07.11.2024
Traditionally, casual games were static. Once a game was put out in the market, any update or change in gameplay was possible only when an updated version of the game was released.
Today, dynamism has become an inherent feature of casual games. Game developers are increasingly infusing technology in gaming to pique the interest of the users and explore new monetization models. New-age technology such as Artificial Intelligence (“AI”), Augmented/Virtual Reality (“AR/VR”), and Machine Learning (“ML”) etc. are making casual games more engaging.
Some examples include:
Use of AI in the gaming universe to enhance user gaming experience. Some manifestations include customized storylines, characters, environments, themes, and sounds.
User have the ability to use AI to develop their own games. As an example, an eight-year-old boy built a game using a text prompt in two hours which is now being played by over half-a-million users!
Use of AR/ VR to create an immersive gaming experience.
Use of in-game tokens, loot boxes etc. to keep players invested in the game.
All such innovative features create new-age legal issues in the world of casual games. We discuss some legal nuances in this piece.
Ownership of IP in AI-Generated Games
AI is essentially a software. One can say that the principles of intellectual property (“IP”) laws vis-à-vis ownership of software should ideally apply to AI as well.
To deliberate on this further, since AI-generated content is in the form of literary work (scripts, articles, software), artistic work (avatars, images, game universe), or musical works (notations, background music), such content could typically be copyright protected if its ticks the requirements under copyright law. AI can also help generate trademarks for game names, character names, taglines, etc., for brands that can be worthy of protection under trademark laws. Lastly, while computer programmes per se cannot be patented, patent protection for software cannot be ruled out, especially in cases of worldwide use of AI. The question is, who will be given this IP protection? Can AI claim ownership?
This may not be a simple one to answer.
To decide who actually owns the IP, several parameters would need to be considered, such as who does the training data belong to? Is the deliverable created by the generative AI a derivative work of the training data? Is the new work worthy of independent IP protection?
For instance, gaming entities can commission the services of AI developers to create a generative AI software which is trained on the gaming entities proprietary data. For this, the gaming entity can contractually require the ownership in IP in the generative AI software and any works (eg. in-game assets, characters, narratives etc.) created by the generative AI software to vest with the gaming entity.
If the content is purely end-user generated (i.e., author), gaming entities may confer ownership of the works created by the end-user on the end users under contractual provisions. Under Indian copyright law, authorship of work vests onto the person who causes the work to be created. However, author and owner are two different concepts under copyright law, and an author may not always be the owner of the work.
Therefore, the ownership of IP will vary depending on the situation at hand, position in law, or the contractual understanding between the parties.
Collection and Processing of Player Data
All the “cool” features of games have an increasing dependency on user data. For instance, customized gaming experiences are an outcome of platforms collecting and analysing user behaviour and patterns to provide an enriching gaming experience. This raises questions with respect to legitimacy and validity of data collection and usage consent, user rights, data security, etc. and tiggers compliance with the current Information Technology Act, 2000 the rules thereunder, and the soon to be implemented Digital Personal Data Protection Act, 2023 (“DPDPA”).
The issues are more complex when children’s data is involved. Since children (i.e., below 18) also form a considerable user base for casual games in India, gaming entities will have to obtain verifiable consent of the parents before processing the personal data of the child under the DPDPA. There are strict restrictions on processing of the personal data of children in a manner that leads to detrimental effects on their well-being, tracking, behavioural monitoring, or targeted advertising under the DPDPA.
A breach of the obligations governing the processing of data has a staggering penalty, which may extend to INR 200 CR.
Another area of concern could stem from the usage of data, particularly when such usage can be considered to be against the interests of sovereignty and integrity, defence, security, friendly relations with foreign states or public order of the country.
In the past, the popular mobile game PUBG was banned by the Ministry of Electronics and Information Technology for compromising the personal data and information of the users.
Casual gaming entities will, therefore, have to work their models in a manner where they collect and process the personal data of users, but only in compliance with applicable law.
Who Caters to Responsible Gaming?
Generative AI has been a bit in the docks because of concerns relating to data bias, discrimination, and user harm. Another important consideration is the tendency of addiction to the game. Since players are being fed with completely customizable gameplay, they might end up spending more hours than usual on the game, resulting in addiction, mental health, and anti-social behavioural issues.
Such consequences may trigger compliances under the law, specially under the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 (“Gaming Rules”) in India. The Gaming Rules prescribe a verification framework that casual games may be subject to if they are causing user harm. Casual games may be put to the test of verification based on measures for gaming addiction, financial loss, financial fraud, and repeated warning messages if a gaming session extends beyond the reasonable duration, and the provision to enable users to exclude themselves if user-defined limits are reached for time or money spent.
India also proposes to replace the Information Technology Act of 2000 with the Digital India Act of 2023 (“DIA, 2023”). One of the proposals under the DIA, 2023, is to regulate addictive tech and protect minors’ data, safety, and privacy of children on gaming apps.
The law in this segment is, therefore, evolving at a rapid pace.
Where is the Money Going?
Gaming entities based in India and internationally have several monetization models including selling ad slots, in-game purchases, and trading of in-game assets.
Transfer of money to gaming entities outside of India may trigger compliances/restrictions under the Foreign Exchange Management Act, 1999, its rules and regulations (“FEMA”) read with the Foreign Exchange Management (Current Account Transaction) Rules (“Current Account Transaction Rules”). As per FEMA, a resident Indian entity/individual making a payment to a foreign entity is required to comply with the requirements thereunder. Further, the Current Account Transaction Rules prohibit certain remittances including remittance from income from racing/riding, etc., or any other hobby. Income from casual games could be interpreted as income from a “hobby” as the term is not expressly defined.
The purchased in-game assets may also be characterized as virtual digital assets (“VDAs”). Gaming entities that engage in inter alia exchange or transfer of VDA’s may also be subject to obligations under the Prevention of Money Laundering Act, 2002.
Do Consumer Laws Protect Players?
The Consumer Protection Act, 2019 (“CPA”) details consumer rights and seeks to protect consumers against unfair trade practices. The guidelines under the CPA, namely the Guidelines for Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements, 2022 and the Guidelines for Prevention and Regulation of Dark Patterns, 2023 (“Dark Pattern Guidelines”) also protect consumers against any unfair trade practices including misleading claims, mis-advertisements, darks patterns etc. with respect to any product or service being advertised/provided by goods/service providers as well as advertisers and endorsers of the goods/services.
Since players of casual games may raise concerns regarding unfair trade practices or misleading claims against gaming entities in the event refund policies or rewards in exchange of in-game purchases are not what were promised or advertised, casual gaming entities will have to in their terms detail the refund policy or explain the exact rewards players will receive in exchange of their in-game purchases etc. to ensure compliance with applicable law.
In May 2024, the Netherlands Authority for Consumers and Markets fined Epic games for using game design elements which amounted to dark patterns. This included countdown timers specifically targeting children’s vulnerabilities which put children under pressure to buy items before the ticker reached zero giving the children the impression that they would otherwise miss the items on offer. However, such sale items continued to be available at the same price even after the timer reached zero. Dark Pattern Guidelines in India aim to curb similar issues; therefore, gaming entities would need to design their games in compliance with the Dark Pattern Guidelines.
Further, consumer laws also require e-commerce entities to provide detailed and accurate information pertaining to delivery, exchange, refunds, guarantee, etc. The laws also require e-commerce entities to set up and publish their grievance redressal mechanism, the contact details of the grievance officer and customer care on its platform etc.
What Lies Ahead?
The evolution of new-age tech is fueling rapid advancements in gaming.
While the law in India is still catching up with the pace of how new-age tech should be regulated, the gaming entities need to keep track and ensure compliance. Sometimes, it may also mean that one needs to rethink models to align with new laws. A pragmatic approach by the various stakeholders in this sector will facilitate ease of growth of casual games in India.
Authored By: Aarushi Jain, Partner TMT, Head-Media, Education & Gaming, Cyril Amarchand Mangaldas, Pooja Kapadia, Principal Associate, Cyril Amarchand Mangaldas, Muazzam Nasir, Associate (TMT), Cyril Amarchand Mangaldas
Edited By: Anamika Shukla and Souniya Dhuldhoya
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