What you should pay attention to when signing a contract with a publisher — VERSUS.legal column

What a publishing contract might look like and what you should pay attention to when signing it, — says in his column for App2Top.ru Alina Davletshina, Senior Lawyer at VERSUS.legal.

Alina Davletshina

We regularly draw up and check a lot of contracts for publishing games. They are different. From three to 40 pages, with the approach of “let’s write everything down” to “we’ll figure it out along the way”, with dozens of approving persons and standard take it or leave it contract forms. But in general, they have one thing in common: regardless of the approach, both sides usually believe in the project, want to be partners with each other in the coming years and earn money.

However, outwardly, the battle for the contract may not look so peaceful, and agreements reached in words may not always be reflected in the text of the draft contract, and both sides may pull the blanket over themselves.

In a new series of articles, we will tell you what you should pay attention to when discussing a publishing contract.

What does a publishing contract look like?

This is usually a 7-15 page contract (very approximate figures) describing the main agreements on the publishing of the game.

Often, specific details on the game, porting platforms, and other specific details are included in a separate addendum to the main agreement. In this case, only general agreements remain in the main agreement.

Which sections are included in the publishing contract as standard:

• scope of the publisher’s license;
• responsibilities of the publisher and developer;
• payment of remuneration and reporting. Minimum publisher guarantees;
• the term of the contract and the grounds for its termination;
• responsibility;
• other provisions (confidentiality, applicable law, etc.).

Today we will deal with the first two sections.

Scope of the publisher’s license

This question is critical for understanding the permissions that the developer gives to his partner. Therefore, it is worth paying special attention to certain points.

1. What is the license for

Usually we are talking only about the game, as a single complex object of intellectual property. However, often at the time of signing the contract, there is no game as such yet. Here it is important to describe the future project in as much detail as possible: specify the technical names along with the genre and, possibly, attach several screenshots from the finished art.

It is important to check whether the source code is included in the scope of the license and whether it is actually transmitted to the publisher. Ownership of the source code usually serves as a guarantee that the project will not be copied, so it is worth very carefully stipulating the terms of its use. For example, sometimes a publisher needs it to make critical changes to the code in order to eliminate urgent bugs if technical support is on it. Also, the source code may be needed for the production of videos on the game. In any case, it is worth clarifying how and for what purposes the code is transmitted.

Sometimes the developer manages to register trademarks before concluding a contract with the publisher (for example, for the name of the game). In this case, the trademark rights are licensed together with the game itself: it is necessary to register their numbers and registration territories. Please note that some countries require registration of a trademark license.

An interesting question that may arise during negotiations on the scope of rights is who will own the rights to the characters of the game. This should be thought out at the start. If the developer intends to make sequels or spin-offs of the game in the future (for example, with different mechanics, different code, but with the same character) and publish them independently or with another publisher, it is important to prescribe this in the contract. Conversely, if it is important for a publisher to maintain a monopoly on publishing games with a character in the promotion of which he is currently investing time and resources, this needs to be legally fixed.

2. Exclusive or non-exclusive license

The exclusivity of the license affects whether the developer will be able to publish his game independently or with another publisher. Usually the licenses are exclusive.

A case from our practice: the publisher included in the contract provisions on the alienation of exclusive rights to the game to him. If the developer had signed such an agreement, he would have completely lost the rights to the project and would not be able to influence decision-making. We persuaded the publisher to change the wording to an “exclusive license”: this state of affairs retained all rights for the developer, but limited the search for new publishers for the same game (which already suited the developer).

3. In which territory is the license valid

Often this point is described as “the territory of the whole world”. However, it is important for the developer to take into account the specifics of entering new markets, if he has this in his plans. Not every publisher can ensure the release of the game, conditionally, in China, and the exclusivity of the license on the territory of the whole world may limit the possibility of negotiations with a new publisher in this region.

We wrote more about China and how to launch games there with a publisher here.

4. Which platforms are covered by the license

The situation is the same as with the territory. It is necessary to understand whether the publisher really works with all platforms or, for example, specializes only in mobile. If he does not deal with PC versions at all, then the “license for all available platforms and consoles” will prevent the developer from agreeing with another publisher about the development of the game. Therefore, it is worth discussing the boundaries of rights and platforms for which there is a specific agreement.

A case from our practice: a publisher specializing only in mobile games has included a provision on the exclusivity of the license for both the current game and its derivative versions on all available platforms. The developer signed such a version of the contract, but after a few years of successful cooperation, he decided to independently publish a browser version of the game and turned to us for advice. Unfortunately, it was impossible to do this formally without violating the contract: the wording of the contract did not leave any gaps, and I did not want to spoil relations with the publisher. Negotiations helped – for a small fee, the publisher agreed to change the terms of the agreement and refused exclusivity in terms of platforms that he was not interested in.

5. What rights does the publisher have

Does he have the right to fight clones? Porting the game? Translate and localize? Make videos and creatives using art? Fix bugs? It makes sense to prescribe all the details in as much detail as possible. It is important to pay attention to this point by the publishers themselves — it is desirable for them to think over a full list of the powers necessary to comply with the agreements with the developer.

6. Does the publisher have the right to sublicense

Quite often in contracts there is a provision that the publisher has the right to sublicense his rights without the consent of the developer. It’s worth thinking about – how comfortable it will be to acquire new unfamiliar partners without being able to influence this situation. Often, such a right to sublicense is limited to companies affiliated with the publisher itself, which globally reduces risks.

7. The license is given for one game or for all the following projects

This clause may come as a surprise to the developer: sometimes the Right of First Offer (Negotiation) or Right of First Refusal clause is included in the contract. If a developer has a new game, then because of such sections, he must first show it to the current publisher. You can only go to other publishers if he refuses a new publishing contract. Sometimes such provisions also oblige the developer to report any offers received for new games so that the publisher can offer the same conditions.

This point is worth paying particularly close attention to if a series of games is planned.

8. Who has the right to register trademarks, domains and create accounts in social networks

An important question. If all the rights are on the developer, then the publisher needs to get a license and admin access for the site and social networks for the game.

If everything is on the publisher, it is advisable to provide for the procedure for transferring rights to licenses and accounts after the termination of the contract. There may be a situation that for some reason the contract will be terminated, and the publisher will have the right to the name of the game (for example, he registered a trademark with the name). Since trademark registration is not cheap, the publisher should provide that upon termination of the contract, he should be compensated for the costs of both the registration itself and the transfer of rights to the marks.

The situation is more complicated if the publisher has the right to only one of the series of games, and a new game is released by another publisher.

If the trademarks for the name of the game X are on the publisher, then can the new game be called the same way?  For example, X2? Formally, no, it would be a trademark violation. If you do not agree at the start what to do in this situation, then there is a risk that projects with the same name will be unacceptable without the permission of the publisher.

Responsibilities of the publisher and developer

It should be noted that everything is individual here, and the distribution of responsibilities can be very different. This affects the amount of remuneration.

The distribution of responsibilities that we meet most often is this.

Developer:

• provides a build of the game and makes agreed edits;

Here it is important to agree on the terms (perhaps even the schedules for the provision of works), the grounds for postponement due to the fault of the developer or publisher, as well as the procedure for approving changes. We also recommend agreeing on the criteria by which the developer and publisher will judge that the project is ready. It is also worth discussing how the parties will agree on the release date of the game in early and commercial access.

• engaged in adaptation, preparing updates;
• engaged in technical support and bug fixes.

It is important to understand what level of bug fixing we are talking about (usually limited to bugs of the first and second level). It is desirable for the publisher to provide a response time and responsibility for violating these deadlines.

Publisher:

• places the game on his account;
• provides user support;

Unlike technical support, these tasks concern users’ problems with compliance with the rules of the game and the community, processing of personal data, making payments and using promo codes, etc. Also, the publisher usually works with reviews of the game.

• localizes games;

It is very important to check which deadlines and languages are agreed. It often happens that this is forgotten in the process of work.

Another important point is that the translation of the original work is, although connected, but still an independent work, for which separate intellectual property rights arise. If the localization and translation function is given to the publisher, it is desirable to provide for what will happen to the translation rights when the contract expires.

You can read about the rights to translations here.

• fights against clones and other infringers of intellectual property;

Although usually in the contract such powers are formed as the right of the publisher, not an obligation.

• he is engaged in game promotion, cross-promotion, traffic purchase, advertising, public relations, creates or orders commercials and creatives, buys merch, organizes showcases.

This is perhaps one of the issues that many copies are fighting about: what specific marketing campaigns should the publisher organize. It is a good practice to get an agreed marketing plan with deadlines, a list of promotions and a budget for them. Also, the developer has the right to agree on his right to receive periodic reports on implemented marketing activities.

A case from our practice: according to the contract, the publisher was obliged to “engage in marketing” (this is a quote from the contract), but nowhere was it stipulated what exactly and in what time frame he was obliged to do. As a result, the only thing he did was to pay for the show case of the game in one local exhibition. The game itself was unsuccessfully released in terms of the date, there was no advertising, and the financial result remained unsatisfactory.

We helped the developer to withdraw from the contract relatively painlessly with reference to the violation of obligations by the publisher, precisely justifying his inactive participation in the fate of the game, but, of course, in the conditions of a “blurred” term without specifics, it was difficult to prove that the publisher specifically did not fulfill.

Of course, it is worth considering that marketing costs, like other major expenses of the publisher, are often reimbursable (recoupable), that is, they are deducted from the revenue of the game before the payment of the developer’s share of remuneration. Therefore, there is always a nuance in the spirit of “more marketing = better for the game, but a lower chance to get a quick profit share.”

But more about the remuneration and the order of its formation — in the following material. In it, we will analyze the sections of the publishing contract related to the calculation and payments, as well as the responsibility and grounds for withdrawal from the contract.

In addition, on November 30, at 19.00 Moscow time, we will hold a webinar where, together with publishers and developers, we will discuss what is important for them in the publishing contract: which points are most critical and what inattentive signing of papers can result in. For our part, we will try to reconcile these positions and share our negotiating experience: what a good lawyer would pay attention to, and where the risks lie.

More information about the webinar can be found here.