"Famous Last Words"

When Confidentiality Becomes Control (December 2004)

Dear Jim,

We recently completed work on an online game and added the publisher to our client list.

That list appears on our web site and in promotional literature when we pitch our development services. We're proud of our work and the client list helps bring in new business.

Last week we got a nasty letter from the publisher demanding we stop using its name. Relations were a little tense during the last days of development. But all we're doing is listing them. We're not saying they endorse us or that we are owned by them. Can they do this? What happened to free speech? The game is coming out next month.

Dear Developer:

We all appreciate the need for confidentiality in the games business. Publishers don't want their competitors to know the games they have in progress (of course, that is blown every time we go to E3 and games in all stages of buggy un-development are on display for the world to see). Developers have a need to protect the confidentiality of their proprietary technology.

Publishers use confidentiality language in contracts to impose tight control over developer's use of even seemingly innocent information. This is consistent with publishers' desire to control all aspects of the relationship between themselves and their developers.

These restrictions appear in several places in development contracts.

The first is the general confidentiality language. Publisher contracts go to great lengths to define what constitutes publisher confidential information (often ignoring developer confidential information until the issue is raised by developer counsel); then restrict disclosure, often for “the term of the agreement” and beyond.

A typical publisher definition of “Confidential Information” includes ---

“material, data, systems and other information concerning the operation, business, financial affairs, products, customers, Intellectual Property Rights or other aspects of Publisher that may not be known to the general public. “Confidential Information” also includes (i) the Game and content provided by Publisher, (ii) the terms of this Agreement and its existence, (iii) information about Publisher's customers such as name, address, email address, occupation, or other personal information; and (iv) any information or materials that Publisher obtains from any third party that Publisher treats as proprietary or designates as Publisher Confidential Information, whether or not owned by Publisher.”

The language contained in (ii) above would stop developer from disclosing there is a contract in existence between developer and publisher.

This limitation is not necessarily a showstopper for the developer. Frequently, there are exceptions to the all-encompassing definition of Confidential Information to cover circumstances where any of the above is known.

A typical contract clause may provide ---

“ ‘Confidential Information' will not include any information that: (a) becomes known to the general public without fault or breach on the part of the receiving party; (b) the receiving party receives from a third party without breach of a nondisclosure obligation and without restriction on disclosure; (c) was in the possession of the receiving party prior to disclosure by the disclosing party; or (d) is independently developed by the receiving party's personnel having no access to similar confidential information obtained from the other.”

If your game is shown at E3 or finally released, and developer has a credit in the package or on screen, presumably the fact that there was a contract between developer and publisher would be “known to the general public without fault or breach on the part of the receiving party.” Under this theory, disclosure of the client relationship (but not the terms of the deal) may no longer be a breach of the general confidentiality language of the agreement.

Unfortunately, it is not that simple.

In addition to the general confidentiality language, dev agreements may have further restrictions on the developer's right to use the name of the publisher, to issue its own press releases describing the relationship and the game, and even to use excerpts and screen shots on its own web site.

An example of such language is:

“Except and only to the extent set forth in this Agreement, neither Developer nor any employee, officer, director, agent, contractor, parent, subsidiary, affiliate, joint venturer or partner of Developer (each a ‘Developer Party') or other party shall acquire any right under this Agreement to use, and Developer shall not use, or allow or assist any Developer Party or other party to use, the name of Publisher, any element of the game or any other Intellectual Property Right which are incorporated into the game for any purpose. Developer shall not directly or indirectly issue or permit the issuance of any publicity regarding, or make any public statements concerning, Publisher, the Game, this Agreement or Developer's services hereunder without prior coordination with and approval by Publisher, which may be granted or withheld in Publisher's sole discretion.”

As you can see, the Publisher retains absolute control over the use of its name and all information about the game. This would include your use on your client list and web site.

I have been involved in several negotiations where this issue was one of the most contentious and difficult to resolve. But I have seen movement in publishers' positions when push really comes to shove.

When approaching this issue in your own contract negotiations, think about what you really need, and find a way to get it in co-operation with the publisher.

At the end of the day every developer works for two things – money and credit. Our goal and our inspiration is to make great games; but money and credit is what keeps the lights on in the office.

The two are completely interchangeable and have equal value.

When confronted with an all-or-nothing situation like the above (where the publisher demands total control and offers nothing in return) I believe the developer has to weigh the cost of being denied the most basic ability to use its relationship and its work to build its company. That cost should be passed along to the publisher in higher fees for services.

Only when developers can monetize the cost of being refused these most basic rights of credit will publishers realize it is in their interest to permit such use by developers.