The following article should not be taken as legal advice. I am not a lawyer. You’re welcome to discuss my opinions with your lawyer, of course.  ;-)

NDAs, aka “non-disclosure agreements,” are common to every industry, but the video game industry has a special fascination with them. We fear that our ideas will be stolen. We worry about alerting competitors to our plans (and thus giving them time to respond more effectively.) We worry about losing control of the marketing message.

Your idea isn’t as sacred as you think it is

In general, we worry excessively — particularly about the theft of our precious ideas. The overlap between companies who will steal raw ideas and companies who are competent enough to execute upon them is very, very small. And the number of ideas that are genuinely worth stealing is even smaller.

Don’t confuse the theft of ideas with game cloning — the latter is common because execution has already taken place and the market for the idea has been proven. Executing on a design and proving out a market are hard things to do, and only the best companies (Valve, Blizzard, etc) successfully do so on a regular basis.

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I just finished reading Ernest Adams’ latest Gamasutra article, “Damn All Gameplay Patents!” It’s a well-intentioned piece that argues passionately against gameplay (as opposed to technology) patents, and contends that developers should not pursue them under any circumstances. I genuinely appreciate the sentiment that drove Ernest to write this article and agree with much of it, but I feel that some nuance is in order. Consider the following:

Patents are Somewhat Like Nuclear Weapons

In many ways, gameplay patents are like nuclear weapons. They’re expensive to develop, and they engender feelings of fear and mistrust. Put plainly, most of us would prefer to live in a world without them.

Unfortunately, like nuclear weapons, many gameplay patents already exist and are in the hands of many different owners. No matter how passionately we write, those owners will not simultaneously and universally revoke their patents tomorrow. Which means that some companies have nuclear weapons (I mean, patents)… and some don’t.

And just like in the real world, asking the countries without nuclear weapons to avoid developing them rarely works — even with economic perks or threats as incentive. More often than not, the countries that couldn’t afford to develop nukes anyway, or that don’t feel threatened, play along, while those that can/do proceed with development. Witness India, Pakistan, and North Korea.

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As I mentioned several months back, my friend Ethan Mollick and I are writing a book tentatively titled For Fun and Profit: How Games are Transforming the Business World. As our publisher’s deadline approaches, I’d like to occasionally bounce early draft excerpts off of you all in hopes of getting useful feedback. And, to be honest, I find it difficult to maintain this blog and write my book simultaneously, so I’m cheating a little bit. :-)

My first draft excerpt has nothing to do with business, per se. It tackles the thorny issue of games and violence. Ethan and I feel that we cannot ignore this issue if we want our book to be taken seriously by a broad range of readers. But we also don’t want to get mired in the issue — after all, there are so many other things we need to cover! So we’ve tried to be brief, clear, and to the point. Tell me: did we succeed in getting the point across?

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I watched This Film Is Not Yet Rated a few days ago. Very interesting documentary (if “preachy”, but aren’t they all?) I recommend that you see it. All the issues raised in the film can be applied to the video game industry, and all are worth discussing, but I want to talk about just one, brief part. In the film, one person argues that (and I’m paraphrasing here): “violence with no gore should be reserved for adults, who can intellectually handle the fiction of it. Violence with realistic gore is what should be considered safe for kids.”

I’m not a psychiatrist. I don’t have kids. I can’t claim that I have a deep understanding of what does and does not negatively impact child development (beyond the obvious things — lack of affection, lack of education, lack of sustenance, etc — stuff we as a society manage to ignore every day in favor of more sensational news.) All that said, this argument struck a cord with me. Let me explain.

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Via Joystiq, an interesting controversy: id co-founder John Romero has accused the modding community of hurting the game industry by exposing or introducing inappropriate content (i.e. nudity) in PC games. His post was in response to the ESRB’s re-rating of Oblivion (which happened after a nudity mod surfaced.) John’s exact words: “modders are now screwing up the industry they’re supposed to be helping.”

There are a number of interesting comments on John’s original post which you may wish to read. Meanwhile, this raises a couple issues that I’ve been meaning to write about:

Whose Side Are They On, Anyway?

When consumers decide to create content for a game (or anything else), they’re doing it to indulge their own creative impulses, and/or to share something with friends, and/or to gain notoriety, and/or other reasons that have little to do with “wanting to help the industry” (or the developer, for that matter.) Let’s not kid ourselves: the guys who made Counterstrike didn’t do it to make Valve rich… that was simply a nice side-effect.

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The current console business model has been established for long enough that most of us take it for granted. Develop great hardware, sell it near or below cost, then generate profit by taking a cut of the revenue from all future game sales. If nothing else, this gets consoles into more homes, which benefits everyone in the long-term. But what would happen if the model were somehow disrupted?

I started thinking about this when I found out that the EU had voted to ban printer manufacturers from forcing consumers to buy their own-brand refills. The business model for printers is very similar to consoles: sell the printers cheaply, then profit from ink sales. (The major difference is that console makers don’t completely lock out third parties; they just exercise quality control and take a big cut of profits.)

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Presentation by John Geoghegan, Executive Director, The SILOE Research Institute (Former VP, Global Sales & Marketing, LucasArts)

It’s a very hostile environment out there. The Utah state legislature recently passed a bill by a landslide vote lumping violent games with pornography. Do you feel like a porn merchant? I don’t.

California, Michigan, Wisconsin, DC, Iowa, and Kansas have all passed or are considering laws like the one in Utah. These laws are unconstitutional, but that’s a technicality, people. We’re not making friends. I haven’t seen this much animosity since big tobacco told congress that cigarettes are not addictive.

It’s time for us to wake up people. We are in deep doo-doo. At the state and federal level, we’re in trouble. Hillary Clinton’s pushing her Family Entertainment Protection Act. Everyone knows hillary is a liberal, but conservatives can’t stand her, so she’s appealing to centrists with the family values issue. Republican moderates and soccer moms can relate to the violent games issue. It’s a safe and smart bet for her as a politician. It worked for tipper gore with the whole rap lyrics controversy.

We’re marketing games to a hostile environment. We have a bad reputation. We’re getting banned, fined, and pulled off the shelves. They’re crushing our product. Some of you think I’m exaggerating. I’m not. This is the perfect storm of circumstances, and we’re sailing right into it.

How not to market in a hostile environment? Basically, don’t do everything we’re doing right now. To be clear, I’m not complaining about the ESA. They’re probably still mad at me about the whole booth babe thing. For the record, I think the ESA is part of the solution, not part of the problem. But it can’t stop with the ESA.

We love video games, right? So why shouldn’t everybody else? Right now, we’re in a defensive crouch, and our critics are playing rope-a-dope with us. The best defense is a strong offense. I propose a 12-step self-esteem recovery program for the video game industry. It’s time we held our heads up high, brothers and sisters. We have nothing to be ashamed of. Games are incredibly fun, creative, and artistic. We should be evangelizing!

1. We need to promote our perfectly good rating system, put in place by the ESRB. Let’s promote the hell out of it and make sure everyone knows about it. It worked for movies and TV, it can work for us!
2. Evangelize the benefits of video games. Read Everything Bad is Good for You by Steven Johnson. Johnson says games help kids compete more effectively, and makes them more intelligent. Games require many hours of sustained concentration and problem solving. In a world where more and more kids are on ritalin and can’t concentrate, this is a major accomplishment!
3. We need to do more quantitative research with leading universities to prove the positive impact of video games, and to quantify the negatives. We need to do research with the Harvards and MITs and the UCLAs or whatever, and we need to share the good and bad news. When we quantify the negatives, it will help us dispense with most of the negative mythologies out there.
4. We need to make it clear that new media is NEVER embraced at the start. It was true for movies, radio, pulp magazines, comics; for every new music wave, INCLUDING Mozart, there was controversy.
5. We need to preach moderation and promote good parenting. Parents should be moderating their kids interaction with ALL forms of media — text messenging, internet, movies, etc. We need to get parents off our backs and onto their kids backs.
6. We need to benchmark against sex and violence in prime network TV and movies. The corpses, blood, sex, and nudity in popular media totally outshadow what you find in games! We’re not as far on the cutting edge as many people like to say.
7. Embrace the constitution. We have a right to make and market our product in an unregulated manner — or at least, not the manner some states are suggesting.
8. We need to lobby. Let’s make political donations, and play the game that everyone else plays. We’re either not paying enough or we’re not getting the results we deserve, because i’m not seeing it.
9. We need to harness our best spokespeople. People like and trust celebrities like Spielberg — let’s get people like him saying why they like and want to work on video games.
10. We need to demonstrate our most creative games. We’re more than just GTA. We need to show people that it’s not all about guns and boobs. Games like Katamari, DDR, Guitar Hero, etc. Not a gun or a boob in sight in Guitar Hero!
11. Put the problem in statistical perspective. “M” rated games are a minority of our product.
12. Be proud! You’re marketing people — so show more pride. Don’t be ashamed to say you like video games; just say WHY you like video games. The depth of talent and degree of committment and the hard work going into games is incredible. You have every right to be proud, so BE proud!

Via Gamasutra, a breakdown of the highlights from Take-Two’s 10-K report. Aside from the notable (but unsurprising) revelation that North Carolina and Connecticut may soon join Los Angeles in suing over Hot Coffee, what I found interesting was information regarding the acquisition prices of Firaxis, Indie Built, and Irrational Games.

Apparently, Irrational (a respected studio about to release the much-anticipated System Shock 2) was worth between $6.2M and $10M, depending on future performance. Firaxis (also respected, but older, and with claims to well-established IP such as Civilization) went for $26.7M, a significant portion of which is also dependent upon future performance. Indie Built (Top Spin, Amped) settled in between the two at $18.5M.

So, does this mean that Sid and Civ are worth approximately $17M? ($26.7M – $10M). Or does it mean nothing more than “Take-Two will pay whatever it takes to cease being ‘Just the Parent of Rockstar, Inc.’” ?

Via Gamasutra, news of a squabble between EA and Ubisoft over the latter’s habit of asking employees to sign one-year non-competition agreements. Says EA: “In the spirit of creative freedom, economic emancipation and workers’ rights, EA has in fact accepted the application of an employee who had been working at Ubi Soft…”

A bit bizarre hearing the industry’s 800-pound gorilla complain about competitive practices. (Was EA acting “in the spirit of creative freedom” when it inked an exclusive agreement with the NFL, torpedoing any franchise that competes with Madden in the process?) Irony is alive and well.

Note to future Ubisoft employees: a non-competition clause (like most things in an employment offer) is negotiable. Ubisoft has the legal right to request that you temporarily restrict your future employment opportunties following termination of your relationship with Ubisoft… and you have the right to request a higher salary, bigger bonus, and/or a significant guaranteed severence package (etc) in exchange for sacrificing some of your precious liberty. Capitalism cuts both ways. ;)

Terra Nova just posted an article about a recent change in Second Life that has effectively devalued the property of many SL denizens. The article quotes a lawyer who cites established legal precedent to explain why Linden Lab (developer of SL) may be at legal risk in this (and related) matters. The basic argument: LL gave users good reason to think that some virtual land plots are worth more than others, so LL can be held liable for actions that devalue the land, no matter how many waivers users agree to when playing SL.

This is just one of the many unresolved legal issues popping up for MMOGs, and especially MMORPGs. I couldn’t find a good, succinct list online, so I’ve compiled one:

1. What happens when one player steals another player’s property?
2. What happens when players generate content that infringes upon the copyrights or trademarks of real-world companies? (Here’s an example other than City of Heroes). For that matter, what happens when one player copies another player’s work? Can they sue each other, and/or the developer?
3. What happens when players (especially underage players) engage in “legally indecent” acts? Can EA (developer of Sims Online) be sued for letting a ten-year old operate a virtual brothel? Can it be sued by players who suffer real financial damages at the hands of a virtual mafia?
4. Can developers be sued for impeding free market forces that generate real monetary value for players? (An especially interesting question, given that those forces are the key to many other potential liabilities on this list).
5. What forms of gambling are permissable in an MMOG? Is it really legal for me to play slots in Second Life, given that SL currency has real world value?
6. Do players have a right to free speech and expression? Can game EULAs contain (and developers enforce) a morals clause, like those in some employment contracts?
7. At what point (if any) does a developer become liable for failing to prevent players from harrassing other players? What constitutes sexual harrassment?
8. If virtual property has tangible value, how badly does a player need to violate a game’s EULA before a developer may evict them… without compensation for their virtual property?
9. Can players use legal means to prevent the deactivation of an MMOG, or to force developers to open source a game prior to deactivation? (i.e. to protect the value of their property?)

I wonder how long it will be before the first in-game court system pops up in an MMOG….

PS. If I’ve missed any notable legal demons, don’t hesitate to comment.