Intellectual property rights in the real-money gaming (RMG) industry assume a pivotal role in shaping business strategies and generating revenue streams. Unlike the tangible domain of physical goods or the broader digital realm encompassing traditional computer games, RMG occupies a unique position where the nuances of IP licensing demand specialized attention and expertise. This sector, a specialized segment within the vast gaming ecosystem, leverages intellectual property not merely as a legal asset but as a cornerstone of its business model. Through strategic licensing agreements, RMG companies can unlock significant value from their IP portfolios, provided they navigate the complex regulatory environment and adhere to industry best practices.
The importance of intellectual property in the RMG sector cannot be overstated. From proprietary gaming software and branded content to innovative gameplay mechanisms, IP assets serve as critical differentiators in a highly competitive market. Moreover, the digital nature of RMG platforms amplifies the relevance of intellectual property, making effective IP management and licensing strategies essential for sustained success and growth.
However, the path to leveraging intellectual property through licensing in the RMG industry is fraught with challenges. The dynamic regulatory landscape governing real-money gaming necessitates a proactive approach to IP protection and compliance. Companies must ensure their licensing agreements are meticulously crafted to comply with international regulations, safeguard against infringement, and maximize commercial benefits. This requires a deep understanding of legal frameworks and market dynamics specific to the RMG sector.
RMG Copyright and Trademark
Copyright remains a contentious issue for RMG companies because unless the RMG company has developed the gaming product it promotes, hosts, and profits from in-house, the third-party developer is usually entitled to copyright.RMG companies operating without a license from the developer would probably find themselves in violation of copyright or trademark law. Generally, RMG companies acting as match and tournament organizers cannot seek refuge under the fair-use exception, especially if they profit from the games. Unauthorized use of copyrighted game content can initiate DMCA takedown notices or lead to costly federal trademark infringement lawsuits. Players and streamers, on the other hand, may be shielded from the fair use exception.
Because game studios generally do not endorse websites or apps that allow real-money wagering on their games, trademarks have also become a thorny concept for real-money gaming companies. Third-party wagering sites using the logos or cover art from the games they support without a license or permission invite brand confusion claims from game studios, as players may assume that the game makers themselves endorse these wagering sites. The fine print (that nobody but a lawyer would read) disclaiming any endorsement is not sufficient to prevent a trademark infringement action. Game developers spend millions of dollars cultivating their image and will not hesitate to file a lawsuit to protect the integrity of their brand.
As real-money video game tournaments become more widespread, we can expect a corresponding rise in the number of IP lawsuits filed. At the very least, game studios and developers will push back, taking their cue from Epic Games, which has announced an aggressive stance toward third-party sites that promote or facilitate real-money contests that use the company's games (particularly Fortnite). It has not yet, however, filed lawsuits against RMG companies for IP infringement.
Licensing as a Revenue Model
The video game business model has evolved through the years. Its first iteration was a simple retail model. The studio developed and published a game, and players bought it. Since then, developers have incorporated subscription and games-as-a-service models and introduced in-game purchases, advertising, and sponsorships to boost their profits. Today's approach leverages new technologies to include in-person and online tournament entry fees, cloud gaming, and IP licensing. In many cases, licensing and microtransactions battle for supremacy as the most profitable RMG business model. Nearly all gaming companies earn some form of income from licensing.
Common licensing schemes in the RMG industry involve gaming studios "leasing" their ownership rights to their IP — characters, designs, catchphrases, etc. — for use in other properties and media. For example, a clothing brand may collaborate with and license a game company's mascot to produce a line of T-shirts, coffee mugs, and mouse pads. RMG companies can generate revenue through licensing their games or characters to third parties. This revenue stream involves granting the rights to use the game or its element for a specific period, for a particular use, in exchange for defined compensation, and subject to contractual obligations.
Licensing allows gaming companies, especially RMG companies, to expand the reach of their IP beyond the digital realm and into physical products or other media formats. By partnering with companies specializing in manufacturing and distribution, developers can leverage their game's popularity to create branded merchandise and products that resonate with their fanbase.
Legal Considerations
Negotiation
A successful licensing business model is the outcome of productive
negotiations between all the stakeholders. RMG companies should not
leave hiring a skilled negotiator to the last stage, as any mistake
can be very costly. Lawyers are naturally skilled negotiators. It
is best to consult a lawyer specializing in RMG law to negotiate on
behalf of your company.
Royalties
Calculation of royalties is extremely complex, and only specialized
professionals can produce accurate figures. Usually, law firms
would have in-house experts who could assist you with royalty
calculation. It is best to hire a single law firm that can assist
you with all the aspects related to building a successful licensing
business model right from negotiation until the deal is sealed.
Scope and Exclusivity
Clearly defining the breadth of the license, including the specific
rights being granted, should include the types of games, images,
platforms, and geographical territories covered, as well as whether
the agreement gives the licensee the exclusive right to exercise
the permissions granted, ensuring there is no ambiguity regarding
where and how the IP can be utilized.
Contracts
An important aspect of a sound licensing business model is a robust
licensing agreement. The importance of having a well-drafted
licensing agreement cannot be overemphasized. Apart from a
well-drafted licensing agreement, it is also essential to have
other documents such as disclaimers, terms and conditions, and
others. A well-written disclaimer can help mitigate legal liability
due to poorly negotiated licensing deals. Similarly, terms and
conditions should include an intellectual property clause and a
disclosure statement. A skilled RMG lawyer can draft all these
documents for you.
Given the nuanced intellectual property considerations in the RMG industry, game studios and developers must remain proactive and assertive in safeguarding their intellectual property. Significant money is involved, so it is best to consult a law firm specializing in RMG law to seek legal guidance on the IP issues involved in real-money gaming. They can also guide you on how to build a successful licensing business model.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.