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Indie Legals 1.02: Intellectual property rights
This is a guest post by Alex Tutty, a Solicitor in the Entertainment Software group at Sheridans who specialises in the creative sector with a focus on computer games, digital media and commercial IP issues. He will be moderating a panel at ExPlay on Friday at ExPlay called “contract killers“ concerning the issues raised in this post.
Indie Legals 1.01 dealt with setting up a company. This next post deals with the intellectual property rights that a games business may have. The value of a games business predominantly resides in the intellectual property which that business owns or can exploit. Being aware of your intellectual property rights and the value in them can be crucial in securing funding and building the value of your business.
What Are Intellectual Property Rights?
Intellectual property rights are the rights which are created by intellectual effort and exist to protect the expression of your efforts from being exploited by a third party without your permission. There are a number of different types of rights including trade marks, copyright, patents, design rights and moral rights. For a games business the two key IP Rights are most likely to be trade marks and copyright.
The law and issues surrounding trade marks has received attention in a number of different matters (Edge, Doodle and Scrolls spring to mind immediately) but these matters deal with the alleged infringement of a trade mark. What is less discussed is the benefits to a business of having the right to stop others from using its name or the name of one of its games.
A trade mark is anything that identifies the goods and services of a business or distinguishes them from those of another. In the UK there are trademark rights in both registered (®) and unregistered (™) trade marks in words, logos and various other devices “capable of graphic representation”.
Since 1994 only registered marks have the benefit of trade mark protection such as statutory rights to use them and stop others using identical or confusingly similar marks in the UK. If a mark is unregistered the owner must look to the notoriously expensive and difficult to prove common law of “passing-off” to prevent infringement.
Trade marks are registered against a number of classes of goods and services and entitle the owner of the trade mark to take action against a third party who uses an identical or similar mark for identical or similar goods or services. There is a clear value in having a trade mark to prevent unauthorised use, but an appreciation of what is infringing and what isn’t should be kept in mind to avoid attempting to take action where there isn’t a valid reason.
If you are building a brand and trading under a distinctive name it is certainly worth considering registering a trade mark. Trade marks are a valuable asset of a business and can also come in handy when you least expect it, such as in the recent .xxx domain name releases where those with registered trade marks could remove their marks from the registry.
In addition to registered trade marks there exist certain rights in unregistered trade marks. If you don’t have a registered trade mark you may have a claim under “passing off” if, for example, a third party uses a mark which is the same or similar to yours and in doing so misrepresents itself, creates confusion and causes damage. The value in unregistered marks lies in these rights but actions in passing off are more difficult to proceed with, hence the value of registering a trade mark.
As soon as an idea is translated into a physical form (such as being written down, coded or drawn) copyright will automatically exist in that work. All artistic, literary and musical works attract protection provided they are original.
For a games business the copyright it will have in a game may be substantial and in different forms, such as the drawn sequences of how the game will look, the source code to the game and the pictorial representation on the screen.
Importantly copyright does not exist in single words or names (hence trade marks being useful), a process and an idea unless it is expressed in a tangible form.
Copyright entitles the owner to take action against another party who copies a substantial part of their copyright work without their permission. By way of an example: if you produced code for a game, and this was taken and used by someone else, you may be able to take action for infringement of your copyright.
Clearly owning the copyright in a game or tech developed by your business is a valuable asset, but just as copyright exists automatically, the ownership of it is also automatically prescribed. If your business is creating any form of works you should ensure that the copyright is owned by the business. Also, if you are doing work for others, you’ll want to make sure that the copyright in your propriety technology is not being given away and is only licensed for use in the work you create. Should you be looking for investment, you will want to show that the business owns all the intellectual property rights it has developed, so an appreciation of the issue of IP ownership is crucial.
Ownership of Copyright
The general rule is that the creator of a copyright work is the first owner of it, but like any good rule there are a few exceptions. One exception is that employees do not own the copyright in work that they create in the course of their employment instead it is the employer. The result of this is that if the work is created by a person who is not an employee of the business, then the ownership most likely remains with them as creator. For a games business this exception is crucial as a lot of work is done by freelancers and not by employees. Without a proper written agreement in place signed by the business and the freelancer (and even though the business may be paying for the work) you won’t own it, instead you will have an implied licence to use it for the limited purpose for which it was commissioned.
This situation is obviously far from ideal when you are working with freelancers but luckily there is a way of avoiding this by having something expressed in writing stating that you will own the copyright in the work the freelancer creates and having this signed by the freelancer. Therefore if you are using a business model where you use freelancers you should get written agreements transferring the rights to the business. You should keep these documents and these will form an asset of the business. These documents can be simple and easy to produce and should be one of the first things that the business gets in place.
It may be that once you have built the business’ tech up you are able to generate income from it by licensing it to others to use. While you are building this tech up you may do ‘work for hire’. When you are being commissioned to build a game or an app you should also be aware of copyright ownership issues.
Work For Hire
For most start ups who are building up their IP they may undertake some work for hire as a way of developing their own tech and getting paid by others in the process. Given the exception to the rule above, the copyright in the work for hire will be owned by the business creating these works. As in the example above for freelancers the company that is commissioning the work for hire will have a licence to use it.
Work for hire can be a great way of funding any business but should the commissioner want to own the work they are commissioning (which is often the case) then the business might end up assigning its copyright in the very thing which they are trying to build up if the issue is not dealt with carefully. If the commissioner is demanding ownership of the delivered work there is obviously an issue here, but again this can most likely be dealt with easily. In most cases it is not (and it shouldn’t be) the commissioner’s aim to strip the value of the business building the game or app so there needs to be a written agreement in place which provides for the commissioner to have the rights they want or need to exploit the work, but at the same time ensure the pre-existing IP of the games business is retained (including retaining any modifications or improvements to the business’ proprietary tech).
In addition to trade mark rights and copyright there are a number of other intellectual property rights that may be of value to your business including database and patent rights.
There are a number of issues concerning the patentability of software. If you have created something that is inventive and not in the public domain and is capable of industrial application, then you may be entitled to apply for a patent. Patenting is not cheap and if you do believe you have something that is capable of being a patent you should speak to a patent attorney. In order to preserve your rights prior to your application, you must keep the details confidential. If you don’t you most likely will lose them.
This right is similar to copyright but exists therefore in relation to the compilation of data. For example a database right will exist where a database is compiled and owned by the developer of a football management game. This database will have value within the game itself and in that it may be licensed to others. Consequently it should be protected against wholesale copying by others.
Database rights may also exist in other sources such as the GamesBrief list of contacts or the directory of previous posts. This right will not be lost if it is published and anyone using that database for a commercial purpose should pay a licence fee to Nicholas.
Identifying where this right exists therefore gives you the opportunity to identify another potential source of revenue. It is however important to make sure that the collected data is accurate with the necessary data protection consents.
The main IP rights for a games company are likely to be copyright and trade marks. If you would like to know more about any of the above please let me know and I can let you know when the next indie legals workshop is.