Famous Last Words March10

DISCLAIMER: This column is intended for general educationaland 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

Publisher's Further Use of Developer's Tools and Tech  (March 2010)

Dear Jim:

Our publisher is letting us retain ownership of our tools and utilities.  But it wants to be able to reuse them for other games.

How should we handle this?

Proud of our Tech Base

Dear Proud:

One of the achievements of persistent negotiation practices over the past 15 years or so is that it is now generally accepted that developers should keep ownership of their tools and tech.

It wasn't always that way.

Early game dev deals demanded transfer of all code to the publisher.  And "all code" meant
"all code" - even developer's tools and tech.

Only by pointing out to the publishers that they would be getting the benefit of previous dev work at no additional cost - did publishers begin to relent on their demands of full ownership of everything - at least in the tools and tech area.

And, of course, it was another battle (still raging on some fronts today) to hold onto ownership of enhancements and advancements to tools and tech made during development!

But with developers retaining these rights, dev contracts must convey sufficient rights in tools and tech in order for publishers to be able to publish their games without infringing on developer's rights.

This is generally handled through a licensing provision.

While the game, and related assets, may be developed as "works-made-for-hire" with ownership and copyright authorship flowing to the publisher, tools and tech are generally licensed.

That license is the subject to negotiation in every game dev deal.

The publisher wants the broadest rights possible.  Those rights would certainly include use of tools and tech in add-ons, ports, localizations, downloadable extra content, sequels, and maybe other games.

Those rights also include the right to provide the licensed tools and tech to any third party developer working on any of the above.

It is in developer's interest to significantly narrow these rights.  It is appropriate for publisher to be able to use developer's tools and tech, but only to the extent it is integrated into the gold master game code deliverable, and only in binary (object code) form (no source code made available for reuse). 

No rights need be granted to elements of developer's tools and tech that may be used by the developer in the lab, but are not part of the game. 

And the grant of rights should be clear that there is no requirement to provide support to any third party developer, and that developer's reps and warranties covering the tools and tech should no long apply if any of the code is modified by any third party or by Publisher.  It is possible that modifications could result in the code infringing upon a patent, for example.

In negotiating the tools and tech license, I also believe that there is no reason to grant free rights for use in sequels or other products.  If the publisher loves your tools and tech and wants to use it down the line, a separate license fee or royalty arrangement should be worked out. 

The only reason why there would be interest in reusing developer's tools and tech is because it can short-cut development.  That has monetary value.  A license fee and/or royalties are appropriate.  And if you accept a royalty, be sure it starts from unit one, and not after recoupment of monies paid to another developer!  After all, how many games ever recoup (answer: very few!).

If you can make such a deal, expect there to be a requirement that you provide reasonable support to the third party developer who gets your tools and tech.  That support obligation is one way a publisher can justify paying the license fee and/or royalty.

If rights are granted that permit the publisher to provide tools and tech to a third party, be sure that the tools and tech are included in the definition of Confidential Information in your publisher development agreement.

Be sure also that before your material is provided to the third party, that it sign an NDA with the publisher that names your company as a third party beneficiary of the NDA.  Being a third party beneficiary permits you to enforce the terms if your information were to be improperly used or disclosed.

In negotiating license terms for use of developer tools and tech in additional products, I've seen license fees as high as $600k, and royalties as high as 4% from the first unit sold.  Of course, this all depends on the nature of the tools and tech, and the size of the project for which they would be used.

Even though it is common for publishers to want these rights, it is not so common for them to be used.  My experience is that developers prefer to use their own tools and tech; there is greater familiarity in using one's own tools. 

But having these rights gives the publisher the comfort that if it were to need to reuse code, or gain access to the tools and tech used for the game, that there is a clear path in which to do so.

Jims Bio

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, is active in IGDA from whom he received an “MVP” Award at GDC 2006, in 2010 will chair the Practicing Law Institute video game law segment the week after GDC at its annual Entertainment Law Symposium in New York, and is a member of the Advisory Board of G.A.N.G.  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.

©2010 Jim Charne.  All rights reserved.