This Week in Business is our weekly recap column, a collection of stats and quotes from recent stories presented with a dash of opinion (sometimes more than a dash) and intended to shed light on various trends. Check back every Friday for a new entry.

Last weekend, the developers of Dolphin announced that they have indefinitely postponed the Wii and Gamecube emulator’s debut on Steam, saying they were informed by the online storefront that Nintendo had issued a cease-and-desist order against them invoking the US Digital Millennium Copyright Act.

It’s the latest in a string of Nintendo moves targeting the emulation and homebrew communities. It invoked the DMCA in having GitHub pull the repository for Lockpick RCM, software letting Switch users dump their system’s security keys for use in homebrew or emulated software, which in turn prompted the developers of the Android Switch emulator Skyline to halt their work on the project “due to the potential legal risks involved.”

(Another Switch emulator, Yuzu, quickly swooped in to capture Skyline’s vacated audience by launching its own Android version.)

Finally, Nintendo updated the firmware on the discontinued 3DS line of handhelds to thwart the most convenient method of hacking the systems to run homebrew software, dump cartridges, and more.

One possible conclusion from this rash of moves is that Nintendo was understandably not thrilled about the Legend of Zelda: Tears of the Kingdom being leaked and played by people using emulators weeks before anyone could legally buy it.

From fumbling around in the darkness to solving problems indirectly with cludgy workarounds, Tears of the Kingdom has a few different parallels to this subject.

None of this is surprising, exactly. After all, emulation and piracy are two circles with an admittedly significant amount of overlap on the industry Venn diagram, and Nintendo has been fighting piracy longer than many of its competitors have even been in the games business, and it is clearly in this fight for the long haul.

QUOTE | “As the piracy itself is underground, someone somewhere finds out the solution to evade our measures. When we shut one hole of the mice, they have dug a new one somewhere else. We have acknowledged that this is an endless battle and we believe the best measure is to keep fighting it technologically and legally.” – In 2009, Nintendo president Satoru Iwata tells investors that much like the war on terror and the war on drugs, the war against piracy is a forever war.

But the most interesting thing to me here is not why Nintendo’s done all this, but how.

Nintendo didn’t go after Dolphin; it sent a cease-and-desist to Steam.

Nintendo also didn’t go after Switch emulators like Skyline and Yuzu; it reached out to Github to shut down access to a tool people use to dump encryption keys those emulators need to work.

If emulators like Dolphin and Skyline are the problem, why not go after them directly?

So if emulators like Dolphin and Skyline are the problem, why not go after them directly? Why just gesture vaguely in the direction of legal action instead of taking someone to court?

There may be a PR consideration here, but Nintendo has historically not cared too much about such optics, often using a heavy hand in shutting down fan-made projects like Pokémon Uranium, Another Metroid 2 Remake, and Zelda: Breath of the NES. This is, after all, a company willing to take money from fans doing free marketing for their games.

But there’s another argument for why they would avoid taking this to court, and it’s pretty basic.

If you go to court over a legal gray area, you might lose.

And if you lose a case like that, you risk establishing clear protections for emulation that will not only let the small fish keep swimming, but open up a newly legitimate market that bigger and better-resourced companies will be keen to capture.

So even though Nintendo Switch emulation exists in the here and now, the legal ambiguity around emulation means we aren’t likely to see big companies release Switch-emulating knock-off consoles anytime soon.

Granted, we also hear lots of people insist it isn’t gray at all and belongs solidly on one side of the legal/illegal divide. But since those people can’t agree on which side of the divide emulation falls and we keep seeing legal teams called into action over this, it seems safe to say this is not a settled dispute. Hence, “legal gray area.”

(Side note: I feel like I should establish somewhere in here that emulation is a good thing. Given companies’ willingness to create online dependencies, shut down servers/storefronts, and design around planned obsolence instead of graceful degradation for a future in which they have ceased to exist – not to mention the limited lifespans of hardware, physical media, and the industry’s shameful neglect when it comes to historical preservation – emulation is one of the few things we can rely on to make the present and past of the medium accessible and understandable in the future.)

A man-size corn person in a living room near a TV frowns angrily as it gestures with one hand toward a hamburger it holds in the other hand
Emulation helps preserve important moments in gaming history like the opening movie for the PlayStation version of Arcade’s Greatest Hits: The Midway Collection vol.2

But emulation is nothing new. It has after all been over two decades since we saw Sony take Bleem to court over its eponymous PlayStation emulator on PC.

So why is this still a legal gray area? It’s because as far as these companies are concerned, the legal gray area around emulation is a feature, not a bug. And that’s something that was understood even back in the Bleem days.

QUOTE | “Ambiguity works in favor of large companies, and it allows them to bring lawsuits which, while ultimately unsuccessful, can drive a small company right out of business before they ever get to market.” – Jon Hangartner, the lawyer who represented Bleem in court, addressing the US Copyright Office in May of 2000 in a hearing regarding the addition of exemptions to the DMCA.

Hangartner didn’t go into much more detail about that ambiguity in the hearing, but fortunately, he was willing to indulge my curiosity in a phone call this week.

“Where you have ambiguity, it allows companies to bring lawsuits that are not quite a sham, but also not quite in good faith”Jon Hangartner

“Where you have ambiguity, it allows companies to bring lawsuits that are not quite a sham, but also not quite in good faith, and use litigation as a tool,” he explained. “I don’t believe that any of Sony’s claims against Bleem had legal merit. But at the same time, it would be difficult to say those claims were frivolous, which is a standard used in US courts to enable the court to sanction a plaintiff for bringing a bad faith claim in court.”

But clarity on its own is not enough to stop that because there will always be edge cases and gray areas, particularly since it’s tough to future-proof laws against as-yet-unimagined technological advances. So to Hangartner, the other important aspect that enables large companies to throw their weight around like this is that both the plaintiff and defendant in these cases are typically responsible for their own legal costs in the US. Hangartner noted that was especially significant in Sony’s case against Bleem.

Bleem released its emulator on PC in the first half of 1999 and the company shut down in late 2001. For almost the entire span in between, it was fighting Sony in court.

“Based on resources, we were absolutely at a massive disadvantage,” Hangartner said. “They had pretty much an unlimited legal budget because it had to do with PlayStation, and we were told they believed this was an existential threat to the platform. So they had a war chest that was whatever they needed, and the guys from Bleem were literally working out of their living rooms.”

So what does having money actually mean if you’re arguing over the facts of the law that have nothing to do with one’s bank account?

“In most cases, it means the side with unlimited resources wins and wins pretty quickly,” Hangartner said. “Because often, the defendant simply can’t afford a defense.”

STAT | Roughly $250,000 – Hangartner’s recollection of Bleem’s legal expenses for just the first couple months of the Sony case.

Hangartner said the only reason Bleem was able to fight the case as long as it did was because the product sold well enough at the outset to give them some money for the fight, and because he left his lawfirm to set up his own practice working for them “at a rate that made it possible.”

“They could not afford to continue with a regular lawfirm to defend themselves after the first couple months,” he said. “At that point, if I hadn’t left the firm, they were going to have to give it up because they just could not afford the legal fees to defend themselves in that case.”

Sony of course understood the financial situation Bleem faced. Indeed, it was counting on it.

“[Sony] made pretty much everything a battle, and they pushed very hard on the case to drive our costs up.”Jon Hangartner

“Their litigation tactics were very heavy,” Hangartner said. “They made pretty much everything a battle, and they pushed very hard on the case to drive our costs up.

“The case lasted for a couple years, and we successfully defended ourselves on every claim. We never lost a case, and I think if the case had continued, we would have won it.”

Sony’s biggest victory in that case was a decision about screenshots in Bleem’s advertising not being covered by fair use, and the only impact was a minor change to the company’s marekting. On the other hand, Bleem did win some decisions in the case that set precedents bringing clarity around copyright issues that Sony obviously would have preferred not to be set, given their unsuccessful arguments against them.

Unfortunately with PS2 launching in 2000, the original PlayStation was rapidly becoming yesterday’s news. Sales of Bleem slowed, and Hangartner said efforts on the Dreamcast (individually purchased versions of Bleem for Tekken 3, Gran Turismo 2, and Metal Gear Solid that would have players swap discs to play the PlayStation games on Sega’s console) were not lighting up the sales charts.

“So their revenue was slowing and Sony kept piling on,” Hangartner said. “They added a new case alleging infringement of five or six patents which we had to defend. So the legal costs continued to mount, revenue slowed, and Bleem needed resources to continue its business operation… We eventually reached a settlement because we won some really good rulings from the court, and the court pushed very hard on both sides to resolve the case.”

The details of the settlement were confidential, but Hangartner was blunt in assessing the outcome of Sony’s years-long legal effort.

“I don’t think the lawsuit itself accomplished anything,” he said. “The Bleem product ran its course. The company kind of ran its course as well. I think other than making Bleem’s existence very difficult, I don’t think it really had any beneficial effect. Their efforts lobbying on things like the DMCA probably did more for advancing their legal causes. They did not come away from the Bleem case with any helpful legal precedent for themselves.”

While the lawsuit itself was a dud, Sony’s legal team did successfully make an example out of Bleem, serving notice that being in the emulator business carries with it the very real risk of being sued into oblivion by a massive company that won’t hesitate to spend a reported $10 million to accomplish nothing more than making your life miserable.

The legal ambiguity and the threat of financial annihilation effectively means the law is whatever companies like Sony and Nintendo say it is

The legal ambiguity around emulation and the threat of financial annihilation effectively means the law is whatever companies like Sony and Nintendo say it is.

It might be good to get more clarity on the law as it exists, but that’s probably not happening unless the industry can convince legislators to write even more restrictive laws protecting the biggest companies’ interests. The Entertainment Software Association after all is still lobbying against right-to-repair legislation and for ever-escalating intellectual property protection even though key members like EA and Activision have already told us piracy has no negative impact on their business.

So realistically, the only way we’re going to get clarity on this issue that favors emulation in any way is for one of these giant corporations to screw up and pick on someone with the resources, idealism, perseverance, competence, and luck to not just fight a prolonged court battle, but to win it with a resounding, precedent-setting judgment?

“That’s exactly right,” Hangartner said. “We had all of those factors in the Bleem case, and it worked for a couple years. But eventually the economic factors did take over. We certainly had the idealism, we had the structure to fight it as efficiently as we could. As I listen to that, that is exactly what we believed we had in place. But even that was worn down over time.”

Given the way Nintendo has gone after Skyline and Dolphin indirectly and without filing actual legal complaints, it seems unlikely we will be getting clarity on this legal gray area anytime soon.

The rest of the week in review

QUOTE | “As a Company, we are committed to transparency—not just as an abstract idea, but because it enables our stakeholders to clearly understand our values and how we uphold them to maintain our culture… We believe we are among a handful of Fortune 500 companies sharing this level of workplace detail. By doing so, we hope to encourage other organizations to follow suit.” – Activision Blizzard’s board of directors, in the introduction to its inaugural Transparency Report.

QUOTE | “The Board recommends that you vote ‘Against’ this proposal. While the Board appreciates hearing the perspectives of our shareholders, we do not believe this proposal is in the best interests of the Company or its shareholders.” – Activision Blizzard’s board of directors, last year, in advising shareholders to vote against a Transparency Report . (The shareholders voted for it by a 2:1 margin.)

QUOTE | “The report should also disclose the Company’s progress on relevant metrics and targets such as the total number and aggregate dollar amount of disputes settled by the Company related to sexual abuse, harassment or discrimination based on race, religion, sex, national origin, age, disability, genetic information, service member status, gender identify, or sexual orientation for the last three years.” – The shareholder proposal’s very first detail about what should be in the Transparency Report.

QUOTE | “We believe that we have included the metrics that best enable our shareholders to evaluate our workplace progress, and which go above and beyond the proposal’s request.” – An Activision Blizzard representative, explaining why that requested data was nowhere to be found in its Transparency Report.

QUOTE | “Playing games is such a visceral experience. We’re getting to the point that the game itself is able to create its own content in real time. That will be exquisite.” – When discussing advancing technology during a tour of Activision Blizzard’s motion capture studio, CEO Bobby Kotick seemingly goes out of his way to invoke the contentious issue of generative AI in game development, practically salivating over the exquisite possibility of not needing to employ human beings any longer.

QUOTE | “An artist was commissioned to produce a lead image for the new Duke Nukem 1+2 Remastered game developed by Blaze Entertainment. It is abundantly clear from the response on social media that the work on this commission has fallen below the expectation and standards demanded by fans due to the artists’ use of AI in the process.” – Blaze Entertainment, makers of the retro handheld Evercade, responds to angry fans after a number of users accused the company of using AI to generate the game’s promo art.

We’re opening up a fantastic new frontier in online abuse here, where the deeply controversial use generative AI art is worming its way into the mainstream and there will be confusion as to whether a contractor is scamming the company by passing off AI-generated art as their own, whether the company is trying to use AI-generated art to avoid paying artists, or whether a given piece of art was generated by AI at all.

I’m guessing this is a scenario that’s going to come up repeatedly in the near future, each time with bad faith actors in a different role – or perhaps with no bad faith actors at all! – but all winding up with the same dogpiling and harassment.

So thank you AI art pushers and scammers; we clearly had too much civility going on and I’m glad you’ve done your part to chip away at that. Very noble.

QUOTE | $499 – The starting price of the Meta Quest 3, launching this fall. Will this finally be the headset that ushers us all into the metaverse and justifies Meta’s billions in AR/VR losses? (My Magic 8-Ball says “Outlook not so good.”)

QUOTE | “I encourage everyone on the team never to say ‘No, that’s too far’ to themselves. It’s their job to push, and it’s my job to tell them when they’ve pushed too far. Although sometimes, when I get too excited about a bad idea, those roles reverse.” – Copychaser Games creative director Ben Gelinas talks about needing to get the entire development team to buy into the tone of the studio’s upcoming game Times & Galaxy.

STAT | 30 – The number of employees confirmed to be laid off by CD Projekt this week. Also the number of employees confirmed to be laid off by Firaxis this week. Kirby and the Forgotten Land co-developer Vanpool also shut down this week, putting an unknown number of employees out of work, while Firemonkeys is laying off up to two-thirds of staff.

QUOTE | “If the LCS summer season is canceled, this will also eliminate LCS teams qualifying for 2023 Worlds.” – In response to League of Legends pro players going on strike, Riot says it will punish them not because it wants to put them in their place and they should be grateful for whatever scraps they get, but because it is “unfortunately the reality of ensuring we run a fair, competitive global system.”

The law is whatever Nintendo says it is | This Week in Business
Tagged on: