Game Development Business and Legal Guide (Premier Press Game Development)

Global Licensing

Developers and other licensors are often buffered against many issues surrounding global licensing by their publishers, who handle international distribution, or third parties such as international merchandise agents or distributors . This section will give you some insight into what often seems like the "black box" of international contributions to revenue.

How Your IP Crosses Boundaries

Property is usually subject to different rules in different jurisdictions. For the simplest example of this, consider what would happen if you tried to take the hashish that you purchased legally in Amsterdam into France. Similarly (or not so similarly, really ), intellectual property is affected by the rules of the jurisdiction it enters. A trademark registered in the United States may receive no protection in another country (see Chapter 5, "Protecting Intellectual Property," for a look at international intellectual property law). Even if your IP is nominally protected by the law of another jurisdiction, whether that jurisdiction enforces that law is a separate matter altogether.

Your intellectual property enters other jurisdictions, usually in the form of games , merchandise, and entertainment, in one of three main ways:

• Distributor imports. A product produced elsewhere is imported into the country by a local distributor (under a valid distribution license).

• Local manufacture. A product locally manufactured and distributed under license.

• Internet. A product either sold or distributed (for example, downloaded) through the internet.

Parties Involved

Taking the example of a U.S. licensor, the licensor has the option of licensing rights country-by-country (usually too time-consuming and expensive), region-by-region (still time-consuming and expensive the first time, less so once the relationships are established), or globally.

• Agents and Sub-agents. The licensor also has the option of licensing directly to manufacturers/distributors, which usually won't make sense for the licensor, or hiring a licensing agent to handle the local manufacturers/distributors and sub-agents where appropriate. Sub-agents are used where, for example, you have granted an agent the right to sell your merchandise globally, but it wishes to sublicense those rights to territorial sub-agents, who will then license them to the parties that actually make and sell the merchandise. No matter how the sublicensing works out, you should only have to deal with the agent you hired , and that agent should be responsible for making all of its sublicensees adhere to the terms of your deal with your agent (for instance, regarding quality of goods sold).

• Entertainment Distributors. Packaged entertainment travels much the same as merchandise, but broadcast or screened entertainment is usually handled by a specialized international distributor who will most likely be chosen by the producer of that entertainment.

• Regional Publishers. Your publisher may sublicense the manufacture and distribution of your game to a regional publisher in areas where your publisher does not have an established distribution network.

Contracting with International Parties

It is crucial to have counsel experienced in the subject matter and the jurisdiction(s) of the contract. This may mean hiring counsel local to the jurisdiction. Some concerns of the international contract:

• Is the contract enforceable? Local law may determine that the intellectual property (copyright, trademark, trade secret, patent) forming the basis of the license is not protected in that jurisdiction. Some nations have laws governing what royalty rates can be charged and whether or not the royalties can be repatriated , taken out of the country.

• How will the licensor protect your property? Piracy and misuse of intellectual property by other parties or by your licenseeis a major concern. The best defense is to choose a reputable local party. Given that, what anti-piracy and enforcement measures will the licensee or agent take? If you are licensing through an agent, who will audit the licensee (or sub-agents)? Who pays the costs of these measures?

• What are the licensee's obligations? Obligations may include: the licensee will neither produce nor sell any competing product; the licensee will not sell the product outside of the licensed territory; the licensee will provide adequate warranty and customer service for the product; the licensee will indemnify the licensor from any harm caused by licensee's product; the licensee will prominently display the licensor's mark on all licensed goods.

• Other concerns. A licensor needs to be concerned with several other issues, including:

• A licensee's failure to exploit the license or create value for the licensor ( generally addressed by having short initial terms with renewal thresholds such as $ X in royalties or X number of products).

• Disclosure of confidential information that may destroy trade secret protection, or losing other intellectual property rights due to licensor's use. This must be handled delicately and expertly, as non-disclosure agreements may not be sufficient to protect the property.

• Currency fluctuation and government control on outflow of cash.

• Responsibility for import and customs fees, as well as VAT or any other taxes.

• How the product will be advertised and who will pay for it (usually the licensee).

• Governing law and dispute resolution. Be aware that the validity of these terms may be subject to your licensee's local law. Example: your contract states that California law will govern the contract, but the law of your licensee's jurisdiction makes that clause illegal. Example: your contract states that any awards from arbitration may be entered in any court with jurisdiction over the parties. You enter the judgment in your jurisdiction, but the licensee doesn't have any assets in your jurisdiction. In this situation, you would probably have to enforce the judgment in the licensee's jurisdiction.