2020-05-15
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Legal guide to video game development

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Posted by Pete Maguire on 23 November 2015

Pete Maguire - Commercial Contracts Lawyer
Pete Maguire Partner

With games being available at the touch of a button either on mobile devices or on a console (whether physically or digitally), it may seem like strong financial backing is the key to successful game development and bringing your creations to market.

However, alongside such backing, developers must have a sound legal knowledge of their rights and potential banana skins on the road to a podium finish.

Keeping ideas confidential

From the outset, it is important to ensure any of your ideas are kept confidential. However, this doesn't mean that your ideas must be locked down and placed in the darkest dungeon. Before speaking to potential publishers or freelance developers, always ensure you obtain sufficient confidentiality safeguards.

There are three common methods of obtaining such safeguards:

(1) A non-disclosure agreement between you and your potential publishers/freelance developments;

(2) Confidentiality provisions in any heads of agreement (if the confidentiality provisions are expressly stated to be legally binding) before beginning to share information to third parties; and

(3) Where applicable, sufficiently strong confidentiality provisions in your employees' contracts of employment and consultancy agreements.

Development

When commencing development of your game, you may not necessarily be a single-player; you may have employees or freelance developers (or both) working for you.

If your developers are employed under a contract, any intellectual property (such as elements of a game relating to its code, music or art) they create in the course of their employment will belong to you (subject to any agreement to the contrary).

However, if any element of a game is made by a subcontractor, then unless there is an agreement to the contrary, the subcontractor will own the intellectual property. It is therefore fundamentally important that, when initially engaging freelance consultants or subcontractors and also when subsequently entering into development agreements, appropriate contractual provisions ensure the developer retains the intellectual property in the game.

Publishing & Licensing

The publisher will be seeking an exclusive right to promote and sell the game. Developers or other intellectual property holders will then receive some form of financial benefit from each sale, typically by way of a royalty, which is calculated as a percentage of the publisher's profits per game (after deduction of all costs, expenses etc.).

Whether in digital or physical format, gamers will need to accept an end-user licence agreement (EULA). This will typically be between the publisher and the end-user. As such, any rights the publisher licenses to the end-user must be appropriately defined as those rights you have previously licensed to the publisher in the publishing agreement.

Distribution & Sale

The methods of distribution are now vast in the context of the explosion of mobile technology and apps. A developer now has available to it the option of distributing:

(i) the "traditional" way, i.e. via an agent or distributor who will:

a. provide physical copies of your game to retail outlets;

b. provide physical copies direct to consumers; or

(ii) provide your game digitally via:

a. an app store platform for particular devices (e.g. Google Play, Apple Store, Amazon Appstore); or

b. via third party digital distribution providers (e.g. Steam).

In both cases, a formal agreement will be entered into between the distributor and the developer setting out the rights and obligations of each party. If your game is distributed directly via a third-party host, no publisher will be involved and, as such, the End User License Agreement (EULA) will usually be between (i) the developer and (ii) the user, who, in addition to the terms of the software platform upon initial download, will have to accept the End User License Agreement if they wish to play the game.

When selling to consumers, a whole raft of legislation applies (although it may not be directly applicable if you sell via a publisher). The Consumer Rights Act 2015, which came into force in October specifically addresses the selling of digital content such as games. Please see our previous article on how this is likely to affect the games industry.

Promoting your game

Dependent on your agreement with the publisher, marketing and promotion of your game may be done in-house or by an independent agency. A developer should always run a cost and risk analysis on the commercial issues surrounding marketing and promotion.

Making sure the remit for the marketing team protects the developer's creation is incredibly important. It can be achieved via a robust services agreement or, if applicable, provisions in the publishing agreement. Advertising and marketing undertaken must also be compliant with local laws, legislation and codes of advertising. Games developers and publishers are particularly falling foul of new advertising and marketing codes in respect of in-app purchases on mobile apps and downloadable content (DLC) on console games which can cause both financial and reputational harm to a developer.

Protection & Exploitation

When your game is available to the public, you may want to look at ways of protecting the brand that has been developed as a result of its release. Registering intellectual property such as trademarks and designs can be of benefit in the countries you trade-in but can be expensive and difficult to enforce worldwide if you are a company based in just one jurisdiction.

Games can also be exploited further by way of DLC, expansions, and in-app purchases to gain higher revenue.

Conclusion

The ease at which prospective gamers can access your games in both physical and digital format creates fantastic opportunities for developers to exploit their creations commercially. Before unlocking these opportunities, these legal issues must be considered to not only ensure you adequately protect yourself and your creations but also to ensure that you don't fall foul of the relevant legislation.

About the author

Pete specialises in the drafting and negotiation of outsourcing and commercial contracts.

Pete Maguire

Pete specialises in the drafting and negotiation of outsourcing and commercial contracts.

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