It’s going to be difficult to identify infringing microtransaction systems, and that weighs against investment in their patents.
by: Robert Kelly | November 6, 2017
Microtransactions have become a significant source of revenue for companies in the gaming industry, and market leaders like Activision Blizzard are trying to maximize their share. Activision Publishing (a subsidiary of Activision Blizzard) has been trying to accomplish this by investing in technology to promote the use of its in-game microtransactions. Activision’s patent (U.S. Patent No. 9,789,406) covering a System and Method for Driving Microtransactions in Multiplayer Video Games is one result of that investment.
The ‘406 probably garnered more attention than Activision expected though. When news broke earlier this month that the ‘406 patent had issued, the reaction from Activision’s customers was decidedly negative. So negative in fact that Activision released a statement telling the public that the technology has not been implemented in any of its games.
Given the generally negative consumer perception of microtransactions, and the difficulty of enforcing software patents in the current patent landscape, it’s not clear that it is worth the time and expense of patenting this type of technology at all. In an effort to dive into this more, the analysis below looks at microtransaction patents as vehicles for granting rights and evaluates whether they can effectively be used as tools to exclude.
Patents are still being invalidated under § 101 at an alarming rate, and claims covering microtransaction systems will generally have a difficult time surviving such a challenge. Surviving a MSJ/MTD under 35 U.S.C. § 101 is a difficult hurdle to overcome, even for patent claims that clearly include physical limitations. That hurdle becomes even higher when you’re dealing with microtransaction processes that (arguably) occur entirely on a generic computer system. This wasn’t lost on the examiner of the ‘406 patent. Activision received a rejection under § 101 during prosecution of the ‘406, but through some well-reasoned arguments (and possibly some unrelated amendments to the claims) they were able to overcome the rejection and secure an allowance. While facts such as these might be helpful in subsequent § 101 challenges, it is by no means a guarantee that microtransaction patents like the ‘406 will survive the § 101 gauntlet.
Covered Business Method Review
Even though we’re seeing a narrowing of what the PTAB considers a “financial service” patent for purposes of a covered business method review (“CBMR”), it’s still likely that a microtransaction patent could be subject to a CBMR. The USPTO is instituting a majority of the CMBR petitions that are filed, and of those petitions instituted almost all result in some patent claims being invalidated.
Visibility Into Infringing Activity
It’s going to be difficult to identify infringing microtransaction systems, and that weighs against investment in microtransaction patents. For example, the ‘406 claims are focused on steps performed by a host computer, and that host computer will almost certainly be under the control of the game provider. Without access to that host computer, or some luck with empirical testing, the patentee is going to have a difficult time proving infringement of the microtransaction patent. It’s possible that infringers will publicly disclose enough information about their systems to enable the patentee to make a credible claim of infringement, but given the potential value of these microtransaction systems it seems unlikely that a description of the inner workings will be readily available.
Market for the Technology
There is a market for microtransactions, and therefore there is value in the exclusionary rights of a patent around the technology (i.e., the market actually has participants to exclude). The digital gaming market, and in particular revenue from microtransactions, is seeing significant growth. Quick growth in a relatively new market typically signals an opportunity to approach competitors and potential licensees about taking a license to the underlying technology. Most companies will not want to put their investment in a growth technology, or their ability to compete in that market, at risk over a reasonable royalty payment or fair cross-license.
While there are certainly reasons to invest in patents around microtransactions (e.g., to signal to investors that the patentee is innovating in this high-growth market, building up the size of a portfolio for purposes of cross-licensing and deterrence generally, etc.), the individual patents themselves may not be very useful as a bundle of rights. Patentees of microtransaction technology need to be very strategic in their prosecution because it’s easy to be outmaneuvered by the fast-moving landscape of patent law. Though, given the size and growth trajectory of the microtransaction revenue model, I’m sure we’ll see much more patenting of the underlying technology despite the risks.