Recently Bethesda, publisher of the popular Fallout and Elder Scrolls video game series, blocked someone from selling his legally purchased second-hand copy of one of their games on Amazon. The law involved is more complex than is being cited in the media.
Ryan Hupp legally purchased his copy of Bethesda’s The Evil Within 2, a survival horror game released in 2017. Instead of playing the game, Hupp listed it for sale on Amazon. His listing stated that, because he had never opened the game, he was selling a new copy. Soon after he received a letter from Bethesda’s law firm instructing him to remove the listing or face legal action.
Hupp complied with the demand under protest. The internet has debated his right to sell the game, pointing to the first sale doctrine. Bethesda clarified that do not intend to stop the sale of all pre-owned games but objected to the product being labeled new. What’s less clear in this rationale is what legal arguments they relied on in the first place. All litigation is fact-specific so this will not be a definitive analysis of the current situation, but Bethesda’s position illustrates the first sale doctrine and its specific exceptions. The most important element isn’t readily apparent: it’s the warranty.
The First Sale Doctrine
Products like video games are protected by both copyright and trademark law. No one but Bethesda could make their own Elder Scrolls game and place it for sale alongside copies of Skyrim at GameStop. But the entire secondary market, from used games to libraries to rentals, works because of one limitation: the first sale doctrine.
The first sale doctrine limits control over a protected product to its first legal sale. Once a customer purchases a copy of a protected work, they are usually free to resell that work without permission of the intellectual property owner. In most cases, if one purchases a copy of a video game, one can then sell that game to another person.
This is the part of the law that many people know. But copyright and trademark law is rarely so simple. There are exceptions to the first sale doctrine. The relevant one here is the material difference exception.
The Material Difference Exception
The first sale doctrine is a defense against trademark infringement. However, it only protects a seller if the product sold is not “materially different” from the original product. Any difference that a consumer is likely to find relevant to their purchase may be a material difference.
On its face a sealed copy of a game may seem to be identical to its original condition. But a material difference need not be physical. This brings us back to the warranty.
Most companies provide a short warranty window during which customers may exchange or have their defective products repaired. These warranties often only apply if the copy is sold by an authorized seller. A small number of states outlaw these clauses, but in most states this is allowed. While a game publisher cannot stop the resale of its games, it can control the terms of its warranty.
In most cases a game publisher would not honor the warranty for a resold game. Bethesda’s game warranties are fairly standard in this regard, providing a 30-day warranty that is only valid for the “original purchaser.” Courts have ruled that the lack of a warranty constitutes a material difference, leaving re-sellers open to the possibility of trademark infringement lawsuits. Bethesda’s statements on the matter have not made it clear whether they would honor the warranty of a fully sealed resold game, but it’s this ability to deny warranties at all that allows them to sidestep the first sale doctrine in the first place. Some courts have held that the lack of an original short warranty constitutes a material difference.
The Complexity of IP Law in the Modern Marketplace
Cases hinge on very specific facts, so this should not be taken as a definitive statement on the situation surrounding Bethesda and Mr. Hupp. But in general, the lack of a warranty in a second-hand game opens up resellers to liability. Proper disclaimers may solve the problem, but they would have to be enough to make the differences clear to an average consumer.
Complex exceptions to well-known legal principles illustrate that businesses of all kinds need affordable legal representation to navigate the modern marketplace. Contact The Law Firm of Dillon McCarthy for help in protecting your business.