In my previous post in this Indie Dev Business Basics series, I discussed why and how you should form a business entity for your new indie game studio. In this installment, I’ll talk about the importance of owning your game content and how you can do it.
The danger of not owning your game content
Many indie developers have a casual attitude about content ownership. If you’re developing everything yourself, that’s not really a problem (though you still want the content owned by your business entity, rather than yourself). On the other hand, if you are using artists, programmers, musicians, and other content creators to develop materials that go into your game, you should be taking this seriously.
Imagine that you’ve released your game and it is selling well. Money starts coming in. The problems start:
- You want to port the game to a different platform, but your artist says that you can’t use their artwork for the ported version;
- Your musician starts selling and streaming the soundtrack (that you paid for) without your permission and without giving you a cut of revenue; or
- Your UI designer is re-using unique parts of your game’s UI in other projects without asking you.
Most indie devs’ first thought is “But I paid them! They can’t use that work for other things, and they can’t stop me from using it, right?”
Wrong, actually. Unless they are your employees (we’ll get to that in a second), all they’re giving you in exchange for that payment is a license to use it. A “license” is simply the creator giving you permission to use that intellectual property. Usually, a written license will define things like the length of time, the scope, and the places where the materials can be used.
However, if you don’t get the terms of that license in writing, it’s unclear exactly what can be done with those materials. You’re relying on an implied license to release your game, the scope of which is unknown. Additionally, they can potentially revoke that license whenever they want. This could be disastrous for your ability to sell the game.
Get it in writing – the best way to ensure ownership
I can’t think of a situation where it’s not better for you as a developer to own the rights to the work that’s in your game, rather than just license them. This is because licenses are rarely as broad as the rights you can gain from owning the work outright. Licenses, as I mentioned before, generally have limitations as far as time, scope, and other aspects of the agreement go. Each one of these limitations is a potential stumbling block in your exploitation of the game. This may not seem like a big deal when you’re first releasing the game, but if your game is a big success, these limitations can come back to haunt you.
US Copyright law requires that work performed by a contractor must be under a written work-for-hire agreement in order for the rights in the work to be passed onto the one hiring that contractor. You can also get an assignment of the rights after the fact, but having a work-for-hire agreement streamlines the copyright process a bit (we’ll discuss that in the next post in this series). Work performed by employees, however, is automatically a work-for-hire and you own those rights.
A quick aside – employees versus independent contractors
Before we continue, you should understand the basics of employees versus independent contractors. As I stated before, work performed by an employee is automatically a work-for-hire. You own that work that is done by your employees, and as far as copyright law is concerned, you are the author. However, there are a number of legal and tax hurdles you have to deal with if you’re hiring employees. That’s why most indie developers use contractors instead.
There are a number of tests for deciding whether someone working for you is an employee or a contractor. Different government agencies (federal, state, and local tax agencies, for instance) use different tests. In general, it comes down to the degree of control you have, in the words of the California Employment Development Department, “the manner and means by which the work is performed.”
If you’re dictating their hours, the place where they work, providing the equipment they’re using, and keeping them on long-term, they are probably an employee. On the other hand, if you are just telling them what the end result of the assignment should be, and letting them handle the logistics of it (hours, place, equipment, etc.), then they are probably a contractor. Additionally, employees are usually only allowed to work for you; contractors can usually contract with as many other employers as they want. If you’re making them exclusive to you for more than just a limited time, your “contractors” may actually be employees.
These are just the basics of employee/contractor distinctions, and I would definitely recommend that you run your situation past an attorney to be sure. The main takeaway is that it doesn’t matter what you call them, but rather the actual work relationship that dictates whether they are a contractor or employee.
What should be in a work-for-hire agreement?
Now that we’re sure you’re using independent contractors, we need to look at what your contractor agreement should include. There are a number of clauses that are important, but the only one that is absolutely necessary under US copyright law is the actual work-for-hire language. This usually looks something like this:
“The Materials are a “work made for hire” under the United States Copyright Act and, at all stages of development, are and will remain the sole and exclusive property of Company.”
In a more robust work-for-hire agreement, there will be additional language assigning the materials to you in case there’s an issue with the work-for-hire clause. Additionally, as this only applies to copyrighted work, the assignment will also cover any patentable or trademarkable materials created by the contractor.
Other important clauses in your contractor agreements include:
- Payment terms. Are you paying the contractor hourly, weekly, per-project, or with a share of profits?
- Confidentiality. You usually don’t want the contractor discussing things about the game before you’re ready to reveal it to the public.
- Warranties. Promises by the contractor that 1) they are creating the work themselves, 2) the work doesn’t include any kind of open source or Creative Commons materials that could harm your ability to sell the game, and 3) the materials aren’t infringing on anyone else’s work.
One vital provision that should be in these agreements is a prohibition against injunctive relief on the part of the contractor. What does this mean?
An “injunction” is a ruling by a court that stops you from exploiting the materials at issue. Sometimes these are issued before the court makes a final decision (called a “preliminary injunction”). If you are prevented from releasing or exploiting your game just because some part of it is the subject of a lawsuit, that could really screw things up for you. Limiting the contractor’s legal remedies to just monetary damages is an essential part of many game dev agreements, especially contractor agreements.
That’s it for this lesson. Now you know how to make sure you own the work that’s in your game. In my upcoming Indie Game Startup course, I’ll discuss this in more detail and include some examples of contract terms that you can use in negotiating with your contractors. The course website will also contain customizable work-for-hire agreement templates that you can use for your first indie game. Sign up for more info on the course here.