By: Shmuel Honig

The United States of America is facing a crisis. People across the country are distraught by the warning signs of a potentially imminent disaster. No, I am not referring to the sub-prime mortgage crisis. I am talking about the potential demise of Scrabulous.

Scrabulous, of course, is an immensely popular online game that is the object of addictions all over the country. The game challenges players to spell words using a set of randomly selected letters and to place the words on a grid to receive point values. The point values are based on the letters used and the spot on the game board where a word is placed.

The creators of Scrabulous now face the threat of legal action from Hasbro, which owns the rights to Scrabble in the U.S. and Canada, and Mattel, which owns the rights everywhere else. The makers of the Scrabulous, Rajat and Jayant Agarwalla of Calcutta, India, are not alone in their predicament. Also being confronted is Facebook, the prominent online social-networking website, which has maintained a Scrabulous application since June, 2007. The availability of Scrabulous on Facebook has been a major contributor to the incredible rise in the game’s popularity; there are currently more than 2 million active Scrabulous users, most of whom play the game via Facebook. Not surprisingly, Hasbro and Mattel sent letters to Facebook in January asking for the removal of the Scrabulous application from the Facebook website.

Also not surprisingly, many fans of the game have been less than amenable to the idea of shutting it down. A handful of groups devoted to saving Scrabulous have emerged on Facebook since news of the story broke in January, garnering threats to boycott Hasbro and Mattel products and to stop using the social-networking site. Tens of thousands of the Scrabulous faithful have joined forces to defend against what they perceive as a gross injustice, a bad marketing decision, and an impending calamity.

Notwithstanding the public outcry, the legal issues facing Scrabulous and Facebook are serious. A potential lawsuit would likely focus on claims of both copyright infringement and trademark infringement. To prove that Scrabulous infringes the copyrights in Scrabble, Hasbro would have to prove that the Agarwalla brothers actually copied from Scrabble, and that the similarities in the copyrightable portions of the game are substantial enough to be considered infringement. See, e.g., County of Suffolk, N.Y. v. First Am. Real Estate Solutions, 261 F.3d 179, 187 (2d Cir. 2001).

The brothers openly admit that they copied Scrabble in developing Scrabulous, a fact immediately apparent to anyone familiar with the two games. The similarities are striking, encompassing not only the uncopyrightable aspects, such as the rules, but also the copyrightable elements such as the design, layout and color patterns. The game boards are not identical, but identity is generally not required to establish infringement. Ultimately, the extent to which the copyrightable aspects are similar, and thus whether there is an infringement, is a question for a jury to decide.

For Facebook, the copyright question is likely one of secondary liability. Facebook may face claims of contributory infringement for facilitating the distribution of Scrabulous through its website. Facebook may also be accused of vicarious infringement for profiting from the distribution of Scrabulous, in the form of increased advertisement sales on its website, while doing nothing to limit the distribution.

If the fair use defense is raised, it would be interesting to see it play out. On the one hand, both the Agarwalla brothers and Facebook have commercial interests involved. On the other hand, it is not obvious that the popularity of Scrabulous has negatively affected the Scrabble market. On the contrary, some argue that Scrabble has actually benefited from the Scrabulous craze, widening its fan base and selling classic versions to people who would not have bought the game but-for their “addiction” to Scrabulous.

Assuming that the name “Scrabulous,” the Scrabulous game board and the Scrabulous letter tiles are similar enough to “Scrabble,” the Scrabble game board and the Scrabble letter tiles to be considered use of the latter game’s trademark and trade dress, Scrabulous faces another legal challenge. If a trademark claim is pursued, the court would be asked to determine whether the Scrabulous game satisfies the “use in commerce” requirement for trademark infringement. 15 U.S.C. §§ 1114, 1125, 1127. This question would focus on the use of paid third-party advertisements on the Scrabulous website and Facebook application to generate revenue. While there is much debate over the intended meaning and scope of the phrase “use in commerce,” some recent cases in the circuits governing Facebook’s two U.S. offices suggest an expansive reading of the requirement. See Bosley Med. Inst., Inc. v. Kremer, 403 F.3d 672, 677–78 (9th Cir. 2005); SMJ Group, Inc. v. 417 Lafayette Rest. L.L.C., 439 F. Supp. 2d 281, 286–87 (S.D.N.Y. 2006).

The court would also need to determine whether the use is likely to cause consumer confusion regarding the source of Scrabulous. See 15 U.S.C. §§ 1114, 1125. The argument that the similarities between Scrabulous and Scrabble are sufficient to cause confusion amongst Scrabble consumers is certainly a strong one. Considering the strength of the Scrabble marks and the fact that the two games are played in a virtually identical manner, it is not difficult to imagine a Scrabulous player assuming that the game was either created or licensed by Hasbro. On the other hand, however, the wide publicity generated by the dispute may actually supply the defendants with evidence tending to show that actual confusion is, in fact, minimal.

Regardless of the strength of the claims against Scrabulous and Facebook, some argue that Hasbro and Mattel would be unwise to take legal action, because doing so will further irritate and alienate many of their own consumers. Instead, some argue, the companies should reach an agreement with the Agarwalla brothers to exploit the marketing phenomenon and allow the game to continue growing online.

In reality, it seems that Hasbro and Mattel might be trying to have their cake and eat it, too (or, as the saying should go, eat their cake and have it, too). Reports have indicated that RealNetworks, one of two companies licensed to produce an online version of Scrabble, has been trying to reach a deal with the Scrabulous founders to put an official version of Scrabble onto Facebook. Why would Hasbro and Mattel threaten legal action against those with whom they have a potentially significant financial relationship? The answer is clear: to avoid setting a precedent that would encourage other techno-savvy game addicts like the Agarwalla brothers to produce unauthorized internet imitations of their products. When the dust from this standoff finally settles—whether in court or not—the challenges facing Hasbro and Mattel may very well prove to be more difficult than the legal hurdles facing Scrabulous and Facebook.