Blizzard Beat the Bots

19 September 2019

The High Court has handed down its judgment calculating the account of profits awarded to the video game publisher, Blizzard Entertainment SAS (Blizzard), in connection with its claim against the producer of software designed to facilitate cheating or unfair practices in Blizzard’s video games.

The Claimant, Blizzard is the creator and publisher of numerous successful online role playing games, including World of Warcraft, Overwatch and Hearthstone. The Defendant, Bossland GmbH (Bossland), produces and sells software, “Bots and Cheats”, that allows users to bypass the pre-set mechanics of the games to secure advantages against other players. After what may be aptly described as an “arms race” between the parties in developing software to simultaneously detect and nullify the others efforts, Blizzard brought a claim against Bossland for inducing its UK customers to breach their end user licence agreements as well as authorising copyright infringement. Bossland admitted liability in March 2017 and Blizzard elected for an account of profits rather than an enquiry as to damages.

In its judgment, the court upheld the dicta in Dart Industries Inc. v Décor Corp Pty Ltd[1] that an account of profits should not entitle the aggrieved party to profits which it did not earn and similarly the infringing party is not entitled to deduct from its gross profits as to be unjustly enriched from their infringing conduct. When calculating the figure for account of profits, the court sought to ensure that the infringing party provides all of the profit made in the relevant period to the injured party without prejudice to either side.

In calculating this figure, it was necessary for the Court to differentiate between Bossland’s UK business, where Bossland had accepted liability, and the rest of the world, where it had not. The approach by the English Courts in respect of profits made from IP infringing activity is, at base level, to take the gross profits from the sale of the infringing product and deduct any costs solely and wholly attributable to those acts (“direct costs”). A further deduction may be applied for a proportion of the costs associated with the broader operation of the business not solely attributed to the infringing conduct (“general overheads”). The judge established that these general overheads cannot be deducted where:

  1. Such costs would have been incurred in any event, save to the extent to which they had been increased by the infringing act; or
  2. Where the sale of infringing products could not be replaced by the sale of non-infringing products, save to the extent to which the overheads sought to be deducted could be attributable to the latter (e.g. in cases where a company is operating at full capacity).

As Bossland operated across multiple jurisdictions of varying profit levels its costs are distributed globally, and were difficult to ascribe to a particular jurisdiction.  The difficulty arose in what costs Bossland could attribute to being costs directly focused on the UK business and therefore deductible for the purpose of establishing net profits.

 The Court concluded that, save as to affiliate costs, none of the costs were general overheads that could be deducted, as:

  1. It could not be said that such costs would have been materially increased by the UK infringing activity (due in part to the small percentage of global revenue derived through UK sales); and
  2. It was not apparent that, in absence of the infringing activity, Bossland would have been able to substitute that infringing activity with non-infringing activity as to incur those costs in respect of that non-infringing activity.

This judgment is the first relating to a global software business and reaffirms the line between “direct costs” and “general overheads” for the purpose of calculating a final account of profits figure for online businesses without territorial scope.

[1]           [1994] FSR 567

Leigh Callaway Author
Leigh Callaway
Senior Associate
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Maddy McAra Author
Maddy McAra
Trainee Solicitor
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