What do you need to have in a game development contract?
With GDC coming around again, many developers are seeking out artists and programmers in order to make awesome games. It is common that many of these development deals are done with handshakes and promises. I’d caution against that and say that a good contract between developer and contractor needs to address some specific things. Let’s take a look at why.
Get it in writing:
I’ve written before about why it is important to get a contract in writing before beginning work, but it’s always a good thing to remind readers of. There are so many things that could go wrong throughout a working relationship, often based on a fundamental misunderstanding of the deal. While everyone enters into a deal with the best intentions, sometimes arguments and broken relationships can’t be helped.
One thing that can be helped is getting a written contract up front. This helps to solidify both parties’ understanding of the agreement. It provides evidence, should the dispute end up in front of a judge. Heck, it can avoid judges entirely and opt for a less-expensive and less time consuming arbitration or mediation process.
As I advise all of my clients: never go into a deal without getting it in writing.
Make sure they’re an independent contractor – and act like it:
There are two types of workers that you can have: employees or independent contractors. When you hire an employee, there are a slew of rules that must then be followed, including state and federal wage and hour laws, overtime payments and workers’ compensation insurance benefits. However, most of these can be avoided by using independent contractors.
It’s generally not as simple as just saying that a person is an independent contractor in the agreement. You also need to act like they’re an independent contractor.
What does this mean?
First of all, you need to give up some control over where they work, how they do their work and whether they use their own contractors to get the work done. At the most reduced level, you basically want to give them the specifications of the assignment and let them get it done. The more control you have over the how and where of them doing the work, the less likely a court is going to find that they were, in fact, an independent contractor.
Additionally, if you add things like non-compete clauses to an independent contractor agreement, they begin to look like an exclusive employee. This isn’t good, because they can then come back and sue you for things like unpaid overtime and lack of breaks. This is currently going on in other industries, like FedEx drivers who recently won a lawsuit against the delivery company.
Is it an assignment, a license or a work-made-for-hire?
When it comes to contracts for creative or programming work, there are always going to intellectual property issues that need resolving. When an independent contractor creates a creative work, whether artwork or software code, they own a copyright in that work. If you, as the developer, want to own that contract and be considered its author, it need to be created as a work-for-hire.
How do you do it?
The work needs to fall into one of nine different categories, listed here. Also, there NEEDS to be a written agreement showing that it was intended as a work-for-hire. Or they need to be your employee, which as I said, brings with it a lot of other requirements.
Another way to do this is through an assignment of the copyright. Many contracts start as a work-for-hire agreement, but include a backup clause assigning the rights in case it is not found to be a work-for-hire. This is a good way to cover your bases as a developer and make sure you own the rights.
Now we get to the big one – this is why anyone is going to do work in the first place. How a contractor gets paid could be simple or complicated. I’ve seen all kinds: flat fees, hourly rates, royalty compensation, percentages of Kickstarter earnings or a hybrid of them all.
The beauty of having a contract is that you get to decide how you pay or get paid. However, these terms need to be absolutely clear in the agreement.
Does the revenue amount include the Kickstarter earnings?
Is it before or after expenses or Kickstarter fees?
Does the contractor get a percentage or a flat fee for each copy sold (when the cost varies)?
Do sequels and expansions count?
When and how do they get paid?
All of these questions and more could be answered by a well-written agreement.
What happens if you get sued because they did something wrong?
Imagine a scenario where the contracting artist uses some royalty-free images that they didn’t pay for or properly attribute. You use those in your game and get sued for copyright infringement by the owner of those images. It may not be your fault, but it certainly is your responsibility.
This kind of scenario could be avoided, in part, with a well-written agreement. There are two ways that we do this: representations and warranties, and indemnity clauses.
The contractor will make a representation that they own all of the rights in the work that they do for you. If they breach this representation, they are then liable for a material breach of the agreement. The indemnity clause means that if you get sued because of their breach, they are legally obligated to defend you and hold you harmless in the dispute. This puts the onus on them to mount a defense or pay the damages, or else you can then sue them for whatever damages you need to pay for the infringement.
Again, get it in writing:
Without a written contract, many of these issues (and others I didn’t address) are left unresolved. Other questions remain, such as where any disputes will be heard or what law should apply, that could also be addressed in the agreement.
Before entering into a working relationship, get it in writing. It can benefit all parties involved. For assistance with these game-related contracts, feel free to contact a game lawyer. We can set up a free consultation to give you an idea of what legal services could be appropriate for your project. For more info on the legal issues that game developers face, check out my free legal eBooks and my course on stopping stolen content with DMCA takedowns on Udemy.