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Game On: The Intersection of Esports and Intellectual Property

June 9, 2021

With the exponential rise of digital media, coupled with the ubiquity of smart devices, esports is a pastime that entertains millions of fans and generates billions of dollars that are up for grabs. Streaming services, especially during the global lockdown, have transformed even the most casual gamers into serious contenders, with a select few reaching celebrity status and raking in seven-figure earnings and landing massive endorsements from world-famous brands.

Esports Is Here To Stay

Esports is developing fast, and the market size is projected to reach USD 1860.2 Million by 2026, from USD 691.6 Million in 2019, at a compound annual growth rate (CAGR) of 15.1 percent during the forecast period 2021-2026. Major factors that are behind this phenomenal growth of the global esports market size are the increasing popularity and availability of video games, growing mobile penetration and internet access, substantial investments, rising live streaming platforms, and increasing infrastructure for hosting league tournaments.

Esports encompasses a massive ecosystem that is both the playing and the watching of competitive video games. The basics of esports are comparable to traditional sports, where professional players compete in an area and are cheered on by their adoring spectators.

The modern esports ecosystem is young, complex, and fast-growing, but essentially its constituent elements are: spectator fans; skilled players (i.e., the athletes of esports); amateur and professional teams that focus on preferred video games; event/league organizers; games publishers (which actually create and distribute the video games that are used in esports); broadcasters; and finally ancillary players such as advertisers, sponsors, and merchandisers.

Millennials and Gen Z see esports as a competitive occupation due to the growing popularity of gaming tournaments, substantial international prize pools, streaming revenues, one-to-one sponsorships, and monetary gifts from loyal fans. The rising investment in sponsorship deals with gamers are expected to increase the growth of the esports market size. Increasing investment in the last two years has created new avenues for development in the esports market.

Investments in this sector have made considerable progress in recent years as the ecosystem provides a number of investment opportunities across a wide range of subsectors. Money flows into esports through broadcast rights, live event ticket sales, merchandise sales, and in-game transactions, but most of the revenue comes from sponsorships and advertising.

Gain (X)IP and Level Up

When examined through the lens of intellectual property (IP) rights, esports raises a considerable number of important issues worth bearing in mind. These questions are relatively distinctive to the realm of esports, such as: To what degree does a publisher’s ownership of a game give it control over the game’s use as an esport? Who owns the rights in an esports tournament broadcast online? Some of these issues already exist elsewhere, but have yet to be clearly answered for esports. For example, it is important to consider if esports mechanics are protected under copyright law or if they are patentable. Another relevant consideration is to examine under which trademark classification model an esport can be registered, knowing that it is an amalgamation of video games, traditional sports, live events, and technology.

In the past, game publishers would use their IP rights and actual control over the relevant game to assert their claim. Whether their IP rights actually would work in that way if tested is an immensely complicated question that has not yet been reviewed or tested. In practice, however, this notion has been supplanted by a more straightforward contractual power over a publisher’s game. These days, for most large scale tournaments, the game publisher and the tournament organizer are signing contracts that stipulate the licensing and use of the game IP in esports events, including how the events are run and marketed. The question of what IP rights are held by the publisher and which are fragmented among other stakeholders including organizers, broadcasters, clubs, and players will make its presence felt as the esports industry matures.

Trademark protection is uncommon in the realm of esports. For the few esports businesses that have trademarks, there is a lack of consistency or industry practice regarding how, where, and in what classes these trademarks should be obtained. Indeed, given the novelty of esports and the already complex and overlapping nature of trademark classification across different systems, it is not clear what the natural or ideal specification should be. We expect that the matter of classification will evolve fairly rapidly in the next few year. This is due to the competition between different businesses and the legal demands that will be made by investors and commercial partners, such as sponsors.

In traditional sports, image rights and other player-focused IP is an important facet for monetization and making profits. For example, famous athletes, like Michael Jordan, have a plethora of trademarks that span the globe. While some degree of image rights exploitation takes place in esports, it is nothing like the level of traditional sports that is often controlled by professional clubs. It will be some time before esports sees meaningful individual player sponsorship or endorsement where a player has taken control of and exploited their own IP and image rights. Image rights in esports will highlight some unique issues. For example, no player has obtained a trademark registration for their gamer tag, which is the core of their identity as a professional player.

The patent scene is still terra incognita for esports as well, since the intricacy of software patents in different jurisdictions around the world could make it extremely challenging to seek the appropriate patent protection. It is worth noting that esports software patent applications share similar challenges as those encountered by video games. It may be that some areas develop faster than others. For example, one area of esports that may look to patent protection quicker than others may be companies focused on gambling, betting, and integrity solutions.

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As with IP issues in conventional sports, these are not cut and dry matters of law. There exist enormous commercial possibilities and trials for esports businesses that will hang on their IP law position. Nonetheless, as with countless legal matters, the run-of-the-mill esports business is usually oblivious and inexperienced in IP matters. Although esports has followed video games in being somewhat free of litigation compared to other big creative industries, this may not stay the case in the future. As time progresses, we expect that such esports enterprises will be forced to change and evolve as the landscape becomes more competitive and necessitates an experience in IP.

To learn more on how Saba IP can help you navigate the IP landscape of esports in the Middle East and North Africa (MENA) region, contact us at info@sabaip.com or visit our website at https://www.sabaip.com/