Tag Archives: indie game lawyer

Your DMCA Registration is Expiring

The US DMCA (Digital Millennium Copyright Act) contains very useful provisions that provide a company with a safe harbour (in the U.S.) from copyright infringement committed by users of the company’s website or other online service.  For technology companies, especially those that permit users to contribute content, this safe harbour is invaluable as, without, liability for copyright infringement committed by users could be a financial disaster – imagine the liability a video upload site could incur.

To be granted the safe harbour, your company must comply with a number of legal requirements, including:

  1.  The posting of certain information concerning a notice-and-take-down process for alleged copyright infringing content, counter-notice to challenge an allegation and compliance with this process; and
  2. Registering your online service with the US copyright office and registering a DMCA agent, who acts as the point of contact for DMCA/copyright infringement claims.

Previously, DMCA agent registration did not expire.  Due to changes in the regulations governing DMCA agent registration, all current DMCA registrations expire on December 31, 2017.  Going forward, companies may register DMCA agent information electronically, each registration being valid for 3 years.  A failure to re-register a DMCA agent will result in the loss of the DMCA safe harbour, even if you previously registered and no change occurred with respect to that agent.

The benefits to the DMCA safe harbour greatly outweigh the minor costs involved in registering a DMCA agent.  Accordingly, we recommend registration to our Canadian clients, even if they do not have a presence in the U.S.  If your company has already registered, be sure to contact your legal counsel to timely begin re-registering your DMCA agent.

Startup Employment Agreements

Working with early-stage startups and game studios, we are often involved in key company decisions, such as a first hire.  Lately, with many of our clients growing their teams, we’ve been fielding questions concerning the scope of employment agreements.  Below are a few recommendations:

  1.  Consider a less strict intellectual property ownership clause.  From the outset, I must stress that the company needs to own employee work product.  However, there are different ways to define what constitutes “work product”.  The most contentious IP clauses grant the company ownership of everything created during employment, at home or at work.  These broad clauses are often at odds with the creative nature of the industry, where employees work on personal projects outside the office, which do not relate to the employer’s business.  For example, making indie games outside of working at a AAA studio.  Further, such broad clauses can drive away prospective employees.  While each company’s needs are different, a carefully crafted IP clause can ensure company ownership of work product while encouraging employee creativity in a manner that does not jeopardize such ownership.
  2. Non-compete clauses are useless (in many jurisdictions).  There seems to be an infatuation with non-compete clauses among early-stage founders, perhaps because there is a presumption that the clause will protect the company’s interests.  It won’t.  In many states (California, for example) non-compete clauses are unenforceable against employees (excluding senior management).   If you’re asking a junior dev. to sign a non-compete, it’s probably unenforceable.  If non-competes are enforceable in your jurisdiction, the clause must be carefully crafted – as a broad clause will be found unenforceable.   In my opinion, I always exclude non-compete clauses unless there is truly a reason for the clause and I believe there is a reasonable chance it will be enforceable.  In most cases, a standard confidentiality clause will provide the company sufficient protection.
  3. Law overrides employment terms.  Employees may be entitled to overtime, paid vacation etc., the terms of which are set by the laws of your jurisdiction.  As a result you, can’t force an employee to waive the rights to which they are legally entitled.  For example, an employee agreeing to be paid a flat wage when the employee is also entitled to overtime is not legal.  When hiring an employee, be sure that the employment terms are consistent with applicable laws.  When you start introducing startup employment trends (unlimited paid vacation, for example), further caution is needed to ensure that the trend reconciles with the legal requirements of your jurisdiction.  Tip:  speak with your legal counsel.

In addition to the above considerations, we recommend that you have your lawyer draft an employment agreement template that reflects your legal needs.  In doing so, you can address the above concerns and create an agreement that will serve your company needs as the team begins to grow.

Incorporating a Video Game Studio

We represent a number of indie video game studios and are often asked what legal structure should be used when incorporating a video game studio.  Fortunately, the legal structure we recommend for most indie video game studios is simple and cost-effective to put in place.  [Press Start]

  1.  Incorporate.  The studio should be an incorporated company (and not a sole proprietorship, meaning doing business personally).  By incorporating you ensure that the company, and not you personally, would be the liable party should legal issues arise in the future.  We do not recommend a partnership as the split of a partnership could tie up game IP and prevent release.
  2. Create one class of Shares.  The company should have a simple structure comprised of a single class of common shares without a cap on the number of shares that can be issued (otherwise called an unlimited number of shares).   If you are incorporating in the US where an unlimited number of shares is not possible, set a high cap such as 10,000,000 shares.
  3. Issue a few million shares per founder.  Don’t stress about the number of shares to issue – more is better!  Issue at least 1 million shares per founder as this avoids fractional shares should you issue shares in the future and looks better visually if you are trying to recruit people to the company.  The shares should be purchased for a nominal amount, ex. $0.00001/share.  Remember, ownership percentage is what matters and owning 1/10 shares is the same as owning 1,000,000/10,000,000 shares.
  4. Consider reverse vesting shares.  If you are offering shares to a few team members who need to prove their value by, for example, meeting development milestones, then consider reverse vesting the shares issued to those team members.  Reverse vested shares are issued to the team member up front but can be forfeit (entirely or in part) if the team member does not meet certain milestones set by the company, such as a time or development milestone.  By reverse vesting shares you ensure that the company shareholders have earned their shareholding and, without, someone could walk away and keep their shares!
  5. Assign IP.  The company will be licensing the video game to end-users and, in order to license the game, needs to own the game.  By assigning all intellectual property that you have in the game to the company you ensure the company has sufficient rights to license the game.

The above is a simple to understand structure that works for many indie video game studios with a small shareholder base.  By starting with a simple structure you can also easily modify the structure in the future should the studio take off and your legal needs shift.

Shameless plug:  Voyer Law offers a flat fee legal package just for indie video game studios.  Click on legal packages for more information.

Publishing Video Games in Germany

Germany has strict rules governing video game content that large studios and indies need to comply with before publishing or advertising a game in Germany.  Breaching these rules is costly as fines may total $550,000 USD in addition to (in some cases) constituting a criminal offence.  Often, the laws result in modified video game content just for the German market (see: Half-Life, Wolfenstein).

By factoring these rules into development you can facilitate a smooth release in Germany.

1. What Content is Unlawful in German Video Games?

It is unlawful to display violations of human dignity, propaganda material of unconstitutional organizations (especially Nazi symbols), glorify violence and war as well as certain pornographic content.  See Article 4 for the full list.

In addition, it is unlawful to provide content that has the potential to impair the social and emotional development of children if you don’t take precautions to shield children from the content. Depending on style and presentation, games that cover violence, sex or drug use can fall under this category.

2. Does my Video Game Violate German Law?

If you’re unsure whether your game violates German law, there are two ways for your game’s content to be reviewed:

A.  You can have it pre-assessed by the German certified self-regulation organization USK.  The organisation offers basic initial assessments at a flat rate equivalent to $330 USD. You can also apply for an official rating which will prevent your game from being put on the “index list” of restricted content allowing for legal certainty before launching. This assessment entails a test run of the game and costs up to an equivalent of $1,320 USD. For a yearly fee equivalent to $3,300 USD, you can also become a USK member, which includes customized child protection solutions and a certain degree of protection from fines and other administrative measures.

B.  If your game is sold through certain marketplaces (Google Play, Nintendo eShop and Windows Store), you can obtain classification via the International Age Rating Coalition. This system is free to developers and allows you to rate a game using a complex questionnaire.  As of October 2016, IARC will be recognized as an official age classification system by German authorities.

3.  Wont Somebody Please Think of the Children!

As mentioned above, for some games, child protection measures have to be taken.  Examples of such measures include:

A.  tagging your website with an age restriction label; and

B.  restricting game distribution to adults, for example by using an age verification system.

Content that is deemed specifically harmful to children may only be made available to adults in closed user groups.  In addition, if you act as a website provider, it might be necessary to appoint a “Youth Protection Representative” to ensure compliance.

While these requirements are not minimal, it’s important to take them into account if you plan on Germany constituting a portion of your game’s market.

Thanks to guest writer Dominika Wiesner, a German trainee lawyer  working in our office this summer, for her work on this blog post.