Startup and video game law, from a Canadian and U.S. perspective
Top 5 Video Game Studio Legal Mistakes
We represent quite a few video game studios, many of which are indie. Regardless of studio size, we are often called to fix legal mistakes that could easily have been avoided. These legal mistakes frequently fall into one (or all) of the following five categories:
- Don’t forget to incorporate or incorporate too close to the date of launch. Often incorporation is left to the last minute and only happens when Steam or Apple asks for a company name. This is a problem as game intellectual property (IP) must be transferred to the new company at its fair market value, which may be more than nominal (given that it is about to be sold) and could involve complex tax solutions. By incorporating earlier in the development cycle, you can put in place proper agreements so that the company owns game IP from day one.
- Don’t create complex corporate structures with no purpose. If you don’t know why your company has a particular corporate structure, you likely don’t need it. The more complexity, the more likely mistakes will be made in the future when you use a certain structure for a different purpose than originally intended.
- Don’t forget to assign IP to the studio. The company needs to own game IP as, without, it cannot sell the game since it does not own the game in the first place. This can be remedied through employment, contractor or IP assignment agreements.
- Don’t use oral agreements with independent contractors. Use independent contractor agreements to document the studio’s relationship with contractors and to ensure the company owns the contractor’s work.
- Don’t sign publishing agreements without review. Have a lawyer review your publishing agreements as there is often a disconnect between the terms you negotiated and the publishing agreement terms (often unintentionally, given publisher reliance on agreement templates).
By keeping the above in mind, you should be able to structure your studio correctly and save the legal fees otherwise incurred to clean these sorts of mistakes up. For our indie clients, we certainly understand that they would rather put money into development than into legal fees!