Papers, Please! – Term Sheets & Contracts for Gamedevs

How do you make sure, you don’t end up with a bad deal? How do you protect your game and company, when engaging in negotiations?  That was the theme at the latest Growing Games Workshop in Copenhagen.

While it might be true that contracts and term papers are not the most interesting things in the world, it can be dangerous for any game developer to not give the legal side of things the attention it warrants. A bad contract can kill even the greatest game, so while it might not be what you went into game development to do, it can be a good idea, to at least have an idea about, what you are doing, before you sign on the dotted line.

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Hortens Hans Abildstrøm

This was the subject at the latest edition in the Growing Games series of workshops, arranged by Interactive Denmark. Here, legal experts and gamedev veterans gave away some of their knowledge and expertise, so startups and newcomers might be able to avoid the worst mistakes, and stay on top of the paperwork and small print, so they can concentrate on making the best games possible, and not get caught up in bad deals.

The host this day was the Horten Law firm, placed in the outskirts of Copenhagen, where Hans Abildstrøm, certified IT Lawyer and partner at Horten, promised to guide the 50 participating game developers, through the basics of getting the best deal. And with experience in video game law stretching back to 1996, he should know, what he’s talking about. However, he did start out with a very honest statement about video game law.

Law is complex, it’s international, and it’s extremely boring.

 

The panel giving feedback at the mini-springboard

The panel giving feedback at the mini-springboard

But, before the first speaker of the day took to the stage, it was time for a so-called mini springboard. A session where a volunteer gives a presentation about his or her company, and can ask a panel of industry veterans for advice on a specific problem or decision. This day it was Aske Sønderby Knudsen who presented his educational game-system EduMode. A multiplayer battle game with upgradeable robots, but where the upgrades are unlocked by answering questions and completing educational tasks. He plans to take his project to a distributor and enter a partnership, but he wanted to ask the expert panel what he should look out for in a term sheet with such a partner.

The response from the panel was, that he should be very careful with the timing. Since it was an educational product aimed at schools, he should prepare for a process that may draw out, since it takes a very long time to get into the educational games market. And since he had people helping him for free, he should make sure to clarify their position, both in the term paper itself, but also with individual contracts for each of them, making sure that he would retain all rights to whatever they might produce for EduMode. They also recommended him to try and get EU funding instead of partnering with a distributor, and if nothing else, at least to make a successful pilot case before chasing down a distribution partner.

 

Next, Hans Abildstrøm was up again, this time to give a quick introduction to the three essential steps in “The Paper Trail”. The NDA, The Term Sheet, and The Contract.

The NDA – The purpose of the NDA, or Non-Disclosure Agreement, is to ensure that people cannot steal your idea if you explain it to them. In general, these are not too complicated, and Abildstrøm recommended just using one of the standard NDA-templates that can be found online, as these are usually quite sufficient.

The Term Sheet – Two pages that outline the most important factors regarding rights, financing, distribution of revenue, and perhaps most important, what legal jurisdiction should govern the things agreed upon in the sheet.

The Long-fom Contract – The final contract that outlines all the details. Budget, timetable, exclusivity, responsibilities, sequels, and spinoff-activities.

 

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Hortens trademark expert Christian Kragelund

Trademark expert Christian Kragelund, also from Horten, took a dive into the nooks and crannies of trademark law, and he had quite a few tips for game developers wanting to secure their name and logo. He told that trademarks can be a lot of things. A trademark can be a logo, a 3d-model, a color, or a sound – and maybe in the future even specific smells or feelings. But they have to be unique. You cannot trademark a generic term like fashion, bicycle or paper. However, if you write a generic term in a special graphical way, it becomes a logo instead, and that in turn can be trademarked.

He could also debunk the myth that you get a degree of trademark protection if you register an internet domain with the name of your game or company. That in itself does not offer any protection. You need to register your trademark with The Office for Harmonization in the Internal Market (OHIM) instead. Here you can also check up on which trademarks are already registered in the EU.

 

After lunch Hans Abildstrøm was ready to talk about the so-called Due Diligence process, which is the process where potential investors and partners will evaluate your company and product and try to asses if they should do business with you. And here, his advice was simple. Unless the proposal is perfect, the partner will try and put pressure on either price, warranties, escrow-accounts for the money, personal guarantees.

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Hans Abildstrøm explaining the due dilligence process

Regarding the legal parts of due diligence, Hans Abildstøm pointed out the two areas that are probably the most important. IP-rights and people.

As for Intellectual Property Rights, you should make sure to keep track of your rights. Make sure all the employees’ work belongs to the company. Otherwise, you really can’t sell it to someone else. Register relevant IP, Trademark and designs. Start locally, and expand if your project picks up. And be sure to keep track of your sourcecode. This matters to an investor or business partner.

For the people-part, you should remember that investors are not only investing in you and your idea. They are also investing in your team. So get an employment contract for everybody, including founders, owners, and management. Document retention programs and bonus schemes, also when bonus schemes are used instead of regular pay. And remember to identify the key employees in your company.

 

Thomas H. Lund and Tim Shephard

Thomas H. Lund and Tim Shephard

Then it was time to hear tales from the trenches, as game industry representatives Thomas H. Lund and Tim Shephard, shared their experiences from the field of contract signing and negotiations. And they had a host of tips and tricks for any game developer dipping their toes in any kind of contract negotiation. We listed all of their great advice in this article.

After that, it was time to round off the day with a pitch, as is customary at the Growing Games workshops. And we were treated to an interesting presentation of a brand new, great looking, tactical wargame taking a lot of cues from the world of miniature figurine combat, with characters placed on chunky bases and moving around hex-based maps.

 

Next Growing Games is November 12th, where the subject is Driving Sales and Achieving Market Success. Visit Interactive Denmark for more details.

Jesper K. Kristiansen

Multi-passionate game developer and journalist. Has been writing about the Danish games industry for more than ten years, and creating audio design for both Danish and International games for almost as long.

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