Mutually Assured Destruction Through Litigation

An excerpt from my upcoming book

Excerpt from the upcoming Clear and Distinct Mind: The Inside Story of the Duelist Revolution that Changed Card Games Forever. Release date TBD.

When Valerie Lynn Baker Fairbank was nominated by President George W. Bush in 2007 to succeed the retiring Consuelo Bland Marshall in the United States District Court for the Central District of California, the Yu-Gi-Oh Trading Card Game would have probably been among the very least of her concerns. Court packing was a hot-button political issue in the Bush years; many appointees watched with unease as their colleagues were filibustered in the Senate, where Democrats sought to prevent the confirmation of supposed “right-wing ideologues.”¹ Fairbank might have been relieved to even have been confirmed; certainly, the Harvard Law alum would have had no idea or expectation that she would, in a few years, be presiding over a legal battle for the fate of a children’s card game. Yet here she was in the spring of 2009 preparing for a fatal and decisive ruling over precisely such a battle in Konami Digital Entertainment v. Vintage Sports Cards, which had only recently been revised to include Upper Deck Entertainment among its defendants.

Konami v. Vintage began in the fall of 2008 as a boilerplate case of trademark violation. Konami charged the Texas-based Vintage Sports Cards with the distribution of counterfeit Yu-Gi-Oh product, earning from Fairbank a preliminary injunction barring Vintage from the further sale of Yu-Gi-Oh cards. Then, of course, came the discovery phase: where, Konami asked, did the counterfeits come from? That fateful question was destined to threaten and eventually unravel everything Upper Deck had built with YGO in the last six years.

Richard McWilliam had been a wily and unpredictable CEO for virtually his entire time at Upper Deck. The firm had exploded onto the collectible market in the late 1980s by having the “audacity to reinvent cards and memorabilia as remorselessly unsentimental, suited to a generation who grew up sliding cards into Lucite instead of between bicycle spokes.”² He told the New York Times in 1992 that he “never had a passion for cards, just a passion for doing something perfectly.” At first, he seemed to be succeeding. Within four years, Upper Deck had “become the industry leader, valued at $1 billion, having expanded into other sports and distinguished itself with ‘premium’ products in an industry still built on cardboard pictures.”³

But McWilliam’s ostensible genius had a dark side, and by the time Konami filed suit in 2008, Upper Deck had become a “banana republic.” With an attitude all too characteristic of the financial sector in the early 2000s, he refused “any counsel that he forgo short-term gain for long-term stability.” It was that logic, of course, that eventually had him “forging cards by the boatload, exploiting a market that priced cards based on scarcity.”⁴

In late 2006, McWilliam asked brand manager Stephanie Mascott for a list of “popular and sought-after” Yu-Gi-Oh cards. She eventually returned to him a list of nine cards ranging from popular mainstays featured in the GX animated series to rare promotional cards that had only been made available in a limited run of McDonald’s Happy Meal toys. McWilliam asked Mascott to prepare a disk of image files containing the artworks of those cards. That disk was eventually sent over to the Beijing Goldhawk Package and Production Company, which McWilliam hired to produce hundreds of thousands of copies of the rare cards at issue. The plan was simple: UDE would provide sub-distributor Vintage Sports Cards with the extra copies of the rare cards so that Vintage could use the cards to sell old booster packs and other YGO products that had been collecting dust in Vintage’s warehouses. The only catch: UDE’s contract with Konami did not authorize UDE to “commission the manufacture of Yu-Gi-Oh! cards.”⁵ That right was retained in full by Konami. So McWilliam had to move in absolute secrecy.

The counterfeit cards arrived in October of 2007, and Vintage promptly packaged them with their old boosters and sold the resulting “blister packs” to Toys R Us and other retailers. But the printing process had been an absolute disaster. UDE employees received complaints from customers about the obviously fake cards they had purchased. One employee got his hands on a pack and showed them to Mascott. “The cards did not look real,” recounted Mascott in a later deposition, “and we could not believe what we were seeing.”⁶ McWilliam was furious. He called a meeting and proceeded to “yell profanities” at Vice President of Global Operations Horst Reichers before taking Reichers off the project and placing Mascott in charge.⁷ He made a phone call to some third party and instructed them to “remember that you do not know where you got the card from, OK?” Then he shredded the counterfeit cards in his office.⁸

Back in the Central District of California, the jig was up, and Konami had followed the trail of bread crumbs back to Upper Deck’s front door. UDE’s strategy of “mutually assured destruction through litigation” kicked into full gear when Konami moved to amend the complaint so as to include UDE as a defendant. Soon afterwards, UDE had filed counterclaims of its own in California as well as Nevada and even Amsterdam. On February 11, 2009, Fairbank granted Konami’s request for a preliminary injunction, ordering Upper Deck to cease for the foreseeable future “manufacturing, advertising and distributing the Yu-Gi-Oh! [TCG].”⁹ Organized play was immediately thrown into disarray. A Bush-appointed federal judge had changed the course of YGO history for years to come: whether for better or worse, none could yet tell.

“Wow, you can make your own forum?” Before stumbling upon an innocuous internet message board called YuGiOhRealms, Mannie Serranilla hadn’t much of an idea that such forums existed for the Yu-Gi-Oh TCG, certainly not in such abundance as in the early 2000s. The most overtly famous at the time was the online forum for Pojo, a publisher of collectible market magazines. Some of the other big names included Obelisk Blue and Rebelforums. By the time Serranilla was dipping his toes in the waters of online YGO, a standard simulator had already appeared in the form of the earlier versions of Yu-Gi-Oh Virtual Desktop (YVD), a downloadable client that was primitive and clunky, but got the job done well enough for its small but growing international community. Many forums used YVD to run “team war” programs for their members, and the forum that Serranilla eventually created would be no exception.

DuelistGroundz earned its place in the national spotlight in 2005, when Max Suffridge won the US National Championship representing one of the site’s strongest teams. By then, Serranilla had sold the site to his fellow Canadian Arthur “Ash” Slaughter for a small sum of money that Serranilla intended to use to jumpstart a career in hip-hop music. The forums buzzed with secretive top-level discussion; team warring was alive and well, and there had even been a few one-off attempts at online cash tournaments. It was here that many Americans first came into contact with some of the mainstay European names that went on to dominate the Pharaoh’s Tour and Fortune Tour circuits, the UDE-era continental sister series to the Shonen Jump Championships. So when the first reports broke in 2009 of the injunction ruled by Fairbank upon Upper Deck and the resulting legal limbo into which the Shonen Jump Championship circuit was thrown, Kyle Schrader and Marshaun Young saw where others could only see grand tragedy a window of opportunity.

Shonen Jump Championship New York City Online was hosted on DuelistGroundz in the spring of 2009 through the grassroots efforts of Schrader and Young beginning on March 25 and ending on May 7. 52 duelists paid a $5 entry fee to get their fix of competitive Yu-Gi-Oh in the absence of real-world Shonen Jump Championships or any other official premier events. Among them was Pat Hoban, who had only recently begun to lurk and browse the forums in his “transition from playing [his] favorite cards[...] into a coherent strategy” in his endeavors.¹⁰ At New York City Online, he would have his first chance since Durham in 2006 to test his mettle against the highest levels of competition the community had to offer.

Not long after his registration on DuelistGroundz, Hoban had earned himself a spot on Undisputed, the team owned and run by the reputable Victor Nolen of nearby Florida, a man with multiple Shonen Jump Championship top cut performances to his name. In 2008, however, he had joined the star-studded assembly of online legends that was Brady Brink’s Starless. In both circles, he was surrounded by players more experienced than himself, so he had “learned a lot by being around all of them.” Hoban had vied for greatness online first on Yu-Gi-Oh! ETC and then on DuelistGroundz throughout the so-called “GX era” with only limited success, but his spot on Undisputed had granted him “recognition as one of the top players on the site,” despite by his own admission having “not done anything to earn it,” and enabled him to “bounce around to other top teams over the next couple of years, whenever Undisputed would become inactive.”¹¹ For Hoban, New York City Online would be an opportunity to prove himself to his new Brady Bunch peers.

Gladiator Beasts seemed to many a duelist, including Hoban, to be the order of the day when Konami Digital Entertainment announced its new Forbidden/Limited list for the TCG, to be effective beginning in March 2009. The list was merciless to the high-dollar TeleDAD decks that had dominated the game for almost six months. Some interpreted the move as a slap in the face, but most duelists in the West welcomed new opportunities for innovation and change. But what good would it be without some sort of premier event, some centerpiece for a social narrative, something to make the duels count for something, to give them meaning? Those were the questions Schrader set out to answer with New York City Online. He took meticulous care to craft forum posts that simulated the written event coverage on Metagame that the duelists of the Upper Deck era had loved and craved. With a new set named Crimson Crisis (CRMS) fresh on the market, the tournament would be a perfect opportunity to test competitive waters in an entirely new environment. “As big name duelist after big name duelist arrives here at the first Shonen Jump Championship of the format one fact grows clearer and clearer,” wrote Schrader in an opening announcement. “The dawn of a new meta will arise this week.”¹²

Two weeks (with some change) and six Swiss rounds later, Hoban squeaked into Top 16 and “Day 2” (in reference to real-world SJCs, in spite of the fact that the tournament took place over the span of many more days than two) at 13th place, with two unfortunate losses. Among his colleagues in the top 16 was Christan “Soul” Centeno, a fellow Brady Bunch duelist who was notorious for speaking loudly and wielding just as big of a stick to back it up. Centeno didn’t think Hoban belonged in his circle, and he was rarely hesitant to make it known. “He wasn’t going to be leaving Starless and I still very much wanted to be a part of it,” reflects Hoban, “but even if we were both on it, Chris never considered me his teammate.”¹³ As if to prove a point, Centeno finished his Swiss rounds at New York City Online a mere three spots ahead of Hoban at 10th place. Hoban’s former captain Nolen sat only slightly more comfortably above him at 9th.

Representing Oceania and a team named Innovation, veteran duelist Jack Turnbull faced Hoban in the Top 16 elimination rounds with his own variant of Gladiator Beasts to challenge that of Hoban. After five turns of play, Hoban was up 1-0 in the match in a display of patient aggression. Alas, it wasn’t meant to be: with poor draws in the second game and a critical bluff on Turnbull’s part in the third, Hoban’s path to the gold slipped from his grasp ever so narrowly. Centeno, on the other hand, made quick work of Nathan Kral in his own octofinals match, earning himself revenge for an earlier loss in the “Day 1” Swiss rounds. It was not until the semifinals that Centeno and his Lightsworn deck fell to the eventual champion in AJ Tiplady of the United Kingdom.

Almost a month later, Hoban had no chance to attend the first Shonen Jump Championship hosted by Konami Digital Entertainment as far away from him as Anaheim. But he was working harder than ever to improve with his newfound testing partners in the Brady Bunch. He continued to absorb as much as he could. His rivalry with Centeno heated up with each passing day as Schrader rebranded and redubbed his series the Grand Prix Championship (GPC) circuit to accommodate the return of official Shonen Jump Championships and continued to host each new installment on DuelistGroundz.

In September, after yet another adjustment to the TCG’s Forbidden/Limited list, Centeno struck gold at Grand Prix Championship Vancouver, earning first place over as many as 110 other duelists, including a dejected Hoban, who would have to wait until Tokyo a month later for another shot at the title. There, Centeno and Hoban both finished with six wins and just a single loss in Swiss, each earning a spot in the Top 16 out of a total of 116 duelists. “He's playing Zombie Lightsworn and I couldn't see his graveyard. I was like what's in your graveyard and he's like ‘I don't have to tell you.’ I'm like LOL the fuck,” reported Hoban in one round against an unfamiliar opponent. “So after 5 minutes he eventually tells me. He has 4 cards left in deck, no outs, and just goes [away from his keyboard]. Shawn said I win.”¹⁴ Once again, Centeno finished out the Swiss rounds at 5th place, ahead of Hoban’s 6th. Once again, the coveted gold eluded Hoban. This time, Centeno himself sent Hoban packing in a brutal quarterfinal match. “At the end of the day,” writes Hoban, “he was still a better player than I was.”¹⁵

Meanwhile, Upper Deck’s strategy of so-called “mutually assured destruction” was turning out to be a disaster for almost everyone involved. Back in April, they had lost control over the Yu-Gi-Oh TCG in Europe after a ruling by the Amsterdam High Court of Appeals. Their counterclaims were going nowhere. UDE executives allegedly involved in the counterfeiting operation had “resisted being deposed, citing their Fifth Amendment privilege against self-incrimination” in the face of “e-mails and other damning testimony.”¹⁶ Even McWilliam himself had failed to appear for his deposition, resulting in sanctions and humiliation for the defendants and their lawyers. After several hundreds of motions and cross-motions, including requests to preclude expert testimony from this or that Upper Deck executive, to dismiss this or that claim or counterclaim, and even to “preclude mention of anything ‘Japanese,’”¹⁷ Fairbank had seen and heard enough. After a series of oral hearings in December, she was ready to set the final nail in Upper Deck’s coffin.

Two days before Christmas Eve, Fairbank granted summary judgment for Konami, thus holding that the plaintiffs were entitled to judgment by law in the absence of any genuine dispute of material facts with no need for a trial. It was an absolute catastrophe for the defendants. Even their own lawyers were furious at them. “At this point, Upper Deck doesn’t have a lot of Life Points,” said Rutan & Tucker’s Richard Howell. “I’m here defending a counterfeiter.”¹⁸ With liability on the part of Upper Deck firmly established by any reasonable metric, Konami now sought “hundreds of millions of dollars in damages.” Just like Bear Stearns and Goldman Sachs before it, McWilliam’s empire was crumbling before his eyes. By the end of 2009, Topps had reclaimed ground, having been named the “sole trading card licensee” of Major League Baseball.¹⁹ Once an industry tyrant, Upper Deck had been reduced to just another statistic of the global financial crisis.

It was little surprise, then, that Konami made it clear from the start that Yu-Gi-Oh would be an entirely different game under their watch. For many duelists, the parting with Upper Deck was a bitter one; Kim wrote with disdain on “Konami's idea of Yu-Gi-Oh as a children's game (despite all of the top players being college age)” and its conflicts with the visions of Upper Deck. For its own part, Upper Deck had run perhaps the most successful competitive card game at the time in the form of Versus System (VS), which had featured Pro Circuits with prizes to the tune of tens of thousands of dollars. Many YGO duelists envied how Upper Deck had for VS “clearly communicated both flaws in the game and future direction.”²⁰ No such announcements came from Konami as they assumed control of the game. Nothing about the North American economy in 2009 suggested to the Eastern executives that it would be a good time to invest in excessive top-level organized play. The industry at large had suffered from the same overproduction that had led to Upper Deck’s burnout, the same shortsightedness that had triggered the global financial meltdown, but the bankers had received bailouts in 2009, while the creators and distributors of trading cards had decidedly not.

For years, competitive games and esports had lagged as an industry on Japanese shores. Cash tournaments had always been subject to “strict regulations” pertaining to gambling; as late as 2018, the law capped cash prizes for gaming tournaments at ¥100,000. Wrote Virginia Glaze for Red Bull as recently as 2018:

“The point of question in tournament payouts lies within Japan’s views on company sponsorship. Game companies themselves are limited from directly contributing to prize pools, as their monetary involvement could be construed as a means of advertisement. Entry fees are likewise hindered from contributing to earnings, as this could be considered gambling. This leaves winnings to the devices of outside sponsors, who have already provided several million yen for various events.”²¹

Of course, it was known to the central Konami offices in Japan that no such restrictive laws existed in the United States; still, excessive organized play was viewed as an indulgence at best and a crippling vice at worst. While Upper Deck had used Metagame to “promote teams [and] sponsors in event coverage” to “make players more recognizable to the community,” Konami preferred to “give feature matches to folks whom most don’t know at all” to “encourage random people to enter events with hopes of finding themselves in a feature match.”²² Independent literature was virtually nonexistent with no monetary incentives; for years, the most cutting-edge ideas and decklists had remained within whispers in the private conversations of tightly-knit circles like the coveted notebooks of the chessmasters of the late 17th century. An occasional exception existed in the form of DuelistGroundz, in which the flow of information still revolved around the complicated network and culture of teams. As Konami took control of organized play, the fate of coverage and literature was uncertain to Kim and other such “pros.”

The casualization of the gaming industry certainly seemed to be taking over in the years following the Lehman crash, as more and more focus shifted towards “mobile, web-based or second-hand games” and “less avid gamers who are more likely to cut back in hard times.” Shigeru Miyamoto suggested to the Economist in 2009 that “spending on gaming is driven by big hits, and that the slight decline in 2009 reflect[ed] creative rather than economic weakness.”²³ The “notion of broadcasting video games on television in North America” had proven farcical, with many coming to the realization that “television wouldn’t suffice” to connect games to a wider worldwide audience, that a “new medium” would be necessary.²⁴ Poker players were coming to the same uncomfortable conclusions about their own game, realizing that their market had become “oversaturated with goofy poker shows on TV.”²⁵ To make matters worse, poker had come under attack at the hands of the Unlawful Internet Gambling Enforcement Act of 2006, which did not outright criminalize gambling but left financial institutions “burdened with creating methods to identify and block restricted gambling transactions.”²⁶ Party Poker, once the largest poker website in the world, elected to “cash in its chips” and “pay a $105 million fine and leave the U.S. market in exchange for not being prosecuted.”²⁷ Live poker events were also ”drawing fewer low-stakes players inspired by the big names to visit Las Vegas.”²⁸ By the end of the decade, it seemed as if competitive gaming communities were under attack from every conceivable angle.

But the contraction of competitive Yu-Gi-Oh was driven first and foremost by the simple disappearance of much of the capital that had allowed for the explosive growth of previous years. Upper Deck was gone from the YGO community, and the VS System experiment appeared by all accounts to have failed. It seemed that the YGO TCG was now destined to be marketed for the short rather than the long term, as a toy and not an art, a hobby and not a skill, a party and not a competition.

1. N. A. Lewis, “Democrats Readying for Judicial Fight,” The New York Times, 1 May 2001: A19.

2. Sam Eifling, “The Hobby: The Rise and Fall of Upper Deck," The Big Lead, 19 Jul. 2013. Web.

3. William Yardley, “Richard McWilliam, Trading Card Innovator, Dies at 59,” The New York Times, 10 Jan. 2013: A20.

4. Eifling (2013).

5. Memorandum of Points and Authorities, 4, Konami v. Vintage, CV 08-6630 VBF-PJW, 2009 WL 5250115 (21 Dec. 2009).

6. Reply to Separate Statement of Facts, 37, Konami v. Vintage, CV 08-6630 VBF-PJW (21 Dec. 2009).

7. Memorandum, Konami v. Vintage, 2009 WL 5250115, at 9-10.

8. Peter Lauria, “Hitting the Deck,” New York Post, 12 Jan. 2010. Web.

9. M. A. Keshishian, “Upper Deck Enjoined from Selling Yu Gi Oh! Cards; Prescient Threats Of 'Mutual Assured Destruction' in Counterclaims,” Milord and Associates, 20 Mar. 2009. Web.

10. Patrick Hoban, “Origins: The Early Years,” Alter Reality Games, 6 Apr. 2015. Web.

11. Hoban, “Origins: The Online Years,” Alter Reality Games, 27 Apr. 2015. Web.

12. Schrader, “Shonen Jump Championship New York City Online,” DuelistGroundz, 25 Mar. 2009. Web.

13. Hoban, “The Online Years” (2015).

14. Post on DuelistGroundz, 16 Oct. 2009. Web.

15. Hoban, “The Online Years” (2015).

16. Lauria (2010).

17. Opposition to Motion in Limine, 1, Konami v. Vintage, CV 08-6630 VBF-PJW, 2009 WL 5250141 (28 Dec. 2009).

18. Chris Olds, “Konami Blasts Upper Deck in Statement,” Beckett, 3 Feb. 2010. Web.

19. Yardley (2013): A20.

20. Jae Kim, “An Open Letter to Upper Deck,” Pojo, 27 Jan. 2009. Web.

21. Virginia Glaze, “Licensed to Play: How Japan’s Pro Gaming Licenses Are Affecting Asia’s FGC,” Red Bull, 23 Feb. 2018. Web.

22. Kristopher Perovic, “YGO: The State of the Game (Restated)” (2012), in DuelistGroundz, 21 Oct. 2012. Web.

23. “Still Playing: Video Games in the Recession,” The Economist, 25 Mar. 2010. Web.

24. Andrew Lynch, “Tracing the 70-Year History of Video Games Becoming Esports,” Fox Sports, 6 May 2016. Web.

25. Steve Friess, “After a Golden Era, Poker’s Stack Is Down," The New York Times, 7 Nov. 2008: ST2.

26. B. P. Rainey, “Unlawful Internet Gambling Enforcement Act of 2006: Legislative Problems and Solutions,” Journal of Legislation 35.2 (2009): 151.

27. Chris Parker, “Black Friday: How the Feds Shut Down Online Poker,” LA Weekly, 1 Mar. 2012. Web.

28. Friess (2008): ST2.