Another Reason Why It’s Important to Distinguish Between Conditions and Obligations

Chris Lemens, longtime reader and now member of Koncision’s confidentiality agreement editorial board, steered me to the Ninth Circuit’s recent opinion in MDY Industries v. Blizzard Entertainment. (Go here for a PDF copy.)

He correctly thought I’d find it of interest because of the court’s discussion of the importance of distinguishing between conditions and obligations (or as the court refers to them, “conditions precedent” and “covenants”).

The dispute involved MDY’s sale of Glider, a technology that automates play of the early levels of the online role-playing game “World of Warcraft.” The court held that as part of its case for secondary copyright infringement by MDY, Blizzard had to establish direct infringement by demonstrating that Glider owners violated one of Blizzard’s exclusive rights.

At issue was § 4(B) of Blizzard’s terms of use (or ToU), which provided as follows:

You agree that you will not … (ii) create or use cheats, bots, “mods,” and/or hacks, or any other third-party software designed to modify the World of Warcraft experience; or (iii) use any third-party software that intercepts, “mines,” or otherwise collects information from or through the Program or Service.

Here’s what the court had to say about this language (citations omitted):

We refer to contractual terms that limit a license’s scope as “conditions,” the breach of which constitute copyright infringement. We refer to all other license terms as “covenants,” the breach of which is actionable only under contract law. …

A Glider user commits copyright infringement by playing WoW while violating a ToU term that is a license condition. To establish copyright infringement, then, Blizzard must demonstrate that the violated term — ToU § 4(B)—is a condition rather than a covenant. …

A covenant is a contractual promise, i.e., a manifestation of intention to act or refrain from acting in a particular way, such that the promisee is justified in understanding that the promisor has made a commitment. A condition precedent is an act or event that must occur before a duty to perform a promise arises. Conditions precedent are disfavored because they tend to work forfeitures. Wherever possible, equity construes ambiguous contract provisions as covenants rather than conditions. However, if the contract is unambiguous, the court construes it according to its terms.

Applying these principles, ToU § 4(B)(ii) and (iii)’s prohibitions against bots and unauthorized third-party software are covenants rather than copyright-enforceable conditions. …

So the court held that Blizzard had failed to establish direct infringement.

I agree with the court that the language at issue is best read as constituting language of obligation. If you want to know how to articulate a condition that won’t be confused for an obligation, consult MSCD chapter 3. I leave to copyright types to determine whether as a matter of copyright law it would make sense to couch all such provisions as conditions.

At any rate, I found it interesting to encounter a context where a particular significance is attributed to the difference between conditions and obligations. For more on that distinction generally, see this April 2007 AdamsDrafting blog post.

About the author

Ken Adams is the leading authority on how to say clearly whatever you want to say in a contract. He’s author of A Manual of Style for Contract Drafting, and he offers online and in-person training around the world. He’s also chief content officer of LegalSifter, Inc., a company that combines artificial intelligence and expertise to assist with review of contracts.