(By You Yunting) Blizzard, a US company recently announced that the license agreement with Netease would expire on 23rd January 2023 and that the parties failed to reach a renewal agreement that conformed to Blizzard’s operational principles and commitments to players and staff members, so it would suspend most of Blizzard’s game services relating to the World of Warcraft, etc. in the Chinese mainland. Let’s discuss this incident and related issues below. Is it possible to renew the agreement? Will the game services be terminated if the agreement renewal failed? If Blizzard changed the Chinese agent, can players’ data be totally transferred?
I. Is the license agreement between Blizzard and Netease renewable?
Based on my own judgement, as the existing divergence can hardly be overcome, there is very low possibility of renewing the agreement for the following reasons.
1. Time is tight. The parties must have negotiated for a long time, but have not reached agreement. The cooperation between Blizzard and Netease is complicated, involving various games, including PC and mobile games, and Battle.net, most of which are developed by Blizzard and some co-developed. It will take a lot of time to deal with technical issues connected with provisions of the license agreement. In my previous job in the legal department of Shanda, I was responsible for renewing the agreement relating to The Legend of Mir Ⅱ. At that time there were major controversies between Shanda and Actoz Soft and Wemade. While several actions and arbitrations were in process, the parties agreed to renew the agreement four months before the agreement expired. It was only two months and a week before the expiration date that Blizzard made the announcement. Based on my experience, the possibility to save the situation is very low.
2. The gap is huge. If the relationship breaks down, both parties will be greatly affected. In case of a minor dispute, at least one of the parties will compromise. They are both established listed companies, neither of which risk big things for the sake of small ones. Time is an excuse. The actual problem is the huge gap.
II. If the agreement fails to be renewed, will the World of Warcraft be suspended?
If Blizzard and Netease fail to conclude a license agreement in the next two months, all games under the current agreement, including the World of Warcraft will be suspended for a long time. Online games is a type of electronic publications. According to the Publication Regulations, to operate an online game in China, a publication number is required, and to change the operator of an imported online game, a new publication number application should be filed. The National Press and Publication Administration (“NPPA”) published a document stating that:
In case of change of the operator of an online game for which NPPA granted pre-approval or import approval, the game should go through new pre-approval or import approval formalities and all operational services relating to the game should be suspended from the date of change of the operator until the new approval is granted. Any violation of the above provision will be treated as illegal online publication.
If Blizzard changes the operation agent, they may wait quite a long time for the publication approval. The cooperation agreement between Blizzard and the new operation agent has not been concluded yet. The publication number application cannot be filed until the agreement is signed. According to NPPA website, the last time when the publication number for imported games was issued was in June 2021. Even if publication numbers for imported games are issued normally as from this month, considering the large number of publication number applications in process, the application for the new operation agent of Blizzard may be approved the year after next.
III. If Blizzard changes the agent, can players’ data stored by Netease be totally transferred?
This is a difficult question. The answer is that if Blizzard changes the agent, it is highly possible that players’ user data be totally transferred to the new operator within an uncertain period of time. Based on Blizzard’s culture, the license agreement between Blizzard and Netease must have included provisions requiring Netease to transfer user data to Blizzard or its designated operator after termination of the agreement. Over ten years ago after termination of the cooperation between NCity and Blizzard, NCity transferred user data of the World of Warcraft to Blizzard and Blizzard then transferred to its new operation agent Netease.
The current legal environment is different from that in 2009 when Blizzard changed the operator. The Chinese Personal Information Protection Law was promulgated in 2021. Players’ user data contains personal information. Netease should go through outbound data transfer compliance formalities in order to transfer user data to Blizzard, US. Players’ user data in games can be classified into access data and game data. Access data can be used to recognize a person and is a type of personal information, such as email address, cellphone number, id number, identification card number, etc. Game data is user data generated by playing the game, cannot be used to recognize a person and is not personal information.
According to privacy agreements for The World of Warcraft and Battle.net, access and game data in the games are all stored by Netease and Blizzard have access to game data that does not contain personal information. Only for sake of account security, anti-cheating or data processing or analysis can Blizzard obtain access data or part thereof. After termination of the operation of the game, Netease should transfer all user data, including access data to Blizzard. Transferring data to Blizzard, a US company, means transferring data abroad.
Before sending players’ personal information abroad, Netease should obtain players’ separate approval under the Personal Information Protection Law. Without players’ approval, their personal information cannot be transferred abroad. Even with players’ approval, Netease should perform outbound data transfer compliance obligations.
There are tens of millions of players of Blizzard games in China. Personal information contained in user data involves tens of millions of people. Sending such a large amount of personal information abroad should pass security evaluation conducted by the authority concerned. Pursuant to Article 4 of the Chinese Outbound Data Transfer Security Evaluation Rules, the data processor processing personal information of over one million people sends personal information abroad should apply to the state cyberspace administration for security evaluation of outbound data transfer through local provincial cyberspace administration in order to send data abroad. The outbound data transfer security evaluation is comprehensive. The government will spend a long time to make the evaluation. The advantage is that the time for the security evaluation couldn’t have been longer than the approval time for an imported game publication number. The result of the outbound data transfer security evaluation should be received when the publication number of The World of Warcraft whose operator is changed is issued.
Another possibility is that Netease and Blizzard think it so complicated to go through outbound data transfer security evaluation formalities that Netease directly hands over user data to the new Blizzard designated operation agent in China after termination of the cooperation agreement. In this way they will avoid the security evaluation and save a lot of time. I hope this is specified in the agreement between Netease and Blizzard.