5 Minute Legal Lessons for Indie Devs - Part 1: Employees, Contractors and IP

[My name is Pete Lewin and I'm an interactive entertainment lawyer specialising in video games and eSports. The following is an extract from my own blog over at www.legalgamer.weebly.com]

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I get it – dealing with legal stuff isn’t as fun as making games.

But actually making your game is only one side of the story – the other is actually running your studio as a business and selling you game. After all, you need to make money to keep doing what you love. This is going to involve thinking about lots of less exciting things like tax, employees, law and yes, a whole bunch of paperwork.

Now I’m not saying you need to go out and get an MBA or a legal degree, but there are some really basic, core legal and business issues that I wish every dev out there were alive to. A large part of my job as a video games lawyer is helping clients sort out things that have already gone a bit wrong, often with contracts entered into several years ago. Having even a super basic understanding of these can save you serious headaches, time and money later down the line.

My goal in starting this series is to flag some of the most common legal problems that I’ve either come across in my job or seen crop up in the news, in the hope that you can avoid these as much as possible. Each piece will be super short (don’t hold me to that – I’m still a lawyer after all!), meaning a lot of the intricate legal details won’t be covered, but hopefully it’ll flag some key things to look out for – you’re always welcome to drop me a line if you’d like to know more. Enjoy!  

Boring Disclaimer: Cmon, I’m a guy on the internet – I’m not your lawyer (unless I actually am, in which case hi!) – this is not legal advice – legal issues are very fact specific =)

TODAY’S TOPIC: IF YOU’RE WORKING WITH CONTRACTORS, MAKE SURE YOU ACTUALLY OWN YOUR STUFF

Who should read this?
Anyone who is planning to, or has in the past, put something in their game (be it code, artwork, sound assets, script or otherwise) that was made by another person.

Copyright and intellectual property law 101
Copyright is a form of intellectual property that is automatically given, by law, to the creator of a piece of work. So an artist would own the copyright in their drawing, a musician the copyright in their song and a programmer the copyright in their code. Owning the copyright in something is important because it gives you the power to say what can and cannot be done with your work. A video game is basically a big package of intellectual property rights, with each different part having its own copyright protection (i.e. the artwork, UI, sound, characters, code, script etc are all copyrighted, but they are all separate pieces of copyrighted work).

Employment law 101
By default, an employer automatically and legally owns the intellectual property rights (mainly copyright) in anything its employees create “in the course of their employment” (more on this later). On the other hand, a studio will not automatically own the work created by a contractor, even though it has paid in full for the work, unless there’s an agreement saying otherwise.

Example
So if a studio’s graphic design employee creates a new character for a game the studio is working on, the studio will own it. If a contractor created the same character and there’s no ‘contractor agreement’ in place, the contractor will own it. 

The possible problem
In some cases this won’t ever turn into a problem at all – the contractor has been paid, they will probably think they’ve given the studio full legal ownership of their work (even though legally that’s not the case), the asset will be incorporated somewhere into the game and it’ll probably never be mentioned again. 

But let’s say the game is released, goes on to be a success (which is the plan, after all) and a savvy contractor see an opportunity. Now, the fact that the game incorporates assets the dev doesn’t entirely own becomes more of a real problem. The contractor could try to argue that the studio should give them a licence fee (in addition to the sum already paid) in order to keep using the contractor’s asset and demand a part of all sales to date.

At this point, since the game has already been released, there are probably only a few options for the studio at this point: (i) remove the offending asset from the game (which is often impractical, impossible or expensive depending on the asset), (ii) agree a licence fee (which stings considering money has already been paid for the work), or (iii) try to refute the contractor’s claim (which will take time and money to do). Whichever approach is chosen, there’s no ideal resolution.

The solution
Instead of having to pick from one of the above 3 options, the easiest thing to do is to prevent the problem from occurring in the first place - make sure you get a proper ‘contractor agreement’ in place from the beginning, transferring all of the intellectual property rights in their lovely work to the studio! Intellectual property rights are the legal lifeblood of a game so it’s crucial that the studio actually own the rights of everything that goes into it.

A contractor agreement will also look to have the contractor waive these things called ‘moral rights’. These are additional legal rights given to creators that entitle them to be attributed as the author, and prevent the derogatory treatment, of their work. These are completely separate from copyright (meaning one person can own the copyright and a completely different person can hold the moral rights) so it’s important to cover these off too.

If an already released game out there contains a contractor’s asset but there was never a contractor agreement in place, you don’t have to wait for things to go wrong. If you want to future-proof things you can get a legal transfer of ownership of their work to the studio by a legal document known as an ‘assignment’. This is usually a pretty short and relatively cheap document.

Who is a contractor?
So, who’s a contractor and who’s an employee is super important. Unfortunately, there’s not always a simple way to tell which group someone will belong to - it doesn’t just come down to whatever they’re called in the contracts – it all depends on the surrounding facts. I’ve written another piece all about this over here which sets out some of the things that tend to make people employees.

In the course of their employment
In the ‘employment 101’ section above I wrote that employers only own things created by its employees “in the course of their employment”, and this is super important. It’s perhaps redundant to say, but this means that an employer will not automatically own anything created by an employee which is not created in the course of their employment (double-negatives – yay!).

What counts as “in the course of their employment” is another slightly murky question which is really fact specific, but generally speaking it means anything which is broadly within their job description and regular duties. So a programmer producing code or a designer creating artwork for a project the studio is working on would clearly fall within this, but if the office cleaner does some voiceover work, this likely isn't. If employees work on personal projects during their lunch break or in the evenings using studio provided software, hardware etc, ownership of that work can be a tricky question. And this is exactly why some studios have what are known as ‘personal project policies’ to resolve questions like these up front. I’ve written more about this here.

Conclusions / Call to Action