It is no secret that digital distribution of video games is considered by many as the future of video game distribution. One debate appears to be when (not if) this distribution channel will leapfrog retail. Satoru Iawata, for example, believes that such a sea change of distribution may take decades, however in the meantime, digital distribution is a useful tool in expanding the lifespan of products.
I am not so sure that it will take this long, particularly after the success of Xbox Live and PSN (amongst others) and the emergence of new business models. While the increasing use of broadband and mobile technology in the games industry points to the fact that consumers want their games distributed in this manner.
One thing that is certain is that developers are increasing their use of this business model. Often it is the easiest and most cost effective way for smaller studios to enter the market. No longer does the developer have to wait to be courted by the “big bad publisher” (although it is nice to get such financial backing!). The current opportunities of small studios can be compared to the indie music boom of the mid 80’s. The barriers to market are getting less and less.
Okay, so we have established that this is potentially a golden era for many developers, what is the downside? Unfortunately, this new distribution channel is fraught with legal pitfalls.
The world of digital distribution is embryonic and the next few years will see developers grappling with the inevitable legal teething problems that any new business model will face. This, coupled with the “wild west” nature of the net means that developers should be careful when using this distribution channel.
- 1. Who are you contracting with?
One of the main problems, from a legal perspective, with digital distribution is the global nature of the marketplace and the relative anonymity of the end user.
The importance of this point will depend upon the nature and content of the game. For example, some USA states have effectively banned any digitally distributed products which have a gambling aspect. How can you be sure that you are not inadvertently breaking such laws (which may entail a criminal offence) by allowing an end user to download your game?
Similarly, how can you be sure that you are not supplying a minor with a product which contains adult content?
Unfortunately, until we have more reliable technology the answer is, you cannot be sure.
Although not failsafe, you may mitigate this risk by including a term within the game’s terms of use that the end user is legally entitled to play the game in the relevant territory, that he is not a minor and has legal capacity to enter into the contract. You should delay distribution until the end user has confirmed such details.
However, this may assist with, as opposed to solve, the problem. Therefore, you have to be diligent.
- 2. Observe local law
Leading on from the point above, the global nature of this distribution channel means that there is an increased chance of the developer breaching local laws and offending local customs.
For example, depending upon the content of the game, as distribution hits more territories there is an increased risk of the game being deemed offensive, obscene or blasphemous, within certain territories. Don’t forget, this issue is live within our shores; remember the Manchester Cathedral case?
This risk is compounded by the uploading of user generated content. Is such content adequately monitored for potential offence, obscenity or blasphemy?
Also, within some territories, certain terms may be implied. That is, incorporated into the contract if you like it or not! While others may be prohibited and therefore won’t apply.
One solution is to monitor closely which territories you are distributing to. If the legal risks are too great in a certain territory, do your utmost not to distribute there.
If possible, obtain legal advice in relation to specific territories. It is better to be safe than sorry.
- 3. Who’s laws apply?
Remember end users are usually consumers, and therefore, often you cannot impose the laws of your own country upon the contract. For example, many countries state that the laws of the end user’s country of residence will apply notwithstanding what laws you state govern the contract.
Again, advice should be taken in relation to relevant laws, particularly those relating to consumers and governing laws.
- 4. Do not overdo it
Given the uncertain nature of the net and constant evolution of viruses, for example, ensure that you are not liable to the end user for any unavoidable “ghosts in the machine”. Expressly limit (as far as possible) such liability in the game’s terms of use.
Also, if support is provided, ensure that you do not inadvertently promise too much. State what support is offered and highlight what costs, if any, it will entail. Unsurprisingly, consumers and courts alike dislike hidden charges.
Manage your promises carefully, do not promise the earth, as there is a chance (even with your best intentions) that you cannot deliver and will be in breach of the contract.
To avoid heightened exposure, state within the contract your limit of liability. Often digital distributors will limit their liability to the costs of the download to avoid unlimited liability under the contract.
- 5. Protect your assets
As all developers appreciate, your IP is the foundation of your business. Do not give it away cheaply.
The industry is well aware that digital distribution has increased the plague of piracy. Although the problem is not novel, advances in technology have exacerbated it. Due to the net’s lack of borders and geographical boundaries, a digital product may be shared with another user on the other side of the world. Such freebies do not fit any business model.
Although governments are closing in on digital pirates, as end users are ultimately anonymous (if they wish to be), up until now this has had limited results. Only time will tell if law can curb this beast.
In the meantime, developers should utilise any technology it has up its sleeve to prevent piracy. And, in the game’s terms of use, include robust terms prohibiting copying together with an indemnity in relation to any losses you suffer due to such piracy. It should be noted, however, that it may be difficult to track down an end user to sue if the contract has been breached. While an indemnity is only as good as the bank balance of the person giving it.
Effectively, such anti copying clauses are more often used as a deterrent as opposed to the basis of a court action.
- 6. Protect yourself from third party assets
The increasing use of user generated content in digitally distributed games, multiplies the publisher’s potential liability. As discussed above, you should be vigilant in relation to any uploaded content. Again, the global nature of such distribution increases the chances of such content offending the laws of certain territories. And, remember it will be you ‘on the hook’ in most cases.
Obviously indemnities from an uploader in the game’s terms of use are useful but, depending upon the status of the uploader, they are not a cast iron remedy. There is no substitute to vigorous monitoring of uploaded content prior to it going live.
In summary, therefore, although the world of digital distribution is your oyster there are a number of legal pitfalls associated with the model. Do not take a chance, speak to your lawyer.
Article Author: Sean Crotty
Weightmans
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