Call of Duty Players Suit Is First to Test Esports’ Market Power

A novel lawsuit accusing Activision Blizzard Inc. of unlawfully wielding its monopoly over its Call of Duty video game calls into question the legal power of publishers over those playing their games.

The outcome of the dispute could hand more power to players and teams seeking to profit off the esports industry that boomed during the pandemic and is projected to reach $4.3 billion this year. It also shines a spotlight on the interaction between competition law and the Copyright Act, which provides companies like Activision, now owned by Microsoft Corp., with protection for original works.

This is the first case of players suing a publisher to allege it has an illegal monopoly over a single game, said John Holden, an associate professor at Oklahoma State University who studies esports.

The players are effectively saying, “Hold on, you’re not going to tell us what we can do just because you make the product,” Holden said.

If the case survives, “that would be a massive blow to the publishers,” Holden said. “They would lose this protection that we’ve thought for a long time sort of underpinned the industry.”

Activision said in a statement after the suit was filed that it will strongly defend itself against these claims, which it says have no basis in fact or in law. “We are disappointed that these members of the esports community would bring this suit which is disruptive to team owners, players, fans, and partners who have invested so much time and energy into the Call of Duty League’s success,” the company said.

Is Esports a Sport?

Top players of the Call of Duty video game argue in their lawsuit, filed on Feb. 15, that Activision’s copyright over the game enabled the company to monopolize the professional Call of Duty market by refusing to grant game licenses to organizers of other Call of Duty competitions.

At issue in the case is whether esports should be treated like other professional sports.

“In pickleball, no one owns the ball and the racket,” said Maureen Weston, a professor at the Pepperdine University Caruso School of Law and a sports law expert. “In esports, the publishers create that specific piece of the game, which is intellectual property.”

A ruling in favor of the Call of Duty players would level the playing field and limit the market power of California-based Activision, which has grown into a global developer of video game products and was bought last year by Microsoft in a $69 billion deal. The Federal Trade Commission has appealed its unsuccessful attempt to block the merger.

Read More: FTC Knocks Microsoft Over Activision Layoffs in Court Filing

“There would still be some restrictions they could arguably impose, but it would certainly reframe this entire picture,” Oklahoma State University’s Holden said. “You could effectively see people say, ‘Well Activision, you’re publishing Call of Duty, we want to start a Call of Duty league. We don’t need to involve you in this anymore.’”

The case could also lead to pushback in the licensing of various electronics, depending on any final ruling, Holden said. “It could reshape some of those end-user license agreements that virtually all technology that we use now rely on,” he said.

Fantasy Sports Precedent

A similar but separate issue has come up before in fantasy sports.

In 2007, the Eighth Circuit ruled in favor of C.B.C., a producer of fantasy major league baseball games, saying it could freely use the names and statistics of players without a license since that information was readily available in the public domain. A division of Major League Baseball had argued that use of player names and stats in fantasy sports violated players’ rights of publicity.

“It provided potential operators of fantasy sports contests with a level of safety when it comes to using players’ names and statistics without securing a license,” said Marc Edelman, antitrust professor at Baruch College’s Zicklin School of Business. “It made it more challenging for players associations to garner for their members a share of the revenues derived from fantasy sports contests.”

The question is whether players can prove that there must also be limits on video game creators’ exclusivity by virtue of copyright protections. To date, that exclusivity has been the basis for rights holders to assert their complete control over any ecosystem that emerges around a video game, including competitive leagues for that game, said Harris Peskin, an attorney at ESG Law, an esports-specific law firm.

A win in the case “would take power out of the hands of Activision but it would put power into the hands of anyone that is looking to essentially monetize this competitive play,” he said.

However, Activision can always argue that its monopoly over Call of Duty is legitimate, since it owns the rights to the game and has the right to charge leagues a fee to play, said George A. Hay, a professor of law and economics at Cornell Law School who served as director of economics at the Justice Department.

He also questioned whether the plaintiffs could successfully prove there was a relevant market limited to professional Call of Duty competitions.

Proving that this market exists will be difficult and will likely require players to name alternative games they can turn to, said Eleanor Fox, an antitrust expert and professor emerita at New York University School of Law.

“Just because it’s a very, very outstanding game does not make it a market,” Fox said.

The case is Rodriguez v. Activision Blizzard Inc., C.D. Cal., No. 2:24-cv-01287.