Top 4 Legal Issues in eSports

Sports have been a lucrative industry for a long time now and so the regulations surrounding them have been well established. In this new age of technology, eSports are beginning to gain traction, and since this is such a new field it is unclear what legal issues will present themselves. Already, eSports have attracted millions of spectators and have been broadcasted online via Twitch, YouTube, and even ESPN and Fox Sports. Most notably, League of Legends has a Worlds Championship that in 2016 had 12 million more viewers than the NBA finals for the same year. With revenues growing into the billions, infrastructure being built specifically for eSports spectating, and investors getting in on the game, eSports are a rapidly growing industry that cannot be ignored. Just like any new and growing industry, there are new issues to navigate that can pose unique legal issues. Here are some to be aware of:

1. Player Representation: It is well established with traditional sports that the players have managers to help them make business deals and navigate legal situations, the case is currently not the same for eSports players. Right now, most eSports athletes are self-represented or represented by one of their family members, which leaves them fairly exposed. As a product of this, players are not being paid what they should right now, despite large cash prizes for tournaments. Formal representation would help the players get the compensation they deserve as well as level the playing field when negotiating contracts with sophisticated companies with skilled legal representation.
2. Intellectual Property: In traditional sports, leagues copyright, trademark, and license their own intellectual property, but with eSports, the IP is owned by the game publishers, studios, and commercial organizations. This can make things like marketing tricky and it will be important to make sure all of the proper permissions are obtained. Another example of this issue is that eSports athletes do not own their own avatars, which puts them under the control of the creators. Since the avatars are shown on screen and not the players, the use and popularity of the actual player’s image will take a while to gain traction in the industry. Right now, the player’s image does not have much value for sponsorship like that of other traditional athletes, but this may change with effective representation. Another IP issue is deciding whether or not a company’s ownership of a game gives it legal control over its use as an eSport. Broadcasting rights and other uses of IP will need to be carefully considered in tournaments and championships, but direct contracts between the organizers and game publishers are becoming a common way to sidestep the issue for now.
3. Gambling: Gambling is already commonplace in traditional sports, but is untested in the eSports world. It is likely that real money eSports gambling will be subject to the same rules as traditional sports gambling, but there will be unique complications. Children have much more access and anonymity in eSports, so underage gambling will be a large concern with children stealing their parents credit cards. ESports also allow for gambling for in-game items such as skins. This kind of gambling will need to be regulated so that these in-game items are not exchanged for real money. Other factors that can complicate eSports gambling include match fixing, in-game cheating, and insider information.
4. Regulation: Finally, possibly the largest issue currently facing eSports is that there is no formal body of regulation. There are some national organizations, but no global authorities yet. Without a global authority, international tournaments will be difficult due to lack of consistency in rules and regulations. Right now, individual games are regulated by the game publishers, but it will be interesting to see how national or global rules fit in once they are established. The sustainability of the eSports world is only possible if there is consensus in regulations on issues such as cheating, match fixing, and doping. There are different conversations considering a pan-regional regulatory body, national regulation, eSport-specific regulation, and tournament-specific regulation. Still others propose following traditional sports governance. Only time will sort out these different approaches.

ESports is a new and fascinating industry that poses interesting legal questions. Many issues will be resolved by following traditional sports and video game precedent. Other issues are completely unique and eSports will have to set its own precedent. Either way, it will be important to be aware of the issues and approach them with caution.

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Founders: Are Machines (AI) Legally Safer for Your Business Than Humans?

A natural part of keeping a business competitive is investigating new technologies. Amazingly, current technology includes artificial intelligence (AI), that has the ability to learn and change its responses as it gathers data over time. Currently AI is capable of serving as a virtual assistant, managing and organizing stock rooms, proofreading and editing documents, and driving cars. It is undeniable that AI will revolutionize how we do business. While adopting AI technology may be a good move for business, a prudent business owner will also consider whether relying on AI over humans will create legal liabilities? The answer will vary based on the business and technology, but the general answer, we submit, is most likely not.

1. If your business has fiduciary responsibilities to your clients: AI will likely be legally safer.

AI works faster and more efficiently than a typical human employee. AI allows your business to save time and money; benefits that will transfer directly to your client. If your business has a fiduciary responsibility to your clients, using AI to complete tasks quickly may soon become a legal duty – especially if a human performing the same task would cost exorbitantly more. However, if a task is so complex that using AI would still require a human to review the work, there may not be a fiduciary duty to implement this technology.

2. If AI will replace a human employee: AI will likely be legally safer.

For example, if AI replaces your stock room worker, there will be less legal risks for you, as an employer. AI does not have legal rights regarding wages, retirement, health plans, and working overtime. If AI gets damaged or injured as it’s moving boxes, it cannot sue you for negligence. AI does not require a working environment to meet certain safety criteria. AI cannot sue for discrimination or harassment. When it comes to legal liabilities employers face from hiring humans, AI is likely to be the legally safer option- that is until AI gains civil rights.

3. If AI makes a mistake: It depends.

There is still an open question as to whether AI will create more liability for employers if the AI makes a mistake. For example, if your business uses self-driving cars for deliveries, and the car gets into an accident, it is not clear who will be liable for the accident. If a human was the driver, the employer would be vicariously liable if the accident occurred within the employee’s scope of work. However, mistakes that occur with the use of AI may arise from either programming errors, or user errors. If the accident was caused because of an issue with the product itself, the employer may be able to shift liability onto the manufacturer. However, the law is unclear, and an employer may still be just as responsible for the accident as if a human had been driving. However, if the accident occurred based on a user error by the employer, such as putting in an incorrect address or overloading the vehicle, the employer will most likely be liable for damages because the employer’s act caused the accident.

If your business chooses to “hire” an AI machine, make sure to evaluate not only how it will help your business financially, but how it will affect your business legally. Currently, there are not extensive laws on AI, so the question of whether AI or humans will be legally safer will continue to evolve, likely at a slower pace than the technology.

 

Founders’ Friday is a series published by attorney Brian A. Hall of Traverse Legal, PLC d/b/a Hall Law dedicated to legal considerations facing founders and start-ups. This week’s post contributed, in part, by University of Texas law student Hayley Ostrin.

 

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Top 5 Legal Issues Inherent in AI and Machine Learning

In modern times, life is less about keeping up with the Joneses and more about keeping up with the Jetsons. Technology has infiltrated almost every aspect of life, to the point where a dead cellphone feels like a lost limb. With developments in artificial intelligence and machine learning, battery-dead devices will begin to feel like lost companions. Artificial Intelligence (AI) and machine learning both refer to software that can adjust how their coding reacts to input over time, as they “learn” more about the information they are receiving. From Siri to smart cars to online advertisements, artificial intelligence is currently affecting life. The full range of rewards, and risks, that arise from the use of these technologies has not been fully explored. However, there are at least five legal issues innately associated with AI and machine learning.

1. AI computes faster than Congress. Technology has been developing at the most rapid rate since the Industrial Revolution; quicker than the law can pace. So, when legal issues arise, more often than not, they are a case of first impression. Lawyers who have an AI case fall into their lap will be treading into uncharted territory, without a map, and trying cases in front of judges who may not comprehend the technology.
2. Who is at fault? If an accident involves AI, trying to find the liable party is like playing a science-fiction version of Clue. A smart car hits a pedestrian, who is the guilty party? The programmer in the office with the source code? The owner on the road with the car? The manufacturer in the lab with the testing protocols?
3. When artificial outweighs intelligence. AI often has to identify objects such as cars, or people. However, because AI relies on cameras and coding, things like contrast, color, and image density affect AI’s “thinking” much more dramatically than humans’. A person would not be likely to miss a white semi-trailer “against a brightly lit sky.” A human would not mistake a pattern of dots or lines for a starfish. AI also can reflect biases of the developer; as seen in many software programs’ tendencies to develop racial biases.
4. Humanizing robots. As technology develops, AI gets closer to actual consciousness. The United States already granted rights and legal responsibilities to non-human entities, namely corporations; it is not unfathomable robots and machines utilizing AI will be granted the same. Facebook has already created AI sophisticated enough to develop their own, non-human language. Were the civil rights of these machines violated when Facebook decided to shut them down? If AI commits a crime, can the software itself be held liable? Switzerland faced that very problem when a robot bought illicit substances online.
5. Privacy no longer exists. AI already tracks and predicts individuals’ shopping preferences, political preferences, and locations. The data accumulated and shared between these technologies has already created many controversies within the legal field. However, AI is starting to tackle more controversial subjects, such as predicting sexuality and propensity to commit a crime. Will these predictions be able to be used in trial? Or will the AI serve as experts, to be cross-examined to determine the validity of their opinions?

When it comes to AI and machine learning, there are currently more legal questions than answers. But don’t worry; robots may have legal answers for us soon enough. When they do, will we be ready to listen? Law, including AI lawyers, is but one area to be disrupted by AI.

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Founders’ Friday: The Emerging Legal Marijuana Industry

So you want to get in on the emerging marijuana industry? Despite the fact that 29 states currently allow the cultivation, sale and distribution of marijuana for medical purposes and legal recreational use in 8 other states and the District of Columbia, there remains significant barriers into the entry of this industry given that it remains illegal to grow, sell or otherwise distribute marijuana on a nation-wide basis because it remains contrary to federal law. Until federal law changes, your marijuana growing or distributing business will be limited to your state where marijuana has been state legalized, and therefore, you will have a single market for your marijuana product which cannot cross state lines. This is not to say that limiting your marijuana business to a single state cannot be a lucrative enterprise (e.g. marijuana dispensaries), however, some innovators are looking to develop businesses that support the marijuana industry, and therefore, are able to offer those products on a wider scale in all states where marijuana is or will become legalized.

For example, there are many new industries that are being targeted by entrepreneurs and investors that support the growing, distribution or consumption of marijuana and that are not illegal under federal law.   Virtually all states require a method of tracking marijuana from the growth facility through testing to transportation, to distribution and ultimately for resale in order to properly regulate and tax the marijuana product. Companies are materializing, such as bar coding and packaging companies to securely track the supply chain of marijuana. There are also industries such as LED grow lights, testing labs and kits that measure potency, and prefabricated buildings designed to grow marijuana that are able to exist because of the wider reach of their markets.

Agricultural innovators are looking for ways to grow marijuana with less water since many legalized states have water distribution issues as well as methods and products that will assists in accelerating the growth rate of marijuana products. All of these innovations and products that support marijuana growth and distribution will be available to the entire legalized marijuana market as opposed to being limited to a single state. Additionally, the European marijuana market is presently twice in revenue as the United States legalized marijuana market presently at around $67 billion annually.

Innovators in the emerging marijuana industry will look for products that support marijuana growing and distribution as those products are available to market globally rather than limited to single the state distribution as is the marijuana product itself. Of course even if your enterprise involves growing, distribution or sales and is limited to a state marketplace careful planning and establishing a brand as with any other product or commodity is the key to the success of your business.  Founders know that with early risk comes the chance for early reward, but, as a regulated industry, albeit one with changing regulations, it will be important to understand and navigate legal issues facing your business.

Ultimately, founders looking to participate in the legal marijuana industry must know the following:

1. What regulations apply to your marijuana business
2. Is your marijuana business legal, considering state, international and potentially federal laws
3. How do you best structure your marijuana business in order to mitigate your legal risk and maximize your revenue potential

 

Founders’ Friday is a series published by attorney Brian A. Hall of Traverse Legal, PLC d/b/a Hall Law dedicated to legal considerations facing founders and start-ups. This week’s post contributed by Traverse Legal marijuana attorney Mark Clark.

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