This Isn’t a Game: Entering Into App and Game Development Contracts

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I love working with video game developers. They are both techy and artsy; equal parts John Bender and Brian Johnson; shades of Hawking with a splash of Picasso. As gaming continues to become even more immersive through virtual reality technology, the work these of these artist-programmers will stand up to any novel, poem, or song in the pantheon of artistic achievement.

Games are the product of tremendous collaboration, not just between programmers, but with visual artists, musicians and storytellers. With so many people involved, it is very important to make sure your agreements are properly drafted. Game companies hire freelancers and contractors all the time, but unfortunately it is all too common for contracts to be no more than verbal promises or handshake agreements. This can cause big problems down the road, for both the developing company and the programmer, if something goes wrong.

If you are designing an app or game, here are a few guidelines to follow.

WRITTEN CONTRACTS

This is so basic that it pains me that I need to say it, but have a written contract. Executing a written agreement not only clarifies things in the event of a dispute, but they are actually instrumental in preventing the disputes in the first place. Details often get glossed over during verbal negotiations which increases the likelihood that the parties have different expectations going in. The process of writing down your understanding of the agreement, and perhaps even working with a lawyer to go through the language with you, will draw out any potential misunderstandings and make sure they get hammered out right from the start.

controller-852271_1920I would always recommend that you consult an attorney before entering into any contracts, just to make sure that it addresses all of your needs and actually protects you the way that you intend it to. I think that alternative legal resources like LegalZoom often provide a good starting point, but there is no boiler plate contract that will work perfectly for your specific needs. An attorney will help you put in all the appropriate language.

By no means does this blog post cover all of the terms you may need, but I have listed some of the most important elements to put in your written agreement.

INDEPENDENT CONTRACTORS

Unless you are hiring someone to work for your company as a full-time employee, make sure your written agreement specifies that they are an “independent contractor.” Having employees creates certain duties and obligations, to the employee as well as to 3rd parties, that you may not be prepared to handle. However, the relationship is much simpler if they are an independent contractor.

hand-apple-iphone-smartphoneMake sure you deem them an independent contractor in the written agreement, then also treat them like an independent contractor. History abounds with cases of employers who treat their workers as employees, but then try to shirk their duties as an employer by simply calling them an independent contractor. This simply does not work. If a court decides that you treat your workers as employees and that you didn’t live up to your duties as such, then you could find yourself in hot water.

There are a number of factors that would contribute to a court’s determination, but the main thing is the level of control you exert over the worker – i.e., you tell independent contractors what work to do, but you don’t have control over how they do it. For example, you might say to an independent contractor, “I need you to build a playhouse, and it needs to look like a Disneyland castle, and I need it done by such-and-such a date,” but you wouldn’t supervise the construction or require them to work certain hours or tell them how to hammer the nails or how to saw the beams. The way they complete the task is up to their expertise as a contractor. If you start exerting more control over the way they do the job, you’ll start looking more like an employer and you run the risk of a court treating you that way.

WORK-MADE-FOR-HIRE: OWN THE INTELLECTUAL PROPERTY (IP)

I wrote pretty extensively about the concept of work-made-for-hire in a previous post, so read that first if you want to understand the finer points. If you are a company and you are hiring an independent contractor to work on a game or app, at the very least you should have the following two clauses in your contract: 1) a work for hire clause, and 2) a catch-all IP assignment clause.

You NEED to designate their work as “work made for hire.” Those are the magic words. When you do, you will be considered the legal “author” of the work, and you own all IP right from the start. If you don’t, your independent contractor will actually retain all their rights as the creator of the work, and you run the risk that they will come back and demand royalties or that you pay them a licensing fee. Additionally, there are some categories of work that you cannot designate as work made for hire, so you will want to include a catch-all provision requiring the contractor to assign any other IP in the work to you.

CLEARLY DEFINE THE SCOPE

You need to clearly define the scope of the project: when it starts, deliverable due dates, and exactly what they are expected to build. Be extremely precise. Don’t expect your contractor to thoroughly understand your business model, your aesthetic, or to just “get it.” The more detailed you are, the more likely they are to deliver satisfactory work product. When I see disputes over programmer contract fees, the root cause is generally that there wasn’t a sufficiently clear definition of what was expected. I would also recommend that, at the very least, you check in on your programmer from time to time to monitor your progress. Communicate frequently and make sure that they aren’t getting off track. The contract should also state that, if the code doesn’t work as specified in the contract, they will fix it at no extra charge.

Scope also comes into play for the compensation provisions, especially if you are paying them in terms of equity or royalties. Do they get royalties on all profits of the game? What about sequels or spinoffs? What if you use their code or contributions in some other game or app? How are royalties calculated in that case?

CONFIDENTIALITY AND NON-DISCLOSURE

Include a confidentiality provision that prevents them from giving away your secret sauce. This becomes even more important if you are actually a contractor building the game or app for your client, or if you are licensing a 3rd party’s technology. If you signed any 1024px-Tex_playing_video_gamesagreements with 3rd parties, chances are that those agreements not only ask you to maintain confidentiality and that you protect their IP, but they also will require you to impose those some obligations on any contractors you hire. Review all of your contracts related to your project and make sure that your contractors are legally held to the same standards that you are.

This often comes in the form of a “warranty” provision, where the contractor warrants that they will 1) not infringe on the IP rights of any 3rd parties, 2) maintain confidentiality, and 3) abide by any other agreements you are in (be sure to add the necessary details specific to your case).

TERMINATION

Things go wrong, like, all the time. Sometimes your contractors don’t finish on time. Sometimes they do a crappy job, or maybe they just take off in the middle of the project. Sometimes you decide to take the game in a different direction, or your investors pull out and you can’t pay your programmers. There are any number of bizarre and surprising ways that things can go off the rails, and to protect yourself you need to include something in your contract that specifies what happens when they do.

Lay out the circumstances in which you can fire your contractor, how much you are required to pay them if they do a poor job or don’t complete the project, and whether you are entitled to the return of up-front payments. Lay out what will happen if you have to terminate their work in the middle of the project. This can happen for any number of reasons – maybe the element they are working on is no longer necessary, or the project gets cancelled altogether – either way, give yourself the option of canceling their contract if necessary and clarify what they are owed if you do.

SUMMARY

App and game development is an exciting industry filled with talented and entrepreneurial individuals, but whether you work for a big-time game company or you are a small team of creative programmers, you need to take basic precautions to prevent legal disputes with your freelance programmers. Execute written contracts that describe all of the rights and expectations of both parties. The specific needs of every company or project is different, but at the very least you need to make sure that your agreement is written, that the freelance programmer is an “independent contractor,” that you deem their work as “work made for hire,” that you assign any other IP rights in their work to the company, that you clearly define the scope of the work and the compensation, and that you define what happens in the event of termination. Good luck!

Disclaimer: This blog is not legal advice and is only for general, non-specific informational purposes. It is not intended to cover all the issues related to the topic discussed. If you have a legal matter, the specific facts that apply to you may require legal knowledge not addressed by this blog. If you need legal advice, consult a lawyer.

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