The Game Industry - contractual, legal & ethical

P3
describe contractual, legal and ethical obligations in the games
industry with some appropriate use of subject terminology
M3
explain contractual, legal and ethical obligations in the games industry
with reference to detailed illustrative examples and generally correct
use of subject terminology
D3
comprehensively explain contractual, legal and ethical obligations in
the games industry with reference to elucidated examples and
consistently using subject terminology correctly

To be able to understand contractual, legal and ethical obligations in the games industry.
REGULATIONS &
COMPLIANCE
The restrictions, licenses, and laws applicable to a product or
business, imposed by the government.
Regulatory compliance is an organization's adherence to laws,
regulations, guidelines and specifications relevant to its
business. Violations of regulatory compliance regulations often
result in legal punishment, including fines.

INTELLECTUAL PROPERTY
RIGHTS
This includes…
• Characters
• Storylines
• Code
• Designs
…and are all considered a commodity.
IP rights legally protect inventions, symbols and creative expression
and can be bought sold, traded, given away and licensed.

Trade Mark
Registered
Service Mark
Copyright

Copyrights protect an individual’s or group of individual’s
original expression of an idea into a tangible medium.
Copyrights do not protect the idea or concept, only the actual
expression of the idea. For example you cannot copyright your
idea for a game until it is expressed in a tangible form, like
computer code.
Copyright protection exists the moment an author fixes an
expression in a tangible medium. This means the moment you
save your source code to disk, or you sketch out the artwork
for your game character or level art, you automatically have
copyright protection without doing anything further.
A publisher will often organise a deal with a developer to
obtain the copyrights so that they can create derivative
products and reproduce the product free and clear. Better
known developers will be in a better position to negotiate this
and potentially retain the copyrights.

Copyrights are the second form of intellectual property, and
protect the expression of an idea (but not the idea itself). Take
Pac-Man, for example. Copyright protection protects the
actual artwork and sounds in the game as an audiovisual
work, and the underlying source code as a literary work. No
one can copy the actual images and sounds used during the
game, illustrated in Fig. 1, or the underlying program.
However, copyright does not protect the idea of a player
controlled character eating dots in a maze-like game board
while being chased by differently coloured evil characters such
as the caterpillar game shown in Fig. 2.

Trademarks are identifying symbols, words or devices
used to distinguish the trademarked good from other
similar goods.
Trademarks identify products and service marks
identify services.
The trademark rights prevent other people from using a similar mark,
but the rights do not prevent others from making similar goods and
selling them under a different trademark.
This logo is a trademark that distinguishes the
games that Rockstar publishes from other games.

Trademarks must be distinctive so they are easily distinguished. Some are
stronger than others and are therefore more enforceable. The strengths of the
trademark are judged by a range of terms from weakest to strongest.
Generic
Descriptive
Suggestive
Arbitrary
Fanciful
Interactive Computer Games

These marks are not protected by trademark
law as they are not distinctive.
Generic
Descriptive
Suggestive
Arbitrary
Fanciful
These types of marks are entitled to protection
because they are inherently distinctive.
After registration, you can then switch to ®, or continue
using TM, as this does not lose you any rights. . There are
some countries – the US is one of them – where failure to
use R once a mark is registered will lose the trademark
owner some of his rights, but this does not apply to the UK.

Trade Secrets
Trade secrets are information that a company keeps secret and which
give them a competitive edge. Trade secrets cost money to develop and
bring economic value to the company that owns them. Trade secrets are
protected by law as long as the information is kept confidential and
cannot be lawfully or independently obtained by other people. Trade
secrets are methods, techniques and formulas, such as the secret
formulas for Coca-cola.
Trade secrets also apply to commercially viable ideas such as game ideas.
If this idea is not kept confidential, it no longer constitutes a trade secret.
This is where Nondisclosure Agreements (NDA) come in. These will be
explained in more detail in the contracts section.

LICENSES
Base this decision on a business outlook rather than a personal one.

Licensing of video game characters or the use of other IP licenses in
video games is very common and often lucrative for both licensee and
the licensor.
A license agreement covers the terms under which the two parties
may agree to work together. The license agreement covers points such
as duration of the license, how and for which products it may be used
and how much is paid in consideration for using the rights.
The licensor may be minimally involved in the actual game
production, or might be extremely involved in determining the game
design, assets and features.
Minimal:
The licensor would have approval rights over the general game
concept and key assets. This would allow them to protect the integrity
of the license. These terms will be clearly spelled out in the licensing
agreement.

Maximum:
There may also be a bible that clearly spells out what can and
cannot be done with characters settings based on a license. It may
detail…
 What types of clothing the character can wear
 What actions they can perform in the game
 What other characters from the universe can appear in the game
It is imperative that the developer and the licensor have a good
relationship and that timing for approvals are built into
agreements.

Paramount Pictures owns the rights to the
Star Trek franchise and has an entire
licensing department set up to handle
requests from licensees on clarification on
how the elements of the Start trek license
can be used in video games and other
products.
For example, a game cannot show the USS
Enterprise being destroyed.

Referencing the appeal of the genre and
demographic in the Harry Potter license is
actually one of the requirements of the
licensee.
The licensor did not want movies or video
games created that did not have direct
appeal to the same demographic as the
books.
Therefore, this was made a requirement
of the license agreement.

REGULATION
Who regulates the video game industry?
How are games regulated?

Rockstar’s Manhunt 2 was submitted to the BBFC on both the
PlayStation 2 and Nintendo Wii console formats in 2007. This game
has an interesting and complex classification history, as it was
originally rejected by the BBFC and went through several levels of
appeal hearings before it was finally granted an '18' classification
certificate in March 2008.
“distinguishable from recent high-end video games by its
unremitting bleakness and callousness of tone in an overall
game context which constantly encourages visceral killing
with exceptionally little alleviation or distancing. There is
sustained and cumulative casual sadism in the way in which
these killings are committed, and encouraged, in the game”.

Hot Coffee mod
Hackers rooting among San Andreas' files unearthed an
abandoned yet mostly intact minigame where main character CJ
would have sex with his girlfriend at the prompting of certain
movement commands. The resulting outcry involved the Federal
Trade Commission investigating Dan Houser (co-founder of
Rockstar) and the rest of Rockstar's staff.
After involvement form US Senator Hilary Clinton, the Entertainment
Software Rating Board (ESRB), the organization which establishes
content ratings for video games in North America, conducted an
investigation that ultimately changed the game's rating from Mature to
Adults Only 18+.

CONTRACTS
Why have contracts?
How do they get written?

There are two types of contract available for you to look
at.
Firstly, identify specific language used in these contracts.
Make a list of any words that are unique to this process
or that you do not understand.
Secondly, summarise what you think the main points of
the contract are – what are they securing for each party?

A brief review of standard publishing terms:
Obligations: self evident. Forget past conversations because this lays out exactly
what each side must do. Familiarize yourself.
Term: a lot goes into a successful publishing effort. The publisher will want a chance
to earn a profit. However, you may be able to negotiate an early out if sales are
extremely poor.
Net revenue: your piece of the pie is determined by this formula. Taxes, fees and
returns are definitely subtracted before your share is calculated. Marketing costs?
Maybe.
Warranties: guarantees that you have the right to enter the agreement and rights to
ip.
Indemnification: promise to take financial responsibility if the publisher faces a
claim for your mistake.
Payment: should state acceptable payment methods and the timing.
Accounting: statement requirements and procedures for audits, including notice,
timing and cost responsibility.
Confidentiality: you can't share info you learned from the other side unless you also
learned that info from a legitimate independent source.
Material Breach: an agreement violation that can terminate the contract. There
could be penalties.
Disputes: you DO NOT want to go to court. EVER. Opt for arbitration in a city with a
fair amount of game / ip business. This could be publisher's home turf. Don't worry
about that

• Employee-consultant agreements
• Work for Hire
• Nondisclosure Agreement (NDA)
• Development Contracts
• License Agreements
• End User License Agreements (EULAs)
• Terms of Service (TOS)

This is the most common type of agreement and exists
between the developer and anyone who is employed by them.
They set out the terms of your employment, including…
• Benefits
• Non-compete
• Confidentiality
• Inventions

These agreements cover the following areas:
• Outsourcing
• Subcontracting
Work for Hire contracts ensure that the rights for any work
undertaken by an external vendor, such as music, art assets
or code, is passed to the one hiring the contractor.
Any work created by employees of the development team within the
scope of their employment is work for hire. They do not own the
right, the employer does. For example, if a programmer writes
code, it belongs to the employer.

If any work by an external vendor is commissioned it can be
classed as work for hire. It must fall into one of nine
categories for commissioned work as detailed in the
Copyright Act.
For example, a magazine
article could be a work for
• A translation
• An instruction text
• A test
• Answers for a test
• An atlas
• A contribution to a collective work
• A compilation
• Supplementary material
• A contribution to a movie or other audiovisual work
hire because it is
contribution to a collective
work. However, a computer
programmer’s code could not
be a work for hire because it
does not fall into any of the
previously mentioned
categories.

These contracts protect ideas and concepts as trade secrets. This is
because they are not tangible and are not protected by copyrights and
trademarks.
If you discuss the idea with someone who hasn’t signed an NDA, the
concept loses its trade secret status and becomes public domain.
Unilateral
Mutual
Used with someone outside the industry –
protecting your secrets.
Used within industry – protecting both parties
ideas.

These are used between publishers and external developers,
outlining what responsibilities each party has to the other.
These contracts cover all the issues involved in the
developer-publisher relationship, including…
• the financial terms, including royalties
• elements of the project
• asset deliverable and advance payment milestone
schedules
• IP ownership
• marketing plans
• distribution plans
• obligations of each party
• licensing use (if applicable)

Appendices - A lot of the important details about a contract are
kind of tacked on at the end. The most important of these (for a
development agreement) are:
• The milestones and payment schedule
• The game design document itself is attached as an appendix
• How the royalties are to be calculated
• Confidentiality agreements signed by every member of the
development company
• Ownership of the IP is signed over to the publisher
(depending on the deal terms)

What's Being Licensed - The contract spells out exactly what the publisher
is getting the rights to use.
What The License Can Be Used For - The contract specifies the platform
the game will be released on and the type of game.
Territory - The contract specifies what parts of the world the publisher's
game will be published in. Publishers always want worldwide rights, of
course - but licensors often charge more for that.
Term - Most publishers will lose interest in a game product after 3 or 5
years, so most license agreements run no more than 5 years.
Finances - The license agreement spells out how much the publisher will
pay for the license. There is usually an up-front payment (called a
"guarantee") and royalties based on sales.

This is an agreement between the publisher and the end
user and is there to protect the publisher. The basic purpose
of the EULA is to eliminate the resale and rental of the
game, as well as protecting them from the software causing
damage to computers or data or reverse engineering.
Because of the way
console games were
originally classified for IP
rights, they can be resold
and traded.

Games with some type of online component such as a web-based or
mobile game may also have a Terms of Service agreement in place.
This agreement outlines expected behaviour of players when they
are in the game world.

There will be specific elements within contracts that are
affected by the projects organisation and these must be clearly
defined before contracts and agreements are signed.
The organisation of staff - knowing the requirements of the
project will have a knock on effect for employing staff and
setting milestone dates. This process affects time management
and scheduling.
Costs – once a budget is set, contracts can be signed. Not
knowing the full implication of license fees or how many
employees are needed to complete tasks will have severe
implications when it comes to fulfilling contracts.

‘Game developers must not break copyright law.
They must not use ideas or images that they did
not think up themselves.’
‘When designing a game, a designer must decide
the age rating because young players should not
play extremely violent games.’

‘Trade and service marks, usually both called
‘trademarks’, are words, symbols and other things
used to identify the source of a product in
commerce. Some little known trademarks are
Kodak Yellow and the sound of a Harley. Both are
protected. But usually trademarks are names and
logos. So game developers must seek (and
probably pay for) permission to include them in a
game.’

‘The GTA3 Hot Coffee issue plagued the games
industry for months and has caused many changes,
especially in America. New legislation and rating
systems mean that any developer looking to release
a ‘graphic game’ will need to be careful. It has yet to
be seen if this legislation will affect the next-gen
consoles. However, I’m not sure that it will. Because
the legislation mainly focuses on more stringent age
ratings this shouldn’t cause too much of a problem
for most games. At the most a game might typically
jump from a 12 to a 15 rating. However, as games
and graphics become ever more realistic, developers
will be under increasing pressure from politicians
and pressure groups. They will be required to look
at the moral and ethical status of their games
rather than just the fun element. Professional codes
of conduct such as the ACM Code of Ethics are
likely to become more widely discussed and
promoted.’

WRITING UP CHECKLIST
 Outline of regulation and compliance
 IP Rights, including copyright and trademarks
 Licenses and the use of franchises
 Organisations involved in regulation
 Types of contract
 Language, look and purpose of contracts
 Organisation and contracts

http://www.gamasutra.com/view/feature/132300/video_game_regulation_where_we_.php
http://www.theguardian.com/technology/2012/jul/30/pegi-video-game-ratings-law
http://videogamelawstrategyguide.com/video-game-law-trademarks-in-games/
http://beersgamelaw.com/2010/04/trademark-law-and-games/
http://www.gamasutra.com/view/feature/131951/hey_thats_my_game_intellectual_.php?print=1
http://jakemissing.com/2014/10/14/regulatory-issues-in-the-computer-games-industry/
http://www.law360.com/articles/540341/video-game-giant-hits-oculus-with-trade-secrets-suit
http://www.johnson-moo.com/publishing-contract-drafting/
http://www.sloperama.com/advice/article58.htm

The Game Industry - contractual, legal & ethical

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