Law less ordinary | The billion-dollar world of gaming law

From nerdy niche to global mega-business, the gaming world is now policed by top IP lawyers

If you weren’t already convinced that the world of gaming had moved on from its teenage nerd in a bedroom stereotype then the news that Minecraft creator Markus ‘Notch’ Persson recently outbid Jay-Z and Beyoncé on the biggest Beverley Hills real estate deal in history should do the job.

Persson is now the proud owner of an LA mansion that features iPad-controlled fountains, a candy room and a car showroom. It may not be tasteful but it’s undoubtedly impressive for a high school dropout who simply followed his lifelong passion: he coded his first program aged eight.

Persson sold his part of his company Mojang to Microsoft for $2.5bn (£1.6bn) last year, making the $70m cost of the mansion small change. Lawyer Alex Chapman, head of Sheridans’ gaming and digital interactive team, worked on the deal.

“It’s the biggest we’ve ever done,” he says. “Minecraft is a work of genius.”

The game, dubbed ‘virtual Lego’ by many, is just one product in a world that never stops changing and growing.

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Mobile gaming revolution

“Gaming is going almost through a circle right now,” muses Bird & Bird IP partner Howard Rubin, explaining that the relationship between the three main pillars of the games world is mutating.

The industry has historically been divided into three: developers, publishers and console manufacturers. Developers are the creatives who take a game from concept to completion; publishers act similarly to book publishers, funding the creative process, then marketing and distributing the game. The console makers give games a platform.

For a long time console makers held a huge degree of control, with developers forced to develop games for specific platforms. Now, that is changing, thanks to mobile technology and the advent of mobile gaming.

“The economic model has changed with mobile,” explains Osborne Clarke partner Paul Gardner. “There’s a return to the dynamics I saw in the late 1980s.

“As game budgets became bigger we saw major players dominate, but now you can once again have people develop games in their bedroom and be successful. You can be a one-man studio and release the game directly onto mobile.”

Protecting IP is getting tougher

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Not only is mobile transforming the shape of the market, it is also affecting the very fabric of games. As barriers are broken down, protecting IP becomes more and more difficult.

Developers are now able to bring their own games to the marketplaces via apps.

“It costs $99 to become an iPhone developer,” says Chapman. “Your app has to satisfy basic requirements to be listed on the App Store, but beyond that Apple doesn’t check apps for copyright or trademarks.”

What opens up developers’ worlds – the chance to self-fund and self-publish their creations – can quickly become a major hindrance.

“When brands become big, one of the first things that happens is people start to rip them off,” says Chapman. “When Flappy Bird was created there were hundreds of clones within weeks.”

Sheridans has a group to deal with these issues: the brand protection team trawls the internet, dealing with the counterfeiters and pirates infringing their clients’ IP.

They judge what action to take on a case-by-case basis, reasoning that not all copyright infringements are bad for business. Games – indie ones in particular – often have loyal fan bases, who rework games or experiment with the brand. They would react badly if they received a cease-and-desist letter.

Developers are understandably keen not to incite fans’ wrath, which can spread rapidly on social media if the company is seen to act in a way that does not chime with what their brand is seen to stand for.

“We take a holistic view,” Chapman explains. “Minecraft has a loyal fan base and some community members do cool things with the brand – we don’t want to hit them with sledgehammers – we manage enforcement in way that doesn’t damage the community.”

The highly engaged fan base is not the only aspect of the market particular to gaming.

“It’s a strange market,” acknowledges Rubin. “It’s an entertainment market and yet at the same time it functions differently to any other.”

The longevity of a successful album can span decades, with film also capable of enthralling viewers of different generations. And while films usually require a budget of millions, music is relatively cheap to produce.

While there is a strong community of people still playing consoles from the 1980s and 1990s, Rubin claims that many blockbuster titles have a short shelf life despite their significant production costs.

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“Most blockbuster games will cost in excess of $10m and take two years to make,” Rubin says. “But they will have a shelf life of three months in Europe – and you can cut that to six weeks in Japan.”

This does not include standout products such as Call of Duty or Fifa, which can stay in top 10 sales lists for about a year, but most games need to make it big in their first few months.

The end result of this model is an incredibly volatile market: while some people, such as Persson, make ludicrous amounts of cash, many lose money on flops.

GTA: the sextapes affair

One of the most lucrative games in the industry is also its most notorious: Rockstar’s Grand Theft Auto (GTA). Since it exploded onto the scene in a volley of machine-gun fire in 1997, GTA has attracted the ire of everyone from the Haitian American Grassroots Coalition to Lindsay Lohan, who alleged that the most recent instalment of the series, Grand Theft Auto V, contained a character inspired by her: the bikini-clad Lacey Jones.

Lohan claimed that her image, voice and clothing line were all depicted in the game, as was the Chateau Marmont hotel in which Lohan used to live. One mission in the game involved driving Jones back to the hotel while avoiding the paparazzi, then proceeding to take compromising photos of her having sex.

“The more notorious a game is, the more column inches it gets and the more people want to have a pop at it,” says Harbottle & Lewis partner Mark Philips. “We deal with all of these issues on other games but GTA is so much bigger in scale so the process is more intense.”

GTA’s already vivid environment is enhanced by its soundtrack of multiple radio stations, most recently manned by Cara Delevingne.

It’s a key part of the draw for gamers but for lawyers it equates to licensing concerns. These issues are present on all kinds of games, from the virtual reality advertising used in the Fifa series to the world of Formula One, tightly controlled by the entity itself.

These ancillary issues are not limited to game play. Gaming conventions attract thousands of fans from around the globe. As part of its work with Mojang, Sheridans looked after MineCon 2015 – a gathering of 10,000 people in London’s ExCel Centre.

“It’s full-on,” explains associate Alex Tutty. “There are Hollywood designers building sets, mazes for fans to explore and talks. We did all the agreements with the ExCel Centre and with UK organisers and sub-contractors exhibiting at the event.”

Gaming trivia

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Question: What does gaming have in common with hip-hop?

Answer: Both have been the subject of moral campaigns orchestrated by activist and former lawyer Jack Thompson, who pursued video games including Manhunt and GTA through the courts, reasoning that they prompted real-life massacres by games-obsessed teens.

Thompson’s stock may have fallen (he took to sending his opponents pictures of Batman, casting himself in the role of the vigilante avenger and, unsurprisingly, was eventually disbarred) but the grand old tradition of demonising games is still with us.

Game certification is a huge issue, guaranteed to whip certain sectors of the press and public into an outraged frenzy, and important enough to be the subject of a government review in 2007.

The review, ‘Safer children in a digital world’, led to the age certification being regulated by games companies themselves. Previously, the British Board of Film Classification (BBFC) had rated games.

“The BBFC was not very well versed, so it tended to react to moral panics,” says Philips. “Manhunt and Carmaggedon were both banned, although we overturned the decisions.

“That’s now changed thanks to the new rating system. In the old days we had issues with every major Rockstar game but now that’s only occasional.”

In such a rapidly evolving world, it can be difficult to predict trends with accuracy – what was hot not so long ago quickly becomes passé – but one trend that seems here to stay involves YouTube gamer reviewers such as PewDiePie and TotalBiscuit.

Like the recent proliferation of YouTube stars, these reviewers hold incredible sway, notching up a million subscribers each while playing video games in their bedrooms. For non-fans the attraction of watching other people play games for hours is hard to figure, but that has not stopped these channels becoming an increasingly important part of games marketing.

“The success of Thomas Was Alone was attributed to TotalBiscuit,” says Philips. “It throws up all sorts of IP issues but developers and publishers have to be careful. If they are seen as squashing it they are shooting themselves in the foot.”

Perhaps there is still room in gaming for teenage nerds after all.

Lawyers at the console of the global gaming industry

Gaming iconHoward Rubin, Bird & Bird

I used to be legal director at Sega but have never really been into games. My only real experience of gaming is when I played Mickey Mouse and the Castle of Illusion all weekend. I got to the last level at 4am on Monday morning, a few hours before I was due in work. It ruined my weekend and I’ve never tried to get back into it.

Gaming iconAlex Chapman, Sheridans

When I was a kid I used to make games with my brother. I came up with the ideas and he programmed – he went on to become my first client. The industry has now evolved so that games are works of art: Monument Valley and Limbo are examples, and Minecraft is a work of genius. I will always love Fifa and Score too.

Gaming iconAlex Tutty, Sheridans

I trained at Addleshaw Goddard, wanting to work in their film department, which no longer existed when I qualified. So I legged it to the West End on qualification and have been here for five and a half years. Having dealt with both industries, the games industry is nicer than the film industry – there are fewer egos. I like games that are less about gameplay and more about following a story, like Dear Esther and The Vanishing of Ethan Carter.

Gaming iconPaul Gardner, Osborne Clarke

My personal involvement with gaming started when I was given an Atari 2600 console as a child. I was at school in the early days of digital technology and everyone was into games. My programming was never good enough to be a programmer so I became a lawyer and forgot about it. Then I got involved in a deal with a company called Tetris…

Gaming iconMark Philips, Harbottle & Lewis

I used to work for Clifford Chance and was under the partner who ran the Virgin relationship. One Friday afternoon I got a call from Virgin saying they needed me to run through a distribution agreement before they flew to Japan the next day. I called them from my bedroom on Saturday morning to give them my feedback. Luckily for me, the distribution agreement was to distribute Sega products in Europe [before Sega was really known outside Japan]. I got to know Sega, they liked my work and I went on to act for them.

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Nintendo deal launches new industry model

Japanese gaming giant Nintendo has helped fuel a new model of gaming.

The innovative company began by commissioning games purely for its own consoles, thereby creating a ‘walled garden’ scenario in which only those gamers who bought into both Nintendo’s creative vision and its technology could play its games. Other console marques followed suit, though they stopped short of making their own games, instead insisting that, to access their platforms, developers held a licence and paid a cut of the profits to them. They were the industry gatekeepers.

Until five years ago that was a powerful position in the gaming market. But it is now being compromised because the traditional model of developers, publishers and console makers is under attack from mobile devices. Mobiles mean that developers have a direct route to gamers, cutting out the role of publishers and console makers.

The market is split between serious gamers, who still invest in consoles and games, and casual gamers, who play games via mobile platforms for very little money.

Nintendo had historically been reluctant to move on from its old model but has now entered into a joint venture with Japanese mobile gaming company DeNa to develop mobile games using Nintendo characters.

“Nintendo was the most die-hard in terms of its walled garden model,” says Harbottle & Lewis partner Mark Philips. “It created a new model of control with it, so this joint venture is significant – but it’s also inevitable.”

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