Does your Game need a ‘Fan-Content Policy?’
For most businesses, infringement of copyright is going to result in lost profits. But what about businesses where infringement of their IP could lead to more engagement and sales?
The video game industry has this issue. Developers and publishers want to benefit from the free marketing that comes with their users creating and sharing content of their Game, but they don’t necessarily want to permit users to do whatever they want with their intellectual property.
Meanwhile, streamers, video producers, let’s players, modders and other forms of video game content creators are having an increasingly difficult time navigating the complexities of copyright law in understanding what they are and are not allowed to do with Game developers IP when making their own content.
The Copyright Acts in both the US and Canada have not been updated to address this issue, thus creating a legal grey zone that results in game creators themselves having to address how users can use their IP in their own content policies.
What is a Fan-Content Policy?
We are seeing the growing use of Game companies implementing ‘Fan-Content Policies’ alongside their more standardized Terms of Service and Privacy Policy documentation. Fan-Content Policy terms could be a whole separate document or be implemented into the more standardized terms to form part of those larger policies.
Seemingly more Game companies are opting to have separate Fan-Content Policies so they can be displayed clearly and concisely to players. Common everyday language is also best to use in Content Policies to convey the information contained in a simple and easy to understand way with limited legalese.
Ultimately, Fan-Content Policies seek to address this legal grey area as best one can outside the context of statutory copyright protections, often detailing how a user can use the Game’s IP to create their own content, and the other rules and requirements surrounding its use.
Common Terms in Fan-Content Policies
Some terms that are often included in Fan-Content Policies include:
- General Rules: what you can and cannot do with the Game and its IP while creating your own content.
- Authorized Uses: detailing what uses are permitted or excluded. Like the General Rules, but this language is often much more legal and akin to a license grant. Often Commercial Uses are not accepted (but monetization via advertisements so long as videos follow the policy may be carved out and approved).
- Mods: whether modifications to the Game are permitted, and if so, how they are permitted and under what contexts (for example, overwhelmingly often they state Mods can never be commercialized or sold).
- Other Agreements: how the Fan-Content Policy works in tandem with other agreements the user is bound to, such as Terms of Service, Privacy Policies and End-User License Agreements.
- Company Property: how the User can use Company property outside just the Game, such as trademark or tradenames.
- Credit: how a User must credit the Game, Developer and/or Publisher in the making of their Game content
- Jurisdiction: what country’s laws govern the policy. Could be the jurisdiction of the user or another specified country.
- DMCA Takedowns: how the policy addresses takedowns on third-party platforms via DMCA.
- Enforcement of Rights: arguably the most influential provision, that states that despite the rules and regulations of the policy, the IP holders ultimately reserve the right to take legal action for misuse of IP as determined by the IP owner in its absolute discretion.
At the End of the Day, Enforcement of Rights Still Remains
In a way, the Enforcement of Rights provision could be the only provision of significant weight in the whole policy, as it signifies and clarifies that these Fan-Content Policies essentially operate in a copyright law legal vacuum and the decision to either withdraw or enforce certain rights as it relates to the intellectual property will always remain with the IP owner. Despite the rules and permission detailed within the policy, the IP owner still has all the power in the relationship regardless of whether content creators were following the rules of the policy or not.
Whatever proposed licensed granted by any policy as it relates to the use of the Game is always going to be (and should be) non-exclusive and revokable by the developer/publisher at any time. Selective enforcement of intellectual property can occur at any time, as is permitted by relevant copyright statutory provisions.
In summary, Fan-Content Policies seek to inform users on how they are permitted to use the Game and surrounding intellectual property for their own content creation. A well-drafted Content Policy seeks to foster a symbiotic relationship between game creators and content creators to create a healthy and more transparent community relationship.
However, developers and content creators alike should still remember that the rights owner still has ultimate power to revoke any permissions granted in a Content Policy unless otherwise stated.
For more information on Fan-Content Policies, or to get your own drafted, feel free to reach out to Voyer Law.
Video Game Studio Intellectual Property Strategy
Recently we’ve seen an uptick in interest among video game studios looking to protect their intellectual property, with a focus on protecting characters and game/studio names.
Here is a list of priorities that should be considered when determining or developing a video game studio’s intellectual property strategy (in common order of priority).
1. Trademark protection for the game name and/or logo
With a successful game comes the risk that a competitor may produce a similar game and brand it with similar game title and/or logo. Obtaining trademark protection of a game title and/or logo ensures your right to stop competitors from using the goodwill and reputation associated with your game title and/or logo.
2. Copyright protection for game characters
Obtaining copyright registrations is best suited for protecting the main character or characters of a game and can be used to stop unauthorized or unlicensed use of the character(s) on things such as t-shirts, plush animals, bobble head toys, clothing, hats, cups and mugs, etc.
3. Trademark protection for a studio name and/or logo
Finally, the studio should protect the goodwill and reputation associated with a studio name and/or logo through trademark registrations.
While a studio may not have financial resources to pursue all of the above at the start of development, it’s critical for the studio to at least develop an intellectual property portfolio strategy and plan to execute over time as resources permit.
Our Most Popular Posts of 2018
With 2018 coming to a close we’ve decided to look back at our most popular blog posts of 2018. Interestingly, all of these posts are on the subject of capital raising/financing, which should be of no surprise to anyone who works in the technology sector! Now, onto our most popular posts from 2018:
In our most popular post we discussed the benefits to priced financing rounds, rather than convertible instruments, for early-stage financing rounds. We also cautioned that some investors prefer convertible instruments and others will reject a priced round valuation but accept the same valuation (or higher) as the cap on a convertible instrument. At the end of 2019, I still prefer priced rounds for early-stage investments but only if a Common share is on offer. I am not fond of preferred share priced rounds prior to a company’s Series A financing (I’ve seen this more than normal in 2018) as this is too early a point in a company’s life for such a complex financing structure and the additional restrictions that often follow.
2. Things Every Startup Should Know Before its First Financing
In the runner-up post, we laid out four things every startup should know before embarking on its first financing: (1) know your investment structure; (2) have your investment documents ready; (3) don’t treat investor interest as commitment; and (4) be realistic in the timeline for closing the investment round. I’ll add a fifth: know all your outstanding equity obligations and clean them up before starting the round. Put another way – all those equity offers you wrote yourself can’t be ignored and need to be cleaned up before the first financing begins.
3. Video Game Profit Sharing Structures
Finally, in third place, was our post detailing three common structures for video game studio profit sharing: (1) draft a profit sharing agreement; (2) create a separate company for each game; or (3) issue shares to profit share participants. While clients came to us with numerous structures for profit sharing in 2018, all went the profit sharing agreement route due to its flexibility.
That’s it for 2018. Stop by again in 2019 for more posts on the law of startups and video game studios, from a Canadian and US perspective.
The Two Questions I ask new Startups and Studios
Each week I meet with prospective clients that are excited to be launching a new startup or video game studio. Regardless of the differences between these clients, I inevitably end up asking two important questions at the start of every meeting:
1. Have you incorporated?
Many clients incorporate without legal counsel, which I have no problem with. However, by incorporating without a lawyer, prospective clients are often left with a few problems that I am attempting to unearth and that I know will need to be remedied:
A. The company’s paperwork is incomplete. While a company exists once the filings are made with the state/province/federal government (if a federal, Canadian company), there are a number of resolutions, registers, receipts and other documentation that a company requires in order to have a complete minute book. The preparation of the foregoing is the bulk of a lawyer’s work incorporating a company and will need to be prepared, especially if the company aims to raise capital as this documentation will be requested as part of standard due diligence.
B. Too few shares were issued. If you incorporated a company with 1, 10 or 100 shares, too few shares were issued and should be split or additional shares issued. This avoids fractional shareholding in the future (imagine offering someone .25% and 10 shares are issued to date) and also makes equity offers to prospective employees more appealing (10,000 shares appear more attractive than 1 share, even if the same percentage ownership results).
C. Too many share classes created or the wrong share classes created. I always ask clients their reasons for a particular share class as both client and lawyer should understand the reasons behind the company’s structure. Since most startups are incorporated with a single, common, share class, I push prospective clients to explain and even justify other classes. Additionally, if a preferred share class exists, what are the rights and restrictions associated with this class? Inevitably, no preferred rights and restrictions were specified,requiring the creation of these rights or restrictions or, more likely, deleting the preferred share class.
2. Have you Transferred IP to the Company?
Clients mistakenly assume that the company they incorporate automatically owns the intellectual property they create. While someone may be a shareholder (even the sole shareholder) or a director, this does not automatically transfer ownership of intellectual property created by such person(s) to the company. Indeed, without a contractor, employment or assignment agreement in place, each founder remains the owner of the intellectual property they create. As a result, the company may not own a core asset and cannot be in a position to license that asset to third parties. Additionally, by asking this question I am often told about contractors who created intellectual property for a founder or the company without an agreement in place, which will also need to be corrected.
Based on these two questions, I am often able to obtain a full picture of a company and its history and put in place the key documents required to address any issues unearthed. If you are embarking on a new venture be sure to keep these two questions in mind – doing so may prevent future legal headaches (and fees). Or, you could read my suggestions on corporate structure and IP assignments here and here.