MDY Industries, LLC v. Blizzard Entertainment, Inc. et al

Filing 84

MOTION for Permanent Injunction or in the Alternative to Amend the Judgment Entered July 14, 2008 by Vivendi Games, Inc., Blizzard Entertainment, Inc.. (Attachments: # 1 Exhibit A, # 2 Exhibit B, # 3 Exhibit C, Declaration with Attached Exhibits, # 4 Exhibit D, Affidavit, # 5 Text of Proposed Order)(Genetski, Christian)

MDY Industries, LLC v. Blizzard Entertainment, Inc. et al

Doc. 84

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SONNENSCHEIN NATH & ROSENTHAL LLP Scott Stein (AZ Bar No. 022709) Shaun Klein (AZ Bar No. 018443) 2398 East Camelback Road, Suite 1060 Phoenix, AZ 85016-9009 Facsimile [phone] Telephone [phone]

Christian S. Genetski (Pro Hac Vice) Shane M. McGee (Pro Hac Vice) 1301 K Street, NW, Suite 600-East Tower Washington, DC 20005 Facsimile [phone] Telephone [phone]

Attorneys for Defendants Vivendi Games, Inc. and Blizzard Entertainment, Inc. UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA MDY INDUSTRIES, LLC, Plaintiff and Counter-Claim Defendant vs. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )

Case No.: CV06-02555-PHX-DGC BLIZZARD ENTERTAINMENT, INC. AND VIVENDI GAMES, INC. MOTION FOR A PERMANENT INJUNCTION OR IN THE ALTERNATIVE TO AMEND THE JUDGMENT ENTERED JULY 14, 2008

BLIZZARD ENTERTAINMENT, INC., and VIVENDI GAMES, INC. Defendants and Counter-Claim Plaintiffs. BLIZZARD ENTERTAINMENT, INC., and VIVENDI GAMES, INC. Third-Party Plaintiffs, vs. MICHAEL DONNELLY, Third-Party Defendant.

The Honorable David G. Campbell

Defendant/Cross-Plaintiffs Blizzard Entertainment, Inc. and Vivendi Games, Inc. (collectively "Blizzard") hereby move for a permanent injunction, or in the alternative pursuant to Federal Rule of Civil Procedure 59(e) to amend the judgment entered by this Court on July 14, 2008, in which it found MDY Industries, LLC and Michael Donnelly (collectively "MDY") liable for secondary copyright infringement and tortious interference with contract, to include a permanent injunction barring MDY from selling, supporting, marketing, or distributing the MMO Glider Software package or any similar software

Dockets.Justia.com

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("Glider"). I. Facts and Procedural History In its motion for summary judgment, Blizzard moved for "injunctive relief, monetary damages, and attorneys' fees against MDY Industries, LLC and Michael Donnelly . . . on their claims for secondary copyright infringement, DMCA trafficking, and tortious interference with contractual relationships." Blizzard Entertainment, Inc. & Vivendi Games Inc. Mot. for Summary J. & Mem. of Points & Authorities in Supp. at 1-2 ("Blizzard Sum. J. Mot."). This Court, in its order filed July 14, 2008 ("Order"), granted summary judgment in favor of Blizzard with respect to MDY's liability for tortious interference (Count I) and contributory and vicarious copyright infringement (Counts II-III). Order at 27. In doing so, the Court found that MDY had damaged Blizzard, because "Glider consumes more Blizzard resources than any other bot . . .," "that Blizzard must divert resources from game development to combat Glider," and "Blizzard has presented evidence that use of Glider has caused Blizzard to lose subscription fees from WoW players." Id. at 23. The Court further noted that the parties would proceed to trial to determine the amount of damages to which Blizzard is entitled and to resolve liability as to Blizzard's DMCA and Unjust Enrichment claims. Id. The Court, however, made no ruling on Blizzard's request that a permanent injunction be entered if it prevailed on its copyright and tortious interference claims. Blizzard hereby respectfully requests modification of the judgment to include a ruling granting its motion for a permanent injunction, which Blizzard believes is necessary to protect Blizzard's copyright in the World of Warcraft ("WoW") Game Client and its contractual relationships with WoW users. Following the entry of the Court's order finding that MDY's sale, marketing, and support of Glider products constituted secondary copyright infringement and tortious interference, MDY has continued its activities unabated. Specifically, MDY has refused to honor Blizzard's demand to cease and desist selling and updating Glider. Ex. A, Ltr. fr. C. Genetski to L. Venable, dated July 18, 2008 & Ex. B, Ltr. from L. Venable to C. Genetski dated July 25, 2008. MDY has continued to release updates for its software designed to
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circumvent Blizzard's latest detection methods. Ex. C, Declaration of Russell M. Shumway "Shumway Decl." at Ex. 2. MDY and its employees have also made public statements expressing their intent to continue infringing on Blizzard's copyrights and interfering with its contractual relations. For example, MDY employee Jason Beatty, posting under the screen name Hamut informed the Glider user forms on July 18, 2008 at 3:31 pm, that "Yes ­ we will certainly appeal and keep doing what we do best ­ Glider." Ex. C, Shumway Decl. at Ex. 3. True to its word, MDY is still offering MMO Glider for sale on its website, www.mmoglider.com, has continued updating the Glider software, and continues to provide support to users. Ex. C, Shumway Decl. at Exs. 1 & 2; Ex. D, Affidavit of Greg Ashe ("Ashe Aff.") ¶¶ 3-7. The continued sale and support of Glider, as well as statements on Glider forums to current and potential customers that Glider will continue to be supported, only serve to continue the exploitive conduct this Court found to be improper. As a result, Blizzard continues to expend resources trying to prevent Glider use and prevent infringement of its copyrights and tortious interference with its contractual relations. Ex. D, Ashe Aff. ¶¶ 3-7. II. Finding that MDY is Liable for Secondary Copyright Infringement and Tortious Interference With Contract Supports Entry of a Permanent Injunction. Under "§ 502(a) of the Copyright Act," a court may "`grant temporary and final injunctions on such terms as it may deem reasonable to prevent or restrain infringement of a copyright.'" MAI Sys. Corp. v. Peak Computer, 991 F.2d 511, 520 (9th Cir. 1993) (quoting 17 U.S.C. § 502(a)). Similarly, "[i]njunctive relief is an appropriate remedy when a claim of tortious interference is involved." Graham v. Mary Kay, Inc., 25 S.W.3d 749, 755 (Tex.App. Houston 2000). "[A]ccording to well-established principles of equity, a plaintiff seeking a permanent injunction must satisfy a four-factor test before a court may grant such relief." eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391 (2006). "A plaintiff must demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity
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is warranted; and (4) that the public interest would not be disserved by a permanent injunction." Id. A. MDY's Ongoing Sale and Support of Glider Impermissibly Harms Blizzard and Money Damages will Not Adequately Compensate for that Harm. "As a general rule, a permanent injunction will be granted when liability has been established and there is a threat of continuing violations." MAI Sys. Corp., 991 F.2d at 520. see also A & M Records, Inc. v. Napster, Inc., 114 F. Supp. 2d 896, 925 (N.D. Cal. 2000) (same) reversed in part on other grounds, (citing Micro Star v. Formgen Inc., 154 F.3d 1107, 1109 (9th Cir. 1998)). When seeking a permanent injunction in copyright cases, irreparable harm is presumed on a showing of success on the merits. LGS Architects, Inc. v. Concordia Homes, 434 F.3d 1150, 1155 (9th Cir. 2006); Micro Star, 154 F.3d at 1109; Sony Music Entertainment v. Global Arts Productions, 45 F. Supp. 2d 1345, 1347 (S.D. Fla. 1999); see also Princeton Univ. Press v. Michigan Document Servs., 99 F.3d 1381, 1392-93 (6th Cir. 1996) (holding the weight of authority supports the extension of injunctive relief to future work). Similarly, "irreparable injury is presumed in cases involving tortious interference with business relationships." Special Purpose Accounts Receivable Coop Corp. v. Prime One Capital Co., 125 F. Supp. 2d 1093, 1105 (S.D. Fla. 2000). Thus, a showing of copyright infringement liability or improper interference with contract and the threat of future violations generally is sufficient to warrant a permanent injunction. Sega Enters. Ltd. v. MAPHIA, 948 F. Supp. 923, 940 (N.D. Cal. 1996) (quoting 17 U.S.C. § 502) (finding access to equipment that allowed defendant to continue to illegally download and distribute game programs constituted a threat of continued violation); see also, MAI, 991 F.2d at 520; Twentieth Century Fox Film Corp. v. Streeter, 438 F. Supp. 2d 1065, 1073 (D. Ariz. 2006) (granting a permanent injunction upon entry of default judgment against defendant in a copyright infringement action). Here, this Court's order on summary judgment conclusively established liability under the Copyright Act and for tortious interference with contract based on MDY's marketing, sale, and support of Glider. Order at 27. Moreover, as demonstrated above, the threat of
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continued infringement and tortious interference is also clearly established. Indeed, MDY's counsel has confirmed that MDY does not intend to cease supporting, marketing, creating, or selling Glider unless enjoined by the Court. Ex. B. Even if the Court does not apply a presumption of irreparable harm, Blizzard has established such harm in this case. While Blizzard can, and will, prove ascertainable and recoverable damages related to Blizzard's costs in combating Glider use, reduced subscriber fees paid by individuals that "level" more quickly, and customer terminations and overall weakening demand for the game because of Glider, recovering those damages without a corresponding injunction will not provide redress for all of Blizzard's harm.1 Ongoing infringement and interference will also result in injuries that include difficult to measure harm to Blizzard's reputation and goodwill caused by Glider use. Blizzard SoF ¶¶ 205, 220, 225, 226.2 As a result of Glider use, Blizzard has received hundreds of thousands of customer complaints that reflect the deterioration of goodwill from those users that expect Blizzard to prevent cheating and hacking in WoW. Id.; see also Ex. D, Ashe Aff. at ¶¶ 3-4. Damages to reputation and goodwill for any cause of action are generally irreparable injuries that support the issuance of an injunction. See Rent-A-Center, Inc. v. Canyon Television & Appliance Rental, Inc., 944 F.2d 597, 603 (9th Cir. 1991) ("intangible injuries, such as damage to ongoing recruitment efforts and goodwill, qualify as irreparable harm."); MySpace, Inc. v. Wallace, 498 F. Supp. 2d 1293, 1305 (C.D. Cal. 2007) ("Harm to business goodwill and reputation is unquantifiable and considered irreparable.") In addition, unless enjoined from doing so MDY may provide or sell the Glider source

In addition, Blizzard will seek damages for willful infringement of its copyrights. Specifically, MDY's continuing violations after this Court's July 14th order, as a matter of law should constitute willful violations. Peer Int'l Corp. v. Pausa Records, Inc., 909 F.2d 1332, 1335 n. 3 (9th Cir. 1990). (Willful, within the meaning of 17 U.S.C. § 504(c)(2), means "with knowledge that the defendant's conduct constitutes copyright infringement."); Danjaq LLC v. Sony Corp., 263 F.3d 942, 957 (9th Cir. 2001) ("the term `willful' refers to conduct that occurs `with knowledge that the defendant's conduct constitutes copyright infringement.'")
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All citations to Blizzard's Statement of Facts in Support of its Motion for Summary Judgment ("Blizzard SoF") contained herein are to facts not in dispute.
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code to other individuals, therefore enabling their distribution of the Glider software. MDY and other individuals engaged in continually updating Glider could become judgment proof and provide Blizzard with no adequate remedy to prevent further infringement and interference with their contractual relations. Indeed, several Glider users have encouraged MDY to take such action to flout the efficacy of the judgment. See e.g. Ex. C, Shumway Decl. at Ex. 4. As such, a permanent injunction is necessary to prevent further collaboration, tortious interference, and infringement with other parties that may not have the means to pay an eventual judgment. See Rosen Entm't Sys. v. Vision, 343 F. Supp. 2d 908, 920 (C.D. Cal. 2004) ("lack of evidence of [defendant's] ability to pay a judgment, favors a finding of irreparable harm.") B. The Balance of Hardships and Public Interest Favor Injunctive Relief

"In issuing an injunction, the court must balance the equities between the parties and give due regard to the public interest." High Sierra Hikers Ass'n v. Blackwell, 390 F.3d 630, 642 (9th Cir. 2004). Here, the balance of equities clearly weigh in Blizzard's favor. MDY's only interest is in the ability to continue producing and selling a product that infringes on Blizzard's copyrights and tortiously interferes with its contracts. See e.g. Triad Sys. Corp. v. Southeastern Express Co., 64 F.3d 1330, 1338 (9th Cir. 1995) ("Where the only hardship that the defendant will suffer is lost profits from an activity which has been shown likely to be infringing, such an argument in defense `merits little equitable consideration [on an appeal from a preliminary injunction].'" (quoting Concrete Machinery Co. v. Classic Lawn Ornaments, Inc., 843 F.2d 600, 612 (1st Cir. 1988)); accord Apple Computer, Inc. v. Franklin Computer Corp., 714 F.2d 1240, 1255 (3d Cir. 1983) (in motion for preliminary injunction, district court should not consider the "devastating effect" of the injunction on the infringer's business). Blizzard, on the other hand, must defend its reputation and the quality of its on-line gaming experience by expending thousands of dollars and hours updating its security devices to combat MDY, all the while risking that it will harm innocent users. The public interest likewise favors the entry of an injunction barring MDY from
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continuing to market, sell, and support Glider. As this Court noted in its order, MDY's actions are improper, with none of the seven factors Arizona courts apply when determining propriety weighing in its favor because MDY exploits Blizzard's contracts at the expense of Blizzard and its users. Order at 23. Most of the relevant public, namely the more than 10 million WoW players that do not use Glider, are damaged by this improper conduct and Glider use because "MDY assists the players in gaining an advantage over other WoW players; MDY enables players to mine the game for their own financial benefit and in direct violation of the TOU; MDY assists players in avoiding detection by Blizzard, and does so in a way designed to place Blizzard at risk." Id. MDY's own stated goal is to harm the public interest by making it a "`bad idea' for Blizzard to try to detect Glider" in fear of the "banning or crashing innocent customers." Id. at 24 (internal quotations omitted.) MDY's only interest is providing users with a means to breach their contracts with Blizzard while avoiding detection, while Blizzard's interest is in maintaining a fair and enjoyable game for all of its users. As MDY itself admits, Glider use is a breach of the EULA and TOU currently in place. An interest in concealing clear breaches of contract and copyright infringement that harm other WoW users is not sufficient to balance out the public interest in preventing disadvantaging and injuring Blizzard and the vast majority of WoW's more than 10 million players. III. The Form of the Injunction Blizzard respectfully requests that the injunction preclude MDY, Michael Donnelly, all employees and agents of MDY, and any person acting in concert with them from marketing, selling, supporting, or developing Glider or similar software for use with WoW. To ensure that MDY cannot circumvent the injunction and to provide redress for Blizzard's injuries, Blizzard requests that the following specific prohibitions also be included. First, the injunction should specifically enjoin MDY from continuing to operate its authentication server. When Glider runs, it first authenticates with the MDY server at www.mmoglider.com by negotiating a key exchange to create a secure channel. (Blizzard SoF ¶ 149). Once a secure channel is determined, Glider sends the game version, Glider
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version, and product key to the MDY server at www.mmoglider.com for validation. (Blizzard SoF ¶ 150). If the authentication fails, the MDY server at www.mmoglider.com will not provide Glider with the memory locations of game data--which are necessary to allow Glider to circumvent Blizzard's security measures--and Glider will not run. (Blizzard SoF ¶¶ 132, 152). MDY maintains control of all purchased Glider programs by requiring that they connect to the MDY server at www.mmoglider.com before running. Thus, MDY has the ability to disable any copy or all copies of WoW Glider at any time. (Blizzard SoF ¶ 153). MDY, by maintaining a central server of software keys for paying Glider users, has the right and ability to terminate the use of Glider at any time, and MDY receives a direct financial benefit from Glider sales. (Blizzard SoF ¶ 154). Enjoining MDY from continued operation of the authentication servers would have the effect of rendering all existing copies of Glider useless, and would effectively protect Blizzard's rights under this Court's summary judgment order. Second, in order to prevent MDY from circumventing this prohibition and to prevent further infringement of copyright and interference with Blizzard's contractual relations, Blizzard respectfully requests that MDY be enjoined from developing or maintaining Glider. MDY constantly updates Glider to ensure its continued success in cracking Warden's evolving detection and access control technologies. Each time Blizzard devises a new method to detect Glider and block Glider users' access to WoW, Donnelly makes changes to Glider to avoid detection. (Blizzard SoF ¶ 146; Ashe Aff. at ¶ 5). An injunction preventing updates to Glider will prevent MDY, or any company or individual acting with MDY's assistance, from creating a version of Glider that works without authentication from the Glider servers, and thus prevents circumvention of the first portion of this injunction. Additionally, enjoining further development of Glider prevents MDY from updating Glider to address Blizzard's new security measures. If the injunction prevents those updates, it will reduce the harm to Blizzard by allowing it to forego constant security updates caused by Glider use. Third, the injunction should preclude MDY from releasing the Glider source code to
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third parties, especially those located abroad and over whom it may be difficult or impossible to gain jurisdiction in the United States. As Mr. Donnelly testified in his deposition, he encrypts and protects Glider source code so that competitors cannot create their own version of Glider. Deposition of Michael M. Donnelly, Sept. 25, 2007 at 188; attached as Ex. 5 to Blizzard & Vivendi's Stmt. of Facts in Supp. of Their Mot. for Summary J. Some Glider users have suggested on internet forums that MDY provide the Glider source code as "open source" software--free for use. Ex. C, Shumway Decl. at Ex 4. If MDY is allowed to distribute the source code, Blizzard will be faced with numerous parties around the world infringing its copyright--and possibly doing so without a revenue stream with which to compensate it for damage to WoW. Preventing this sort of irreparable harm is one of the purposes of an injunction, and thus such a provision should be included in the injunction here in order to protect Blizzard's rights. Finally, the injunction should specifically enjoin MDY from providing assistance to third parties in developing their own botting software for use with WoW. While Glider is far and away the most popular botting software used in WoW, other bots do exist. Blizzard SoF ¶ 218. Numerous other individuals around the world, many of whom may be difficult to sue in United States courts, would undoubtedly be interested in picking up Glider's mantel and continuing to provide an equally successful bot for use in WoW, something that has thus far proved beyond the ability of anyone other than MDY. Preventing MDY from not only releasing the source code, but providing advice to those individuals creating their own bots would prevent the irreparable injury that could result from the creating of botting software by disparate individuals and companies from whom a judgment might be difficult or impossible to collect.

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CONCLUSION For the reasons stated herein, Blizzard respectfully requests that this Court amend the judgment entered on July 14, 2008 to include a permanent injunction as described in the attached proposed order.

Dated: July 23, 2008 Shaun Klein SONNENSCHEIN NATH & ROSENTHAL LLP 2398 East Camelback Road, Ste 1060 Phoenix, AZ 85106-9009 Telephone: [phone] Facsimile: [phone]

Respectfully submitted, /s/ Christian S. Genetski Christian S. Genetski Shane M. McGee 1301 K Street, NW, Ste 600E Washington, DC 20005 Facsimile [phone] Telephone [phone]

Attorneys for Defendants Blizzard Entertainment, Inc. and Vivendi Games, Inc.

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CERTIFICATE OF SERVICE I hereby certify that on July 28, 2008, I electronically transmitted the attached document to the Clerk's Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to the following CM/ECF registrants: Name Lance C. Venable Joseph Richard Meaney Public Knowledge Connie Jo Mableson Email Address [e-mail] [e-mail] [e-mail] [e-mail]

/s/ Christian S. Genetski