In an important appeal that divided Hollywood, the Third Circuit sides with the likeness rights of celebrities over protections afforded by the First Amendment. (SAG 1, MPAA 0)

In a ruling that some in the entertainment industry are going to love and others are going to hate, the Third Circuit Court of Appeals revived former Rutgers QB Ryan Hart's lawsuit against Electronic Arts for allegedly violating his publicity rights in the video game "NCAA Football."

Hart played at Rutgers from 2002 to 2005 and objected to EA's video game which let users go into "dynasty mode" and control digital avatars that bore strong resemblance to real-life counterparts.

The case tested the balance between an individual's right to protect their likeness from commercial exploitation and an entertainment studio's right to engage in free speech. In September, 2011, a federal judge granted EA summary judgment victory, finding that EA's free expression outweighed Hart's publicity rights and that the game contained creative elements that were transformative fair use.

The case then went on appeal, and among those supporting EA was the Motion Picture Association of America, which submitted an amicus brief. On the other side, supporting Hart was the Screen Actors Guild. (Other amici included the professional sports leagues, A&E Television, Gawker, ESPN, The New York Times, etc.)

On Tuesday, the Third Circuit judges overturned by a 2-1 margin the lower court's call and remanded the case back to a trial court for further proceedings.

The majority opinion by Judge Joseph Greenaway Jr. accepts the fact that video games are protected as expressive free speech by the First Amendment and analyzes case law on the subject of publicity rights including the only case on the issue that has made it to the U.S. Supreme Court -- Zacchini v. Scripps-Howard Broadcasting Co. (1977), which involved a man named Hugo Zacchini who performed a human cannonball act and sued after a local Ohio TV station broadcast Zacchini’s entire act. (Zacchini won.)

"In the wake of Zacchini, courts began applying a balancing inquiry to resolve cases where a right of publicity claim collided with First Amendment protections," notes Judge Greenaway. "Consequently, we now turn our attention to more standardized balancing tests to see whether any of them offer a particularly compelling methodology for resolving the case at hand and similar disputes."

In the ruling (read here in full), the appeals court ultimately settles on using the "Transformative Use" test, which taken from copyright precedent, generally means an analysis of the creative contributions that might transform use of a protected work into a fair use.

Judge Greenaway also leans on other big decisions in the rights of publicity genre including one in California involving an artist who sold lithographs and T-shirts bearing the faces of the Three Stooges. That case (Comedy III Productions, Inc. v. Gary Saderup) put the question as whether the celebrity likeness is one of the “raw materials” from which an original work is synthesized, or whether the depiction or imitation of the celebrity is the very sum and substance of the work in question. (It has recently come up in a lawsuit over the opening credits in the hit series, Mad Men.)

Ultimately, the appeals court judges look at the former Rutgers QB's situation and see it similarly to the way an appeal had gone for No Doubt's Gwen Stefani over a videogame from Activision.

Judge Greenaway writes:

"The digital Ryan Hart does what the actual Ryan Hart did while at Rutgers: he plays college football, in digital recreations of college football stadiums, filled with all the trappings of a college football game. This is not transformative; the various digitized sights and sounds in the video game do not alter or transform the Appellant?s identity in a significant way. Indeed, the lack of transformative context is even more pronounced here than in No Doubt, where members of the band could perform and sing in outer space."

The circuit judge also looks at the videogame "users? ability to alter the avatar?s appearance" but finds that it is insufficient to overcome the plaintiff's publicity rights as transformative. "To hold, therefore, that a video game should satisfy the Transformative Use Test simply because it includes a particular interactive feature would lead to improper results. Interactivity cannot be an end onto itself."

The majority ruling even cites the amicus brief filed by SAG here that said, "[U]nder [EA's] application of the transformative test [sic], presumably no infringement would be found if individuals such as the Dalai Lama and the Pope were placed within a violent 'shoot-em-up' game, so long as the game include[d] a 'mechanism' by which the user could manipulate their characteristics."

In perhaps the part of the 73-page ruling that will cause most concern going forward for Hollywood studio lawyers, the appeals court addresses the issue of what to do about works that contain many creative elements so as to possibly outweigh a minor portion that includes something bad. Says the ruling, "It cannot be that content creators escape liability for a work that uses a celebrity's unaltered identity in one section but that contains a wholly fanciful creation in the other, larger section."

The case now moves forward. There are other similar fights going on, including an appeal that was just argued weeks ago at the Ninth Circuit over a lower judge's dismissal of a publicity rights claim brought by an Iraqi veteran against producers of The Hurt Locker.

The Hart v. Electronic Arts ruling could be appealed up to the Supreme Court.

Saying his guild was "very gratified" with the ruling, SAG-AFTRA GC Duncan Crabtree-Ireland commented that the "clear and unambiguous adoption of the transformative use test by the Court should lay the groundwork for the establishment of a consistent jurisprudence that will make resolution of these issues much easier in the future."

E-mail: eriq.gardner@thr.com; Twitter: @eriqgardner