Legal challenges in the video game industry: are you game?
Technology, Media & Telecoms Focus
The gaming industry has come a long way since the 1980s when the first arcade games were developed.
Law Update: Issue 358 - Technology, Media & Telecoms Edition
Zeina AlbuainainAssociate,Digital & Data
The gaming industry has come a long way since the 1980s when the first arcade games were developed. In the past four decades, gaming has become a significant player in the global entertainment market. With billions of video gamers worldwide, PwC projects the global game market to be worth $321 billion by 2026.
This massive growth potential of the video game sector has made it a magnet for investors globally. Various M&A transactions continue to take place as stakeholders battle for a slice of the gaming pie. However, like every other booming sector, the gaming industry has legal and regulatory hurdles that involved parties should understand and know how to navigate. Set out below are some of the key legal issues in Bahrain that may impact video game businesses.
Intellectual property and licensing are important issues that need to be considered in the video game industry. Bahrain laws - such as Resolution No. 1 of 2015 on the Supervision and Control of Media Content – emphasize on the need for ‘digital media businesses’ (a broadly construed term) to respect the intellectual property rights of others. Developers or owners should seek to protect their IP (including trademarks, graphics, designs, characters, and music) through registering the IP rights with the competent authorities in Bahrain, to the extent required for IP protection.
Separately, due legal consideration should be given in relation to the use of third-party IP within the game content. Using protected subject matter without appropriate licensing could be considered intellectual property infringement and may result in the imposition of hefty fines. A breach of Bahrain’s Copyright Law, for example, could lead to the imposition of a fine of up to four thousand Bahraini Dinars (BHD 4,000). Where a license is granted to a party to use gaming IP by the owner, the licensee should seek appropriate representations and warranties from the licensor in relation to the IP rights (for example, a licensee will want to ensure that its exercise of the rights and license granted will not infringe the rights of any third party).
It is not uncommon for games with multiplayer and downloadable content to require user information to improve gaming experience or send marketing materials. Video game companies targeting gamers in Bahrain will need to abide by the set privacy regulations regarding user data handling and transparency, including but not limited to Bahrain’s Personal Data Protection Law (Law No. 30 of 2018).
Video game companies should also invest in appropriate functional security systems to prevent third-party user data breaches. Failure to protect user data can be costly, whether as a result of remediation efforts or regulatory fines, and perhaps more importantly, a data breach can cause reputational damage to the affected organisation. Corresponding requirements such as breach reporting would also need to be considered.
Bahrain’s Children’s Act (Law No. 37 of 2012), cybercrime laws, and content regulations all expressly emphasise on the importance of protecting children from accessing inappropriate content, and this could potentially extend to ad-supported content. The Children’s Act, for instance, provides for a broad prohibition on the publication, display, or circulation of prints, visuals, audios, or readable materials that are ‘sexually explicit’ or encourage ‘moral deviation in a child’.
With respect to children’s data privacy, it may be a prudent approach to implement age assurance processes to manage risks associated with the handling of personal information relating to users who are below the age of majority.
As is the case in various jurisdictions across the globe, Bahrain laws expressly prohibit “deceptive” advertising (i.e., the provision of information to consumers in relation to a good or service, which ‘leads to creating unrealistic or misleading ideas’ in respect of such good or service (Art. 6, Law No. 30 of 2012 on the Consumer Protection Law)).In the context of gaming, this could include, for example, advertising a free-to-play game ad without making it clear that some advertised features require in-game purchases.
Separately, in terms of in-game advertising, Bahrain’s content regulations should be considered insofar as digital advertising is concerned (in this respect, while Bahrain does not have a consolidated piece of legislation governing digital advertising, the advertisement materials could trigger Bahrain’s content regulations that are applicable to all digital media businesses). In-game advertising materials should also be age appropriate as highlighted above.
In-game currencies or ‘virtual currencies’ essentially underpin in-game economies. While in-game currencies may be limited to the video game universe, used for purchasing in-game items only to enhance gameplay, those that are convertible to real money require additional legal consideration.
In-game currencies could, depending on various factors, be caught by certain strict regulations under Bahrain, including for example:
Regulations surrounding electronic money transmission activities for cases where in-game currencies are purchased using real money and can be covered back into real currency, which can also be transferred to another person. Depending on the specific circumstances, a video game operator may be considered as providing ‘ancillary services that relate to the financial services industry’, which requires prior licensing from the Central Bank of Bahrain.
Gambling. Depending on the way that a virtual currency is earned, issues may arise from a gambling perspective. Bahrain’s Penal Code provides for a blanket prohibition on gambling, which may apply even for non-casino-type video games. It is a criminal offence to engage in the act of gambling in Bahrain.
The regulatory space is dynamic and constantly evolving to keep up with the ever-changing world of technology and gaming. The video game industry’s enormous financial potential means that it will attract more investors in the coming years. The above highlights some of the key current considerations relevant to video games businesses targeting consumers in Bahrain, however this space should be watched carefully as Bahrain is yet to expressly regulate some key related areas, such as video game age ratings and classification requirements.
For further information, please contact Zeina Albuainain.
Published in May 2023
