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Candy Lab Inc. v. Milwaukee County

United States District Court, E.D. Wisconsin

July 20, 2017

CANDY LAB INC., Plaintiff,



         This case concerns a location-based augmented reality (“AR”) mobile application developed by Plaintiff Candy Lab, Inc. (“Candy Lab”). The app is a game is called “Texas Rope ‘Em, ” and it is reminiscent of the traditional poker game from which its name derives. The game accesses the phone's rear-facing camera during gameplay and overlays visual elements onto the image of the real world as seen through the camera, including playing cards which the user can collect. Part of the game involves the user traveling to specific real-world locations to collect these cards, with the aid of the camera images and an in-game map.

         The first runaway hit in this game genre was Pokémon Go. Although its storyline is, of course, quite different, Pokémon Go has gameplay elements very similar to Texas Rope ‘Em, including location-based and AR elements that require players to travel to real-world locations to play the game. Such locations include, at times, public parks owned and maintained by Milwaukee County.

         Defendants, collectively referred to herein as “the County, ” say that while playing Pokémon Go, players trashed Milwaukee County parks, stayed after park hours, caused significant traffic congestion, and made excessive noise. Their impact ultimately cost the County thousands of dollars in increased police and park maintenance services. In response, the County adopted an ordinance (the “Ordinance”) requiring those offering such games to apply for event permits and secure garbage collection, security, and medical services, as well as insurance. Offering a game without a permit can result in a fine or jail time.

         Candy Lab wishes to offer Texas Rope ‘Em to County residents to use in County parks. It does not want to apply for a permit to do so, nor incur the fees associated with obtaining the services necessary to secure a permit. Candy Lab brought this action challenging the Ordinance on the ground that it violates Candy Lab's First Amendment right to freedom of speech.

         Presently before the Court is Candy Lab's motion for a preliminary injunction against enforcement of the Ordinance and the County's motion to dismiss the complaint for failure to state a claim. The motions are fully briefed and, for the reasons stated below, Candy Lab's motion will be granted and the County's motion will be denied.[1]

         1. BACKGROUND

         1.1 Texas Rope ‘Em and Augmented Reality Video Games

         The relevant facts are not in dispute. Candy Lab is a company that has been developing location-based and AR software since 2011. Candy Lab not only creates its own applications but also licenses its proprietary software engine to others.

         Location-based applications are those that track the real-time physical location of the device running the application, and allow the user to interact with digital content based on the device's geolocation. “Augmented reality” refers to the digital enhancement of physical senses, most commonly sight. Candy Lab's mobile applications augment reality by superimposing images on a live video display from a mobile device's rear-facing video camera, creating the illusion that the image is physically present on the other side of the device.

         In July 2016, Pokémon Go arrived on the scene. This mobile game uses location-sensing technology and AR imagery to create a game world in which players interact with digital content in designated geolocations, called “game stops, ” and discover virtual creatures that are algorithmically generated in response to players' locations. Pokémon Go quickly became one of the world's most popular mobile game applications.

         In March 2017, Candy Lab announced the launch of the first location-based AR poker game, Texas Rope ‘Em. The goal of Texas Rope ‘Em is to beat the dealer in the popular poker variant “Texas Hold ‘Em.” Players begin the game with two of the five required playing cards. To build their hands, players must carry their mobile device to game stops indicated on the game map to obtain a new card. Once the player has set his or her hand, the cards are played against the dealer. If the player loses, he or she can try again. Players who beat the dealer win points and, in future versions of the game, will be able to win in-app bonuses or prizes. Candy Lab reports that none of these prizes will be worth money. See (Docket #18 ¶ 7).

         Consistent with its name, Texas Rope ‘Em has a Texas theme, including graphics and a color scheme that evoke the Wild West. When a player travels to a game stop and chooses a card to collect, the game generates an animated lasso that whips forward and grabs the selected card. Candy Lab's CEO describes this as reminiscent of “rustling up” cards like a cowboy would with cattle. Id. ¶¶ 5-6. However, there are no other characters in the game besides the player and the dealer, and the dealer is not itself represented or animated in any fashion. Id. ¶ 4.

         Texas Rope ‘Em is currently in “1.0” or “beta” form, meaning that although it is publicly available, its functionality is limited compared to the anticipated full public release. The game is currently playable in select cities, including Milwaukee, and is being actively showcased at technology events. The game is presently free to download and play, though later versions will likely offer in-app purchases.

         1.2 Pokémon Go and the Rise of Discontent

         The unanticipated popularity of Pokémon Go in July 2016 drew thousands of users across the country outside while playing the game. One member of the Milwaukee County Board of Supervisors (the “Board”), Sheldon Wasserman (“Wasserman”), says he received complaints that large numbers of people were playing the game in his district's Lake Park, some of whom littered, trampled the grass and flowers, and stayed past park hours. There were also reports of inadequate bathrooms for parkgoers, unauthorized vendors in the park, parking violations, and significantly increased traffic congestion. Wasserman claimed that, as a result, the County was forced to spend tens of thousands of dollars on additional law enforcement and park maintenance services. See (Docket #2-1 at 2).

         Wasserman proposed Resolution 16-637, which became Section 47.03(3) of the Milwaukee County Code of General Ordinances, to regulate games like Pokémon Go by targeting the companies that publish them. Multiple supervisors spoke against the Ordinance during deliberations, disputing Wasserman's claims about the game's impact. These officials argued that the gamers were not causing disturbances and that it was a positive development to see a diverse new group of people using the parks. They perceived the true driving force behind residents' complaints to be fear of the unknown and umbrage at an unanticipated increase in use of the nearby public parks.

         Wasserman emphasized that the Ordinance was not directed against Pokémon Go players, but instead sought to regulate the businesses that profit from them. Wasserman believed that the Ordinance could help control the growing popularity of games like Pokémon Go and, perhaps more importantly, leverage that popularity to make money for the County, which was required to maintain the parks which were so heavily used during gameplay.

         1.3 The Ordinance

         On February 2, 2017, the Board adopted the Ordinance by a vote of 13-4. On February 20, the Ordinance was published and became effective. The Ordinance reads, in relevant part:

(3) Permits required for location-based augmented reality games. Virtual and location-based augmented reality games are not permitted in Milwaukee County Parks except in those areas designated with a permit for such use by the Director of the Department of Parks, Recreation, and Culture [(the “DPRC”)]. Permits shall be required before any company may introduce a location-based augmented reality game into the Parks, effective January 1, 2017. The permitting application process is further described on DPRC's website for companies that create and promote such games. That process shall include an internal review by the DPRC to determine the appropriateness of the application based on site selection, protection of rare flora and fauna, personal safety, and the intensity of game activities on park lands. Game activity shall only occur during standard park hours, unless otherwise authorized by the DPRC Director, who has the authority to designate special events and activities within the Parks outside of the standard operational hours.

(Docket #2-1 at 4). The resolution adopting the Ordinance (but not the codified language itself) defines “virtual gaming” as “an activity during which a person can experience being in a three-dimensional environment and interact with that environment during a game, and the game typically consists of an artificial world of images and sounds created by a computer that is affected by the actions of a person who is experiencing it; and. . .[further provides that] Pokémon Go fits the characteristics defined by virtual gaming and is considered as such by the standards of the DPRC.” Id. at 3. The Ordinance does not define the term “location-based augmented reality games, ” although it implies that Pokémon Go is such a game. See Id. at 2.

         The DPRC website notes that the “Milwaukee County Parks 2017 Special Event Application” (the “Permit Application”) is required for “virtual gaming.” The 10-page Permit Application requests a large amount of information about a proposed event, such as estimated attendance, location within the park, event dates and times, a site map, and whether and how the event will be advertised. See Id. at 16-26. It requires detailed plans for garbage collection, on-site security, and medical services, and warns that applicants will be responsible for these services. The Permit Application requires applicants to have liability insurance and make it available on-site for inspection. It also requires payment of several fees, and reserves to the DPRC the discretion to demand more information. Further, the Permit Application cautions that “[s]ubmittal of an application does not automatically grant [an applicant] a permit or confirmation to conduct your planned event.” Id. at 18. Indeed, the Application warns that “Milwaukee County Parks in its sole discretion may grant, deny, revoke, or suspend any permit, at any time and for any reason.” Id. at 21.

         The Ordinance was codified at Section 47.03(3) of the County Municipal Code. Chapter 47 of the Code regulates County “Parks and Parkways.” Section 47.29(1) specifies that the penalty for violation of a provision of that chapter is a fine of not less than $10.00 nor more than $200.00. A court may order up to ninety days of jail time if the fine is not paid. Additionally, police officers can arrest violators, and the DPRC can issue citations in addition to the penalties described in the municipal code.

         In late March 2017, Candy Lab's CEO, Andrew Couch (“Couch”), contacted the County to explain Texas Rope ‘Em and confirm that Candy Lab requires a Special Event permit before releasing its game to the public. DPRC Special Events Coordinator Ryan Broderick (“Broderick”) responded, “you must complete the attached Special Event Application and submit with a map of all of the areas that you would like to add virtual gaming stops.” Couch again responded to confirm ...

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