Take-Two Interactive Software, publisher of the popular video game series NBA 2K, scored a victory this past summer when it successfully dismissed a claim for statutory damages by Solid Oak Sketches, a tattoo licensing company. Solid Oak had sued over the in-game depictions of tattoos worn by several famous basketball players, including LeBron James, but its claims were dismissed by Judge Laura Swain in the Southern District of New York.

In her opinion, Judge Swain concluded that Second Circuit precedent established a “bright-line rule that precludes recovery of statutory damages and attorneys’ fees where the first act of infringement in a series of ongoing infringements occurred prior to the work’s copyright registration.” Solid Oak had registered the disputed tattoo designs in June 2015, almost two years after Take-Two had begun using them in its NBA 2K14 video game.

Following the judgment, counsel for Solid Oak stated that they intended to continue pursuing their claim for actual damages.

Tattoo copyright disputes are a relatively recent phenomenon, and as such, the legal doctrine and economics surrounding such suits are unclear. Furthermore, the vast majority of enforcement actions brought so far have ended in settlement, providing little clarity for future litigants. In 2005, Nike was sued for copyright infringement by a Matthew Reed, a Portland tattoo artist, over a commercial featuring his Egyptian-themed tattoo design on basketball player Rasheed Wallace. In 2012, video game publisher THQ was sued by artist Chris Escobedo over the depiction of his “Lion Tattoo” design on professional MMA fighter Chris Condit in the video game UFC Undisputed. Most notably, Warner Brothers Entertainment was sued in 2011 by artist S. Victor Whitmill over the depiction of a facial tattoo originally created for Mike Tyson on Ed Helm’s face in the film The Hangover Part II.

Both the Nike and Warner Brothers cases ended in settlement. The THQ case moved to bankruptcy court after THQ went out of business. After that court assessed Escobedo’s damages at $22,500, akin to a hypothetical licensing price, Escobedo appealed and the parties reached a settlement.

U.S. courts have not yet had the opportunity to make any binding statements on the copyrightability of tattoos, but as District Judge Catherine D. Perry of the Warner Brothers case commented, “Of course tattoos can be copyrighted. [The Plaintiffs] are not copyrighting Mr. Tyson’s face, or restricting Mr. Tyson’s use of his own face… but the tattoo itself and the design in itself can be copyrighted.” Given that so many of these tattoo cases have ended up settling, it would seem that most defendants would agree.

There are several factors, however, that indicate that further litigation between Take-Two and Solid Oak is likely. The two parties had previously engaged in licensing discussions, with Solid Oak offering a perpetual license for $1,144,000. However, Take-Two rejected this offer and proceeded with its unlicensed depiction of the disputed tattoo designs. Take-Two has also shown a willingness to delve deeper into the litigation. It filed counterclaims asserting de minimis use and fair use, and it accused Solid Oaks of committing fraud on the U.S. Copyright Office by knowingly submitting for registration a design with an incorrect creation date. Furthermore, Take-Two has asserted that requiring the licensing of tattoos would be “an encroachment on basic human rights,” since they would significantly burden tattooed individuals seeking opportunities in various visual mediums.

It will be particularly interesting to see whether the de minimis and fair use counterclaims pose any real threat, or if they are merely an attempt to gain a stronger foothold in settlement negotiations. A brief analysis of both claims indicates that Take-Two might be successful on both counts, but the outcome is by no means assured.

Under the de minimis doctrine, even direct copying is acceptable if it is so insubstantial that an average audience would not recognize it. Take-Two could easily argue that the particular design of the players’ tattoos would not be noticed by the average NBA 2K player. Solid Oak, on the other hand, could argue that certain tattoos on the most famous players are recognizable to the average gamer. A tattoo of a lion on the upper arm of LeBron James, for example, is one of the tattoo designs in dispute. Such a visible tattoo on one of the NBA’s most famous players might be recognizable enough to warrant licensing. Solid Oak could also argue that their tattoo designs are qualitatively important to the NBA 2K product, since the game is heavily marketed for its realistic depictions of players, including their appearance and play styles.

Take-Two’s fair use claim will be evaluated under the four factors described in 17 U.S.C.A. §107. Take-Two’s purpose in using the tattoos is primarily commercial, since the accuracy of the tattoos adds to the realism of the game, which enhances its marketability. Solid Oak’s tattoo designs are undeniably artistic in nature and so warrant greater protection. Take-Two’s depiction of these tattoos in-game is unlikely to be transformative, as they are not rearranged or repurposed in any meaningful or creative way from the original. Rather, their in-game depiction is meant to replicate the real-life version as accurately as possible. The fair use argument appears to turn on the market effect of Take-Two’s use, which would be to eliminate a licensing market for tattoo artists. A judge might be convinced that such a market should not exist due to the high transaction costs involved. Take-Two could argue that it would be too expensive and impractical to require licenses for each of the dozens of tattoos on the hundreds of players it depicts in its games. A similar type of argument has failed in the realm of music sampling, but the use here is arguably less qualitatively important. Take-Two certainly seems to distinguish tattoos from music sampling, seeing as how it reached a settlement in a music sampling dispute for the same video game (NBA 2K16) in less than three months. That said, the presence of tattoo licensing companies such as Solid Oak could suggest that a legitimate market already exists.

If the Take-Two litigation manages to go to trial, the resulting decision should have major impacts on tattoo licensing negotiations. By pushing this case to trial, Take-Two may be trying to establish precedent that would absolve it of further litigation in future iterations of NBA 2K. After all, there does not seem to be a major difference in the dollar value of Take-Two’s liability. The potential statutory damages claim would have amounted to around $1.2 million, which is not too far off from Solid Oak’s initial offer of $1.14 million. The immense popularity of the NBA 2K series ensures that Take-Two will continue to make a new game every year. Given the influx of new tattoos on current players as well as rookies entering the NBA, the economic implications going forward are much greater than what is involved in the actual case.

Joel Jung is a J.D. candidate, 2018, at NYU School of Law.