Press Start Legal Insight with Zac Rich- Episode 176
Press Start Legal is a law firm based in the United States for Interactive Entertainment Industry. Zac Rich is the cofounder and is helping to bridging the gap for all game developers about the legal side of indie development, contractual agreements, and many ways to avoid the common pitfalls of startups.
Zac Rich is the managing partner and also the founding partner of a law firm, Press Start Legal, “down here in South Florida. We created the firm to service the interactive entertainment industry. So that's everything from your video game developers, your publishers, all the way to your online content creators, your youtubers, your twitch streamers. Everyone that would fit into that mold of interactive entertainment. It used to just be video games but now we're trying to expand that genre to any form people can interact with. We like to think that streaming really falls onto that and same with YouTube. Because you have a direct correlation as a viewer with what you're watching on screen.
So we launched early 2018, and it was been a slow start but I would say about October of last year things really started to pick up and and now everything has just been taken off.”
Common Pitfalls for Game Company Startups…
“When you when you look at it from a legal perspective, the barrier to entry into creating video games has become so low that anybody with a computer with an idea can design a great mobile game. People don't think of the legal side of things. So they think emailing back and forth with someone who's going to do the graphic design for them or maybe writing the music score is their contract. What they don't understand is that it is more complicated. Let's say you want me to design your logo and I agree on a price and everything's peachy. Well, that's great, but no rights were transferred to you. You picked me for a logo but I still own the rights as
a creator to all of them. So this particular developer had spent a lot of money on sounds, on new artwork, on everything. When it came time to publish the publishers like ‘Well, let me see all the rights of this, let me see all your agreements… and you reply ‘Oh, we have emails right here. Is that enough?’ That would be sort of the scariest part of both aspects of the contractual side of things. Emails are not contracts and when it comes to intellectual property you want to make sure that these sort of transfers are inside these agreements that you're signing with people. Because if you're paying someone three, four, ten thousand dollars to design something
for you, you want to make sure you have those rights.”
Busting Legal Myths...
“Mailing to yourself does absolutely nothing to be the originator. To have something that is copyrightable all it takes are for you to take that original artistic expression, that it has to be unique, and put it into a fixed medium. So if you have an idea of a logo, as soon as you draw it on a piece of paper, or design it in Photoshop, or if you're writing code... as soon as you put that code in a Word document you have a fixed medium. That is what gives you those rights. Mailing it to yourself is just a waste of paper.
Registering a Company Legitimately…
“Many people think that just creating a company is as simple as calling themselves a company name and that's just not true. You have to register a either an LLC or a corporation in your state. Or depending upon certain factors like if you're seeking investments you would register in a state like Delaware. My advice for everyone out there is if you are just doing this as a hobby and it's just you and your friends and you don't forever see this turning into a legitimate business… don't go out of your way to you know register business in your state and pay taxes. Don't pay
the taxes and fees for setting up a company if it just doesn't make sense for you. If you're planning on taking this business seriously and you see it as a business or you're thinking ‘Hey, I've made a couple good games. They're for free and people really like them, maybe, I want to turn this into a business.’ The the most simple way to do that would be to register a limited liability company, an LLC, in your local state. Double check with your state's laws because every state for registering companies are different. The fees in some states like California are significantly higher than a place like Florida. My caveat to all the people in California is that California is a very consumer protective state. If you know your offices in California and you don't plan on leaving California, and you want to roll the dice on California then register your business in California. I wouldn't advise it.”
Getting an LLC is the first step…
“If you're looking to do this as a business get an LLC, at least. You want to form a LLC because you want to limit your personal liability. Let's say, you were contracting with somebody and that contract fell through. Well, they're suing you personally and you're personally on the hook for those funds. But if you set up your company to follow proper corporate formation, corporate formalities, and are caught up in a similar situation then they can't sue you personally. They're suing your company and if your company has no assets, great! You've got a judgment against a company that's not worth anything and thereby you get to go home and no one's touching your house no one's coming to break in to steal the refrigerator. You're good to go. It's taking yourself out of it. I'm not a tax expert, but, you're gonna get taxed the same way being in an LLC as you would being in a DBA. Because an LLC is a pass-through tax structure so you're gonna report your profits and your losses on your income tax.”
Common Problems Most Startups have....
“What comes to mind immediately are most new startups aren’t forming proper contracts from day one. In most situations, it's two friends who are working together and they wanted a form a partnership and they're arguing with each other about certain things that a contract day one would have been set in stone. So then if there's ever any bickering you guys go back to what your agreement says and it's there. Nothing changes. People could be the best of friends but when there's money and other things involved things can get too loose. It’s a business so treat it like a business and do that upfront.
The other common problem is not protecting their brand when they should be. That kind of caveats into making sure that you're not using other people's stuff without permission. That would be one of the biggest. If someone put it up on a random message in a reddit board you think to yourself ‘this is some really good stuff that he put up here.’ Where did this come from? If they're not willing to say sign a quick assignment to you or give you a non-exclusive license you should be wondering do you really have the rights to use this and if you should be using it in a game that you're about to release for for sale.”
Avoid Legalese and What Makes a Contract Legal...
“All you need for a valid contract is need an offer, an acceptance, and you need considerations. So you could do something really plain language, incredibly simple. As long as there's something exchanged for consideration and the other side accepting that, you got a contract! I mean, you could write a contract down on a napkin at a restaurant and it'd be fine. The reason why a contract written by an attorney is full of legalese or it's 36 pages to say two things is because there's other things that a napkin on the diner table is not considering. Things like if you die or if you want to sue me what state are you suing me under and what laws are going to be filed. Things like protecting your rights and when am I going to pay you. How long after you completed payments do I have to not pay you.If I'm not satisfied with the work, then what? Things like that. But, you could do something just as basic as ‘I’m paying you to paint my house brown and you're gonna complete it on Thursday in this state and I'm signing here and you sign there and I pay you the money.’ We've got a contract!”
Differences for Youtubers, Streamers, Game Developers, and Investors..
“All sectors of the game industry have similar issues but I would say that some things are a little bit more important in different areas of this industry than others. For example, for a youtuber their brand, their trademarks, their copyright on their videos, the content they create is the top of that list of most important. I would also consider that most youtubers and streamers for that matter, as well, don't think about starting a company. Also, running their stream or their channel through that company. Some of the biggest players in that industry doed do that. For example, Linus Tech Tips, Linus owns Linus Media so he is an example of someone who's huge on YouTube and started a company out of it. So that's something that we've seen a lot.
For gaming, it's a lot of contracts. Also intellectual property is huge there too, but then there's other aspects.
For social media influencers, the biggest things are contract branding and then you need to worry about the consumer activists and consumer protection laws that come out that the FTC oversees. So you're seeing things like deceitful advertising and I don't know if any of you guys have seen at the Fyre Festival documentaries on Netflix and Hulu. All those models that were in the documentary that promoted the festival are being brought into this massive class action lawsuit and are being investigated for deceptive advertising. Because that video that they all appeared in and all that promotion wasn't disclosed to the average consumer that this was a paid advertisement.
The biggest case that sprung all this was Warner Brothers gaming was hit with a massive fine by the FTC because they were paying game review youtubers to say positive things about Shadow of Mordor. Iit wasn't disclosed and this is where the term under the fold came up in the front YouTube page. It wasn't unless someone clicked this see more and scrolled all the way to the bottom was it ever disclosed that ‘Hey this is really a paid advertisement for this game.’ Because they were paid to do this so now the game industry really got a big spotlight on it. It's about not being deceptive and having all this disclosure.”
Restrictions on Privacy Laws…
“Privacy law is the new hotbed right now with in Europe with the GDPR with the California Consumer Right of Privacy that just passed you're going to have more and more States jumping on this extraordinarily strict level of privacy. I wouldn't be surprised if we don't see like a federal government GDPR, our style of the law being passed in the next year.
states these are the number of people that may be affected. Here's the measures that we had in place to prevent this and this is how this breach occurred. So that's why privacy is a huge thing that used to not be on the forefront and now is really starting to creep its way up.”
Sponsors & Gratitude
WANT TO TALK TO LARRY & BRANDON in real-time to discuss the episode or get some feedback on something you are working on? Join us in Discord for After Show Tuesdays and Feedback Fridays. Where every week we discuss with our listeners about their thoughts on the new episodes and give FREE advice on personal projects.
Keep in Touch!