Fortnite court decisions show risks of contracting with minors
Ryan Meyer of Dorsey & Whitney LLP examines recent court cases indicating how binding (or not) a EULA really is when kids are playing
According to one source, 70% of the world's over 2.5 billion video gamers are age 18 or older. While this statistic shows that most of the video game industry's customers are adults, it also shows that roughly 750 million of those customers are children.
Since minors are treated differently from adults under many areas of the law, a one-size-fits-all legal model for licensing, privacy, sales, issues that assumes the end user is a competent adult fails to account for a significant portion of the video game market. Accordingly, game companies should understand and address the potential hurdles and pitfalls relating to having minors as customers.
Multiple court decisions from the past few years involving the popular Fortnite game released by Epic Games illustrate how two common elements of the video game industry -- End User License Agreements (EULAs) and in-app purchases -- can give rise to legal problems when a customer is a minor. However game companies can implement strategies to reduce their legal risk stemming from these issues.
"Many states (including California) allow minors to disaffirm their prior agreement to a EULA"
Game companies typically rely on EULAs to protect their intellectual property, limit their liability, and place limitations and conditions on the use, distribution, etc. of their games. They often include an arbitration clause to limit a video game company's exposure to court litigation, particularly costly class action lawsuits. However, despite a company's attempt to protect itself with a strong, well-crafted EULA, many states (including California) allow minors to disaffirm their prior agreement to a EULA. This puts the applicability and effectiveness of a EULA in question when a customer is a minor.
In R.A. v. Epic Games, Inc.1, a minor, R.A., filed a putative class action against Epic Games alleging violation of California's Consumer Legal Remedies Act, unjust enrichment, and false advertising relating to Epic's Fortnite, which has become a frequent target for litigation. Epic moved to compel arbitration because the version of the EULA to which R.A. had agreed contained an arbitration provision. United States District Judge George H. Wu explained that, under California law, minors can disaffirm a contract before they reach majority, or within a reasonable time thereafter, by "any act or declaration disclosing an unequivocal intent to repudiate its binding force and effect," as long as they disaffirm the contract in its entirety.
Judge Wu found that R.A. disaffirmed the EULA when he filed a declaration to that effect and discontinued playing Fortnite. Accordingly, Epic lost the benefit of the EULA's arbitration clause. In a more recent decision involving Fortnite, Doe v. Epic Games, Inc.2, United States District Judge Yvonne Gonzalez Rogers came to a similar conclusion based on a similar fact pattern after discussing the earlier R.A. decision.
"Epic tried to ensure parental consent by stating in its EULA that minors must have a parent or legal guardian consent to the agreement. Of course, minors do not always do as they are told"
Of course, one way to avoid this problem is to ensure that a minor's parent, not the minor, consents to the EULA. Crawford v. Sony Interactive Entm't LLC3 demonstrates the impact this factual difference can make.
In that case, Brandi Crawford was a parent whose minor son spent $1,000 on, once again, Fortnite (hosted on Sony's PlayStation Network) without her permission. However, Crawford did not dispute that she was the person who had accepted Sony's System Software Licensing Agreement and Terms of Service and User Agreement, which both contain arbitration clauses. While Crawford argued that her minor son could not be bound by Sony's contracts, United States District Judge James Donato concluded that this was irrelevant since the dispute was entirely between Crawford and Sony. Thus, the court referred the case to arbitration.
Epic tried to ensure parental consent by stating in its EULA that minors must have a parent or legal guardian consent to the agreement. Of course, minors do not always do as they are told. R.A. was able to install Fortnite and consent to the EULA using his father's email address without his father's permission and without his father having ever reviewed or agreed to the EULA. Similarly, the parents of the minor plaintiff in Doe v. Epic allegedly did not read or agree to the EULA either.
"In addition to acknowledging that minors, in some states, can disaffirm contracts, a video game company's strategy must also recognize human nature"
Accordingly, these cases show that, in addition to acknowledging that minors, in some states, can disaffirm contracts, a video game company's strategy must also recognize human nature. Games companies should, therefore, consider one or more robust verification systems, such as requiring a credit card transaction for a trivial amount, using a third-party identity verification solution, or even using biometrics. These sorts of measures might not work against the most determined minors, but they will put more parents on the hook for their children's conduct.
Even after a parent or guardian consents to a EULA, video game companies can further protect themselves by requiring parental confirmation of each in-app purchase. Companies like Epic have a strong incentive to make in-game purchasing as quick and painless as possible for the customer, but doing so also increases the risk of unauthorized purchases by minors.
As shown in Fortnite-related case, C.W. v. Epic Games, Inc.4, a parent entered her credit card information into her son's account to make a purchase with her permission. Unfortunately, her son then used her stored information to make more purchases without her knowledge. The court concluded that C.W. could still disaffirm his in-app purchases even though his parent had voluntarily provided her payment information.
To avoid this situation video game companies can require multi-step authentication that requires a parent or guardian's authorization of each purchase. For example, requiring the purchaser to enter a special code sent to a parent or guardian's phone via text message could prevent many unauthorized purchases. In addition, game companies could require each child account to be associated with an app on the parent's mobile device that alerts the parent each time the child accesses the game or attempts to make a purchase.
Children constitute a large portion of the video game industry's customer base, but they also present special challenges for video game companies. Video game companies must take this into account when drafting EULAs and allowing in-app purchases. By taking the right precautions, they can avoid or minimize the risks involved in dealing with minors.
Clarification: The Doe v. Epic and C.W. v. Epic decisions are part of the same litigation. The case was originally filed named 'Doe' as the plaintiff, but the name was changed to 'C.W.' in a subsequent amended complaint.
Ryan Meyer is an intellectual property attorney at the international law firm Dorsey & Whitney LLP. He specializes in IP focusing on the video game industry and is co-chair of Dorsey's Video Game Industry Practice Group.
1No. CV 19-1488-GW-Ex (C.D. Cal. July 30, 2019)
2435 F. Supp. 3d 1024 (N.D. Cal. 2020)
3No. 3:20-cv-01732-JD (N.D. Cal. Mar. 30, 2021)
4No. 19-cv-03629-YGR (N.D. Cal. Sep. 3, 2020)