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Since 30% of the world’s gamers — approximately 750 million people — are under 18, minors constitute a valuable and important part of the video game market. However, as any loving parent will tell you, children are great, but they can complicate things. As a recent series of court decisions involving Epic Games’ Fortnite has shown, children can sometimes render a game company’s End User License Agreement (EULA) unenforceable, thus complicating a company’s legal strategy.
One nearly universal way that software companies, including game publishers and developers, manage their legal risk and protect their intellectual property is through an EULA. When a customer purchases software, such as video games, they are almost always purchasing a license to install and use the software, so the customer ultimately does not own the software itself. What the customer can and cannot do with the software is spelled out by the EULA. Not only do EULAs help protect a company’s intellectual property, they also frequently limit where the customer can sue the company, which state laws apply, etc. When the customer is a minor, however, some or all of a EULA might be unenforceable.
One of the risks many companies, including game publishers and developers, seek to avoid is having a lawsuit certified as a class action. This is why companies often include arbitration provisions in their EULAs since, if a dispute by a customer can only be filed as an arbitration, it cannot be certified as a class. However, under some circumstances, such provisions cannot be enforced against minors.
In one case, R.A. v. Epic Games, Inc., No. CV 19-1488-GW-Ex (C.D. Cal. July 30, 2019), a minor plaintiff, R.A., filed a complaint against Epic Games asserting claims for violation of California’s Consumer Legal Remedies Act, unjust enrichment, and false advertising based on Epic’s Fortnite. R.A. filed the case as a putative class action, meaning that R.A. would eventually request that the court certify a class of similarly situated plaintiffs who would all benefit from any settlement or verdict. To avoid this development, Epic moved to enforce the arbitration clause of its EULA against R.A. Unfortunately for Epic, in California, where the case had been filed, minors can disaffirm a contract by “any act or declaration disclosing an unequivocal intent to repudiate its binding force and effect,” as long as they disaffirm the contract in its entirety. Since R.A. had stopped playing Fortnite and also filed a declaration disaffirming the EULA, the court denied Epic’s motion to compel arbitration. The following year, in Doe v. Epic Games, Inc., 435 F. Supp. 3d 1024 (N.D. Cal. 2020), a different federal court in California came to the same conclusion based on similar facts.
Game companies can circumvent this problem by establishing that, even if the person playing the video game is a minor, the person who consented to the EULA is a parent or guardian. For example, in Crawford v. Sony Interactive Entm’t LLC, No. 3:20-cv-01732-JD (N.D. Cal. Mar. 30, 2021), the court referred the case to arbitration because, even though a minor was playing Fortnite hosted on Sony’s PlayStation Network and had spent $1,000 on in-app purchases without parental consent, the minor’s parent did not dispute that she was the person who originally accepted Sony’s licensing and terms of service agreements. Of course, putting a parental consent requirement into a EULA or other agreement, by itself is not always enough — R.A used his father’s email address to install Fortnite and consent to the EULA without his father’s consent or knowledge.
While a sufficiently motivated child might be unstoppable, game companies can reduce their risk by requiring a parent to provide credit card information (even when the basic game is free-to-play, like Fortnite), to use a third party identity verification solution, or to provide biometrics. And, to limit the amount of exposure once a parent (or someone stating they are a parent) consents, game companies can require multi-step authentication, such as receiving a text or email containing a verification code, for each in-app purchase to prevent a child from making unauthorized purchases using stored payment information. Companies can also avoid the need for litigation by permitting refunds for in-app purchases, since angry parents who get their money back for unauthorized or accidental purchases have no need to file lawsuits.
As stated above, children are great (they are valuable customers to the video game industry), but they can complicate things (they can render a EULA completely ineffective). Accordingly, video game companies must take the legal status of their minor customers into account when drafting their EULAs and other agreements, and they must take measures to better ensure parental consent to those agreements and subsequent in-app purchases. By implementing stricter verification requirements for online and in-app purchases or offering refunds on purchases made without parental consent, game companies can limit their liability and risk of litigation while still serving their younger customers.
Ryan Meyer is an intellectual property attorney at the international law firm Dorsey & Whitney LLP and is the chair of Dorsey’s Video Game Industry Practice Group.
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