Experienced Points

Experienced Points
Revenge of the Litigated

Shamus Young | 13 Aug 2010 21:00
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Last week I heaped on the doom and gloom and talked about how hard it is for a small company (like a game development house) to prevail in court against a larger opponent (like a publisher) when the big company is simply interested in dragging out the case in order to drive the little guy broke. I left some people with the impression that the bad guys always win and there's nothing anyone can do to stop it. This is actually not at all the case. There is a way that small companies can protect themselves, and it doesn't even require an overhaul to our legal system. If you're worried that your little development studio might get crushed under the heel of (say) Activision, then there are some pretty easy things you can do to make it almost impossible for them to come after you.

How these cases work is that a large company will enter a business relationship with a small company. Maybe they're paying your studio to make a game. Or port an existing game to another platform. To make a spinoff to an existing franchise. Or maybe they're just buying your company outright. In any case, people don't just pay tens of millions of dollars without making sure everyone is very clear on what they'll be getting in return. The two companies will, over the course of some months, hammer out a gigantic contract that details what work is expected and when it should be done. This protects the big company from having the little guy take their money, blow it on pizza and party hats, and turn in a Peggle clone at the end of the development cycle. Which is a shame because that would be a pretty sweet job.

But this contract also cuts the other way. If the big company decides they want to alter the deal, Vader-style, then they can just drag your little company into court and claim you failed to meet one of the hundreds of line items on the contract.

"You failed to turn in a viable demo by E3 as agreed."

"We had the Xbox 360 demo on the show floor."

"Ah, that was just gameplay footage. And we wanted the PS3 demo."

"We're developing native Xbox 360 and porting it later. We can't suddenly produce a PS3 port right in the middle of the project!"

"So you admit you entered into this agreement knowing you wouldn't be able to meet the agreed-on timetable?"

A real case wouldn't be nearly as simplistic as my example above. But the important thing to take away from it is that this kind of he said / she said stuff is very hard for an outsider to sort out, even if the truth is clear to the parties involved. Any argument that requires a judge or jury to understand how programming or art production pipelines work is going to be time consuming to make, and in a court case time is money. And the little player has a lot less of that.

Last week I warned you that there was no easy solution to the problem of big companies suing little ones, but some people just couldn't help themselves. So let's go over some of the responses.

Le_Lisra says:

Moral of the story: Don't live in the US.

Sadly, there is no country in the world where the little guys are somehow magically safe. Every country has its own eccentricities, and what works in the U.S. might not work elsewhere, but every system has holes because every system has human beings in it.

Some genius who got himself banned said:

Well, a simple fix would be to place a soft cap on what corporations can spend in legal fees to sue other corporations. Say, ASSHOLE inc. can't spend more than 25% of VICTIM llc.'s net worth in legal fees.

Tracking this is quite difficult. Big firms employ salaried lawyers. They're paying their lawyers 24/7 whether they're working on a particular case or not. It would be very hard (and more importantly, expensive) to prove those lawyers were or were not working on any particular case and not just playing FarmVille.

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