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>Software licenses, assignability, and mergers
>A new case was handed down out of the Sixth Circuit last week that dealt with software licensing. In this case, a company had licensed some software, and the license agreement contained some of the standard non-assignment language: that the license was non-transferable and that the licensee could not transfer its rights without the approval of the licensor. The licensee underwent some corporate reorganization — it was merged into a new entity. The key thing here is that the merger was *not* with a third party entity or as part of buying assets. This case stemmed simply from a parent company consolidating a set of wholly-owned subsidiaries. However, even though, pre- and post-merger, the software sat on the same computer, doing the same thing, at the same location, the surviving entity was in violation of the software license as a result of the merger.So, two tips for all of the… Continue Reading
>Rocket Jumping in Fallout 3?
>A couple of days ago, we found out that legendary developer id Software has sold itself to ZeniMax Media Inc., the parent company of Bethesda Softworks. This means that the company that defined the PC shooter genre (and is responsible for me missing more than a few college classes) will now be owned by the current leader in role-playing games, with titles like Fallout and the Elder Scrolls series. The sale marks the end of id’s long and impressive run as a stand-alone company (it was founded in 1991). id’s press release said the deal will not affect its daily operations much, as it becomes one of four studios within the ZeniMax family. John Carmack, lighting effects genius and space rocket builder, will continue to head id as “Technical Director.” It is unclear whether id will continue its unique policy of releasing the source code for its older games to… Continue Reading
>Tip: Buying Video Game Assets Out of Bankruptcy
>Like many industries, the video game industry has seen a rise in Chapter 11 bankruptcy filings. Large corporate bankruptcy cases can be complicated and intimidating affairs, but for the savvy investor (or the savvy competitor), they can present tremendous opportunities. Traditionally, companies filed Chapter 11 to restructure their debt and emerge from bankruptcy as a more efficient going concern. It is becoming more common, however, for companies to file bankruptcy and quickly sell some or all of their assets and liquidate the remainder. These transactions are commonly referred to a “363 sales” (named after the applicable Bankruptcy Code section). Such sales can involve any asset of a bankrupt company, including intellectual property rights, and a prospective buyer has an opportunity to acquire a desired asset at a discounted price. However, because of the particularities of the bankruptcy proceeedings, there are some choppy waters that a prospective buyer needs to successfully… Continue Reading
>I’m in ur base, buyin ur studio
>Two upcoming DJ-themed rhythm games are set to compete in the market this fall, and now the publishers of these two games are set to compete in a lawsuit, as well. The history of this dispute is a bit convoluted, but it contains several important lessons for game publishers and developers concerned about maintaining control over their Intellectual Property. Scratch DJ Game, LLC, a joint venture between DVD distributor Genius Products and turn-table manufacturer Numark Industries, is the publisher of the upcoming game “Scratch: The Ultimate DJ.” Scratch DJ Game commissioned independent game studio 7 Studios to develop the Scratch game, which was originally targeted to ship this fall. Activision (publisher of the Guitar Hero series) plans on entering into the same game space with the upcoming game “DJ Hero,” which is currently also set for release this fall. In a complaint filed in L.A. Superior Court, Genius asserts that… Continue Reading
>Tip: Spinning out of Control
>As companies consider spinning off subsidiaries or divisions (read: developers), generally in an effort to get a cash infusion or to sell off an underperforming portion of its business, it is important to remember that this transaction is not the equivalent of wrapping a red ribbon around a box and handing it off to a buyer.One of the most important issues to consider when separating two companies (whether sister entities, parent-child, or just a division) is to determine “what stays” vs. “what goes.” A classic example: who owns the development tools? Often, the development tools are used by both the parent and the division — do they both get to use the tools after the separation? What about the source code of the development tools? Are there development libraries, stock animation or photographs, or sound effects? “What stays” vs. “what goes” often turns into “who owns” and “who gets a… Continue Reading
>Tip: Buy Me!
>Seeing the news reports of acquisitions brings to mind some issues that we commonly see during the buying and selling of technology companies. Before a potential purchaser will buy the company, they will most likely do an analysis of the innards of the seller. Does the seller have any contracts? Are the workers signed to employment agreements? Has the seller done anything to protect the intellectual property (e.g., filed copyrights, patents, trademarks?) If not, why not? And, what routinely happens is that the less actions that the seller has taken up to the point of the potential acquisition, the more downward price pressure that the buyer is able to exert.And I know I’m not saying anything earthshattering, but the value of a video game company generally comes down to two things: (i) the intellectual property assets and (ii) the people. So, to all of those fledgling game developers out there,… Continue Reading
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