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DISCLAIMER: This column is intended for general educational and entertainment purposes and is not legal advice. Every situation is unique. Anyone entering into a contract should have a lawyer who can provide counsel.

Jim Charne, Attorney at Law

January, 2012
Famous Last Words
By Jim Charne, Attorney at Law

Zeroing In On “Fine Print” Issues in Your Dev Agreement 

Dear Readers: 

Every game dev contract is a mix of deal points and boilerplate.

The “boilerplate” is all the pages and pages of so-called “standard terms” that make up much of the agreement.

A key part of contract boilerplate is developer’s representations and warranties.  These are promises made by the developer to the publisher or game producer.  The publisher oir game producer has a right to reply on them in entering into the deal.

Break a promise and the developer is in breach.  A party in breach may be on the hook for damages.  

Here’s one issue that rises frequently in negotiating developer’s reps and warranties.  Next month, we’ll look at another.

The developer is often asked to warrant that each deliverable, and the final game, are bug free.  Bug-free code is certainly an admirable goal; but we all know that game programs are huge, complicated.  It’s the exception rather than the rule for a game not to have bugs.

There is no real reason for intermediate dev milestones to be delivered bug-free.  Frequently, milestones containing known bugs are delivered for testing.  The standard for milestones should be only that they delivered in such a condition that permits testing. 

As the game heads for final delivery, both developer and publisher should be working together to identify and eliminate bugs.  That is a job for both parties to share.  

Bug testing is a joint responsibility.  Both developer and publisher must focus on identifying where the code needs work.

If the developer gives a warranty that code is bug free, but that proves not to be the case, what happens?

When a contracting party breaches a warranty, the other side has an action for damages.  

So what are damages?  Generally, damages amount to losses suffered by one side when the other side fails to perform its obligations or fulfill its promises under a contract.

In this case, where the developer falsely or mistakenly promises the code is bug-free, losses could include costs incurred to fix the bugs, returns of the buggy game sent back from retailers, replacement copies, unplanned support resulting from the bug(s), and maybe even damages for lost sales!

In extreme cases, these costs could be enormous.  If inventories of a game must be recalled and scrapped, all costs of the recall, shipments, destruction, and manufacture and shipping of replacement copies, could be part of the damages calculation. 

How does a developer avoid taking on such a risk?

The best way is not to give a representation that the game is bug free!    

QA is a shared responsibility.  The publisher has ample opportunity to be satisfied that the game is of sufficient quality before it is accepted.  If a console game, before it is accepted for manufacture, it would also go through QA at the console manufacturer.

The financial risk of undiscovered bugs should not fall to the developer.

What if the publisher is adamant that the developer give a warranty of bug-free code?

A way to handle this for a developer is to give the warranty (which may be necessary to close the deal), but provide that the exclusive remedy of the publisher in the event of breach (i.e. bugs turn up) is that developer will fix the bugs.

Such an exclusive remedy may take the financial risk of bugs off the table for the developer.  And it provides the publisher with a way to fix the game.

In considering this exclusive remedy, the developer may also want to set a time limit on its willingness to fix bugs at no cost.  After 180 days (from either acceptance of the gold master, or initial release), any problems with game code should have made themselves known.  Bug fixes after an agreed upon time can still be offered at Developer’s standard engineering services rate.    

Bottom line – in negotiating a dev agreement, never overlook that boilerplate.  Despite protestations to the contrary, it can be negotiated!

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Jim Charne practices law in Santa Monica, CA (www.charnelaw.com) where he represents developers, designers, composers and other clients in the games industry.  Jim has been a frequent speaker at GDC and Practicing Law Institute games industry programs, is active in IGDA from whom he received a coveted “MVP” Award at GDC 2006, and is a member of the Advisory Board of G.A.N.G.  On October 19, 2011, Jim will chair a one day program in San Francisco, offered by the Practicing Law Institute, titled: “Representing the Games Industry Client 2011.  Jim served as President of the Academy of Interactive Arts and Sciences from 1998 to 2001.

Is there language in your contract that has you scratching your head?  Found something confusing or worse?  Send it to “Famous Last Words” for developer-oriented analysis.

Famous Last Words is intended for general educational and entertainment purposes and is not legal advice.  Every situation and circumstance is unique.  Anyone entering into a software-related contract should have an experienced lawyer who can provide counsel throughout the process.

©2012 Jim Charne.  All rights reserved.