On
Background
While loot boxes can take various forms, they are usually videogame mechanisms that generate randomized virtual items when 'opened' by players. Loot boxes typically contain in-game items such as weapons, virtual apparel for the player's character (also commonly referred to as "skins"), or even additional loot boxes. Players may purchase loot boxes with earned in-game virtual currency or virtual currency purchased using real currency. In both lawsuits, the Plaintiffs alleged that the loot boxes in certain games on the respective app store are a form of gambling because players do not know what the loot box contains until it is opened.
Apple and Google use app stores as a way for smart phone users to download apps, such as mobile games. Generally, these app stores serve as the primary means of distribution for third-party app developers and publishers. Further, distributors such as Apple and Google typically collect a 30% fee from any in-app purchases made through their respective app store. It is this participation of distribution through app stores upon which the Plaintiffs in both lawsuits premise Apple and Google's liability, despite each company not being the developer of the games at issue.
Both the Taylor and Coffee Plaintiffs originally alleged three causes of action against Apple and Google, respectively: (1) Apple and Google have violated
On
The district court also found that Plaintiffs failed to allege any additional factual allegations that supported their claims that Apple violated the UCL, thus lacking sufficient merit to survive a motion to dismiss. The UCL defines unfair competition as any "unlawful, unfair or fraudulent business act or practice." Plaintiffs alleged that Apple violated the UCL through both "unlawful" and "unfair" business practices by hosting and distributing a game on
Yet notably, Apple reasserted in its second Motion to Dismiss that Plaintiffs' claims should be entirely barred by the Federal Communications Decency Act ("CDA"). Section 230 of the CDA permits courts to dismiss claims where the alleged conduct exceeds the scope of defendant's role as a publisher of third-party content. Here, the district court again rejected Apple's argument. The court briefly commented that Apple's participation in the "marketing and distribution" of an illicit gambling device would support Apple's liability with regards to similar claims. The district court explained that Apple's argument remains a moot point, as Plaintiffs' claim lacks standing and merit to proceed. Accordingly, the district court dismissed the Taylor Plaintiff's lawsuit without leave to amend.
The Coffee lawsuit followed a similar pattern to the Taylor lawsuit: on
In its recent decision, the Coffee court dealt first with the alleged Section 230 immunity Google asserted and noted that liability may be imposed against defendants only "if it contributed materially to the alleged illegality of the conduct." The court cited to the Ninth Circuit three-prong Barnes test where immunity from liability exists for "(1) a provider or user of an interactive computer service (2) whom a plaintiff seeks to treat, under a state law cause of action, as a publisher or speaker (3) of information provided by another information content provider." See Dyroff v.
Under the second prong, Plaintiffs cited the unpublished Taylor order, arguing that Plaintiffs did not seek to hold Google liable as a publisher, but rather for its own conduct in promoting and selling loot boxes through games hosted on Google's app store. Additionally, Plaintiffs argued that the revenue-sharing structure between Google's app store and the game developers exceeded the scope of immunity granted by Section 230. However, the district court rejected Plaintiffs' argument, noting that Google's conduct of processing in-app purchases and collecting a 30% cut of such transactions through its app store is lawful conduct. Rather, the Google app store offers a "neutral means" for third-party developers to publicize their content. Therefore, the court reasoned that Google's alleged conduct "falls squarely within the protection of [Section] 230" and dismissed Plaintiffs' claims on the basis of Section 230 immunity.
The district court similarly addressed Plaintiffs' lack of standing. Just as the Taylor court found, the Coffee court held that Plaintiffs failed to state a cognizable economic injury resulting from Google's conduct and dismissed Plaintiffs' claims under the UCL. Additionally, regarding Plaintiffs' claim under the CLRA, the district court found that the absence of unlawful conduct and lack of a cognizable injury bars Plaintiffs' claim. Plaintiffs purchased virtual currency directly from third-party game developers and received "exactly what they paid for," similarly undermining the merits of the unjust enrichment claim.
Lastly, the court briefly touched on the connection Plaintiffs asserted between illegal slot machines and loot boxes. Plaintiffs argued that loot box prizes have subjective value that could be traded in legitimate digital markets. However, the court noted that a virtual item cannot be a thing of value where the sale of the item would violate any applicable terms of use, and therefore loot box prizes are not things of value under
Conclusion
Both the Taylor and Coffee Plaintiffs made identical policy arguments that loot boxes are a form of gambling that may lead to depression and addiction, citing that the
www.fkks.com
This alert provides general coverage of its subject area. We provide it with the understanding that Frankfurt Kurnit Klein & Selz is not engaged herein in rendering legal advice, and shall not be liable for any damages resulting from any error, inaccuracy, or omission. Our attorneys practice law only in jurisdictions in which they are properly authorized to do so. We do not seek to represent clients in other jurisdictions.
Ms
Frankfurt Kurnit Klein & Selz
E-mail: info@fkks.com
URL: www.fkks.com
© Mondaq Ltd, 2022 - Tel. +44 (0)20 8544 8300 - http://www.mondaq.com, source