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Key resellers claim legitimacy -- the courts say otherwise | Opinion

Beiten Burkhardt's Andreas Lober probes the legal basis for key resellers, and finds those marketplaces on shaky ground

Buying activation keys on reseller websites currently ranks among the cheapest ways to purchase a game. While there is controversy between some of these platforms -- such as G2A -- and developers, users generally consider keys the perfect legal way to purchase games. However, this only applies to keys purchased from authorized vendors; these are usually not the surprisingly cheap offers and this is not the type of key selling this article focuses on.

We do not want to go into the pros and cons of keyselling in detail here -- a lot has been written in other articles on Gamesindustry.biz. Instead, this article deals with the legal background.

Most buyers purchasing from unauthorized key selling websites do not even realize that they're paying for an actual possibility to obtain a downloadable copy of the game by (albeit in most cases unintentional) deception or even fraud. A key is only a means for the purpose of proving one's right to download software. It is not a software license.

"Buying a key for the door to a house for €10 does not make the buyer of the key the owner of the house"

In a similar way, buying a key for the front door to a house for €10 does not make the buyer of the key the owner of the respective house, nor does it give him the right to live in that house, even if the key is actually the original key and not a counterfeit. It only enables the buyer of the key to bypass the protection installed to protect the house by using the key to unlock the door. The same applies in principle to unauthorized keyselling.

Some take a clear stance: the German Federal Supreme Court, for example, has found that the business of (re-)selling activation keys can be a criminal offence, and many other court rulings support game publishers or developers who act against such keysellers.

The main court decisions here are the famous "UsedSoft" decisions. The legal questions involved are among the most complex of copyright law -- under which circumstances can software be "resold"? For many products it is clear: the rightful owner can sell a used car whenever they want to. Also books or DVDs can generally be resold by the consumer who purchased them, and this also applies even to software sold on storage media.

It is true that these are all works protected under copyright law, but once the rights owner has put a copy on the market, they cannot prohibit that this very copy can be resold -- at least, not if the copy was placed on the market within the EEA and is being resold within the EEA. Technically, European law says that the rights holder's rights are exhausted. US law has a similar concept known as the first sale doctrine.

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Dr Andreas Lober

Why should keyselling be illegal, then? Reselling software has been controversial for some time. In principle, courts have allowed this under certain conditions -- these conditions include especially that the rights owner has brought the software on the market in the EEA, that the license has been fully paid (i.e. no subscription or similar), and that the original owner does not retain a copy.

The latter, obviously, is hard to prove, especially when the software has been downloaded, as opposed to being stored on a storage media with copy protection. Keyselling websites are keen to cite this in order to convince their customers that they have a right to resell games, but there is a major flaw. These decisions and the principles explained therein do not apply to games.

For games, the story is quite different. Games are not only software, they are so-called "hybrid" works -- i.e. audio and visual elements form an important part. In the EU, audio and visuals are protected under a legal regime which is different from that applying to software (the InfoSoc Directive protects, inter alia, graphics and sound, and the Software Directive protects software). Courts have decided that games are protected under both regimes, and exhaustion can only apply if the conditions for exhaustion are met under both directives. This can never be the case for games distributed digitally: under the InfoSoc Directive, exhaustion can never happen for digital distribution, and most product keys sold by keysellers originate from digital distribution.

"Many keysellers are aware of the problem and operate as an alleged marketplace, hoping to escape liability by pretending to be neutral"

But what about keys taken out of the retail box by so-called "key-scratchers"? In principle, that is physical distribution and exhaustion applies, right? Not quite. Most games distributed in retail today do not have the full game on the disc. They require a substantial download or at least a day one patch in order to work. The product is not on the disc in its entirety. This is a strong argument against exhaustion. Plus, according to a Berlin court, it is a copyright infringement to separate the key from the rest of the product. The principle of exhaustion does not apply if only a part of the product which has been brought on the market is resold, because this ultimately results in a different product -- i.e. a digital copy instead of a physical copy of a work.

As a side note, what we discuss above is what the operators of keyselling websites consider legal. We do not even have to take a look into stolen keys, credit card fraud, account hacking and all the other obviously illegal ways to obtain keys for reselling purposes to draw the conclusion that there simply is no legal way to resell keys without authorization from the rights holder.

Many keysellers seem to be aware of the problem and operate as an alleged marketplace, hoping to escape liability by pretending to be a neutral platform -- i.e. a platform just hosting third-party content. However, this argument has no merit in the case that there is no possibility to legally sell game keys -- as argued above. In addition, the operators of such websites are involved in the whole fulfillment process way too much to be considered a neutral platform.

Finally, it remains to be proven that "marketplace" sellers offering thousands of game keys are individuals selling their used software over the platform, unrelated to the operator of the keyselling platform -- not least because it is usually impossible to activate a key twice. Therefore, we are not really talking about the selling of used games but about the commercial activity of selling game keys of mysterious origin on a large scale, which is usually not a common pastime of individual persons.

This all sounds (and is) very complex, but there are courts familiar with these matters now. The author of this article has been granted several interim injunctions against keyselling platforms within a couple of days from applying for the injunction. And an additional side note: there are also very interesting tax issues to be discussed with regard to keyselling platforms. The most intriguing way to deal with VAT issues that the author of this text has seen was a site which let users choose how much VAT they wanted to pay.

Operators of keyselling platforms are aware of the legal issues discussed here. While many pretend to be perfectly legal and even pay significant sums for marketing campaigns to spread that wrong impression among their customers, they have also set up their corporate structure in a way that is hard to imagine was not deliberately designed to make enforcement of court decisions as difficult as possible. This means, ultimately, that game publishers and developers who want to take aggressive action might have to resort to legal instruments used against pirates -- takedown notices with host providers, disconnecting domains, blocking injunctions, and tackling all companies supporting these services.

Dr Andreas Lober is partner at the law firm BEITEN BURKHARDT. He has been advising video game companies for many years, and he has been involved in legal proceedings against keyselling websites for several publishers. The views expressed in this article are his personal opinions and conclusions.

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