporation has identified specific art assets it believes have been copied from “PUBG.”
It’s telling that PUBG Corporation opted to file suit against Epic outside the United States and specifically in Korea. Epic has not been accused of asset misappropriation. Rather, based on previous statements regarding “Fortnite,” PUBG Corporation appears to be focused on the ideas underpinning “PUBG” (and, to wit, the entire battle royale genre).
“In the NetEase ‘Knives Out’/‘Rules of Survival’ suit, there was actual consumer confusion,” explains Morrison. “Users were calling the games ‘PUBG-Mobile’ and YouTube videos popped up doing the same. This kind of consumer confusion is what trademark laws are there to prevent, and the associated copyright with each art asset was much closer in these games. No one, on the other hand, looks at ‘Fortnite’ and thinks it’s ‘PUBG.’ The games look very different, not ‘substantially similar’ as copyright infringement in the U.S. would demand, or ‘confusingly similar’ that is the test for trademark infringement in the U.S.”
The goal of an injunction is likely to cut Epic off from Korea’s voracious gaming community, especially as Epic and partner Neowiz have plans for PC cafe presence starting in the first half of 2018. South Korea is the sixth-largest market by video game revenue, responsible for $4.2 billion in 2017 (just a hair less than the fifth ranked U.K.). Additionally, Bluehole can leverage the government to assist with its infringement claim.
“I am not a Korean attorney, but I know the penalties in Korea are much harsher if infringement is found,” Morrison told Variety. “There, the government actually assists with enforcement and can even block access to the infringing game throughout the web. I don’t believe Bluehole would have much of a case in the United States, as you generally cannot protect and idea, genre, or game mechanics, however litigation is always unpredictable. Judges can barely work their own email accounts usually, so asking them to weigh in on the finer points of game design is usually difficult.”
While we don’t have a direct comparison of user numbers to-date, Epic and PUBG Corporation both announced in November 2017 that their games had each reached the 20 million player milestone. The difference is that it took PUBG Corporation eight months versus Epic’s two.
In January, “Fortnite” reached 40 million players. By contrast, a reported (and not insignificant) 30 million copies of “PUBG” have been sold to date since launch. “Fortnite” has been outpacing it by thousands of concurrent players as the bottom has started to drop out of “PUBG’s” community. A dip in player base over time is a natural outcome of “games-as-a-service” development, often countered with new content and technical improvements.
However, PUBG Corporation has been plagued by cheaters in its game. This has led some to posit that this is incentivizing “PUBG’s” player base to migrate to “Fortnite.” To its credit, the “PUBG” development team has been contrite about the game’s shortcomings.
“Although we’ve made some meaningful improvements to “PUBG,” we’ve fallen short in other ways,” a May 26, 2018, post on the “PUBG” Steam Forums says. “Players have rightfully called us out for failing to address complaints about performance, and recently we haven’t done the best job of communicating about the changes we’re making to the game.”
Competition amongst publishers vying for players isn’t uncommon. Copyright lawsuits are, though. In this case, there are business entanglements that further complicate the situation.
Epic and Bluehole have a complicated history
It’s impossible to say how the NetEase and Epic lawsuits will play out. Morrison pointed out on Twitter, “Litigation is unpredictable and judges do not understand video games. That said, in a strictly legal reading, I think this case is a huge long shot.”
There are business matters separate from the Epic lawsuit that make this a story to watch. In addition to developing games, Epic produces and licenses one of the most widely used game engines on the market. Unreal Engine 4 powers dozens of titles, including Microsoft’s “Sea of Thieves,” Square Enix’s “Kingdom Hearts III,” Ninja Theory’s “Hellblade: Senua’s Sacrifice,” and a little game called… “PlayerUnknown’s Battlegrounds.”
Neither Epic or PUBG Corporation are talking about the suit or their business relationship, but there are a few things we do know. Unreal Engine licensing operates via a royalty model. It’s free to download and tinker with, but once you earn more than $3,000 in a calendar quarter, Epic typically requires a 5% payment on the gross earnings. If operating under a standard licensing agreement, the value of this relationship based on 30 million full-price sales ($29.99 each) is, to-date, about $45 million in royalties (plus a portion of revenue earned by PUBG Corporation from Steam marketplace item transactions).
It’s possible that Bluehole negotiated a lower rate based on an up-front payment. Such arrangements are common for larger titles. Any such agreement could also include non-standard licensing terms, but these deals are negotiated under non-disclosure agreement.
Epic may issue an amended Agreement at any time in its discretion by providing notice to you or by providing you with digital access to the amended Agreement when you next log in to your Account, access the Marketplace, or download additional Content or new Versions. You are not required to accept the amended Agreement. However, in order to continue accessing your Account or the Marketplace or to download or use additional Content or new Versions, you must accept the amended Agreement. By logging in to your Account, using the Marketplace, or downloading or using additional Content or a new Version, you hereby agree to be bound by the amended Agreement then most recently issued by Epic. If you do not accept the amended Agreement, you may not log in to your Account, access the Marketplace, download or use additional Content, or download or use any new Version that is made available by Epic contemporaneously with or after the issuance of that amended Agreement (but this will not terminate your License for the Licensed Technology that you downloaded prior to the issuance of the amended Agreement). If you are a legal entity, acceptance of an amended Agreement by any of your Users will be binding on you.
Whether Epic would do this to a single licensee operating under the standard agreement and EULA remains to be seen. If so, Epic could make the terms so onerous that PUBG Corporation would either be left behind with no access to new Unreal Engine updates or accept the new agreement. Without access to new versions of the engine, “PUBG” won’t be dead in the water. It will, however, be cut off from technological innovations that could improve player experience and aid in user retention. This could push PUBG Corporation into rebuilding its entire game on a new engine, requiring a significant investment of time and money.
Regardless, PUBG Corporation might want to start investigating other technology. “The business relationship has obviously soured, and it would be in Bluehole’s best interest to consider an engine change,” Morrison says.
Bluehole is also reportedly courting investors. The most prominent name floated to the top is Chinese powerhouse Tencent, which seems ready to pour 500 billion won (about $468 million USD) into Bluehole. While Bluehole wouldn’t confirm the report, it did state that if this deal went through, Tencent would own approximately 10% of the “PUBG” developer.
Tencent is the world’s largest gaming company, with stakes in a number of developers and publishers. Among those holdings is a 40% share of Epic Games. In effect, PUBG Corporation has filed suit to prevent a potential investor’s significant property from launching in its home territory. That’s not a good way to welcome a someone to the family.
PUBG Corporation and Epic are both staying relatively silent on the legal dispute. Epic Games doesn’t comment on ongoing litigation, according to a company spokesperson. PUBG Corporation declined to provide a copy of the lawsuit, offering a single sentence statement. “PUBG Corporation filed an injunction against Epic Games Korea on January 5, 2018 to the Seoul Central District Court as an action to protect PUBG Corp’s copyright,” a representative told Variety via email.
We can’t predict how the U.S. District Court in California will rule on the “Rules of Survival”/”Knives Out” case or how the Seoul Central District Court will decide the “Fortnite” injunction. What we do know is that “Fortnite” is the current leader, not only in the battle royale genre, but in gaming as a whole. The Korean market is important, and it’s Bluehole’s base of operations.
A legal win in Korea won’t slay the “Fortnite” giant, but it will serve as a warning to NetEase and any other company that wants to play on Bluehole’s home turf: “PUBG” will be the last man standing.