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Game Development Contract Laid Bare

by Chris Remo, Jan 12, 2007 3:14pm PST
Related Topics – Activision

In 2005, Call of Duty: Finest Hour (PS2, Xbox, GCN) developer Spark Unlimited sued publisher Activision for breach of contract, fraud and misrepresentation, and breach of an implied contract, alleging that Activision was cutting short Spark's development agreement counter to its contract. Activision counter-sued for fraud, breach of contract, misappropriation of trade secrets, trade-mark infringement, false designation of origin, and false advertising; the legal matter is still pending. As part of the proceedings, the full development contract between Spark and Activision was publicly disclosed, and Gamasutra has published it online in its entirety along with very useful commentary from game industry attorneys Tom Buscaglia, Chris Bennett, and Dave Spratley. As a legal document, it's dense reading, but the running analysis makes it much easier to digest. The contract is an interesting--and rare--look at how the publisher/developer relationship is weighted, and what kind of rights are granted (or not) to each.

Not surprisingly, the termination clauses allow Activision to terminate the agreement for any reason or for no reason ("for convenience"). If Activision terminates for convenience, Activision must pay a cancellation fee, but gets to keep the IP. This is typical in game development agreements, although some developers are able to negotiate the right to complete the game with a new publisher after termination for convenience, provided that the developer reimburses the first publisher over a period of time for the amounts the developer received from the first publisher.

Also not surprisingly, the termination for cause provisions don't entitle Spark to a cancellation fee. That's why developers usually want a clause in the agreement to say that their late delivery is not a material breach of the contract if the lateness was caused by the publisher (see our comments on section 6). Typical delays are late feedback on milestones, requiring additional work thatÂ’s outside the scope of the design documents, failing to provide assets and licenses required to develop the game, and failing to pay advances on time.

As for easy highlights, Page 12 contains the breakdown on the game's development budget, which is $8.5 million in terms of what was allocated for Spark's role, as well as some notes as to how Activision will interpret the laid out development schedule. "I recommend anyone serious about working with a major publisher like Activision or in making AAA titles take a close look at these notes because there is a wealth of information in them," commented Buscaglia. The following page contains an outline of what defines a game design document and a technical design document, at least in the context of a project such as this. Finally, the last page lays out the major development-related expenditures spread out on a monthly basis.




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