Legal Issues for Rookie Development Studios Part III
This is the final installment in a three article series of legal issues a start up developer should be aware of, long before they even consider looking at a developer/publisher contract. The first, Initial Legal Issues, dealt with ownership, corporate forms and starting a company. The second, Just what are these games made of...legally speaking?, examined the different types of Intellectual Properties (IP) that comprise a game and how they are established. Now, we will take a look at some other basic contracts every rookie developer should have: the employee/consultant agreements and Non Disclosure Agreements (NDAs). These basic agreements protect the IP that form the core assets of your development company.
The employee/consultant agreement assures that everything that is developed by those working on your game is the property of the company. It also should contain an acknowledgment of any trade secrets your company may have such as design, play, concept or even the identity of your industry contacts. These contracts can be as tight or restrictive as your "corporate philosophy" dictates. Obviously, most start up studios do not want the onerous type of atmosphere that many "game factories" demand. But remember, no matter how open source you want to be about your IP, if it is not protected, you will not be able to sell it.
Here is a list of topics and a basic description of what they are and why they are included in agreements of this type:
Introduction - This introductory section identifies the company and the employee or consultant and the date the agreement is being entered into.
Definitions - Sets out specific meaning of the important terms on the agreement. These terms are capitalized here and will be capitalized throughout the agreement to identify them as defined terms.
Information, works, and trade secrets - Sets specific rules and procedure for employees/consultants who deal with the companies intellectual property including restrictions on use and dissemination to third parties.
Customers and Employees of Company - Restricts the ability of the employee/consultant to seek to employ fellow employees or deal with customers for a period of time after the employment or consultancy is terminated.
Intellectual Property of Company - Identifies all IP created by the employee as being owned by the company. Major corporations often include any new IP or inventions that a full time employee has while employed, even if they are completely unrelated to the company's projects. With consultants, the scope of IP ownership by the company is limited to the work done for the company. In either case, the employee/consultant agrees to assign all rights in this work to the company and also obligates the employee/consultant to execute whatever documents are necessary to ensure that the company's ownership of these rights is secure and exclusive.
Your secrets and rights - This section relates to any IP that the employee/consultant has or develops outside of the agreement and to which they retain full rights. This section often refers to an addendum to the contract where the specific independent IP that is not the company's is set out in detail.
Third party rights and property - Here the employee/consultant acknowledges that they have the full rights to all the IP they bring to the company and that their execution of this agreement does not violate any other agreements they may have with prior employers. They also agree that they will not violate any third party IP rights during their period of employment or consultancy.
Co-operation with Company - Requires the employee/consultant to cooperate with the company in maintaining and enforcing its IP rights including everything from the execution of documents to testifying in court proceedings.
Records creation and retention - Sets out the documentation and records requirements to be followed by the employee/consultant in conjunction with the work being done for the company. There is nothing worse than having a lead programmer leave your project and being left with undocumented spaghetti code that only they understand.
Arbitration or litigation of disputes - Arbitration clauses usually are included to avoid costly employment discrimination suits from employees. This section should include any jurisdiction and venue provisions, essential to making sure that any virtual team members must proceed against the company where the company is, instead of where they are. Also a sentence regarding the awarding of attorney's fees to the prevailing party in any arbitration or litigation is often included here.
Entire agreement - States that the written agreement is the entire agreement and none of the prior verbal or written statements or promises made by or to anyone have any binding effect once the contact is signed. This provision also usually requires any modifications to the agreement be in writing signed by all parties.
Signature - Signatures and dating of the execution of the contract by both the company and the employee or consultant.
Of course you may or may not want to have some of these more restrictive provisions in your agreement. But they can be easily modified to accommodate your particular situation. For example, you may want to have a very open policy regarding any work done that is not directly included in your project or allow your team to retain some of the IP rights to tools and technology they develop. In addition, since everyone involved in game development must keep a portfolio of some sort, carving out exceptions for such limited uses of company IP is probably appropriate in most cases.
The bottom line here is that you must have some sort of agreement for your employees and consultants that deals with these IP ownership issues, conclusively transfers all ownership of IP to the company, and sets out the responsibilities of the employee and consultant regarding the company's preservation and enforcement of these rights. And it is best to have this sort of agreement drafted specifically for your situation by a knowledgeable attorney
So, now that we have the IP identified and nicely owned by the developer how do we dare show it to anyone for fear that they will steal it from us. Enter the Non Disclosure Agreement commonly referred to as the NDA. Most of us are familiar with technology related NDAs which accompany SDKs or technology demos. Some even accompany parties in night clubs (remember the 3Dfx NDA parties at GDC?). These NDA are required by technology companies to help control the unauthorized or premature release of their new technologies. They also are necessary to retain the "trade secret" nature of any portion of their new technology that is not covered by patent or copyright. Remember, it is essential for a trade secret to be treated as a secret by the company - NDAs do that!
NDAs have a lot of other uses as well. Any time you show your stuff to someone not already on your team such as potential team members, investors or other developers an NDA is a good idea. However, they are not generally used when presenting your game to a prospective publisher, where you would think they are most necessary. In fact, publishers will rarely sign an NDA with a developer prior to checking out a game. You see, publishers have games in process and are reviewing hundreds of games every year. If they sign an NDA with you then they run the risk that they may already have a game substantially like yours either in the works or under consideration. Of course you can ask. But don't expect much.
However, this does not mean that you should not have an NDA in your arsenal of contracts. You should. After all there are plenty of other people who you may want to have sign one. Especially as your project progresses and your need for feedback from outside of your team grows. Let's take a gander at a basic NDA.
The above NDA is set out as an example and was not specifically drafted to apply to a developer situation. But using even a basic NDA may have some advantages. For example, it may help get that private funding source you are looking at to treat your venture with a little more respect than might have been afforded otherwise. Or it might inhibit someone considering poaching your concept from doing so.
That's it for my series of articles regarding legal stuff that every rookie developer should know before looking for a publishing deal. I hope they have been of some help to you.
© 2003 Thomas H. Buscaglia. All rights reserved.
Tom is dedicated to the computer and video game industry, assisting developers in all aspects of their legal and business needs. Tom was the Keynote Luncheon Speaker at the 2003 Summer Simulation Multiconference in Montreal,
Tom is the Founder and Executive Director of Games-Florida, a non-profit committed to building the Computer and Video Game development industry in Florida by bringing Florida to the Game Development industry and bringing the Game Development industry to Florida. www.games-florida.org He also sits on the Advisory Board of the Digital Media Alliance of Florida www.dmaflorida.org recently participating in a DMAF Panel Discussion with Florida game industry leaders at Full Sail in Orlando on "The Future of the Game Industry in Florida." Tom has been the Chapter Coordinator for the South Florida Chapter of the IGDA since its inception, and is a moderator for the Business and Legal forums on IGDA web site, www.igda.org.
As FaTe[F8S] Tom is the founder and Supreme Warlord of FaTe's Minions, an online gaming "clan" that has been competing in various online competitions since January, 1998. www.f8s.com As a "hard-core" gamer, Tom plays online on a regular basis and has a gamer's appreciation and understanding of the game industry.