Every developer is aware that designing games – regardless of the target platform – requires assembling a team of experienced programmers, sound engineers and animation specialists. What is not always obvious, however, is that creating digital products also requires careful legal analysis and the creation of contracts that safeguard the producer’s interests. What should be kept in mind when setting up a gamedev studio?
Choosing the organisational and legal form for the company’s business activity
The first step, before even starting the substantive work on the title, is to choose the optimum form for the business, even if it will initially operate as a low-budget start-up.
Statistics show that limited liability companies are particularly popular in Poland. This is justified by many aspects of this legal entity. Among its main advantages are:
- low initial share capital – as little as PLN 5,000;
- the limitation of the shareholders’ liability to the amount of the contribution made and the subsidiary liability of the members of the management board under Article 299 of the Code of Commercial Companies. In addition, there is a possibility of further risk mitigation through the establishment of a limited partnership with a limited liability company as the general partner;
- the possibility to use the Estonian CIT to postpone the moment when the tax liability arises and to develop the company faster.
Title rights management
The next step is to design a copyright management strategy. It is important to realise that the protection envisaged for computer programmes under the Copyright and Related Rights Act mainly applies to the ‘programming’ layer of the game, i.e. its source code and documentation in this respect (analogous to literary works). In order to be able to claim protection for other elements of the game, it must be shown that they are unique and have a creative element in them. These other elements may include, in particular:
- character graphics and their characteristics
- sounds and music;
- individual graphic elements.
It is not possible to protect the game idea itself. If a studio decides to design another FPS title, only its individual elements will be protected.
The basis of employment primarily determines who is entitled to economic copyright on individual works. In the case of a works contract, commission and B2B contracts, the performer may exercise the rights. In the case of an employment contract, the type of work created determines entitlement. For a computer program, as a rule, this will be the employer (Section 74(3) of the Copyright Act). For a different type of work (e.g. a dialogue layer), according to Article 12(1) of the act, the employer will also be the author, but already conditionally – it is necessary to accept the work and also to start distributing it in due time.
The content of the licence agreements should be taken care of before the work starts, so as not to unknowingly lead to situations in which the studio is unable to publish the game simply because it did not ensure the transfer of copyright by one of the programmers.
Many gemedev studios make games on behalf of the company funding the whole project. In such a situation, care must be taken to ensure that the copyright is transferred to an appropriate extent to a third party. The agreement transferring the copyrights must be in writing under pain of invalidity, as well as specifying the exact fields of exploitation in which the purchaser will be able to use the work and the remuneration in this respect.
What to do with personal copyrights?
Personal rights are different from economic copyrights. They cannot be transferred to another entity and are inextricably linked to the author. It is popular practice to insert a clause into a licence agreement whereby the author agrees not to exercise his/her copyright. However, he or she will then not be able to claim disclosure of his or her name in the ‘Credits’ section. It is also possible to transfer the right to decide the fate of the moral rights to the other party to the contract.
Regardless of copyright protection, a studio may seek to register selected elements of the game as a trademark. This usually applies to logos, but also to characters. Obtaining a certificate of protection from the patent office gives an exclusive right to use the mark in question for commercial purposes and allows to effectively fight various attempts to counterfeit the result of the work.
The applicant can apply for protection from the Polish UPRP, but if the game is to be released worldwide, it may be better to seek the admittedly more expensive but territorially wider protection guaranteed by the European EUIPO or the global WIPO.
It is important to remember that a trademark is protected for 10-year periods. Renewal of protection requires payment of a fee for the following period.
Key elements of a game development agreement
A game creation agreement (the so-called development agreement) is a contract that sets out the terms on which the parties will work together to create the game, publish it, promote it, and also addresses the issue of profit sharing. It should clearly define the object of the contract, i.e. indicate what the developer and his team are actually supposed to create. It will not always be just the creation of a game. Sometimes it is about preparing a mobile version of an existing title or developing a port to another platform.
Typically, these types of projects are carried out using agile methodologies based on successive iterative and incremental cycles. This means that the work is divided into successive stages, at the end of which there is an audit by the funder and an evaluation of the work results and the application of any changes.
Deadlines are set by specific milestones, i.e. the implementation of further critical functions. Between milestones, the developer is free to work as long as he or she is within the timeframe and budget.
As a rule, the development contract should include the so-called DoD (Definition of Done) of the individual milestones. In this way, the parties can clearly define when an element is deemed to have been properly completed. Introducing a DoD on the one hand allows the momentum of the work to be maintained, on the other hand, it protects the developer from escalation of unjustified claims and demands for further revisions by the client.
A key element of the game development contract is also to safeguard the interests of both parties by introducing a NDA clause obliging them to maintain confidentiality with regard to specific elements of the project. A properly structured NDA should include:
- a precise definition of the information that the parties consider to be confidential;
- a specification of the standard of protection of the information and an indication of when it can be said to be disclosed;
- the duration of the prohibition;
- the sanction for breaching confidentiality (usually a contractual penalty or termination of the agreement).
How to determine the remuneration for the creation of the game?
The creator’s remuneration can be determined in several different ways. The most basic assumes that the entire sum is paid upon completion of the title. For the developer, it will be much more beneficial to pay successive tranches upon completion of milestones. The contract should also specify exactly when the remuneration for the transfer of copyright is to be paid.
Of course, the game development process also involves a whole range of other issues related to, for example, personal data processing, non-competition or distribution channels (e.g. Steam service instead of a typical box). Each of these aspects should be carefully described in the agreement, otherwise enforcing the partner’s actions may be very difficult.
Linke Kulicki Law Firm has for years specialised in providing comprehensive legal support to entities operating in the IT industry. Our lawyers will assist in the establishment and ongoing operation of a gamedev studio.