5 Types of Legal Disputes that Game Developers Face Most Often

Briefly about the main controversial legal situations in the gaming industry, he told for App2Top.ru Kamal Terekhov, Head of the Arbitration & IT Disputes Division of the REVERA Group.

Kamil Terekhov

There is a common misconception that the product itself is always more important than some rights and their design. In fact, there is as much logic in such an opinion as in buying an apartment or a car by simply handing over the keys.

If you do not take into account the risk of possible disputes, then you can suffer significant losses in the future. Below I will briefly consider several options for disputes that developers most often face:

• protection of trademark rights;
• domain name protection;
• protection of intellectual property rights in the framework of professional activity;
• copyright protection on digital platforms under the DMCA
• disputes between the publisher and the developer of the Game Publishing Agreement

Protection of trademark rights

In the absence of a registered trademark, developers periodically face difficulties in protecting the rights to the name of the game. For example, it is more difficult for them to claim the games of competitors who copy the name of their game.

The presence of a registered trademark is also important in the case of the sale of an asset (studio or game). The buyer usually checks the legal “purity” of the designations used. If the trademark is not properly issued for the seller, the transaction may be at risk.

Plus, it is important to keep in mind that if a trademark does not have registration, it can be registered by your competitor or a “troll”, who can then demand the withdrawal of the game, cash payments or the conclusion of an unprofitable license agreement.

At the same time, the logic “I will launch the game, and if there is a complaint, I will just make changes” does not work here, since frequent complaints through the platform can lead to an absolute blocking of the corporate account. In turn, such blocking leads to the complete loss of all games, even those that do not violate the rights of third parties, as well as to the prohibition of registering a repeat account by the same developer.

Therefore, even before the announcement of the game, it is recommended:

• check for the absence of trademarks, as well as competitors’ games similar to the name and homogeneous in goods/services with the published game;
• register the main domain name and several similar ones in advance;
• register a trademark in relation to the name of the game.

In relation to large projects with bright mascots, it is additionally recommended to register all key characters (and sometimes even locations and objects, if they play an important role in promoting the product or are unique) as trademarks. This will protect them from copying as well.

On the other hand, trademark registration may not be justified if the lifetime of the game is less than a year. In other words, in the case when the developer / publisher does not believe in the future of the project and is focused solely on initial sales.

It also happens that the prospects of the game are unclear, and a young small team is responsible for the launch. For her, trademark registration, as a rule, is an unaffordable investment in financial terms.  Here registration is usually recommended to postpone. Anyway, even a small startup with a short-lived game should check the absence of similar trademarks and competitors’ games, otherwise the creative path can quickly end at the start with a complaint from the copyright holder.

Domain name protection

Given the prevalence of disputes about the protection of trademark rights, there is nothing surprising in the frequency of related (but still separate) disputes about the protection of a domain name.

We are talking about cases when:

• you receive an email that your domain name violates the trademark of a third party;
• you see that a third party has registered a domain name that is consonant with your trademark.

Actually, in our practice, it is not uncommon for competitors to intentionally register a trademark in order to further claim monetary payments or conclude an unprofitable license agreement. The opposite situation often happens, when a cybersquatter registers a domain name in relation to a well-known brand, and then offers the copyright holder to “buy” it for a substantial amount.

In such proceedings, the presence of a registered trademark is essential. It has an advantage even over long-existing domains.

Such disputes are usually dealt with within the framework of the UDRP, a special simplified procedure for the consideration of domain disputes (it is agreed by the Corporation for the Management of Domain Names and IP Addresses, as well as the World Intellectual Property Organization). As part of this procedure, the trademark owner, in relation to the domain name infringing the trademark, has the right:

• demand his transfer to yourself;
• making changes to it;
• termination of its registration.

Please note that hiding the owner of the domain name in WHOIS does not save from the UDRP process, since in practice the registrar discloses the address to the applicant without the consent of the domain name owner to file a complaint. The decision of the arbitrators based on the results of consideration of the complaint within the framework of the UDRP is executed by the registrar without recourse to state courts.

Protection of intellectual property rights in the framework of professional activity

There are also frequent proceedings concerning the rights to the results of intellectual work. As a rule, we are talking about two types of cases:

• the company receives a lawsuit from a former employee, in which it is accused of misuse of someone else’s intellectual property;
• the employer sues the departed employee, claiming that his new personal project was created within her walls, which means it belongs to her.

Such situations arise when the transfer of copyright (for code, art, music, models, etc.) is improperly executed from an employee/freelancer to a company. The transfer of rights to it should always be formalized.

As part of the protection of intellectual property rights , the following situations also occur:

• the lack of registration of the transfer of rights within the group of companies, where the development studios are separated into separate legal entities (for example, the agreement is concluded by company A, and the development is handled by company A+, a member of the group of companies: in such a situation, company A may not have the rights to the game to transfer them under the agreement);
• careless use of open source solutions (such solutions are always distributed under the terms of a specific open license, which may prohibit its commercial use of the code; recently, the creators of opensource products have become more likely to file claims and lawsuits in connection with violation of the terms of open licenses).

To avoid disputes related to intellectual property rights, it is recommended to check the “purity” of the code used by the developer, including:

• the correctness of the design of relations with employees / freelancers;
• the existence of a formal relationship between the developer and the studios that are part of his group;
• whether opensource solutions are used and whether open licenses are respected (you can get a lawsuit for commercial use of “free” code).

Copyright protection on digital platforms under the DMCA

The subject of dispute in such cases is not trademarks (IP), but copyrights to content.

Usually we are talking about a situation when a developer discovers content from his game (or similar to it to the point of confusion) in a game that is someone else’s and has already been published on any of the international platforms.

Stories like this usually fall under the American Digital Millennium Copyright Act (DMCA). Within the framework of this law, only specific objects expressed in an objective form (photos, art, videos, models, text, code, etc.) are protected. At the same time, the “spirit”, idea or “logic” of the game are not protected, although opponents often refer to this in DMCA complaints.

And in general, appeals accusing the other party of unauthorized copying or processing of content are the most popular legal practice in the gaming sphere.

After receiving a complaint, the platform, as a rule, provides an opportunity to negotiate between the parties and settle the dispute peacefully. If such a complaint has come to your address, I recommend responding to it promptly and starting negotiations with the applicant, since the platform can (and by law must) block the game for ignoring the complaint.

Based on practice, DMCA complaints are often unfounded, that is, they claim objects and rights that are not protected or do not belong to the applicant at all, for example, for copying the same “spirit” of the game.

By the way, for an unjustified DMCA complaint, the applicant is responsible and obliged to compensate the publisher for the losses associated with blocking the game on the platform, which can be used as a counterargument if you have received a complaint.

It is important to understand that the procedure itself is primarily aimed at protecting the interests of the platform and frees it from responsibility if it promptly responded to the complaint and blocked content that violates the rights of third parties.

Disputes between the publisher and the developer of the Game Publishing Agreement

A separate big topic is the mutual claims of publishers and developers.

At the same time, the main problem that, in fact, leads to conflicts is the use of terms and concepts that each of the parties has the opportunity to interpret differently. For example, the publisher understands some actions by the word “promotion”, and the developer understands completely different ones.

The main recommendation here is to use (and require from the partner) clear and unambiguous formulations, as well as try to disclose them.

When signing papers, first of all it is worth paying attention to:

• payment procedure;
• calculation of the payment amount;
• accounted expenses and income at profit sharing;
• transfer of rights to the game;
• terms and procedure of development;
• how and what information the parties are obligated to share.

Pay attention to the dispute resolution options. Among the frequently used alternatives to state courts:

• conversation;
• mediation;
• technical, economic or legal assessment;
• international commercial arbitration.

The clause on the applicable law in the contract also plays a significant role.

The applicable law defines a wide range of issues related to the contract, starting from the order of execution, the contract, the rights and scope of obligations of each of the parties, ending with the legality, validity of the contract or individual conditions. Accordingly, the economics of the project and the possible consequences of a breach of contract may significantly depend on the applicable law.

For example, there is a myth that English law allows you to prescribe in the contract everything that the parties can agree on, however, in reality, not all the conditions are enforceable and valid. From the widely known: English law has an extremely negative attitude to penalties and fines for violating the terms of the Contract.

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In summary, I recommend that you worry about the registration of the rights to the game in advance, if necessary, register one or more trademarks – otherwise you can lose the game, money and corporate account. Carefully monitor the “purity” of the rights to the game and the unambiguity of the terms of the contract.

The column was written based on the motive of an hour-long YouTube stream. It can be found here.