Out-Law Guide | 02 May 2005 | 2:55 pm | 2 min. read
The computer games industry is an unusual business in the way it operates. It is important for new companies in this area to understand their rights and to ensure that they structure their deals properly.
If you are a games developer, your most important business relationship will be with a games publisher. Essentially, the publisher will fully fund the development of a computer game through up-front payments which will be paid to you on achieving milestones set out in the publishing agreement. The publisher will also pay royalties on the games sold, but will first recover the money already paid to you.
When first approaching a publisher, you should consider getting the publisher to sign a confidentiality agreement before disclosing the details of your proposed game. You can find a confidentiality agreement to download here.
Since both the publisher and the developer will want to get the game underway as soon as possible you will usually be asked to sign heads of agreement. These heads tend to provide that development will begin and payments will be made against agreed milestones, pending the signing of a full contract. It is important to ensure that the heads are clear and drafted properly they will set out your only source of payment in the initial stages.
One of the most thorny issues to deal with is that of the ownership of the intellectual property rights in the game. Intellectual property rights in games are very complex and diverse, covering a number of elements of the game. These include, for example, the characters, trade marks for the title, copyright in the source code and executable code, copyright in any music used, and so on. (See our guide on Branding)
Publishers will normally want you to transfer all intellectual property in the game to them. You should always start from the position that you own everything as ownership of the intellectual property gives an element of control. It is much easier to terminate a licence than to require a publisher to transfer back the rights should the relationship with the publisher fail to work out as you had originally planned.
You should always consider what will happen if the agreement is terminated. For example what will happen to the intellectual property rights on termination? You should also specifically address the problem of money which has already been paid. If the intellectual property is all owned by you and the publisher has no rights to exploit the game or further develop it, he will not be willing to lose all the money paid.
Remember that computer games development does not always go smoothly for a variety of reasons and publishers may well change their attitudes during the course of a contract.
See also: Heads of Agreement for Games Publishing (checklist)