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Is Michael Donnelly a cheater? That’s the issue in an appellate case with important implications for the online gaming and software industries. Back in 2005, Donnelly developed a software “bot” called Glider that enabled users to bypass the easier levels of Blizzard Entertainment’s interactive World of Warcraft online game. Donnelly’s company, MDY Industries, earned more than $3 million selling 12,000 licenses to Glider, which Donnelly updated to evade Blizzard’s attempts to block it. Blizzard claimed it was losing subscription money from users who blitzed through World of Warcraft’s lower levels with Glider. After the company sent a lawyer to Donnelly’s house to instruct him to cease Glider sales, Donnelly filed a declaratory judgment suit, seeking a ruling that he could continue marketing Glider. Blizzard countersued Donnelly and MDY for secondary copyright infringement, Digital Millennium Copyright Act violations, and tortious interference with its users’ license agreements. Phoenix federal district court judge David Campbell agreed with just about all of Blizzard’s allegations against Donnelly. In a combination of summary judgment and bench trial rulings in 2009, Judge Campbell essentially concluded that the software developer was, in fact, a cheater: He found Donnelly and MDY liable for secondary copyright infringement, DMCA violations, and tortious interference. He also ruled that Donnelly was personally liable to Blizzard and entered a $6.5 million judgment against him. Donnelly and his lawyers at Venable, Campillo, Logan & Meaney appealed to the U.S. Court of Appeals for the Ninth Circuit. And on Tuesday, a three-judge appellate panel offered a more benign view of Donnelly and Glider than Judge Campbell. In a dense and highly technical 47-page opinion (available here, via Courthouse News) written by Judge Consuelo Callahan, the Ninth Circuit panel concluded that Donnelly and MDY were not liable for copyright infringement because Glider doesn’t alter or copy World of Warcraft’s software. “Were we to hold otherwise,” Judge Callahan wrote in a significant interpretation of secondary copyright infringement in software applications, “Blizzard–or any software copyright holder–could designate any disfavored conduct during software use as copyright infringement, by purporting to condition the license on the player’s abstention from the disfavored conduct. The rationale would be that because the conduct occurs while the player’s computer is copying the software code into RAM in order for it to run, the violation is copyright infringement. This would allow software copyright owners far greater rights than Congress has generally conferred on copyright owners.” Moreover, the Ninth Circuit panel found that Judge Campbell erred in granting Blizzard summary judgment on its tortious interference claims because it’s not beyond dispute that Donnelly and MDY had improper motives in creating and selling Glider. “MDY argues that Glider is an innovative, profitable software program that has positively affected its users’ lives by advancing them to WoW’s more interesting levels,” the judge wrote. “MDY has introduced evidence that Glider allows players with limited motor skills to continue to play WoW, improves some users’ romantic relationships by reducing the time that they spend playing WoW, and allows users who work long hours to play WoW.” But the panel, which included Judges William Canby Jr. and Sandra Ikuta, also found that Donnelly and MDY violated a section of the DMCA that deals with “dynamic non-literal elements” (please don’t ask us to explain what the heck that means) because MDY marketed Glider as a product that circumvents Blizzard’s attempts to block it. Overall, MDY counsel Lance Venable of Venable, Campillo told us, the ruling is an “overhwhelming victory” for his client. “The Ninth Circuit adopted a more lenient view of what MDY was doing,” he said. And although the appellate panel remanded the tortious interference and personally liability issues to Judge Campbell, Venable said, “I’d love to take this to a jury.” But in the meantime, Venable added, the Ninth Circuit’s reasoning on the DMCA violation, which rejects contrary rulings by the U.S. Court of Appeals for the Federal Circuit, has created a circuit split that could prove problematic to other courts considering software copyright cases. Venable said his side may petition the U.S. Supreme Court to resolve the split. Christian Genetski of Zwillinger Genetski argued the appeal for Blizzard. He didn’t return our call for comment. Tom Snydor of the Innovators Network, which supported Blizzard in the litigation, circulated this e-mail statement on the Ninth Circuit’s ruling: “[The opinion] confirmed both the validity of software-licensing agreements and the wisdom of the anticircumvention rights that Congress and President Clinton conferred upon copyright owners in the DMCA,” it says. “The court held that, together, software-licensing agreements and the DMCA empower creators of online games to prevent other companies from profiting by helping cheaters breach their legal duties not to ruin wildly popular games enjoyed by millions of users who play by the rules.”

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