Social Gaming Company Zynga sues Virtual Property Clearinghouse Playerauctions.com in California District Court for trademark and copyright infringement

This week upstart casual gaming company Zynga sued auction website Playerauctions.com in California District Court for the sale of virtual currency and goods under a theory of intentional interference with contractual relations, violations of the state unfair competition code, trademark and copyright infringement.  Zynga is the company that builds and offers popular social games Zynga Poker, Mafia Wars, and Farmville on Myspace and Facebook.  Playerauctions.com is a website that offers to users accounts, virtual currency, and goods for various online games, acting as a middleman between buyer and seller similar to eBay.

The mechanics of Zynga games require you to spend time playing the game or paying money to Zynga to increase the status of your character.  Playerauctions.com allows you to bypass that step by purchasing Zynga virtual goods or currency from their website and enrich playerauctions.com instead.  As a result, users who choose to participate in third party auctions violate the Zynga terms of service, which results in lost sales to a company potentially worth several billion dollars.

Zynga alleges in their complaint that Playerauctions.com are using their copyrighted and trademarked material when advertising virtual currency and goods online.  Zynga has requested an injunction against the sale of their virtual goods and currency by Playerauctions.com, and is seeking an unspecified sum in damages that Zynga intends to establish at trial.

Playerauctions.com does serve as an auction house while individual auctioneers use Zynga marks and copyrighted content to sell Zynga’s virtual currency and goods.   This certainly helps Zynga establish an argument for contributory and vicarious copyright infringement in addition to trademark infringement.  Zynga also establishes in their complaint that they have copyrighted and filed for trademark protection on the properties Mafia Wars, Farmville, Yoville, and Zynga poker.  The implications of this lawsuit could put a dent in the growth of virtual property auction houses and the sales of online goods and currency through a gray market.  Because arguments haven’t been heard yet it’ll be difficult to predict the outcome, but either way it should be interesting to see how the courts intervene or whether they allow the auctions to continue  or not.  Zynga Game Network, Inc. v. Playerauctions.com, CV10-2576 CBM (C.D. Cal. 2010).  Click here to access a PDF of the original complaint.

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