A blog reader has passed along a legal demand letter they recently received from Smart & Biggar, a leading Canadian IP law firm, representing the Entertainment Software Association. The letter focuses on the sale of modification devices – frequently referred to as "mod chips" that can be used to modify or alter store-bought video games or play infringing copies of those games. Mod chips have been rendered illegal in the U.S. and U.K., while Australia's High Court upheld their legality in 2005 (the law was changed under pressure from the U.S. last year).
The letter argues that the ESA has both trademark and copyright rights in the video games. In addition to pointing to Section 27 of the Copyright Act as governing the sale or distribution of unauthorized software, the applicability of criminal offences under Section 42 of the Copyright Act, and the fraud provisions of the Criminal Code, it claims:
"any use, offer for sale or sale of modification devices, or 'mod chips' to permit circumvention of our clients' consoles security systems to play pirated or counterfeit software, is also an offence and constitutes direct or indirect infringement of our clients' intellectual property rights by inducing and procuring infringement by others of our client's aforesaid rights."
Given that the letter makes no reference to patent rights, the intellectual property referred to in this sentence is presumably copyright. This raises at least two issues.
First, while the ESA makes no secret about the fact that it would like Canada to follow the U.S. model, this letter suggests that it isn't bothering to wait for the law to change. It is trying to apply U.S. law in Canada today since the doctrine of inducing infringement does not exist here (if it sounds familiar, it is because the U.S. Supreme Court raised inducement in the Grokster case). Moreover, I believe that it is simply wrong to argue that the use of a mod chip alone constitutes an infringing act in Canada. These attempts to import U.S. law into Canada is precisely why the Copyright Act should be reformed to include a copyright misuse provision that would penalize copyright holders from overclaiming.
Second, the letter appears to completely undermine the ESA's argument that Canadian copyright law is in need of reform. While the ESAmaintains that Canadian law does not adequately address mod chips, its own Canadian lawyers are actively using a range of Canadian legal provisions to address the issue (and it regularly trumpets police action). It seems to me that you can't have it both ways – either Canadian law does not address mod chips (in which case this letter arguably constitutes an abuse of process) or it does (in which case the ESA's claims for copyright reform are subject to challenge). Mod chips raise a host of legal issues in Canada and selling unauthorized software in Canada is clearly an act of infringement. That said, the ESA's claims raise serious concerns about copyright misuse and call into question the organization's claims about the need for reform.