Patents and Video Game Microtransactions: Legitimate Revenue Generator or Scummy Cash Grab?
To say the consumer market for video games is large does not do the industry justice. According to a recent market report, there are over two billion people in the world that play video games.1 The industry’s profitability is equally impressive, with current market estimates expecting it to pull in over $108.9 billion in global revenue this year, up $7.8 billion from 2016.2 This level of profitability is remarkable given that, putting aside the stunning growth of mobile gaming over the past few years, the general purchasing experience for the consumer has not evolved much since the turn of the century: a shopper pays $60 for a game and is then free to enjoy it. 3 The gaming industry did find a new source of revenue in the early 2000’s with downloadable content (“DLC”), game expansions sold and downloaded after the base game was purchased, but the industry focus primarily stayed on producing superior games rather than DLC, as that was where the most sales potential was. However, with the advent of microtransactions in recent years and the grant of a new patent last month, the industry could possibly be facing a serious overhaul in how it generates revenue.
The United States Patent and Trademark Office recently granted Activision Publishing, Inc.’s patent application for a “system and method for driving microtransactions in multiplayer video games.”4 Microtransactions are generally used for cosmetic items, gameplay bonuses, or relatively small pieces of content purchasable for a game after the initial sale, and are extremely popular in mobile gaming. Though technically microtransactions provide DLC, they are usually seen as distinct from DLC. The term DLC is typically reserved for significant game expansions while the term microtransactions is generally applied to relatively small purchases like those mentioned above. These microtransactions as a whole have begun to become vilified by consumers, many seeing such sales as blatant attempts to squeeze a few extra dollars out of gamers’ wallets for minimal content purchased on impulse.5 There are also additional concerns that microtransactions promote a “pay-to-win” system, wherein a consumer engages in microtransactions to gain some kind of advantage in gameplay, effectively paying to win.6 These specific concerns are why Activision’s new patent is seen as troubling.
Activision’s new patent is for a computer method that can alter the traditional mechanisms behind the matching of players for multiplayer gaming in order to entice additional purchases.7 Existing matchmaking systems typically rely on traditional variables like an individual’s general skill and level to create optimal matches for players, balancing player skill and match-creation time. This way, players are consistently and quickly matched up against players of comparable skill and the game is neither too easy nor brutally difficult. Activation’s new method retains these traditional variables, but goes further by also looking at details in a player’s profile, identifying items available via microtransaction that the player may be interested in, finding another player who possesses such an item, and adjusting the matchmaking system so the first and second player are more likely to play together, even if they would not be matched together in a traditional system.8 This system manipulation presents the first player with the opportunity to see the item in use by the second player, hopefully enticing the first player to purchase the item.9 The patenting of this kind of method is frightening given the results microtransactions have had on other areas of gaming.
Within mobile gaming, microtransactions are commonplace and not terribly surprising. What is surprising, however, is that a disproportionate percentage of players spend a disproportionate amount of money on the game compared to others.10 One report found that of all the money spent on mobile gaming in 2014, 50% of it came from just 0.15% of the players.11 This implication that such a small percentage of players contribute so much to the industry’s revenue is even more startling when total revenue is considered. In 2016, mobile gaming took in $38.6 billion in revenue globally.12 If similar transactions were to be implemented in other areas of gaming, what kind of figures would result as game developers and publishers begin to rely more and more on microtransactions to generate revenue? Of course, how widespread this implementation is depends on the industry and the patent’s validity.
At the moment, Activision claims the system is not in use within any games.13 Given the revenue-generating potential of such a system, though, it likely won’t take long for Activision and other industry members to implement the system or something similar. When that happens, challenges to the patent would not be unexpected, though the outcome may be.
Because the patented method relies on computer variables and system manipulations, the patentability of the method would almost certainly be questioned if the patent is ever challenged. Given the developments in what constitutes patentable subject matter over the past few decades, especially in regard to methods related to computers, it would be interesting to see how the validity of this patent would be judged.
Back in 1981, the Supreme Court determined in Diamond v. Diehr that the use of a computer algorithm in the process of rubber manufacture was not precluded from subject matter patentability.14 Whereas previously, formulas and algorithms themselves were not patentable, their integration into a process or method could allow for a valid patent claim.15
In Bilski v. Kappos, the Supreme Court ruled that a particular business method patent, one that hedged risk while investing, was not valid.16 More importantly, though, the Court determined that even though the patent at hand was not patentable per the “machine-or-transformation” test, the test itself was not the sole method of determining patentability, thereby preserving the possibility that other business methods could be held as patent eligible.17
Finally, in Alice Corp. Pty. Ltd. v. CLS Bank International, the Court found that the use of a computer to implement an abstract idea did not transform the abstract idea into patent eligible material.18 Here, a method by which to facilitate financial exchanges via a third party was implemented via computer. This simple addition of a computer was not sufficient to transform the process.19
With these cases in mind, it is extremely interesting to consider how Activision’s patent could possibly play out. It certainly isn’t a just a simple business practice being implemented by a computer, but it is arguably a business method in that it drives additional sales by means of actual manipulations of an existing system. Regardless, the future implementation of this patent is bound to be newsworthy, whether because it would further refine what kind of business methods are patentable, or because it genuinely has the capacity to change the entire dynamic around which the entire industry does business.
Emma McDonald, The Global Games Market Will Reach $108.9 Billion In 2017 With Mobile Taking 42%, Newzoo (Apr.20, 2017), https://newzoo.com/insights/articles/the-global-games-market-will-reach-108-9-billion-in-2017-with-mobile-taking-42/ [http://archive.is/GL613].↩
Activision Patents Algorithm To Make Gamers Spend, PYMNTS (Oct. 24, 2017), https://www.pymnts.com/news/merchant-innovation/2017/activision-machine-learning-algorithm-makes-videogamers-spend-more/ [http://archive.is/naYtW].↩
U.S. Patent No. 9,789,406 (filed May 14, 2015).↩
Tim T.K., Why Microtransactions Are Killing Game Audiences, Gamers Media (Sept., 2017), https://gamers.media/why-microtransactions-are-killing-game-audiences [http://archive.is/6Eh1I].↩
U.S. Patent No. 9,789,406 (filed May 14, 2015).↩
Brian Crete, Activision Researched Using Matchmaking Tricks to Sell In-Game Items, Rolling Stone (Oct. 17, 2017), http://www.rollingstone.com/glixel/news/how-activision-uses-matchmaking-tricks-to-sell-in-game-items-w509288 [http://archive.is/75xSL].↩
Paul Tassi, Why It’s Scary When 0.15% Mobile Gamers Bring In 50% Of The Revenue, Forbes (Mar. 1, 2014), https://www.forbes.com/sites/insertcoin/2014/03/01/why-its-scary-when-0-15-mobile-gamers-bring-in-50-of-the-revenue/#6306da2a4065 [http://archive.is/c5VhQ].↩
Emma McDonald, The Global Games Market Will Reach $108.9 Billion In 2017 With Mobile Taking 42%, Newzoo (Apr. 20, 2017), https://newzoo.com/insights/articles/the-global-games-market-will-reach-108-9-billion-in-2017-with-mobile-taking-42/ [http://archive.is/GL613].↩
Activision has a patent on using matchmaking to sell microtransactions, Metro (Oct. 18, 2017), http://metro.co.uk/2017/10/18/activision-has-a-patent-on-using-matchmaking-to-sell-microtransactions-7008495/ [http://archive.is/yX23j].↩
450 U.S. 175, 188 (1981).↩
561 U.S. 593 (2010).↩
Id. at 607.↩
134 S. Ct. 2347 (2014).↩
Id. at 2352.↩