Gaming Series #6: Navigating the legal maze - Decoding the intricacies of Intellectual Property in video games

Intellectual Property Rights (IPRs) are the main assets of video game companies and form the backbone of the video game sector. It is therefore crucial for developers and publishers to design strong IP policies to protect and enforce their IPRs. IPRs protect assets and revenues, but also prevent reputational damage in a sector that has a strong community focus.

However, designing and enforcing IP policies is complicated for video games due to the worldwide distribution model typical in the industry. Video game companies must navigate their way through the law of many jurisdictions and take a risk-based approach to decisions. 

We recommend four important steps in protecting and enforcing video game IPRs:

1. Signing strong agreements with a long-term view

Carefully negotiating all the agreements necessary to create, launch and commercialize a video game is a must:

• Publishing agreements – are often long and complex but no clause should be overlooked given that these contracts will govern a long-term (very long term for AAA games) relationship between developers and publishers.
• Clauses related to future/derivatives works – are crucial for both parties to a publishing agreement, as successful games may be expanded through sequels, prequels, spin-offs etc.
• Various schemes – may be set up for IP ownership, ranging from a simple licence of the developer’s IP granted to the publisher, complex co-production agreements with co-ownership of IP, to full IPR assignment from the developers to the publisher. All schemes must be carefully thought through with a long-term view, and translated in clear contractual provisions.
• Licensing – video games companies must be careful to only enter into strict licence agreements and licence the minimum rights possible (for example, reserving movie adaptations of the video games) so that they can create a strong IP franchise and develop transmedia strategies.
   

2. Clearing third parties’ IPRs

Video games may also include representations of IRL assets protected by third party IPRs, such as:

• Real life buildings – protected by copyright or other local laws used in the backgrounds of the games.
• Cars or other types of vehicles – that may be protected by copyrights or designs (see for example the Ferrari / Take Two case in France or the AM General LLC v. Activision Blizzard, Inc. case in the in the US).
• Dance moves (see the Epic cases revolving around Fortnite) or tattoos (see the Take-Two and NBA 2K cases) – are works that may be protected by copyrights.
• Music compositions and songs – protected by various rights including copyrights and performers rights.

Clearance exercises are however, extremely complex. The question of whether assets protected by IPRs might be included in a video game without authorization, depends on the applicable laws.

Given that video games are global products, video games companies are advised to take a proactive approach and to sign licence agreements upfront with third parties for permission to include the riskiest assets in the game.

Strong warranties in publishing agreements are also essential. Although they do not protect publishers from being the target of a lawsuit, they provide a contractual remedy for breach.

Clearance processes are becoming even more complicated with the advent of generative AI, a true “intellectual minefield”. AI may be used in video games, not only to generate bespoke backgrounds and original soundtracks based on player prompts, but also to create adaptive or intelligent behaviours in non-player characters (NPCs).

The potential for AI in games is huge but also brings many IP related challenges. In this regard, not only the outputs (i.e. the results generated by the AI) but also the inputs (i.e. the data fed to the AI) will need to be cleared, and the clearance analysis will vary jurisdiction from jurisdiction.

3. Developing IP policies 

Video games and their underlying software will generally be protected by copyright, which - at least in the EU - arise out of the creative act itself and do not need to be registered.

In order to create attractive IPR portfolios, video games companies should think about applying for registration of other types of IPRs:

• Traditional trademarks - are the most obvious and can offer long term protection for video games titles or the names of the main characters of famous games. In most jurisdictions, trademarks are registered for 10 years and can be renewed indefinitely.
• Multimedia trademarks – in jurisdictions such as the UK and the EU, it is possible to register multimedia trademarks in the form of a video with sound. This could prove useful to protect the main visual feature of a game from third party reproduction.
• Patents – to protect games mechanics are available in some jurisdictions, such as the US. These offer strong protection against third parties reusing such features.
   

4. Designing smart enforcement strategies

It is important to carefully design IP specific enforcement strategies, taking into consideration the particularities of the sector and the following factors:

• Infringement actions – IP disputes in the video game sector mainly focus on copyright, trademark and to a limited extent, patents. Having a strong diversified IP portfolio, gives video game companies the option to invoke various IPRs as the basis of their infringement actions. For example, in infringement actions involving competitors cloning games which in some jurisdictions may not be considered original enough to be protected by copyright (e.g. casual or hyper-casual games), trademarks and claims of unfair competition can help strengthen the claim.  
• Choice of jurisdiction – some courts may be more willing to protect video games and their components than others.
• Timing – is key, especially with mobile games which may be built (and cloned) in a few weeks. Revenues are mostly recouped within the three weeks of launch – making it crucial to be able to initiate an action as soon as possible to preserve revenues (and the reputation) of the owner of the original game.
• Alternative dispute resolution – and negotiation might, in some cases, prove even more beneficial than a lawsuit. Litigation can in some instances risk backlash from the gaming community (and is a reason why some why some video games companies, for example, have decided not to oppose fanfictions).

Looking ahead

Given the importance of IPRs in the sector, no video game company should take their protection for granted.

See our Games and Interactive Entertainment page  for more details of and how we are supporting clients in the industry.