Sheppard Mullin’s Jim Gatto on online video gaming law and risk

Jim Gatto is a lawyer who, in his role as Social Media and Games Team Leader & Intellectual Property Partner at Sheppard Mullin, has worked with some of the largest video game publishers and developers to develop legal strategies for everything from social media engagement to critical issues of patent protection and other intellectual property rights. His team of 70 people does everything from the basics of corporate formation, to licensing, development and publishing contracts and finance.

I sat down with Jim in San Francisco just before this year’s annual Games Developer Conference to talk about his views on in-game fraud, cheating, and abuse, recent court decisions related to gray market virtual currency re-selling, and about what game studios and publishers should be thinking about – and doing – to protect their virtual worlds and their players.


Panopticon Labs: Tell us what it is that you do, Jim.

Jim: I head the social media and games team here at Sheppard Mullin. In that role, I lead a team of about 70 people who focus on all legal aspects of games and social media. Everything from basics of corporate formation, finance, and M&A. We do a lot of intellectual property and strategy and help companies with their business models to make sure they are legal, privacy policies, terms of use, EULAs  and the rest of the gamut. It’s very fun, we get to work with a lot of cutting edge companies and cutting edge legal issues.

PL: As a lawyer who works with IP and issues related to virtual currency, what do you think is the main threat that you see the industry experiencing from fraud and risk?

Jim: Mainly from issues related to in-game cheating and collaboration type stuff and gold farming and secondary markets depending how the game is designed. Cyber security is a huge issue for everybody including the game industry and I think it really hasn’t gotten the attention that it probably should get.

PL: Why do you think that is?

Jim: I think that it’s a lack of focus, There’s so much focus on getting the game out, and monetizing it, that the idea of keeping your money and making sure you’re not vulnerable sometimes doesn’t get top attention until there is an issue.

PL: So that’s a great lead in to my next question, because as you know in December of 2016 the FBI successfully convicted a ring of thieves that were stealing FIFA virtual currency, then reselling it on authorized websites. In that case, the FBI sought and won a conviction for wire fraud against them. Why do you think they chose to pursue that specific charge against them?

Jim: Well I don’t know for sure, but in general when dealing with virtual currency that’s typically a type of contractual issue between the game publisher and the players. There are contractual rights, and generally a terminable license. So if a game company is going to go after a player it is typically going to be under a contract theory, unjust enrichment or some other form of contract or tort law. For the feds it is interesting– a lot of the federal statutes that give the feds enforcement power over different types of crimes– some of them are just very general. You know, like wire fraud, that is pretty encompassing. If you commit a crime you’re using the wires, so I think in general, from my understanding and talking to federal agencies, they’ll usually look at the facts and the available laws that are out there, then figure out which fits best. And you know, in that case, it obviously seemed to work.

PL: So now that a law enforcement agency has actually won a conviction do you think that we will see more of this happen?

Jim: Anytime you have a successful enforcement it always leads to the possibility of more. I think a number of things have to come together. One is that when you see a successful enforcement, it raises the awareness and acts as a deterrent for people who engage in similar behavior. Some people, of course, will always be undeterred and will continue to go and do similar things,  and to the extent that they do, I think it will give the feds the confidence in the right circumstances to use that again or other statutes that might be appropriate.

To read the full interview, CLICK HERE!