When and Why Game Developers Need Lawyers. Presented to Attendees of South by Southwest (SXSW) in March 2010

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2010 presentation to game developers at SXSW on when and why they need legal counsel. The goal was to make attendees better consumers of legal services by introducing them to major legal concepts. …

2010 presentation to game developers at SXSW on when and why they need legal counsel. The goal was to make attendees better consumers of legal services by introducing them to major legal concepts. Topics addressed include key areas where legal counsel are essential: HR, M&A, licensing, funding, open source, EULA, TOS, transactions, contracts and IP. The presentation also covers how to find, evaluate and retain good legal counsel for the issue at hand.

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  • 1. Game  Developers  Need  Lawyers:     When  and  Why   .  .  .  And  When  They  Don’t!   Frank  Coppersmith   VP,  Finance  &  AdministraAon   Challenge  Online  Games,  Inc.  
  • 2. About  Me   Let’s  get  this  out  of  the  way...   Frank  Coppersmith  is  Vice  President,  Finance  and  Administra1on  for   Challenge  Online  Games,  Inc.  In  this  posiAon,  he  serves  as  a  senior   member  of  the  execuAve  team  overseeing  the  company's  financial  and   human  resources  operaAons,  and  providing  legal  counsel  to  the  board  of   directors  and  senior  management  on  a  wide  variety  of  strategic  issues.   Prior  to  joining  Challenge  Games,  Mr.  Coppersmith  served  as  general   counsel  to  Toppan  Photomasks,  Inc.  (formerly  DuPont  Photomasks,  Inc.),   a  globally-­‐operaAng  supplier  of  semiconductor  materials.  Prior  to  his   promoAon  to  general  counsel  at  Toppan,  Mr.  Coppersmith  had  served  as   deputy  general  counsel,  plant  producAon  manager  and  customer  service   manager.       Mr.  Coppersmith  has  also  served  in  a  variety  of  roles  with  the  US  Air  Force,   including  tours  as  counsel  to  NATO  and  deployments  to  Iraq  and  Qatar.     Mr.  Coppersmith  is  the  president  for  the  AusAn  Chapter  of  the   AssociaAon  of  Corporate  Counsel  for  2010.       Mr.  Coppersmith  earned  a  bachelor's  degree  in  Electrical  Engineering  from  the   Citadel  in  Charleston,  SC  and  a  law  degree  from  Samford  University  in   Birmingham,  AL.  He  also  holds  an  MBA  from  the  Wharton  School  of  the   University  of  Pennsylvania  with  majors  in  Finance  and  OperaAons   Management.       Mr.  Coppersmith  first  began  playing  video  games  on  an  Atari  2600  and  has  an   original  white  box  ediAon  of  Dungeons  &  Dragons.     “Microchip”   Level  80  Warlock   Suramar   Destruc1on  Spec  
  • 3. Challenge  Online  Games,  Inc.   We  make  engaging  games  for  social  pla1orms   with  high  produc7on  values         Images  are  ©  2010  Challenge  Online  Games,  Inc.;  WarstormTM,  Ponzi,  Inc.  ®  and  Gridiron  LiveTM    are  the  trademarks  of   Challenge  Online  Games,  Inc.;    All  rights  reserved  
  • 4. What  is  this  presentaAon  about?   •  NOT  a  sales  pitch.  .  .   –  Spending  more  money  on  lawyers   –  Confusing  you  with  legal  jargon   –  Legal  sclerosis  (i.e.  paralysis  by  legal  review)   •  GOAL  is  to  make  you.  .  .   –  A  beber  consumer  of  legal  services   No  crystal  ball   needed   –  A  beber  client   –  A  beber  decision-­‐maker  for  legal  related  issues   •  HOW?   –  Give  you  the  tools  to  idenAfy  whether  and  when  an   issue  or  problem  needs  legal  input   –  What’s  the  most  cost-­‐effecAve  way  of  going  about  it?  
  • 5. Everyone  Hates  Lawyers   •  But  why?       –  Too  expensive   •  $300/400/500/hr?    OMGWTF?   –  Give  confusing  /  contradictory  advice   •  “On  the  one  hand.  .  .but  on  the  other.  .  .”   –  Advice  isn’t  useful,  helpful  or  acAonable   Empty  suit.   •  “Legal  sclerosis.”   –  Just  slow  things  down   •  “The  lawyers  got  involved  and  screwed  everything  up.”    
  • 6. All  of  Those  Complaints  Are  True   •  Why?   –  Didn’t  set  expectaAons  ahead  of  Ame   –  Engaged  too  early  or  (more  typically)  too  late   –  Insufficiently  engaged  with  the  client   –  Wrong  experAse  (generalist  vs.  specialist)   –  Needed  fee  alignment  up  front   Actual  angry  clients.  .  .  
  • 7. Legal  Landscape   Corporate   Forma1on   M&A   Transac1ons   &  Contracts   Licensing   TOS/TOU/EULA   Open   Source   Compliance   Funding   Employment   Publishers   Intellectual   Property   Li1ga1on   (Land  of  Barbarians)  
  • 8. Why?  Worst  Case:  Lawsuit  “LiAgaAon  only  happens  to   poorly  managed,  unethical  companies,  not  a  well-­‐run  company  like  mine.”   •  DistracAon  and  Uncertainty   –  260  pleadings  in  18  months   –  Dev  vs.  Engine  Licensor   •  LiAgator  View:  this  is  all  normal   ü  DeposiAons   ü  Discovery   Borrowed  from:   ü  DuraAon   ©  2009  Henry  W.  Jones  III   ü  Costs   §  Not  normal  to  you  .  .  .  unless  you  like   being  deposed  on  video   §  Comes  with  territory:  more  products,   channels,  customers  =  more  likely  chance   of  a  legal  dispute     Li>ga>on  is  bad.    Maybe  not  this  bad.   DISCLAIMER:    This  is  the  only  scary  slide.  
  • 9. When  Do  I  Need  a  Lawyer?   •  Core  business  acAviAes   –  If  something  goes  wrong,  does  it   cripple  the  company?   •  LiAgaAon   –  No  alternaAve;  need  to  stop  this   before  it  starts   –  “Bet  the  company”  stakes   •  Highly  specialized  info   –  Patent  filings,  securiAes   Your  lawyer  has  a  nicer   office  than  you.    I  blame  “LA   Law.”   •  Maybe  others   –  Depends  on  capabiliAes  of  current   employees  and  availability  of   leadership  team   –  Time  /  cost  tradeoff  
  • 10. But  Really,  When?    Misc.  Topics   •  Corporate  FormaAon  /  Secretarial  FuncAons   –  Cheap,  easy  to  file  on-­‐line  if  simple   –  Not  simple:  stock  opAon  plans,  divided  ownership   •  TOS,  TOU,  EULA,  Privacy  Policy   What  privacy  policy?   –  Don’t  just  d/l  one;  it’s  worth  having  an  expert  give  this  a  once  over   every  Ame  your  business  operaAons  change.   •  “Standard  Agreements”   –  Good  to  get  a  stable  of  typical  NDAs,  consulAng  agreements,  invoice   templates,  employment  agreements,  IP  assignment,  etc.   –  Many  affordable  choices   –  Pay  now  or  pay  later   •  Intellectual  Property   –  Trademarks  /  copyrights  are  “do  it  yourself”  (www.uspto.gov)   –  Patents  are  another  maber  –  must  have  specialist  legal  support   •  M&A,  VC  Funding,  IPO   –  Who  are  you  kidding?    Get  the  best  you  can  afford  
  • 11. •  Employees   When?  Employees   –  You  can’t  build  games  without  employees   –  BUT:  employees  can  represent  the  greatest  legal  exposure  your   company  faces   –  FMLA,  discriminaAon,  wage  &  hour  –  numerous  pitalls  for  the   unwary;  compliance  training  is  a  must!   –  Good  news:  employment  law  is  a  commodity  and  priced  as   such;  lots  of  flexibility  and  availability   –  Get  support  early  (employment  agreements,  invenAon   assignment,  confidenAality  of  trade  secrets)  and  oXen   (discipline,  terminaAon)   –  Want  to  go  it  alone?  www.dol.gov/elaws   Q:  Which  employee  is  going  to  sue  you?   A:  Trick  ques>on:  all  of  them!      
  • 12. When?    Contracts   •  Contracts  are  the  lifeblood  of  any  business   •  Must  do:   –  –  –  –  –  –  –  –  –  What  are  the  deliverables  on  both  sides?   When  are  these  due?   How  much  do  we  get  paid  /  or  do  we  pay?   What  happens  if  we  fail?   How  /  when  can  we  terminate?   Who  owns  the  IP?    Who  owns  the  deliverable?   Who  owns  derivaAves?   If  we  disagree,  how  is  it  handled  (e.g.  ADR)?   Dis-­‐incenAvize  liAgaAon.   •  No  such  thing  as  a  “standard”  agreement   –  But  not  every  agreement  merits  legal  review   –  Use  own  documents  as  much  as  pracAcable   –  www.USLegalForms.com   Claiming  the   salamander  ate  the   contract  won’t  help.   •  Get  legal  support  to  establish  a  set  of  agreements;  review  of  key   documents  (such  as  those  with  publishers,  IP  rights  holders,  engine   licensors,  etc.)  
  • 13. How  Do  I  Find  the  Right  Lawyer?   •  Referral   –  The  absolute  best  way  to  find  the  right  lawyer  is  to  get  a  referral  from   someone  in  your  space  who  understands  your  needs   •  Talk  to  more  than  one   –  Fit  is  incredibly  important   –   Ideally  you  want  an  advisor-­‐counselor  who  understands  you   •  Fees  on  the  table  up  front   –  Good  lawyers  won’t  mind  talking  about  it   –  Watch  out  for  up  front  retainers   •  In-­‐house  general  counsel   –  Just  hire  your  own  lawyer  to  work  for  you   •  Outsourced  general  counsel   –  If  you  don’t  need  a  full-­‐Ame  in-­‐house  counsel   •  Specialist  versus  generalist   –  IP,  liAgaAon,  securiAes  (IPO)  all  require  special  experAse   Slightly  easier  than   finding  a  unicorn  
  • 14. Wrap  Up   •  Why?   –  Avoid  catastrophic  legal/ business  risks   •  When?   –  Core  business  operaAons,  areas   of  highly  specialized   knowledge,  some  employment   mabers  and  contracts   •  How?   Big  scary  monster.     Probably  not  a  lawyer.   –  Referral  from  industry,   interview,  fee  discussion  and   experience  
  • 15. Had  Enough  of  the  Farm?   hbp://apps.facebook.com/ponzi_inc/   hbp://apps.facebook.com/warstorm/   Thanks  for  listening!  
  • 16. Credits   He’s  finally  done  talking.    Party  >me!   Frank  Coppersmith   VP,  Finance  &  AdministraAon   Challenge  Online  Games,  Inc.   frank@challengegames.com   512  560  7026       SubsAtuAng  for.  .  .   Henry  W.  Jones,  III   Law  Office  of  Henry  W.  Jones   2002  Mountain  View  Road   AusAn,  Texas  78703   memphishank@aol.com   512    695  4673