2004 Web and Downloadable Games White Paper 

IGDA Online Games SIG 

E Data previously won court judgments against several companies over download services, 

including sheet music publisher Hal Leonard and computer games company Broderbund.

19

(7) 

Sun Microsystems (Java) 

On October 7, 2003 Microsoft issued a press release stating,  Recognizing the need to provide a 

smooth transition for current users of the Microsoft  Java Virtual Machine (MSJVM), Microsoft 

Corp. and Sun Microsystems Inc. today announced an agreement under which Microsoft will 

extend its support for the MSJVM until Sept. 30, 2004. In addition, Microsoft and Sun have 

agreed to include links on Microsoft 

s Web site that will provide upgrade information and 

assistance to customers and developers currently using the MSJVM 

20

(8) 

Wisconsin Alumni Research Foundation 

On October 20, 2003 University of Wisconsin Madison 

s commercial arm, Wisconsin Alumni 

Research Foundation (WARF), filed a patent infringement suit in the US District Court for the 

Western District of Wisconsin against Sony and Toshiba, claiming that the technology used in the 

creation of the PS2's Emotion Engine infringes on their US patent #4,630,094. The patent, issued 

on December 16, 1986, is titled  Use of metallic glasses for fabrication of structures with 

submicron dimensions  and covers products which allegedly include the Emotion Engine and 

other integrated circuits using copper interconnect technology that are currently being marketed 

by Toshiba. Sony and Toshiba had 20 days to respond to the filing.

21

(9) 

Digital Millennium Copyright Act 

The Digital Millennium Copyright Act prohibits the hacking of copy protection measures on 

recorded movies, music and software. In the week of October 31, 2003 the US Copyright Office 

ruled on what works would be exempt. One of the ruled exemptions pertains to  obsolete  

computer programs and video games which require the original media in order to function. The 

ruling defined obsolete to mean  no longer manufactured or reasonably available in the 

commercial marketplace. 

22

 (This is known in the industry as "abandonware") 

g) 

Taxation Issues  

(1) 

International Taxation of Web Based Games 

Web based games have stretched the legal definition of who has the right to tax the cash flow 

generated by those games. The definition in question is one of nexus. Prior to the Internet and 

mail order, nexus was easy to establish. The physical location of the vendor was the location that 

could tax the transaction. Mail order began to blur the importance of physical location. The 

Internet (or e commerce) has diminished physical presence to a point where it is a minor factor in 

determining nexus. E commerce utilizes servers. Web based games also utilize servers in the 

same manner. A person logs onto the game server, pays a monthly subscription fee to play the 

game (Odd World, EverQuest, etc.), or perhaps when the user purchased the software, it enabled 

him or her to access based multiplayer games (Battle.net, etc.). The international Organization for 

Economic Cooperation and Development (OECD) on January 9, 2001 announced a change in its 

position in regards to servers. The OECD decided that a server could meet the definition of 

permanent establishment. The language adopted by the committee provides that computer 

servers can be considered to create a permanent establishment if  the business of an enterprise 

is wholly or partly carried along through the equipment.  A central issue is whether the activities 

carried along through the server are merely preparatory or auxiliary? In which case they would 

not generate a permanent establishment or go beyond that threshold. Other significant points 

made by the additions to the treaty commentary include conclusions that: 

1. 

A World Wide Web site does not by itself create a permanent establishment because it does not 

constitute a fixed place of business; a web site hosting arrangement typically does not result in 

permanent establishment status for an enterprise paying for space on a server it does not own; 

and no human intervention surrounding the server is required for a permanent establishment to 

19

 C/Net News.com 10/13/03 

20

 http://www.microsoft.com/presspass/press/2003/oct03/10 07MaintenanceLicensePR.asp 

21

 Computerworld.dk 10/28/03 

22

 Gamemarketwatch.com 10/31/2003 

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