IP Assignment and Background Asset Carveouts in a Master Services Agreement: A Guide for a Game Development Studio

Introduction

For game development studios, understanding intellectual property (IP) ownership and background asset carveouts in a Master Services Agreement is crucial. These elements define who owns what in the ever-evolving world of gaming. Without proper clauses, misunderstandings can arise, leading to disputes and potential losses, both financially and creatively. It's essential to set these terms clearly to ensure that everyone involved knows their rights and obligations. If you’re looking for more clarity about these elements, now is a great time to delve into specifics.

What Is IP Assignment?

IP assignment refers to the transfer of ownership rights from one party to another about intellectual property created during a project. Clients often expect to own the end product once they pay for it, which is a reasonable assumption. However, for creatives, this can lead to confusion if the terms aren’t clearly outlined. When studios understand and implement clear IP assignment clauses, they can enjoy peace of mind, knowing that their work is protected and that clients understand which rights are being transferred.

What Are Background Assets?

Background assets are the proprietary tools, frameworks, and methods that a developer uses to create their work. These assets are crucial to the production process, often containing valuable processes that the developer may not want to relinquish. Carving out these assets ensures that while clients can utilize the work produced, the consultant retains ownership over the methods and tools used to create that work. This balance is vital in fostering a collaborative environment while also protecting the integrity of the creative process.

Suggested Clause Language

Work Product. Upon full payment of the Fees provided in the SOW, Consultant agrees that the deliverables, work product, content and other materials created, developed or conceived by Consultant for Client for purposes of this Agreement as provided in the SOW (the “Work Product”) shall be the sole and exclusive property of the Client. Consultant hereby irrevocably assigns to Client all right, title and interest worldwide in and to the Work Product, including all copyrights, patents, trademarks, trade secrets, and other intellectual property rights therein. Consultant acknowledges that to the extent permitted by law, all of the Work Product consisting of copyrightable subject matter is “work made for hire” as defined in 17 U.S.C. § 101 or any similar or analogous law or statute of any other jurisdiction and such copyrights are therefore owned by Client. To the extent that the Work Product and/or the results and proceeds of the Services may ever be determined under the laws of any country not to be a “work made for hire,” Consultant hereby confirms that effective on the date of creation of the Work Product, it assigns (or has assigned) to Client all right, title and interest thereto (including all copyright and associated rights, extensions and renewals, and all causes of action appurtenant thereto) throughout the world. If Consultant has any rights in any jurisdiction, including without limitation “artist’s rights” or “moral rights,” in the Work Product that cannot be assigned, Consultant hereby unconditionally and irrevocably waives the enforcement of such rights, and all claims and causes of action of any kind against Client or Client’s customers.

Background Assets. “Background Assets” are the materials, tools, utilities, techniques, technical frameworks, data models, object models, methodologies, know-how and information (both in object code and source code) made available to Client by Consultant under this Agreement that are proprietary to Consultant. This Agreement grants Client a non-exclusive limited right to use the Background Assets and does not constitute a sale or convey title or ownership of the Background Assets or any intellectual property rights therein to Client. Consultant is and shall remain the sole and exclusive owner of all right, title and interest in and to the Background Assets, including all improvements or modifications made thereto, and all intellectual property rights embodied in or related to the Background Assets.

These clauses help create a fair balance, protecting the rights of both the game studio and the consultant involved. By clearly defining each party's ownership rights, it lessens the chance for disputes down the line.

Example Scenario

Consider a scenario where a game development studio hires a consultant to develop a new gaming engine. The consultant has a proprietary set of tools they use to streamline development, which constitutes their background assets. If the agreement includes the carve-out for these assets, it ensures that the studio can use the engine produced with those tools but doesn’t claim ownership of the tools themselves. This way, the consultant can continue innovating new games while the studio enjoys a cutting-edge product, and both parties retain their valuable intellectual property.

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FAQs

What is the difference between work product and background assets?

Work product refers to the deliverables specifically created for the client, such as the final game or application, while background assets cover the tools and methods used to develop that work. This distinction is essential to clarify ownership rights.

Does the client get a license to use background assets?

Yes, clients typically receive a non-exclusive limited right to use the background assets for their projects. However, the consultant retains ownership of those assets.

Are source files included in the work product?

This generally depends on the agreement. Clients may assume they own source files, but it's best to clearly state this in the contract.

How are third-party or open-source components handled?

Handling third-party or open-source components needs careful consideration and should be documented in the agreement to avoid legal issues down the line.

How should the split be documented in the Statement of Work (SOW)?

The SOW should clearly outline what constitutes work product and what is considered background assets to ensure both parties have transparent expectations.

Final Thoughts

It’s essential to ensure your Master Services Agreement includes clear clauses for IP assignment and background asset carveouts. Taking the steps now to define these for your game development projects can provide clarity, avoid disputes, and protect both your creative work and proprietary tools. If you need help drafting these clauses, reach out for assistance.