TOP 5 QUESTIONS THAT ARISE WHEN DISCUSSING GAME PUBLISHING AGREEMENTS

Game publishing agreements can differ greatly. They may be short or lengthy, with complex “multi-tiered” provisions or relatively simple ones. One thing, however, remains constant: game developers always have questions.

Over the years of assisting clients in navigating the legal intricacies of dealing with publishers, we have identified the top five such questions:

1. I do not want my IP to be taken away. Does the agreement contain such provisions?

Indeed, this question is to some extent fundamental. In practice, it is more common to encounter agreements where the publisher may use the IP under a licence, rather than by way of an assignment of rights. In such cases, you remain the rights holder.

However, particular attention should be paid to certain aspects of licences in publishing agreements:

• as a rule, the licence is exclusive, meaning that you cannot exploit the IP yourself or grant licences to other publishers to the same extent;
• the scope of the licence may be very broad, which, combined with exclusivity, a long term and a wide territory, imposes significant restrictions on the developer.

2. Can I create other games without restrictions?

Developers naturally wish to implement their ideas without constantly being constrained by contractual limitations.

However, when entering into a publishing agreement, you may face restrictions such as:

• rights of first offer, first negotiation or first refusal (ROFO, ROFN, ROFR). The scope and requirements of such rights may vary, but their essence is that you must first offer your publisher the opportunity to publish a new IP before approaching another publisher. If you encounter such a clause, the key points to verify are: which new IP it applies to (ideally limited to that related to the licensed game); whether an explicit refusal from the publisher is required (as under ROFR) or negotiations (as under ROFN); and whether a clear and detailed procedure for interaction is provided;
• another common clause is a prohibition on creating similar or competing games. Much depends on how such a clause is drafted. At the same time, it may be possible to seek to extend this restriction to the publisher as well.

3. What if the publisher stops spending money on marketing?

The issue of trust, particularly in a first collaboration with a publisher, may be critical. It is important that the parties ensure maximum transparency, including with respect to how and how much the publisher spends on marketing. Mechanisms that can be used include:

• prior approval of marketing plans;
• establishing a minimum threshold for marketing expenditure, below which the publisher may not go;
• monthly revenue statements with a full breakdown of expenses.

4. Can I terminate the agreement early?

This is an important issue, especially where a publisher proposes a term of 3, 5 years or more. Not all publishing agreements provide the developer with a right to terminate early without restrictions. The general trend is rather that such a right does not exist for the developer, but may exist for the publisher. However, there are several options for termination by the developer (apart from cases of breach by the publisher):

• the possibility to terminate the agreement by giving notice within a certain period prior to expiry, where the agreement provides for automatic renewal;
• the possibility to terminate the agreement where certain performance indicators are not achieved, provided that such indicators and their values are clearly defined.

5. What happens to money after termination of the agreement?

Indeed, termination does not bring the relationship with the publisher to an immediate close. One of the key issues is how the parties agree to share revenue that may continue to be received afterwards. As a rule, publishers protect themselves financially by reserving a “corridor” for recoupment of costs that have not been recovered by the time of termination. Sometimes it is also agreed that revenue sharing will continue for a certain period after such recoupment. What is important here is to have a clear timeframe for such an obligation and the specific conditions.

There may, of course, be many more questions. We will be glad to assist with the review and adjustment of game publishing agreements and to answer any queries.

Authors: Svetlana Gordey, Daria Gordey.