Game developers don’t always rely on their own intellectual property when making a game. They don’t always develop their own game engines or tools software, or compose original soundtracks for their games, or even use characters and stories they’ve created.  Sometimes developers rely on third party intellectual property, or IP developed by someone else. To obtain third party IP, you need a license. Knowing what you can and cannot do with those licenses is mandatory. Understanding what you can and should negotiate is equally important. I will cover a few of the basics, but by no means all, in this series.

Music

Music licensing usually happens in one of two ways. You either only need the music and lyrics of a song and will re-record your own version or you need the original recording as performed on an album. In every case, there are three primary concerns you need to consider when dealing with music licenses: the fee, the scope of the license (how you can use the music) and the duration.

Let’s take a fictional example. Mercedes is the President of Bottom Line studios and is in the process of developing an MMO for teens and young adults called “Rebel Garden”*. She wants to incorporate some “Guitar Hero”-like mechanics in her game that allows kids to jam out online. She’s also incorporating listening parties and listening stations all over Rebel Garden that allow both indie and signed acts to promote their latest releases. Before she can do any of this she’ll need a licensing system in place to get all of the music she wants to include in Rebel Garden.

Music Licensing Basics

Copyright law treats music in a confusing way by providing two types of protection in a recorded work. First, there’s the musical composition. This is the melody, arrangement, and lyrics of a song. Next, there’s the sound recording. This is the specific recording of a song. So any recording in any format, whether physical or digital, will have at least two layers of copyright protection. What kind of license you need depends heavily on these two forms of protection.

Sync License

 Let’s go back to Mercedes and Bottom Line. For Rebel Garden’s rhythm and music mini-games she’s going to re-record the songs she wants to include. This will give her greater flexibility in how the songs can be performed on-line. If she includes some Tool and Puscifer songs she wants the ability to simplify the songs to make them more accessible to her younger audience. Because she’s not using the original recordings from albums like Ænima and “V” is for Vagina, she only needs a license for the musical composition. This is known as a sync license.

The sync license is obtained through the song’s publisher. Co-publishing deals (where the songwriter retains 50% or more of her publishing/musical composition rights) are common, but even in those cases the publisher will handle the licensing (also called “exploitation”) of a songwriter’s catalog and distribute royalties to the songwriter.

Master Use License (Master License)

What licenses will Mercedes need for Rebel Garden’s listening rooms and listening stations? These areas permit players to listen to the latest releases by their favorite artists. However, before Mercedes can include these recordings in her game she must be permitted to use both the underlying song and the recording itself. You can have a sync license without a master license, but you will always need a sync license for the underlying composition if you get a master license.

Unless an artist self-releases record labels hold the rights to reproduce recordings. You will need to contact the record label that released the specific recording you want to use to obtain a license.

Music License Deal Points

Fee: Sync licenses for video games are still relatively new to the publishing industry. Industry standards for fees are therefore still being established. Those fees currently vary depending on the publisher/record label and the developer’s leverage. The rate can be flat fee or royalty-based. A royalty-based sync license could include an advance on the royalty, a minimum guarantee, and any number of ways of defining “net receipts” on which the royalty is based. In short there are as many ways to negotiate the fee for a sync license as there are songs in the vast catalog Mercedes needs. If Bottom Line has the leverage and the budget a flat fee may be ideal. However, if Bottom Line is relying on a big payout at the end and doesn’t have much capital in the beginning a royalty rate can still net Mercedes the song, provided she can negotiate out of an advance. Minimum guarantees can be treacherous, as they will require Bottom Line to pay a set amount at a specific time after the release of the game regardless of whether the game has made any money.

Scope: Scope describes how you’re allowed to use the music. The “Scope” statement will include the title and a brief description of your game and limit use of the song to that game. Mercedes should keep the scope of use as broad as possible to allow for current and future distribution channels within Rebel Garden. The scope should include current and future technologies both known and not yet contrived, and the region covered should be universal.

Term: The perfect deal allows you to use the work for as long as the rights holder retains copyrights in the work. Similarly ideal licenses include words like “perpetual”. However, publishers and record labels may attempt to hedge you in by limiting you to a specific release cycle. For example, a license may say that it will endure for the three years that your game is in print. This isn’t always a bad thing as it may reduce the fee. However, in today’s digital distribution environment games are able to see sales long after the initial release cycle.

Additional Considerations: Sync licenses and Master Use licenses should match up as much as possible. This will avoid confusion in the future. If, for example, Mercedes is using a recording and her sync license is narrower in scope than her master use license, the narrower license trumps. Additional rights granted in the master use license become moot. Another point worth noting: Unless a developer commissions a song for their game, all licenses are non-exclusive; this means Mercedes isn’t the only one who can use it and her rights are limited to the scope of the license.

Movies

Film licensing has taken on a life of its own in the video game industry. Almost every notable film franchise has a game or series of games based on that franchise. These licenses are generally negotiated through the game publisher and are usually so fraught with restrictions and time constraints that the game becomes little more than a mediocre marketing tool for the film. This should be a major consideration when you’re developing for big screen properties; you generally will not enjoy the same freedoms and sense of accomplishment you probably enjoy when developing original IP.

And while a film IP license is often infinitely more complex than a sync or master use license, you still have a handful of major considerations: development time,  approvals and creative freedom/control, and of course the budget.

Let’s assume that Bottom Line Studios is approached via their publisher to produce a game for on an upcoming blockbuster based on a wildly successful book. What deal points should Bottom Line’s publisher fight for prior to accepting this project, and can Mercedes produce a game that’s more than your typical Marketing Department Debacle?

Development Time and Release Date: The single most important consideration for Bottom Line in creating a game based on film IP is lack of development time. The time Mercedes gets to develop a game based on film IP is constricted. A movie studio usually won’t consider licensing its IP for a game based on the film unless that film is 100% greenlit. This means all financing is secured, all necessary parties are committed to the deal, and principal photography is ready to begin. From beginning of principal photography to completion of post-production can take anywhere from 8 months to 2 years depending on the film’s budget, special effects, etc. However, by the time a studio gets around to finding a publisher, principal photography may be well under way unless a relationship with the publisher is already established.

Assuming a relationship isn’t established, principal photography has likely already begun by the time Mercedes is given the dubious honor of developing the game. Bottom Line must deliver the game by the end of post-production. Because film studios often do treat games like marketing tools, the game’s ideal street date is two weeks before the film’s release.

Any developer can tell you that it is impossible to produce a Triple A title in 6-8 months. Even a marginally polished, professional product is difficult to pull off with that much of a time crunch; and it will be crunch, hours and hours of it. And unfortunately, even if a relationship already exists between the publisher and the film studio development time usually isn’t negotiable, with some exceptions. Games based on already released film franchises, television shows, and long term film franchises (e.g., Harry Potter) are under less pressure to produce games quickly.

Creative Control: Another major drawback in developing games for film IP is getting necessary approvals throughout development. Milestone deliverables for a movie-based game are subject to an additional layer of approvals by the film studio in addition to the publisher’s approvals. In the studio’s mind this is necessary; studios need to preserve the integrity of their IP, and this includes monitoring the quality and content of any product licensing their IP. Unfortunately, this also means that the developer has fewer opportunities and less time to make the game fun. The additional approval process takes time away from development. If the publisher has considerable leverage and a working relationship with the studio, or if the film studio is actually interested in making a worthwhile game as opposed to making a merchandising opportunity, some of these approvals may be loosened. However, Mercedes should expect that every aspect of her game will be hedged in by licensing parameters, restrictions, and approvals over all content.

Budget: Unless the publisher is under the same roof as the film studio, studios don’t assist in the budget for the game. In fact budget for a third party IP game is generally less than average because of licensing fees to the studio and the shorter development time. The studio may require an advance or minimum guarantee that the publisher must pay in addition to the licensor’s royalty; this money frequently comes out of the game’s budget and the game’s bottom line. Mercedes will have to keep this in mind when preparing her milestone and payment schedule as the publisher will invariably try to make the budget as lean as possible.

All of this means that Mercedes will have less money, less creative control, and considerably less time to create the game she wants; in exchange, she gets free marketing for her game in the form of the film itself and the crossover customer benefit of the franchise. This paints a somewhat bleak picture for Bottom Line. But this should be familiar if you’ve examined the status quo of games based on movie franchises. Until and unless the movie industry treats games as valuable IP in and of itself, the intersection between games and film will continue to disappoint. However, in the uncharacteristic and unlikely situation that you get a film studio willing to grant you some modicum of creative control and all the stars are aligned granting you the time and budget to do so, you may be able to produce a game that can succeed independently from the licensed IP.

Clearance

One additional concern in all third-party licensing is the matter of clearance and chain of title. Is it Mercedes’ job to ensure that Bottom Line can use certain properties and assets from the film in the game? For example, whether Bottom Line can use likenesses of the actors in the movie depends on whether publisher, studio, and developer have permission from the actor to use his likeness in derivative products other than the film. Whether Mercedes can use the film score depends on if the studio owns those rights. Locations, trademarks, product placement; all of these individual components of IP must be separately licensed or included in the third-party license prior to moving forward.

Missing even one seemingly unimportant license can get the publisher and developer into a world of legal trouble. Ideally Bottom Line has negotiated a publishing deal that lay this responsibility wholly on the publisher. The publisher, in turn, will likely demand some assurances and warranties concerning these assets from the film studio. At no point should clearance be Bottom Line’s problem when creating games for licensed IP. The cost of clearance should also be in addition to the budget and at the Publisher’s expense, not Bottom Line’s.

Conclusion

Third party licensing is a part of the games industry. It is neither simple nor, in many cases, fair. Every game studio will be confronted with it at some point; how you fare depends on what you’re licensing, why, and your bargaining position.

• Special thanks to David Nonaka at Lionsgate and Patrick Sweeney at Reed Smith for their assistance and expertise.

* All characters, events, companies, and game concepts are fictional.

Article Author: Mona Ibrahim

Reproduced with permission from http://underdevelopmentlaw.com/

I had the honor of speaking at the LOGIN 2010 Conference in Seattle during the week of May 10, 2010. During my panel Tom Buscaglia, Randy Price, Nick Mitchell and I fielded questions concerning legal issues for studio start-ups; as an example we addressed several questions concerning rights ownership, work-for-hire agreements, collaboration agreements, etc.

The panel focused primarily on contracts and rights issues. We discussed the kinds of contracts a developer needs to have in place before and during the development process (collaboration agreements, assignments of rights, licenses, work-for-hire agreements for independent contractors) and the types of deals you can negotiate when immediate compensation isn’t an option (credit-based deals and back-end deals are the usual suspects).

I also sat in on a few panels, lectures and keynotes. One in particular stood out for me. Jason Della Rocca’s talk, “Failing to Succeed”, concerned the need to remain flexible and adaptable as a developer. Developers who rigidly remain married to a single idea or game concept will have difficulty moving forward and will rarely achieve the same success as those who are willing to fail and fail often. Trial and error, fluidity in thought, and having an adaptable nature that isn’t afraid to fail is a more proven recipe for success than the restrictive alternative of constantly fearing failure and taking fewer risks.

You need a similar mindset when committing to intellectual property in your game. It’s wise to avoid the kind of rigid commitment to an idea that will make it impossible for you to complete your game should you have to go without the “perfect name” or the “perfect song”.

Let’s look at a hypothetical: Mysty’s* game studio is developing an online flash RPG that loosely involves a magical school, a series of puzzles, and a riveting conclusion: a tournament between the protagonist and her two rivals. She’s decides to name the game “The Triwizard Tournament” in honor of the ending. Her attorney advises her that this may give rise to a potential trademark claim from J.K. Rowling and her publisher, but Mysty is determined to use the name. After all, none of Ms. Rowling’s books use the name as a title, and it’s so descriptive that it shouldn’t be a problem… right? She releases the game with her chosen name—it becomes an immediate success in the casual games market and soon ports across several mobile systems and social networking sites.

A few months later Mysty’s studio receives a Cease and Desist from the publisher of the Harry Potter novels. She still believes that she is in the right, but the publisher contends that Mysty’s success is based on the confusion the name has created in the marketplace; people purchase and play the game because it seems closely tied to the Harry Potter franchise. Mysty is insulted; in her mind nothing in her game even remotely resembles Harry Potter—it’s not as if that franchise was the first IP to us a school of magic or magical tournaments.

Mysty wants to fight even though her attorney warns her that this may become a long and tedious battle. She might lose. Still, she is committed to the name and won’t give it up. The game has generated a lot of revenue and the brand clearly has value.

Mysty becomes so entrenched in the fight that she’s unable to commit the time to create new content. She spends hundreds of thousands of dollars on legal fees and expenses and there is still no end in sight. The mobile markets and social networking sites that once hosted her game have removed it and the game is no longer generating revenue. Mysty begins to see that her game studio is suffering severely at the hands of this dispute. She becomes jaded and angry with the system that forced her into this fight and eventually quits making games all together.

A more flexible mindset and a conscious effort to make fun games instead of catchy titles would cure Mysty’s woes. The mindset of being married to a name or an idea that closely resembles someone else’s intellectual property will almost always create risks in the future, but it happens all the time. Examining your game from this angle early and coming up with palatable alternatives can easily prevent the kind of downward spiral Mysty experienced. This isn’t limited to trademarks—music, artwork styles, and other game elements can just as easily create similar disputes.

It’s important to remember that for as “right” you think you are the opposing party will usually maintain equal conviction that you’re wrong. Morality, ethics and the law do not always act in unison. It may take years to prove that you’re “right” morally but quite wrong legally. And proving that you are right may distract you from what’s truly important: making games that people want to play.

Article Author: Mona Ibrahim

Reproduced with permission from http://underdevelopmentlaw.com/

I read an interesting discussion on this recently, and wanted to see if I could get some further opinion on it – so please comment below or over in the forums if you have any info to share.

What I am hearing is…

• Publisher budgets have dropped, and they are becoming more risk averse at the moment (i.e. more choosy about what D/L content they sign)
• PSN & XBLA are the platforms they are keen on – budgets range from €400,000 at the top end, to €250,000 at the lower end. The experience of the team has a fairly large impact on the budget too – a new team, unless they have a killer product would be looking more toward the lower end of the scale.
• For multiple platforms (i.e. PSN & XBLA) look to add an additional 10 – 20% onto the budget.
• For the above budgets the publisher should be covering the devkit costs, QA, marketing & submission costs.
• Cost out a range of options, such as with or without multiplayer content, online services such as leaderboards, DLC support, etc… DON’T promise the world on an unrealistic budget or you really will enter a world of pain.
• WiiWare – the sales numbers are appalling, and apparently most publishers now won’t even consider a WiiWare title. There are some that may though – such as Hudson who have built up a big catalogue of WiiWare titles.
• PSP Minis – not a lot of info on this, but looking at the service most titles are either self-published, or internally developed publisher titles using established big IP names.

And that’s it – again I’d really like to hear any further feedback on this, as costing/setting budgets is one of the darkest arts of game development. Without prior knowledge it can be impossible to come up with a realistic figure that a publisher will accept, which just looks bad for the developer.

Actually, they’re not – but, you have to admit, the headline did get your attention…

[Tim Christian kicks off a series of articles about the auditing process for royalties. This is essential reading for anyone working with a publisher.]

I’ve been in the UK computer games industry since 1991, initially on the publishing side as the head of the European operations at Accolade, Microprose and finally Hasbro Interactive and I’d like to think that during that time I ran a tight ship and certainly didn’t intentionally defraud the developers on whose creative talents we depended to make a living.

Fast forward from 2000, when I left Hasbro Interactive, to the present day as the owner of TC Associates Ltd, part of which has become the games industry’s leading independent royalty auditor, through an earlier involvement with Media Forensics Ltd., which I also founded, and an unhappily-ending flirtation running my own development business, and what do I have to report? Well, the good news is that the games industry continues to thrive, albeit in an ever-changing and very dynamic guise. Those early days of the Commodore 64 and 5 ¼ inch PC floppy disks are unrecognisable as the technology-changing times that they undoubtedly then were. In 2010, all the talk is of apps, mobile, digital download and the end of retail as we know it. However, somewhat depressingly, the majority of publishers’ accounting systems haven’t advanced as fast or as far as we could have expected. In fact, from a royalty audit point of view, I can still boast a 100% record of having discovered previously unreported royalties in almost every single royalty audit I’ve ever undertaken. In other words, almost every single royalty audit throws up errors and, interestingly, those errors are almost always in favour of the developer.

Now, as I said earlier, it’s not that (with the exception of a very tiny minority) games publishers go out of their way to short-change the developers, but it’s important to remember three things. Firstly, royalties are a cost, and the publishers will always interpret the contract to their best advantage. Secondly, the people who put the royalty statements together are only human and, yes, they make mistakes. Lastly, whilst the finance department may well rely on a multi-million dollar accounting system, the end royalty statement will almost always be generated on an Excel spreadsheet, which is not always the most sophisticated or error-free way of doing things. In the 8 years I’ve been in the audit business, I can only name two companies which I would say had deliberately set out to misrepresent the performance of a title to their own financial benefit. So, all the other royalty finds – which ranged from several thousands to a few millions of dollars – were down to questions of contractual interpretation or weaknesses in the financial systems.

So, where am I going with this? Well, over the next few months I hope to follow this article up with further detailed advice on why, when and how to carry out a royalty audit, as well as some observations on the games industry itself – its ups, downs and developments. In the meantime, with regard to the thoughts above, think about the following good business practices to get into the habit of following.

• Have your development contract professionally reviewed before you sign it (no, really, there are stories I could tell!). There are a number of experienced – and reasonably-priced – law firms with a specific games practice. If you can afford it, have your lawyer help you through the negotiation process too. Spending a few quid here could save you a bundle later.
• Make sure there is a right-to-audit clause in the contract (no, really, there are stories I could tell!). Again, no lawyer worth their salt would overlook this.
• Make the net receipts/royalty calculation clause as clear and as transparent as possible. A worked example of the royalty report layout can always be included in the contract as an exhibit. Again, time spent on this will save money later. If there’s no room for misinterpretation, there’s little room for argument other than over the maths. In my experience, when errors in the maths are found, there is no defence.
• Don’t fall for the publisher saying that unless you formally object to a royalty report within one year of its publication, the report can’t be challenged. This is designed to stop you from auditing. Hold out for two years at least – unless you do intend to audit within one year of release. If you do intend to audit every year, make sure you put the relevant dates in your calendar. Time flies …… and suddenly it’s too late.
• If the title recoups, or is close to doing so, or if you really think there’s something wrong with the royalty calculation and your questions aren’t being taken seriously, then audit the publisher. Trust me, they’re used to it and far from taking it badly, the publisher will actually respect your seriousness and professionalism. The costs of the audit are always negotiable and sometimes can be far less than you think – and if there’s an error in excess of 5% or 10%, the publisher will be obliged to pay for the audit (assuming you negotiated that in the first place).

So, a few do’s and don’ts with which to kick of this series of articles – they’re common sense, I know, but it does no harm to draw attention to them every so often.

As I said, I’ll be back over the next few months (assuming I’m invited!) to share more thoughts on royalty auditing in particular and the computer games industry in general. In the meantime, feel free to contact me at tc@tc-ltd.com or via www.tc-ltd.com

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When Rich from Indievision got in touch to ask my to write an article about self publishing it got me thinking.  The difficulty is that self publishing can’t be reduced down to a single article.  It’s a whole business model and corporate philosophy.  To do it properly a business needs to be responsible for making a great game, marketing it, building an exploitation strategy and negotiating deals with the key channel owners.  Each of these areas could easily support an entire conference and to attempt to cover them in a single article would be to abstract their complexity and subtlety to a level that would prove utterly useless to the savy indievision reader.  Instead I’m going to write a serious of articles, based on some blog articles I wrote last year which I hope will cover some topics in enough depth to be of some use.

 I’m not an industry analyst so I’m not going to compare different business models or analyse case studies, but I’m going to dig into my mind and the minds of my pals in the industry and try to build a guide to “doing it the Introversion way”. That’s not because I think we are a perfect company or that we have “cracked it”, but because I know everything about Introversion and I think we’ve done well for three guys from Uni.

So let’s start at the beginning which in our business is an idea for a game design.  People often ask about our inspiration and the “creative method”, but the truth is that ideas come from all around us. We have no idea when an idea will hit or what will trigger a thought process that ends in an embryonic game design, but we need to be ready to capture it when it does arrive. What we also know is that the more we experience, the more we expose ourselves to the higher our creative potential. Chris explains this as feeding his inner creativity, if that part of his mind becomes starved then the ideas begin to dry up. So perhaps the first piece of advice I will impart is to expose yourself to as much stimulation as possible, read books, play games, watch films get out there and give your brain something to work with.

Most people know all that though, most people don’t need too much help coming up with ideas and if they do then the tend to be more interested in being accountants than working in the video game industry. Most people who want to start a games company already have a game idea, but it seems to me that many of them don’t seem to be able to tell when their game is crap.

Now I need to be very careful at this point. It wasn’t that long ago that we experienced around twenty publishers telling us that Uplink was crap and wouldn’t sell. A few years later we were looking for distributors to shift boxes of Darwinia however it took as a long time to find someone who didn’t think it was crap. By the time we released DEFCON we’d pretty much given up on publishers, but we thought we’d give it one last go, but I think you can probably guess the response we received.

We’re not publishers and I try to be as positive as I can about new game concepts (even if I don’t understand them), but there are some features of an idea that make it bad.  If we can avoid those obvious pitfalls than perhaps we have something worth taking forward. 

Firstly, don’t make a game that only you are going to play. In order to be successful there has to be some market potential. Perhaps that market can be very small – with a team of three people, ten thousand sales can be a good result, but you still need some people to want to play your game. If you get your rocks off thinking about a third person bunny slaughter set in a steam-punked Tehran, fair enough, but you need to ask yourself what will non-freaks make of this idea.

Secondly don’t try to beat the big boys at their own game. It’s like EON but better is not a good way to begin a pitch.  The big companies spend millions developing their games and you and your mates are not going to be able to get anywhere near the production quality of these AAA titles.  It’s a cross between EON and WoW is another great way to shoot yourself in the foot. These are massive franchises with established players and if you create a second rate blend you’re not going to attract either group of fans. Ask yourself, what am I doing to convince a player to put down what he is playing and pick up my game?

Finally, make sure that your idea is feasible. Figure out how much work it will take to complete your game. Figure out how much work your team can complete in a day and figure out how many days it will take to get to the end of your project. Double that number. What you end up with is a realistic estimate of the time taken to get your game out the door. If you are looking at several years than you really need to find out if you are committed to the concept.  All too often Student teams have ideas that are way beyond their practical reach – don’t make this mistake. Keep the scope small, and sleep safe in the knowledge that you can always put more of the cool stuff in the sequel.

If your idea passes those three tests than you are on to something. What exactly you are onto is yet to be seen, but at least you know that you cleared the first hurdle!

Thanks to Mark Morris of Introversion. ( Cheers Mark – Rich )

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Last month I wrote the first in a series of articles, aimed to help budding game developers found their own studios and avoid being developed, trained, integrated, educated and moulded by the mainstream until all creative spark has been utterly extinguished. Last time we looked at ideas and I tried to gently provide some guidance on what is a bad game idea and this time I want to talk about the prototype.

It is important to note that I have not written – How to get funding for a prototype – because it is virtually impossible to secure money before you have something to show. Even if you have the most fantastic idea in the world, you have a much, much better chance of getting somewhere if you have an actual tangible game then if you only have a few scribbles on paper (even if those scribbles do include some amazing concept art and a ton of design work).  Now I’m sure that there are people in the world who have managed to get development money for a prototype (and there are grants out there to give you some funding), however these people are few and far between and my view is that you have a much better chance of getting funding for principle development if you have a prototype worked up. So if we assume that you and your mates are going to have to work in the evenings, weekends, during lectures and on the tube we’d better start to look at what you are trying to achieve.

There are two main objectives for the prototype, the first is internal, the second external.  Once you have a game design (or even just an idea in your head) it is necessary to start experimenting with bringing that design into the real world. The major challenge with game design is that the end product must be fun to play and sadly it is very easy to take the fun out of the game. You can produce an incredible game that looks stunning, includes an amazing back story, has great game-play mechanics, but if you get the control mechanism wrong the whole thing will collapse before your eyes.  Of course in different games different aspects are more important (the story is perhaps less important in Half life than in Mass Effect), but you may not be able to determine this at the start. The point is that until you actually have the game in front of you then you do not necessarily know which areas of the design work, which need tweaking and which are fundamentally flawed.  This is where you prototype comes in.

At introversion we loosely adhere to a spiral software engineering paradigm and I would recommend this approach for developing a prototype. The first stage is to sit down and determine the scope of the project. Whether you are aiming to produce one complete level or small area of your game world or perhaps a large area with only some elements included you need to understand and stay focussed on achieving this objective.  When you choose the scope you need to try to deal with the most uncertain part of your design, which areas are you least confident in? Which areas are of most importance to the player? Where are the technical challenges? Asking yourself questions like these should help you determine what to include in your prototype and what to leave until later.

Once you have determined the scope I would recommend a quick first pass to get something playable as soon as possible. Try to avoid getting bogged down with detail, at this stage you should not be making the game look great or worrying about implementing your maps perfectly just get something working. Once you have completed your very raw first version, you can then complete a second pass where you start to deal with the next layer of detail and finally (if there is time) you may want to do a final pass for polish.

The above approach provides a good deal of momentum for your initial work. It enables you to tackle the hard problems first and not get caught up in something that might ultimately prove impossible. If you get stuck, try to solve the problem for a couple of days and if you don’t make progress just move onto the next problem and worry about it in the next phase. It’ll inform you about the quality of the game design and enable you to make massive global changes without having to go back and re-do all the detail. The method has served us well in the past and if you have been reading Chris’ subversion development blog you’ll see that he is constantly switching between different aspects of the game whist he proves his design.

I also mentioned that prototypes have an external (secondary) objective and that is to convince someone (publisher, invester, government body etc) to give you some money. If you find yourself in a position to use your prototype in this manner then you need to bear in mind one fact. The publisher will run your exe once and once only. If it doesn’t work, game over. If it is non obvious what he needs to do, game over. If it crashes in the opening few minutes, game over. In short do not expect any slack what so ever – you will not get it. This means you must test your prototype fix the bugs and make 100% sure it will run. This sounds simple, but I once told a developer that I was off to see Microsoft and I would show them his prototype if he could get it to me. He sent me three e-mails each with a different build (he kept fixing last minute bugs) and none of them worked. Sadly that was his chance blown for an XBLA deal. I’m not going to deal with testing in this column, because there are a ton of books out there on the subject, but I leave you with this thought: If Uplink had crashed when Keiron Gillen put it in his PC, where would Introversion be now?

Thanks to Mark Morris of Introversion.

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This issue has a lot of angles and typically two or more sides to each story. On the one hand you have the enforcer, or anyone who owns original IP. An example of the stereotypical enforcer includes Microsoft, who put a complete stop to the independent development of a Command and Conquer “HaloGen” mod that employed Halo’s intellectual property, developed by a small studio called Slipstream. MS subsequently went on to have Ensemble develop Halo Wars, which is, you guessed it, a Halo RTS. Another philosophically controversial “enforcer” example is Apple, who has worked continuously to enforce its EULA against the owners of jailbroken iPhones.

At the other side of this debate is the alleged infringer, which could be an indie like Slipstream or, more problematically, the crackers and black hats who hack DRM and pirate games in a manner that damages the entire industry. This is, in fact, one of the biggest problems arising from jailbroken iPhones; it has rapidly become a problem that creates constant strain in the application and casual game markets.

Regardless of your personal philosophy concerning the identity of the enforcer or the infringer, IP enforcement is an important aspect of protecting what you create. It’s as important in commercial works as it is in open source projects even though the ideals behind enforcement may differ. The issue here is control and access, and who has that control and access. Without this article will explain intellectual property enforcement methodology without touching on personal philosophy or the identity of the infringer or enforcer. It is my belief that it is just as important for independent developers to protect their IP as it is for the majors, and as such the tools for enforcement should be available to all.

Getting it in Writing

Contracts such as EULAs, licenses, and employment agreements are the first line of defense in IP enforcement. The more clearly your contracts set out your intellectual property rights and your remedies in the event of infringement or breach, the more likely the people you contract with are to comply. This is particularly true with regard to proprietary technology, trade secrets, and ideas you want to keep confidential.

Identifying Intellectual Property. The first step in protecting your IP is identifying what you consider protected under the shield of the contract. In the case of employment agreements and NDAs you need to be as specific as possible with regard to trade secrets and proprietary technology. With regard to EULAs you need to identify all components of what you want to protect, including content you’ve licensed from third parties. One example of how this can be done* is demonstrated in the World of Warcraft EULA, which identifies IP in two places: it sets out the game, patches, and manuals in the introduction, and expounds on those basics in the “Ownership” section further down.

Identifying Permissible Use of Intellectual Property. The next step in protecting your IP via contract is clearly stating what the licensor/end user/employee CAN do. Explain what is permissible: in the case of your game’s EULA, explain what users can do with your software; in the case of your employee agreements, explain how and when employees may access or use information; in the case of non-disclosures and confidentiality agreements, explain who information may be disclosed to or when confidentiality may be waived.

Identifying Impermissible/Infringing Use of Intellectual Property. Once you’ve explained what people CAN do with your IP, you need to explain what they can’t do. For example, in the case of games, computer programs, and hardware, one major issue of contention is reverse engineering. Under the Copyright Act reverse engineering is generally (but be careful, because this is a devilishly tricky area of the law) permissible if it is done exclusively for the purpose of interoperability. However, you may not want your game or software to work on jailbroken iPhones or other gaming devices that you plan on porting to down the road. This is something that may arguably (although this is by no means settled law) be limited by the EULA. Most major content owners seem to think so. If it’s something you deem necessary to protect your future interests, you should consider including it.

Identify Remedies and Damages. This is where you let the people you’re contracting with know what they risk if they infringe or impermissibly use your IP. You should include all available equitable remedies (remedies not grounded in monetary damages), including injunctions and restraining orders, as well as statutory and actual damages or profits resulting from infringement.

DRM and Keeping Secrets. If you’re using DRM technology, you need to let people know that you’re using it. You also need to explain that the disruption or removal of that DRM will expose them to additional Copyright Act liability if they choose to crack it. In the case of employment agreements, if you’re trying to protect trade secrets you must take steps to keep information secret. This includes DRM, password protection, encryption, and making it clear to employees that disclosing that information to anyone outside of their department is a big No No.

Cracking Skulls

There’s always a possibility that someone will breach your contractual provisions, or your game will be cracked and pirated, or you’ll find an inferior clone that passes itself off as the original. You will be angry and you will want to do everything you can to stop this from happening. First, calm down. Immediately calling a lawyer and filing a complaint or otherwise throwing a fit is expensive and probably bad for your health and peace of mind. Next, evaluate the validity of your claim. Do you have a claim? Is it really infringement? Would you know if it weren’t? For example, if the product is similar or identical to your own but released prior to or very shortly after your own, there’s a strong presumption of independent creation (which isn’t infringement under Copyright Law). You may want to talk to an attorney before going further. Take a deep breath and review the suggestions below, from most cost efficient to least. In some cases you may want to skip the first option, but as you’re an independent developer you may garner more sympathy from other small collectives, pirates, or studios who are (perhaps unwittingly) infringing on your rights.

Contact the people directly. A polite phone call or casual e-mail as a first step can go a long way in preventing future ill will or the need to lawyer up. If the infringer isn’t aware that the material is infringing or if they don’t understand the basics of IP law, they may comply with a friendly request without any further cost to you. This isn’t always the case, but as I said above, you’re an indie. There’s camaraderie among your fellow compatriots and there’s nothing wrong with taking advantage of that good will to protect your IP.

Send a Cease & Desist. If the first approach is unrealistic or ineffective the next option is a more formal C&D. This should typically come from a lawyer, but if you’re still trying to avoid the need to lawyer up you will want to at least include the following:

• An introduction that sets out your name, your product, and where your product can be found;
• A description of the rights you hold in the work, including any music, artwork, engines or code you’ve exclusively licensed;
• A description of their work, and how it is infringing;
• A citation of the laws being infringed, including Copyright law, Copyright Circumvention laws, trademark and unfair competition;
• A list of actions that they must cease and desist;
• A request for damages, if relevant;
• A “respond to by” date;
• Your preferred contact method.

Before you go any further. Have you registered your work/trademark? Under U.S. law you can’t bring an action for copyright infringement against anyone until you’ve filed your application, paid your fee and submitted your deposit. In the case of trademark, monetary damages including profits aren’t available unless your mark is registered and you’ve included the ® symbol or some other notice of registration. The sooner you register the better. Under Copyright law you’re entitled to statutory damages so long as the infringement occurred after you’ve fully completed your application and submitted your fee/deposit, or within three months of the infringement. Since the minimum statutory award is $750 for each infringement registration really shouldn’t be put off. In fact you should make it a policy to register as soon as you complete a project and have something to submit to the copyright office.

Send Takedown Notices. Send takedown notices wherever you find your infringed work. Bear in mind that the DMCA safe harbor only applies to those sites with a registered DMCA agent. If the site or service provider doesn’t have an agent you may want to instead send another C&D explaining why they are also infringers.

File a Complaint. This is certainly the point of no return. If you haven’t lawyered up yet, do so now. If your C&Ds have gone ignored or the infringer has sent a put back up notice in response to your take down, the only way to get that infringing material taken down again is to file a complaint and send a copy of that complaint with a second take down notice. Most websites with DMCA provisions will explain that process in their EULA. You will likely be filing your complaint in federal court and you will want to include every possible cause of action available, including all possible state claims.

At this point the conflict could take a few turns. If this catches the infringer’s attention, you can try to achieve settlement quickly or use some of the mediation or arbitration techniques described previously. It’s typically at this point that enforcement gets pricy and time consuming, but it may be a necessary step to protect your rights.

*  Direct copying from any document including EULAs and other contracts without permission from the original drafter or document owner is typically considered copyright infringement. Draft your own or hire an attorney to draft it for you.

Article Author: Mona Ibrahim

Reproduced with permission from http://underdevelopmentlaw.com/

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Royalties are overwhelming if you’re not used to working with them. Royalties operate on two levels in most contracts—first, there’s the language used to determine the kind of royalty we’re dealing with, and next is the actual number that applies. Therefore it is necessary to know both the terminology and the math involved. I am going to explain this word-by-word, with examples, because it’s the only real way to keep track of the details. *Note: The deal points and amounts set forth in the examples are NOT real world examples and are totally arbitrary.

Advance: An advance is a lump sum or installments of a lump sum (i.e. milestone payments), paid out to the developer and later charged against the developer’s royalties.

    Example: Publisher will pay Developer an Advance of Thirty Six Million Dollars ($36,000,000) payable pursuant to a mutually agreed upon milestone schedule.

Guarantee: A Guarantee, Minimum Guarantee, or Minimum Commitment is more common in license or distributor agreements and is sometimes used incorrectly (in other words, it’s sometimes used interchangeably with “advance”). It means that the party responsible for revenue is promising the other party that the other party will earn a specific dollar amount in royalties by a specific time. If that amount isn’t earned, the party responsible for the revenue promises to pay the rest of the guaranteed amount out of its own pocket.

    Example: XXX guarantees to sell at least the minimum quantities of _____________ for each of Company Y’s Product within thirty-six months of Delivery (“Guarantee”). In the event that XXX does not achieve the Guarantee, XXX agrees to pay, at the expiration of thirty-six months after Delivery, the difference between the royalties which would have been payable had the Guarantee been achieved and the actual royalties paid to Y Company. 

Recoupable: Advances are usually a) recoupable and b) non-refundable. B is self explanatory. A sounds like gibberish. Recoupable means that the amount of an advance must be paid back through sales. Specifically, it means that the royalty you’re entitled to under the contract won’t be paid to you until you’ve paid back your advance directly from your own royalties. 

    Example: Publisher will pay Developer a non-refundable, recoupable Advance of Thirty Six Million Dollars ($36,000,000) payable pursuant to a mutually agreed upon milestone schedule.

    Example- Application: The publisher must earn back that $36,000,000 from the developer’s royalty rate. If the Developer has a royalty rate of 10% of Net profits, then the game would have to earn $360,000,000 in Net Profits before Developer is entitled to royalties.

Royalties: Simply put, royalties are the percentage of earnings you are entitled to. You sell your intellectual property rights (or a substantial portion of those rights) to a publisher. In exchange for those rights, the publisher gives you a royalty, which is usually a percentage of Net Profits. Note: Even though you are no longer the legal owner of your intellectual property, your royalty gives you an equitable interest in that property. That means that you still have standing to sue as a “beneficial owner” in the event of infringement.

 Example: Developer shall receive a Royalty equal to 30% of Net Profits.

    Example- Application: Assume that Advance has been recouped. After recoupment, Publisher earns an additional $100,000 in net profits. The developer is entitled to 30% of that $100,000. The developer is therefore entitled to receive $30,000.

Gross Profits: Gross profits or gross revenue is the total amount earned in sales before deductions and expenses.

    Example: Publisher has sold 10,000 units at $15. The gross profits/gross revenue is $150,000.

Net Profits: Net profits mean revenue earned AFTER deductions. Deductions may include cost of goods sold, reserves, “free goods”, shipping and transportation, taxes, duties, and tariffs, marketing allowances, and earnings of third parties (i.e., if the game is based on a movie, the IP owner of the movie may have a royalty senior to the developer’s royalty. The amount paid to the licensor is deducted from the net profits.)

    Example: “Net Profits” shall mean all monies received by Publisher, its affiliates, subsidiaries, assigns and licensees less customary reserves, cost of goods sold, lost and damaged goods, returned goods, promotional units and free goods, rebates, trade/marketing discounts, allowances and credits in connection with Product, and earnings due to third parties.

    Example- Application:

    @ 30% royalty, you earn $1,779,000. If you aren’t recouped, this amount goes towards your Advance and you never see it.

Reserves: Reserves are typically a percentage of the receipts that are withheld for a specific period of time to cover returned units. Retailers are entitled to return units that they are unable to move, and they can get a refund from the Publisher for those units. Publisher may try to pass those losses onto the developer.

    Example: “Reserves” shall mean 10% of Net Profits for all returns, discounts, markdowns and allowances of Units. Publisher shall liquidate Reserves if Reserves are not used within 180 days.

    Example- Application: Your deal sets a reserve amount of 10% for a period of 6 months. This means that at a maximum Publisher can withhold 10% of revenue as reserves against net profit calculations for 6 months (this doesn’t include lost or damaged goods, those are accounted for separately). Publisher sells 1,000 units at $20 to Retailer. Of that $20,000, Publisher can withhold $2,000 for 6 months from royalty accounting to cover returned goods by Retailer. Of those 1,000 units, retailer returns 50 units. Assuming there is no penalty Retailer is entitled to a refund of $1,000. Publisher can then use the reserve to cover the $1,000 loss, which is deducted then deducted in Net Profits calculation. At the end of 6 months, the remaining $1,000 is added into the accounting for Net Profits assuming there are no more returns.

Free Goods: Somewhat self-explanatory—publishers will give away units to various media entities for promotional purposes. Those units are typically marked “For Promotional Purposes Only, Not For Resale.” Those promotional units are not considered “sold” and provide no revenue. Therefore the cost of those units is deducted from Gross revenue.

    Example: No royalties shall be earned with respect to (a) Units used for promotional purposes or furnished free to the trade, press or for public relations use; (b) Units furnished free to distributors, sub-distributors, retailers, or others; or (c) prior to a uniform wholesale price reduction, Units sold to distributors, sub-distributors, retailers or others for less than the actual per unit cost (i.e. “at-cost” price) of the applicable Unit.

Cross-Collateralization: Cross-collateralization means that revenue earned from one game title can be used to cover unpaid advances and development fees of other titles. This is typically the case when one developer works with one publisher over various titles. The term can also be used in reference to sale of the same title over multiple platforms. 

    Example 1: All royalties shall be cross-collateralized across all platforms and version of the Title.

    Example 2: Publisher may recoup Advance and all additional fees in whole or in part from all Royalties earned by Developer under this Agreement or any other agreement between the Parties.

OEM: Original Equipment Manufacturer, or “bundling.” Publishers may license a game title to OEMs (i.e. console manufacturers) to be bundled into the product. OEM agreements are typically treated as “ancillary” compensation. Under OEM deals the publisher grants the equipment manufacturer a license to distribute the game software in a very specific manner, usually as part of a bundle with equipment or a console. To do this, the publisher usually delivers a master CD of the game to the equipment manufacturer, and the manufacturer is responsible for printing and packaging that product pursuant to approvals by the publisher.

    Example- Application: Your game is ported to Nintendo Wii. Your publisher then enters into an OEM Agreement with Nintendo to bundle your game product with the sale of each Nintendo Wii. The royalty rate for OEM bundled products is ordinarily substantially less than the retail list price. If OEM products are included in your deal as ancillary revenue, and your ancillary royalty rate is 50%, you’ll be entitled to 50% of the publisher’s OEM royalties from the Nintendo OEM deal.

Ancillary revenue: Ancillary revenue is usually calculated separately from Net profits because ancillary revenue doesn’t involve the sale of traditional units. Instead ancillary revenue is derived from licensing of the game product. For instance, strategy guides, merchandising, and licensing your game’s IP to a movie studio all constitute ancillary revenue.

    Example: “Ancillary Rights” shall mean any and all ancillary items, including, but not limited to, strategy guides, toys, books, comic books, photographs, posters, television series and motion pictures, derived from, based on, or in any way related to, the Title and/or content of Title.

Future Products: In the event that the Developer doesn’t create sequels, prequels, or additional ports for the game, the developer may still be entitled to additional compensation for future products that use the game’s IP.

    Example: Publisher shall pay to Developer X% of Net Profits for Future Products not developed by Developer, including any future ports, sequels, prequels, and other game products derived from the Title’s content.

These are the general principles behind royalties. However, how royalties are calculated depends very much on the specific agreement, and relying on “general” principles can therefore be dangerous. Your best bet is to read the definitions section of your agreement. If royalty terms aren’t spelled out there, review the “royalties” Or “contingent compensation” section of your agreement. If something isn’t clear to you, consult a lawyer. It’s the only way you can be sure that your royalties are properly being accounted for.

Article Author: Mona Ibrahim.

Reproduced with permission from http://underdevelopmentlaw.com/

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A lot of agreements
will contain language similar to this:

“XXX agrees that all
work performed in connection with XXX’s services and all derivatives thereof
shall constitute “works made for hire” as that term is defined under 17 U.S.C.
sec. 101 and the author and owner of the work made for hire is Y Corp.”

This can create
confusion for some people, especially for independent contractors. Does a work
for hire agreement create an employer/employee relationship? The short answer
is no. A Work made for hire determines the ownership of the work performed and
not the actual relationship of the parties.

A “work for hire” or
a “work made for hire” is a copyright term of art. The definition is spelled
out in § 101 of the Copyright code.  Works made for hire are property of the
contracting party or employer. If a company hires you as an employee, any work
you do for that company is a work for hire and is considered owned and authored
by the company. Similarly, if you are hired as an independent contractor for a
project and your contract contains a work for hire provision (like the one set
forth above), the work you do in connection with that project is deemed a work
made for hire.

The independent
contractor relationship is a bit trickier than the more straightforward
employment relationship. The definition is narrowly tailored to include: “a
work specially ordered or commissioned for use as a contribution to a collective
work, as a part of a motion picture or other audiovisual work, as a
translation, as a supplementary work, as a compilation, as an instructional text..
if the parties expressly agree in a written instrument that the work shall be
considered a work made for hire.”

An independent
programmer contributing to a game would probably fall under the “contribution
to a collective work” category. However, the language above means a couple of
things for the contracting party/company.  

1) The contract MUST
contain language like that stated above—i.e., it must clearly state that the
work is a work made for hire as that term is defined under 17 U.S.C. sec. 101.
This isn’t negotiable.

2) The contract
should also contain an assignment provision on the off chance that the
independent contractor’s work doesn’t fall under one of the work for hire
categories. It should also address droit morale and other author rights that
may or may not be waivable.

An assignment of
rights will look something like this:

“In any event, XXX
does hereby assign, transfer, and set over to Y Corp., its successors and
assigns, one hundred percent (100%) of XXX’s entire right, title and interest
in and to all works in connection with Z Project and all derivatives thereof (individually
and collectively herein “Works”), including without limitation any and all
so-called “moral rights” in and to Works, together with all copyright therein
throughout the world and any and all renewals and extensions of copyright
therein now known or hereafter existing under any law, rule, statute and/or
regulation now known or hereafter enacted, and including without limitation
exclusive rights to administer the Copyrights to Works. Works are the sole and
exclusive property of Y Corp free from any claim by XXX or any other person or
entity… XXX hereby waives any and all moral and author rights held by XXX in
connection to Works throughout the world to the extent that those rights are
waivable.”

For the sake of
brevity, I’ve cut that down a bit. It’s saying that XXX (the independent
contractor) is assigning/transferring all of his remaining rights in and to his
work on the project to the contracting company. It also says that he has waived
his foreign moral and author rights to the extent that they are waivable (some
are not).

Here’s a brief and
by no means all-inclusive list of things you should have in your agreement if
you are the contracting party (i.e.,
the company):

1) The words “work
for hire” or “work made for hire” and reference to sec. 101 of the Copyright
Act;

2) An assignment provision
assigning/transferring all rights in and to the desired work, including any and
all rights that may arise at some future time;

3) A waiver of any
and all moral and author’s rights to the extent that they are waivable (this is
important. Failing to include “to the extent that they are waivable” may cause
the contract to be voided in some countries);

4) A specific
description of the works deemed as “works made for hire”.

Here are some things
you want if you are an independent
contractor:

1) A statement of
any work that is being contributed to the project that should NOT be deemed a
work for hire—for instance, if you’re bringing in specific know-how or a
program you previously wrote, that needs to be distinguished from the work you
are doing as a work made for hire. You want to include an addendum setting
forth everything you are bringing in to the project;

2) A retention of
rights for those things you are bringing to the table;

3) A clear statement
that any and all work performed outside the scope of the contracting party’s
particular project by the independent contractor is the independent contractor’s
sole and exclusive property (unless it too is subject to a work-for-hire
agreement, of course) and/or is not subject to the work made for hire
agreement. If you already know you are going to be working on something else,
you may want to consider spelling that out as well.

4) If you are
bringing in propriety know-how or your own trade secrets, you will definitely
want a NDA protecting your interests and prohibiting the misappropriation of
those trade secrets by the company. Limit the use of those trade secrets and
processes to the particular project in question, and take steps to retain the
confidentiality of those trade secrets.

Article Author: Mona Ibrahim.

Reproduced with permission from http://underdevelopmentlaw.com/

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This keynote speech from the Digital Distribution Summit provides an insight on how to pitch your indie game for funding.

Digital Distribution Summit – Sandra Sdraulig Opening & David Edery Keynote from Digital Distribution Summit on Vimeo.

Key points:

• Be able to describe your game in one sentence.
• Identify your target audience (don’t just say everyone)
• Do your research, make sure you have sized your market and are pitching for the right budget (current XBLA budgets are sub $1M for example)
• Tailor your pitch for the organization
• Try and identify gaps in the organizations portfolio and move quickly to fill it.
• Make sure a prototype or video sells gameplay, don’t over focus on story, tech or art (I’ve been guilty of this myself.

David is formerly XBox ‘Worldwide Portfolio Planner’.

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So someone asks – “how can I protect my idea?”

Someone else says “put it in an envelope and post it to yourself.”

Someone responds that that does nothing and is useless.

What is the reality?

Answer:

It’s not useless to post to yourself as evidentially this has some value. It has more value than not doing so but the key is that it is “evidence”.

It’s all about evidence when it comes to copyright. Copyright arises automatically on the creation of an original work – there is no need for registration to get it (though I believe that in the US you need registration to litigate it).

So you have to prove that you created it and when.

Posting a full copy of the design history etc works more because of the fact that there is a full design / development history.

You will be the only one with the full design / development history and this is something that an infringer will not have.

So that means keeping (and not overwriting) all files and each iteration of the design, program etc. – from the first to the last

What you do then is icing on the cake. FTP to a secure server can verify date of submission (not creation unless you do it daily). Email to yourself or a secure hotmail / googlemail account should have the same effect as posting to yourself – if not more because it is less easy to fake.

But of course this all relates to copyright which only protects the expression of an idea not the idea itself AND which can only be infringed if someone else copies it.

Of course the best way to avoid someone copying your idea is to keep it confidential.

Which creates the big dilemma – if no one knows about it then no one can copy it – Great. but if someone independently comes up with the same idea there is nothing you can do about it.

then there is also the problem that copyright only protects the expression of an idea – not the idea itself. So if someone takes your idea and expresses in a different way then there is no protection that copyright gives.

Also functionality per se isn’t protected by copyright and so with web applications and software you have to rely on the code as a literary work or the visual appearance as an artistic work – to the extent that it can be protected as an artistic work.

Practically therefore if you want to protect functionality mechanics then you have to look at writing down all the component elements, producing flow charts, design drawings and committing as much as possible to paper in the same way they do in film and TV when they create “Format Bibles” to try and protect game show ideas etc.

There is no great certainty whether this will work either – buts its all about doing the best you can with the rights you have since a bare idea is not protectable.

Enter Patents – which can protect the idea / invention itself – if it is novel, capable of industrial application and inventive (i.e. not discoveries). These cost money. In Europe software is not patentable per se (though the technical effect it has on hardware can be). In the USA business processes and software are patentable but the costs can vary from $15000 for a provisional “holding” filing to many 1,000s for the full thing – if you want it done properly.

Then we have trade marks (spelt trademarks in the US) which are essentially used to protect names, logos and marks that differentiate your goods and services from those of other i.e. brands that designate the origin of goods or services as being yours.

These can be registered or unregistered – though for you to have enforceable rights in an unregistered trade mark you will have to have made use of it in such a way as to give you good will and reputation in it.

As I say – so much to say – too much to cover it all here but the key rule with intellectual property is to:

• Identify – what rights exist
• Protect – them as best you can
• Enforce – use them or lose them
• Exploit – make them work for you

IP is the single most important asset of a software business and if you don’t look after it at then its like leaving your house unlocked.

If nothing else following a few simple steps at least give you the option down the line.

Oh and one final point – make sure anyone who creates anything for you enters into an agreement confirming that you own the IP in it (wherever you intend to do so).

The whole of the above can fall down if someone else can claim rights in the work.

Thanks to Alex Chapman for this article (Sheridans).

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What’s the situation when someone develops a game or product based on third party software (with permission) i.e a “vanilla” product or engine that is made available for that purpose – then someone else comes along and uses it?

In true lawyer style I have to say it depends on what the licence terms of the “vanilla” software are.

Use of middleware is extremely common in games and other applications but each have there own terms concerning modifications, adaptations and improvements etc – so it all turns on what they say.

Non-derivative works i.e. those that aren’t derived from the “vanilla” code should belong to you.

The code in that work would be protected as a literary work so that a substantial part of the code could not be reused by someone else without consent. Also art and visual assets would be protected as artist copyright works.

However functionality per se is not protectable.

So if someone has just copied the ideas then its hard to do anything.

If the owner of the “vanilla” tech has taken his mods and is entitled to under the “Vanilla” licence then its hard to do anything.

However if someone has copied his original work or a substantial part then its possibly copyright infringement.

The key is to make sure that before using any third party software you understand the terms – and if someone does copy your work to look to enforce your rights once you have understood what they are.

Thanks to Alex Chapman for this article (Sheridans).

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I often get asked about disclaimers and notices in email footers and the requirements for providing information in web sites and emails. Its something I have commented on before on Chinwag and elsewhere but I thought it would be good to refresh the topic.

The long and the short of it is that you must include the company’s name, place of registration, address of its registered office and registered number in emails but there are some optional extras that you might want to consider. These are the kind of things you might normally expect to be included a subject header or (if it was a letter) in the main body or heading such as “subject to contract”, “confidential” etc.. However it has become common to include them in the email footer “just in case”. There is some uncertainty as to the enforceability of these notices and disclaimers but the accepted thinking is that they can’t hurt and their enforceability will depend on the circumstances of each case.

Confidentiality Notices You use these already and the purpose of that is to remind or notify the recipient that the information disclosed in the email may be confidential. This is also intended to help protect you if the email falls into the wrong hands or goes astray. In that case it may be an idea to add to your notice that the email is for the intended recipient only and that if it is received by someone other than the intended recipient it should not be used etc.

Contractual Notices You may also find that you are negotiating deals through email. In those cases it can be sensible to head the email “subject to contract” so that you aren’t deemed to be entering into an agreement through email when in fact you intend there to be further negotiation and the final deal to be subject to a signed negotiated agreement. Therefore in case you / your team forget to include it in the subject header or main body including it in an email footer can be the next best thing.

Disclaimers Sending emails have their own inherent risks. For example the attachments may have viruses and there may be technical problems such as email going astray (as described above). Therefore there is the opportunity to include a disclaimer to try to limit or remove your liability for these things.

Email Monitoring You may want to monitor emails sent and received by your employees. In that case you should include a notice saying that this is possible.

THE FOLLOWING IS A MORE COMPREHENSIVE SUMMARY OF THE ISSUES

Business Names and Information Disclosure – a summary of the issues

 Alex Chapman

The law concerning what information a business should disclose has recently been updated to clarify that companies must now disclose their full name, registered address and registration number in all its web sites and all letters, order forms, notices and other official publications whether those are in electronic form or not.

That includes emails which relate to the business of the company.

All companies should therefore review their web sites and emails to make sure they are compliant.

For email we would recommend that you include the information as a footer to the standard email template and for web sites you should consider updating your “terms and conditions”, “about us” or “contact” pages.

The new regulations should also be considered in conjunction with some existing rules that it can’t hurt to be reminded of and these are set out below

 Company’s name to appear in its correspondence, etc

 Every company must have the company’s place of registration, address of its registered office and the number with which it is registered mentioned legibly in all business letters, order forms and web sites of the company.

 The legislation specifically states that references to a type of document include all such documents, whether in hard copy, electronic or any other form and that therefore includes all emails sent by or on behalf of the company.

Every company must have its name in legible characters:

(a) in all business letters and order forms of the company;

(b) in all its notices and other official publications;

(c) in all its web sites;

(d) in all bills of exchange, promissory notes, endorsements, cheques and orders for money or goods purporting to be signed by or on behalf of the company, invoices, receipts and letters of credit.

However a web site is not a company’s web site for the purposes of these rules if-

(a) its content is determined solely by persons other than the company, or

(b) it does not relate to the company, its business or its operations.

Business Names Generally

 In the case of businesses that are not companies the general rule is that they should state legibly on all business letters, orders, invoices and receipts and written demands for the payment of debts:

(i) the name of each partner in the case of a partnership,

(ii) in the case of an individual, his name,

(iii) in relation to each person so named, an address in Great Britain at which service of any document relating in any way to the business will be effective (this could be the principal place of business and would not have to be a different address for each person).

Also in any premises where the business is carried on and to which its customers or suppliers have access, a notice containing such names and addresses is to be displayed in a prominent position so that it may easily be read by such customers or suppliers.

The E-Commerce Regulations

 The effect of this is that any business sending an email or similar communication for marketing purposes must comply with certain requirements of the Directive including that:

• The effect of this is that any business sending an email or similar communication for marketing purposes must comply with certain requirements of the Directive including that:

o       they give at least their name, e-mail address, geographic address and the particulars of their regulator;

o       whether it is solicited or unsolicited the email must clearly identify:

§         that it is email marketing;

§         the business on whose behalf it was sent;

§         whether a promotional offer is made and that it is a promotion together with its conditions in clear and unambiguous terms;

§         the terms of any promotional competition or game in an easily accessible manner and that it is promotional competition or game.

o       as soon as individuals receive unsolicited commercial communications they must be clearly identifiable as such i.e. in the subject header and therefore without reading the email

o       those involved in email marketing regularly consult and respect any
opt-out registers such as the E-mail Preference Service scheme supported by the Direct Marketing Association.

These Regulations became law in 2002 and deal specifically but not exclusively with the issue of commercial communications. These are broadly defined as being any form of communication designed to promote the goods, services or image of a business and, insofar as they form part of an “information society service” such as the Internet, they will be covered by the E-Commerce Regulations.

Thanks to Alex Chapman for this article (Sheridans).

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