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![]() However, if the prohibition on using bots was a condition to the license, the licensee would be liable for copyright infringement, including statutory damages that could greatly exceed the damages owed for breach of contract. If the former, the licensee would be liable for monetary damages, which would amount to relatively little. So the question before the Ninth Circuit was whether the crucial contract provision was a promise by the licensee not to use bots or a condition on the grant of the license itself. And if the license is void, the breaching party will probably be liable for infringement of the underlying intellectual property - in this case, the copyright to the software. If the conditions to a license are not satisfied, the license is void. ![]() In the context of a license agreement, the other substantive provision is the license itself. In contrast, a condition is a fact that must exist (or not exist) before another substantive provision of a contract takes effect. If the promise is broken, the breaching party is liable to the other party for monetary damages - usually the amount of money required to put the non-breaching party in the same situation it would have occupied if the covenant had not been broken. The question was whether the provision was a covenant or a condition.Ī covenant is a promise by a party to a contract to do something or not to do something. There was no question that the licensee had violated that term of the agreement. The license agreement prohibited the licensee from using bots to simulate people playing WoW. Blizzard Entertainment, and it dealt with a license agreement for the popular online role-playing game, World of Warcraft, or WoW. Even though the decision has been thoroughly discussed from every angle, it still serves as a useful reminder to lawyers not to be careless with license agreements and to pay particularly close attention when drafting conditions. The decision received a great deal of attention at the time, and I used it as an assignment in the law school class I was teaching on contract drafting. ![]() The importance of the distinction between a covenant and a condition was driven home by a 2010 decision from the Ninth Circuit Court of Appeals. But it would be a very different story if the question had been, “What is the difference between a covenant and a condition?” The business owner related that, as he rode down the elevator with his lawyer, he asked, “What’s the difference between a covenant and a warranty?” The answer: “Not much.” And that is not too far from the truth. At long last, they reached some sort of agreement, and everyone took a break for dinner. In one particularly brutal negotiating session, the lawyers argued at length about a particular provision, with one side saying it should be a warranty and the other side saying it should be a covenant. I remember a story told by a business owner who had been involved in the negotiation of a very complicated contract, with both sides represented by high-priced lawyers.
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