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When is a Licensing Agreement Used for Video Game Development? (A Full Guide)

When is a Licensing Agreement Used for Video Game Development

When is a Licensing Agreement Used for Video Game Development? Video games consist of layered storylines, millions of lines of code, and evolving and complex network stakeholders and talent. All this creativity produces works of art, entertainment value, and performance, all of which warrant legal protection. A video game licensing agreement facilitates this purpose.

A license agreement is used when video games are being published. These licensing agreements play a significant role in the creation, marketing, and advertising of video games. You cannot successfully distribute video games by skimping on necessary licensing agreements.

In this article, we will take a closer look at licensing agreements for video games.

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What Is a License Agreement for Video Games?

A licensing agreement for video games involves parties including video game publishers, sports organizations, and developers, as in the case of the popular soccer game “FIFA.” Video games are generally created and licensed by gaming corporations, including Ubisoft, Konami, Electronic Arts, etc. They acquire the appropriate licenses from companies such as WWE, FIFA, and then license them to the end-users via an end-user licensing agreement.

When Do You Need a Licensing Agreement for Video Games?

If we’re talking about when is a licensing agreement used for video game development, you need a licensing agreement when publishing your video game. These agreements play a major role in various aspects of video games, including their creation, marketing, and advertising. If you do not have a licensing agreement in place, you will not be able to distribute them successfully.

Key Components of a Licensing Agreement for Video Games

Let’s explore some important clauses that make up a licensing agreement for video games.

1. Representation

In this clause, the licensor specifies and represents all the rights they have. For example, EA Sports acquires licenses from FIFA to use FIFA branding along with other trademarks. Consequently, EA sports case the trademarks and name of FIFA in their game.

This clause also details all the rights available to the licensee.

2. License Grant

The licensor outlines the nature of the license and how the licensee can use the rights offered by them. The parties need to agree to whether the license is a non-exclusive or an exclusive one. For example, EA Sports has licensed multiple trophies and football leagues exclusively for their FIFA editions.

The licensor needs to outline all the uses allowed under the license. The licensee’s right to sublicense the granted license needs to be described in this clause. If the licensee can sublicense, the details of the sublicense and the number of times the licensee can sublicense should be included in the agreement.

3. Payments and Royalties

The parties need to decide upon a royalty for the granted license and the nature of the royalty. For example, royalties can be paid at a specified percentage of the overall sales in a specific time period or as a percentage of revenue generated through the sale of every licensed item. In addition, the payment currency, payment mode, and the time limit for paying the royalties need to be outlined in the agreement.

4. Giveaway Restriction

This clause prevents the licensee from utilizing the license for reasons other than what’s allowed under the license. For instance, if EA Sports gets a license from FIFA to use its trademark, the same will be used only for the sale and marketing of the licensed game. The clause restricts all other uses of the licensed video game.

5. Locations and Territories

The territory clause outlines the areas where the license can be used. All marketing, sales, and promotional activities of the licensed product need to be done according to this clause. All the regions where the license isn’t authorized need to be mentioned here.

For instance, some EA Sports games are unavailable in countries including Iran, North Korea, and Cuba because of problems with sanctions and embargoes. If there aren’t any restrictions regarding territory, the term “worldwide” needs to be added to the agreement, indicating the license applies all across the globe.

Conclusion

As the legally recognized owner of the game, you can initiate licensing contracts to sell and distribute your work. Licenses need to be implemented according to the various laws and drafted to make sure that the developer’s interests and rights are protected. Both, independent developers and video game companies need to protect their intellectual property before publishing their games through licensing and copyrights to prevent misuse of their products.