On January 23, 2023, the license agreement between Activision Blizzard, Inc. (“Activision Blizzard”) and NetEase Inc. (“NetEase”) with respect to the publication of multiple online games in mainland China will expire, ending a 14-year partnership between the two companies. On the expiration date, the companies will suspend the operations of multiple famous game titles in mainland China, including World of Warcraft (“WOW”), Starcraft II, Diablo III, Hearthstone, Heroes of the Storm and Overwatch. Although details of the failed license extension negotiations are not public, conflicts arising from China’s new data localization laws may have substantially contributed to the partnership’s dissolution.
Meanwhile, in the U.S., TikTok, Inc. (“TikTok”) faces ongoing scrutiny from U.S. government authorities based on concerns that the Communist Party of China (the “Party”) might access TikTok-collected U.S. personal data through the Party’s authority over TikTok’s parent company. TikTok has attempted to address these concerns by implementing its own data localization arrangements through a partnership with Oracle Corporation (“Oracle”), pursuant to which Oracle will host U.S. data separately from TikTok’s own data servers. But, if access to U.S. personal data by a hostile foreign power is a national security concern, then the U.S. government does not have the legal tools that it needs to adequately address the issue.
This legal update discusses global data localization trends, how China’s data localization rules might have driven Activision Blizzard and NetEase’s failure to extend the WOW license, and how America’s approach to TikTok reveals that the U.S. is not prepared to compete with China in the new data wars.