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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.

Employee/Consultant Agreements

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


  Employee/Consultant Agreements

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The Series
  Initial Legal Issues
  Just what are these games made of...legally speaking?
  Completing Your Contract Arsenal - NDAs, Employee and Consultant Agreements