Blizzard Entertainment Inc. v. Ceiling Fan Software LLC

Citations: 28 F. Supp. 3d 1006; 2013 WL 5511596; 2013 U.S. Dist. LEXIS 139313Docket: Case No. SACV 12-00144 JVS(RNBx)

Court: District Court, C.D. California; September 23, 2013; Federal District Court

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The Court grants Plaintiff Blizzard Entertainment, Inc.’s Motion for Summary Judgment regarding liability and denies Defendants Ceiling Fan Software, LLC, Brian Becker, and Stanton Fraser’s Motion for Summary Judgment. The case involves Defendants marketing software that allegedly induces Blizzard’s players to breach contractual terms prohibiting such software use. Blizzard seeks judgment on claims including tortious inducement and violations of California Unfair Competition Law, asserting that the individual Defendants also breached their contracts with Blizzard.

The Court finds that the key facts are uncontroverted and does not require consideration of inadmissible evidence. Blizzard's 'World of Warcraft' (WoW) is a widely popular online role-playing game, which requires players to agree to both an End User License Agreement (EULA) and Terms of Use (ToU). These agreements expressly forbid the use of unauthorized third-party software intended to alter the gameplay experience. Blizzard invests significant resources to maintain and update WoW, charging players a subscription fee and ensuring fair gameplay. The Court's ruling aligns with its prior tentative decision.

Defendants Becker and Fraser jointly own Ceiling Fan LLC, an Ohio Limited Liability Company established in 2011, which develops and sells two software programs, Pocket Gnome and Shadow Bot. These programs, designed specifically for the online game World of Warcraft (WoW), automate gameplay on Apple Mac and Windows PCs, enabling players to collect virtual rewards without actively playing. As the lead developer, Becker created these Bots to allow users to engage in prolonged gameplay, gaining advantages over non-bot users.

The Bots are sold through dedicated websites with a one-time startup fee of $25 and a recurring monthly license fee of $8.99, plus an optional $2.99 for Pocket Goblin. Defendants provide comprehensive user support, including instructional materials. They currently hold around 800-900 licenses for Pocket Gnome and 900-1000 for Shadow Bot, generating over $289,000 in revenue as of early 2013. 

Defendants have employed marketing strategies such as purchasing Google keywords related to WoW and advertising on websites that focus on gaming exploits. They are aware that using bot software violates WoW's Terms of Use (ToU) and End User License Agreement (EULA). Their website previously included explicit warnings about the risks of using their software, acknowledging the possibility of account bans by Blizzard Entertainment due to these violations.

Defendants inform their customers that Pocket Gnome is a bot, carrying a risk of account bans. They advise against claiming detection by Blizzard without strong evidence and assure users that they will issue statements if Pocket Gnome becomes unsafe. The defendants assert that their bots are designed to be 'undetectable' by not injecting into computer memory, and they provide guidance on avoiding detection. They employ moderators to oversee forums but allow discussions about avoiding detection and the trading of game accounts and virtual goods.

Defendants can monitor bot usage but do not enforce restrictions on how bots are used, nor do they terminate licenses for misuse except for unauthorized sharing. Blizzard actively polices for botting, receiving 185,000 complaints in two years, resulting in over 91,000 specific to botting, incurring investigation costs exceeding $390,000. Accounts found using bots are typically suspended for short periods. Approximately 1,400 users associated with the defendants have faced bans or warnings from Blizzard.

Both individual defendants have played World of Warcraft (WoW), accepted the End User License Agreement (EULA) and Terms of Use (ToU), and engaged in botting, fully aware of the risks since at least 2009. Accounts linked to their email addresses have been suspended or banned for violations, and one defendant has purchased multiple pre-played accounts, totaling around $2,000.

Summary judgment is granted when, viewing the evidence favorably for the nonmoving party, there are no genuine disputes regarding material facts, and the moving party is entitled to judgment as a matter of law (Fed. R. Civ. P. 56(c)(2)). Partial summary judgment is also permissible under similar conditions (Fed. R. Civ. P. 56(a,b)). Material facts are defined by substantive law and are essential for proving or defending a claim (Anderson v. Liberty Lobby, Inc.). A complete failure to prove an essential element of the nonmoving party’s case renders all other facts immaterial (Celotex Corp. v. Catrett). A genuine fact issue exists if reasonable jury evidence could favor the nonmoving party (Anderson). The nonmoving party must present specific facts to show a genuine issue exists, beyond mere metaphysical doubt (Matsushita Elec. Indus. Co. Ltd. v. Zenith Radio Corp.). When ruling on a summary judgment motion, the court must believe the nonmovant's evidence and draw justifiable inferences in their favor, though such inferences must be grounded in factual predicates (Richards v. Nielsen Freight Lines). The moving party initially bears the burden to show no genuine issue exists; if successful, the nonmoving party must then rebut this with sufficient evidence (Celotex). In cases with cross-motions for summary judgment, each motion is evaluated on its own merits (Fair Hous. Council v. Riverside Two). 

In California, the elements for intentional interference with contractual relations are: (1) existence of a valid contract between the plaintiff and a third party, (2) the defendant's knowledge of this contract, (3) intentional acts by the defendant aimed at inducing a breach or disruption, (4) actual breach or disruption of the contract, and (5) resultant damages (Quelimane Co. v. Stewart Title Guar. Co.).

Causation is a key element in establishing tortious interference with contractual relations, requiring that intentional acts be a substantial factor in causing a breach. Under California law, unlike the tort of intentional interference with prospective economic advantage, a defendant's conduct does not need to be independently wrongful for interference with existing contracts. Blizzard has demonstrated all five elements needed for tortious interference, warranting summary judgment against Defendants. It is undisputed that all World of Warcraft (WoW) players enter into a valid contract (EULA and ToU) before playing, fulfilling the first element. The second element is satisfied as Defendants had knowledge of these contracts, including the prohibition on bot usage. Despite this, Defendants intentionally induced breaches of the bot prohibition through actions like designing, selling, and maintaining botting software, as well as educating users on avoiding detection. This satisfies the third element, showing their actions were a substantial factor in the breaches. The fourth element is met with evidence of multiple breaches by players using Defendants' bots. Blizzard also demonstrated resulting harm, spending significant resources combating bot usage, alongside numerous player complaints that damage Blizzard's reputation. Even if exact damages are hard to quantify, California law holds that defendants cannot evade liability if their wrongful conduct complicates damage assessment. Finally, the Unfair Competition Law (UCL) prohibits unlawful, unfair, or fraudulent business practices, and Plaintiff alleges that Defendants’ actions fall under the unlawful and unfair categories.

The UCL prohibits unlawful practices that violate any law, which can include tortious interference with contractual relations. In this case, uncontroverted facts demonstrate that Defendants’ actions involving botting software constitute a UCL violation, leading to summary judgment in favor of Blizzard on its UCL claim. For breach of contract in California, four elements must be proven: existence of the contract, plaintiff's performance or excuse for nonperformance, defendant’s breach, and damages. The evidence shows that Defendants Becker and Fraser, who used bots while playing WoW, breached their contracts by violating the EULA and ToU. Their actions resulted in measurable harm to Blizzard, including increased costs in combating bots and damage to its goodwill and reputation. The Court finds all breach of contract claim elements are satisfied against the individual Defendants.

Blizzard also seeks a permanent injunction, with the Court agreeing that it is warranted to prohibit the sale, licensing, and use of the bots. The Court concludes that additional evidence or legal briefing is unnecessary given the existing record and confirms that Blizzard has demonstrated irreparable injury, inadequacy of monetary damages, a balance of hardships favoring Blizzard, and no disservice to public interest from issuing the injunction.

The Court exercises equitable discretion in deciding on permanent injunctive relief, finding that Blizzard meets the necessary factors. Customer complaints from tens of thousands of WoW players regarding bot usage indicate significant dissatisfaction, resulting in irreparable harm to Blizzard's goodwill and reputation, as established in case law. The balance of equities favors Blizzard as Defendants' business is based on intentional interference with Blizzard's contracts, justifying an injunction despite the potential significant harm to Defendants. Public interest also supports enforcing contractual obligations over engaging in covert breaches. 

Blizzard is ordered to submit a proposed permanent injunction within seven days, with Defendants allowed to object and propose a bond within fourteen days. Blizzard can respond within twenty-one days, after which the Court will issue a permanent injunction or schedule further hearings. The Court grants Blizzard’s Motion for Partial Summary Judgment on liability for intentional interference with contractual relations, breach of contract, and unfair competition, while denying Defendants’ Motion for Summary Judgment. The Court notes that Blizzard's claim of unjust enrichment is not a separate legal claim and is better suited for the damages phase.

Installation of WoW software requires users to accept the End User License Agreement (EULA) and Terms of Use (ToU), which have consistently prohibited certain actions since at least 2007. Additionally, Defendants sell software that enhances gameplay through unauthorized modifications, allowing actions typically restricted by the game.

The evidence presented regarding the pricing structure is deemed insufficiently supported, consisting primarily of deposition testimony and PayPal records. However, Defendants agree that certain facts are uncontroverted, particularly concerning the pricing structure and the operation of 100-120 Bots in WoW. Despite Defendants' claims disputing the use of the term 'exponentially,' the evidence does not effectively counter the Rice Declaration on the matter. Rice's investigation reveals that email addresses used to purchase Bots are linked to over 1,400 disciplinary actions for botting, indicating Defendants' awareness of potential breaches of the EULA and ToU. The Court rejects Defendants' argument that their warnings to customers absolve them of liability, affirming that such warnings do not transfer legal responsibility for breaches to users. The Court also finds unpersuasive Defendants' timing argument related to existing contracts at the time of bot purchase, emphasizing that Defendants’ ongoing support for Bot usage indicates continuing actions impacting Blizzard’s contracts. Blizzard's expenditures in combating botting are recognized as legitimate costs, not merely preventative measures. Regarding the UCL claim, the Court notes that while Blizzard does not fully articulate the unfair prong, it has already granted summary judgment on the unlawful prong, confirming Blizzard's success on the merits of its claims.