The Funeral of WoW Gold

LOS ANGELES – A year ago, newly minted lawyer Shawn Foust approached a senior partner at his
Los Angeles firm with an idea: dedicate an entire practice to the video-game industry.

Today, the 26-year-old coordinates a team of 20 lawyers at Sheppard, Mullin, Richter & Hampton. The group tackles mergers, licensing contracts and other deals that help make the burgeoning game business hum.

“I’m pursuing my lifelong dream of combining the two things I love – games and law,” Foust said.

Never a group to steer clear of the action, lawyers across California are retooling their entertainment practices to cater to the game industry. Video games are expected to generate almost $50 billion in global revenue this year, despite a slowdown in consumer spending, and sales have already surpassed old-line businesses including music.

As the game industry grows, so do its legal needs.

“There’s tax work, litigation, risk management, immigration, labor – the list goes on and on,” said Seth Steinberg, who last year left his position as general counsel of George Lucas’ video game publisher, LucasArts, to start a private practice in San Francisco specializing in the game industry.

Other firms have joined in. Greenberg Glusker Fields Claman & Machtinger, the law firm of record for the likes of Tom Cruise and Warren Beatty, has cultivated a game practice led by Stephen Smith and Suann MacIsaac.

For Greenberg Glusker, billings from game-industry clients quickly sprouted from nothing to millions of dollars a year.

The firm’s first big case came in 2004, when one of its clients, Ubisoft Entertainment, was sued by MGA Entertainment Inc., the Los Angeles maker of Bratz dolls and toys. MGA sought to revoke a license it had granted Ubisoft to make games based on the Bratz franchise.

The game publisher countersued and won an arbitration award of more than $13 million in damages, including $2.5 million in attorney fees.

The increasing sophistication of video games and game consoles has generated technical problems, and class-action lawyers have jumped in to pursue claims on behalf of consumers.

Knowing how to play games – particularly complex online titles such as World of Warcraft – can be an asset. For these games, Foust said, the typical software end-user license agreements that limit a company’s liability and protect its intellectual property don’t work.

“Games aren’t like software,” he said. “People who play them feel a deep intimacy with the game. They feel very attached to the virtual items they acquire in the game through hundreds of hours of playing it. That presents some interesting twists in property law.”