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Understanding the hidden risks when outsourcing game development

As outsourcing game development and content increases, so do the potential risks. Game lawyer Zachary Strebeck explores these risks and what to watch out for when contracting with a company overseas.

Outsourcing game development has both pros and cons:

While the benefits of outsourcing game development are obvious, mostly as far as cost is concerned, there are certain risks to look out for.

As the cost of domestic game development goes up, it is becoming increasingly common to outsource the creation of game assets to overseas companies. Some even have their entire game created by a foreign company. While the benefits of this are obvious, mostly as far as cost is concerned, there are certain risks to look out for.

Can you have a valid contract?

Of course. A US developer who has a signed contract with an overseas developer will most likely have a valid and enforceable agreement. This is assuming that the contract follows basic contract principles of offer, acceptance and consideration (value for value), of course. However, most non-edge cases easily meet this basic standard.

The problem lies with the realities of enforcement.

In the contract, you can specify that the forum for any disputes arising out of the agreement will be somewhere local for you, assuming you have that kind of bargaining power. You can specify the governing law and the method of dispute resolution, as well. This helps to avoid any conflict of laws issues and venue challenges.

So what’s the problem?

The problem lies with the realities of enforcement.

Let’s say you have contracted with an overseas developer and they deliver a buggy piece of software that doesn’t meet your specifications. There are a number of legal theories you can sue over, such as getting back any money you’ve already given them or putting you in the place you would be if they HAD fulfilled the contract. 

So, let’s say that you file a lawsuit in your home jurisdiction. They don’t show up, so you plead your case and get a default judgment against them. Good news, you’re a winner!

But maybe not.

If they are a fly-by-night outfit, all the judgments in the world may do nothing to help you.

Now you have to get that judgment enforced. This usually entails taking the judgment to a court in the developer’s home country. This, in case you didn’t guess, involves money. That court may or may not enforce your judgment. Even if they do, you then have to collect on the judgment. If they are a fly-by-night outfit, all the judgments in the world may do nothing to help you.

Heck, it isn’t always easy to get judgments enforced against defendants in the US. If you’ve sued in small claims court due to a small amount of money in controversy, it’s on you to collect. You may end up only getting pennies on the dollar. 

Or maybe their company has burned through the money and the business entity has nothing left. You have to go through the process of piercing through that limited liability to reach personal assets (which, again, they may have none of).

risks-outsourcing-game-content-01

So should you even consider using outsourcing?

Sure.

Just be aware of the risks. If you’re putting a ton of money into your game, you need to balance that with the risk that you could get screwed in the end. If that possibility scares you, then maybe it is worth the money to go domestic. Or maybe you have other options.

Certainly, you need to check out the company that you’re dealing with. Look at their track record and reputation. Ask around for others who have dealt with them before.

Do your homework.

My job as an attorney is to mitigate, or at least make the client aware of, risks.

Hopefully this article isn’t seen as just “doom and gloom.” My job as an attorney is to mitigate, or at least make the client aware of, risks. There is always a risk that the other party will not perform – it’s unavoidable. The question is one of risk and how much you are willing to accept. If possible, building outs and ways around those risks into the agreement or the deal is the best way to handle these things.

I hope this was helpful for those who are looking to cut costs through the use of outsourcing. I'd love to see some comments from people who have used outsourcing or are outsourcers themselves. Different perspectives would be great to hear. 

If you need assistance in deals like this, whether in negotiating with the foreign company or drafting a development or content creation agreement, why not contact a game lawyer? Or check out my two free eBooks on game development legal issues and fair use.

photo credit: Lost at sea and Ghost Tunnel via photopin (license)

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