Just about everything of value in a game company is intellectual property. This includes the game collectively, and its components of programming, story, art, and music. Accordingly, it is essential that a game company protect its intellectual property rights and properly license it in order to make a profit. Further, a game developer often ends up using intellectual property developed or owned by others, and needs to make sure that it has properly licensed that technology so as to avoid trouble down the road when the game is released.
Licensing arises primarily in three main areas of intellectual property law: copyrights, trademarks, and patents. We will discuss each of these licensing areas in more detail in separate later posts. For today, we will focus on general licensing concerns common to all three type of intellectual property.
License versus Assignment
First, we distinguish two broad concepts: assignment and license. An assignment is a transfer of all of the rights to a piece of intellectual property for its full duration. In other words, in an assignment, the transferor does not retain any rights to any aspect of the property that has been transferred. In contrast, a license is a transfer of less than all of the rights or less than the full duration of those rights. In other words, the transferor retains some rights in some aspect of the intellectual property that has been otherwise transferred.
License Terms
In a typical license agreement, the areas limiting the rights transferred should be spelled out in detail. These typically include details as to the field of use, duration, geographic area, and exclusivity of the license.
Field of Use
Field of use limits how the transferee can use the intellectual property. For example, in a model often used for online software, a license can be restricted to non-commercial, personal use only. Under such a license, the transferee may not use the software in a commercial or business setting. Such a license is often free. A separate license may be offered for business or commercial use that requires the payment of a fee.
Duration
Duration limits how long the license lasts. A license can be for a fixed term, can terminate upon the occurrence of specified conditions, or can be perpetual. The duration provisions can provide that at the end of the term, the rights go back to the transferor, or can provide that the rights then transfer to a third party. The license can provide that it is terminable upon notice, or that it automatically renews unless notice of termination is given.
Geographic Area
Geographic area limitations specify the regions where the intellectual property can be used by the transferor. This may be on any regional basis, be it country-by-country or state-by-state, or other geographically definable area.
Exclusivity
Exclusivity is an important limitation that should be spelled out carefully in a license agreement. Any exclusivity provisions usually have a significant impact on the economic value of a license. If the license is exclusive, that means that the transferor cannot license conflicting rights to another. Exclusivity means that the transferee well not face competitors within the scope of the license. On the other hand, a non-exclusive license means that the transferor can transfer the same rights to third parties, who may then be competitors of the transferee.
Warranties and Disclaimers
Another area to cover in a license agreement is to specify warranties and disclaimers. For example, software licenses typically disclaim or limit damages to the cost of the software, excluding consequential damages such as business profit losses that result from the failure of software. A common warranty often demanded by transferees is that the intellectual property being transferred is owned by the transferor and does not violate the rights of third parties.
Sublicenses
A license agreement can provide that the transferee may sublicense or transfer the license to others, within the scope of the original, parent license. If the transferor does not want the transferee to have this right, the agreement should expressly prohibit any further transfer or sublicense.
In conclusion, the proper licensing and assignment of intellectual property is at the core of the game business. It is important to identify all needs to acquire intellectual property rights early in a project, and to protect and control acquired and developed rights through a careful licensing programs.
