September 13, 2021 • 32 mins
In this episode, host Mary O’Brien chats with Wilson Sonsini partners Barath Chari and Jason Storck as they highlight employment considerations for gaming founders.
Conversation Highlights:
- Classification—Employee or Contractor
- Global workforce—team members outside the U.S. and laws that apply
- Agreements to protect the company's intellectual property
- Legal issues with remote work including taxation and cybersecurity
Meet the Host:
- Mary O'Brien
Learn More:
The information in this podcast episode is for general information purposes only and may not reflect current law in your jurisdiction. Nothing in this podcast should be taken as legal advice for any individual case or situation, and this information is not intended to create, and receipt or listening does not constitute, an attorney-client relationship. No listener of this episode should act or refrain from acting on the basis of any information included in, or accessible through, this episode without seeking legal or other professional advice from an appropriate licensed professional in the recipient’s state, country or other appropriate jurisdiction.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:01):
Hi, everyone.
Thank you for joining Wilson Sonsini's Electronic Gaming Group Podcast.
I'm Mary O'Brien an associate at Wilson Sonsini.
I'm thrilled to have you join me as I interview several of my colleagues and dig into key topics surrounding early stage gaming companies.
The information in this podcast episode is for general information purposes only and may not reflect current law in your jurisdiction.
(00:22):
Nothing in this podcast should be taken as legal advice for any individual case or situation and this information is not intended to create and receipt or listening does not constitute an attorney client relationship.
No listener of this episode should act or refrain from acting on the basis of any information included in or accessible through this episode without seeking legal or other professional advice from an appropriately licensed professional in your state, country, or other appropriate jurisdiction.
(00:47):
We're very excited to have Barath Chari,
a partner in our Technology Transactions department and Jason Storck,
a partner in our employment litigation group joining us today.
Could you both tell me a little bit about yourselves and what made you interested in the gaming space?
Sure,
this is Jason Storck,
I can start out,
I'm a partner in WSGR's
employment trade secret litigation group. Our group is others works with clients of all sizes from start-ups to multinational corporation and corporations that includes advising on employment matters of all different shapes and varieties,
(01:17):
including protecting confidential and trade secret information as well as day to day counseling to full blown litigation and supporting transactions.
Um,
as most know,
the majority of our clients are in the technology or life sciences spaces as well as other kind of cutting edge areas. And the gaming space is no different especially with the rise of MMO and other kind of highly confidential I
(01:38):
P
that goes into these more advanced games.
they can be very competitive.
Plus there's just a lot of fun to work with. At WSGR our work with a number of different gaming clients including Epic, E
A,
Bungie, and others. And hey, everybody.
Barath Chari, I'm a partner in Wilson Sonsini's technology transactions group.
So, what technology transactions lawyers are is they are commercial transactional attorneys that that primarily specialize in the monetization and commercialization of I
(02:11):
P.
I came into this practice because prior to being a lawyer, I was a software engineer.
so I've always had a great interest in the convergence of software and the law and I found my way to this practice group.
I think as Jason said,
I like many other Wilson Sonsini attorneys work with a wide range of companies from small two person startups to huge multinationals in a wide range of commercial transactions as well as supporting their M.
(02:44):
& A
and other deals.
And also because of my software engineering background,
I help many of our clients around things like open source counseling.
Now they're more technical areas of the law.
Thank you both.
Well, as we know there's different ways you can bring people on on board into someone's new company.
Jason,
would you kind of talk about the differences between bringing someone on as an employee versus an independent contractor and Barath,
(03:07):
Could you also jump in and highlight the specific I
P
differences that occur when a company would hire an independent contractor versus an employee?
Absolutely.
Look, how to properly classify somebody is one of the most important initial decisions any employer makes,
right?
And it's important to properly classify service providers from the beginning is either an employee or an independent contractor.
(03:28):
There are number of tests out there between the different states and the federal government who can and who can't be an independent contractor.
Most of that ends up coming down to the level of control the company has over the service provider,
whether they're able to control their their daily workflow,
their workspace and so forth.
Also comes down to whether the services they provide go to the heart of the company's business,
(03:52):
as well as whether the service provider regularly engages as an independent contractor.
Are they regularly holding themselves out?
Do they provide other types of services?
For example,
there are consulting services for a wide variety of clients maybe.
But, at the end of the day,
one of the most important pieces is going to be,
whether what they do goes to the heart of the company's business and if so,
(04:12):
they're going to be more likely than not an employee and that's really more than norm,
right?
Somebody, if somebody is coming to the service provider and independent contractors generally to be more the exception than the rule,
right?
Because they're providing something that has ancillary support to that company.
Why is that important?
A lot of that comes down to if you get this wrong,
(04:33):
it can impact a number of different things.
Barath will be talking in a moment about some of the I
P
issues.
But from the employment perspective if you're classifying them as an independent contractor,
for example as opposed to employee,
you're not going to be withholding taxes.
That is if you're handling them properly as a contractor,
you're, you're not going to be offering them company sponsored benefits.
And more likely than not,
(04:53):
you're not gonna be tracking employment related rules and requirements for that specific service provider like overtime or minimum wage or tracking employment hours depending on the services they're providing and so forth.
And that can lead to costly audits,
both tax and wage and hour from state and federal governments as we well as, as we all know class action litigation.
So some of the,
(05:13):
you know,
the intent might be to do,
you know,
to kind of create a flexible role for somebody.
But there are better ways of doing it.
Either part-time service providers like a part-time employee or otherwise at the end of the day.
It can be a very costly mistake that can take valuable dollars from I
P
development into unnecessary litigation.
And just to play off something very astute that just said.
(05:38):
So, the more you get at the heart of what your company does,
the more that this classification risk comes up.
There's two main reasons why we see our clients use independent contractors, in particular, for software development.
The first is they have a specialized skill set.
(06:00):
That is something that a company's developers don't have.
So maybe you don't have uh you know any expertise in some kind of database development or in UI or in certain types of practical development techniques.
The other time you'll often see it is for staff augmentation.
(06:22):
So you just have a big deadline coming up and you just need a little bit extra help to get over the hump.
So you want to hire a few more hired guns to help push the team over the line.
So those are the main reasons we see our clients often hire independent developers.
I think where it becomes more of an issue potentially is where you're hiding hiring developers,
(06:45):
you know work on your you know the core of your game engine for long-term cases etcetera. From I
P
perspective,
a thing to keep in mind is when you're talking about most electronic gaming companies,
they're predominantly concerned around in the copyrights in their software.
(07:08):
Right?
So when you write software you are you are not going to own the copyrights in that software and you're also worried about trade secret protection and confidential information. And the difference between employees and consultants is that if you're an employee,
there's a presumption;
(07:29):
and so let's say you're a software engineer that's employed by a company.
There's a presumption that your employer is going to own the software you write on the job.
Conversely,
if you're an independent contractor,
there's a presumption that you retain what you own.
So as you can see there's a big problem.
They're only hiring independent contractors which is if you don't have a proper I
(07:50):
P
assignment agreement in place,
which says that all my work is assigned to my to the company that's engaging me.
I'm going to keep that in the company that's engaging me is not going to own it.
And this often comes up in financing investments all the way up to M.
& A deal.
So it's really important for companies to have their paperwork done properly up front
such that they actually get ownership of the work that's coming from the independent contractors.
(08:14):
The recent pandemic has now highlighted more than ever that we live in a globalized world that has a lot of outsourced development and support. Jason,
could you talk about any considerations the company needs to make when hiring someone outside of the United States and Barath,
how does international I
P
become implicated in all of this.
Well the first thing, and this will be a common theme that we'll talk about a bit more in this podcast,
(08:38):
but it's knowing the rules,
knowing the playground rules here.
Like what are the rules you know where you have service providers,
the rules regarding intellectual property and employees and how how as other employees,
independent contractors or others interact with I
P
and other matters that they vary from state to state just like they do country to country.
So knowing the local rules and what rules govern,
(08:59):
for example the terms and conditions of employment,
how they're classified,
how you pay them whether, or not they're at will versus for a term and so forth.
Those are all things that are gonna be very country, jurisdiction specific.
That same thing goes for protecting confidential and proprietary information and trade secrets,
knowing that the local rules is critical to having those protections.
(09:20):
And that's something that you can't just make an assumption on.
You know we see that from time to time where you know you'll have a company that says well these these were drafted, these forms were drafted by our counsel here in the United States.
Surely they'll work just fine in Indonesia or the U.
K.
Or Croatia.
You fill in the blank.
Right?
That's generally not going to be true.
I mean maybe you've got something by ___,
(09:41):
right?
But each of these different countries and jurisdictions again has their own rules and regulations and working with council that knows those rules and regulations can really be critical.
Yes,
so a perfect example of the regulations that vary country by country that Jason was just mentioning and why it's really important to make sure local counsels looped in appropriately is for example in many Eastern European countries.
(10:09):
The way software development contracts work is that you can that the contractor can only assign the I
P
rights in the software they developed after the fact.
So the way it's supposed to work is that once the software is developed there's supposed to be an assignment document where the software that was developed as described as some level of specificity.
(10:32):
And there's kind of a log that comes across with that to say that here's what was assigned.
So, we often see you know for example in investments or similar deals where companies you know frequently use Eastern European development shops to assist.
And we often find that the I
(10:52):
P
hasn't been adequately assigned there.
And it ends up being a big to do you know trying to figure out how to get this fixed.
Trying to get assignments from developers after the fact to make everything work out.
So I think it's important to always be aware of where contractors sit or where employees sit.
Especially now when everybody's at home somewhere.
(11:14):
For the most part just to make sure that the I
P
rules of whichever country in which these people sit are adequately addressed.
So now that founders have this unique I
P
from their independent contractors or employees.
How do they keep those people from leaving to their competitors?
(11:37):
Well, there are a number of ways that you can do that and in some ways, you can't do that, right?
So, you go, coming off of a common theme here about different roles for different jurisdictions,
this is a primary example of that.
Um you know,
we'll talk about proprietary information agreements in just a moment but, but you know,
within your proprietary information agreements where you're governing,
you know,
assignment of I
(11:58):
P
and so forth.
You know,
many states will allow you to put in restrictive covenants like a non-compete,
a customer non-solicit,
an employee
non-solicit, I
P
Tail provisions and so forth.
However,
those specific restrictions on employee mobility are highly regulated.
They're highly governed by individual state laws.
And so,
you know,
you may have some states where having a non-compete or a customer non-solicit might be not just impermissible but illegal,
(12:26):
like in California or flatly banned like in the District of Columbia now or many other or a number of other jurisdictions. Or, you may have other states where you have to follow certain tests with respect to them being reasonable and time,
geographic scope and subject matter.
The key is that each individual state is going to have its own legal regime with respect to what can and cannot be enforceable to protect, to have these types of restrictions in place to protect against someone going to a competitor and taking your intellectual property along with them. And understanding those different rules is important.
(13:01):
But this is one area of the law that is just constantly evolving,
especially in the last couple of years,
we've seen more and more states that have allowed non-competes,
putting limitations on what that may mean,
what,
you know,
what type of employee can enter into it when they should not be applicable.
maybe
in a reduction in force,
What consideration is appropriate when you get it.
(13:22):
for example,
is it at the exception of employment or is it down the road?
And so because each of these states have their own rules and regulations with respect to what you can restrict with employee mobility and because it's kind of a moving target,
it's something that you need to keep an eye on.
And especially now, we'll talk about this a little bit more shortly,
but as employees move around as well,
(13:43):
you have to think about whether or not they're,
you know,
moving from one jurisdiction that might allow restrictions to another one that may not.
So again,
it's a bit of a moving target. With respect to proprietary information agreements in general,
you know,
beyond the restricted province,
we talked about those,
they can restrict them from going to a competitor.
You also have all of their other protections in there
(14:05):
that can be critical.
For example,
even if someone is an employee based in California and it's impermissible to have a non-fee or a customer non-solicit,
that doesn't mean that the employee is permitted to go to a competitor and misappropriate trade secret, or confidential, or proprietary information.
Every state and there are federal,
you know,
there's also Defend Trade Secrets Acts as well.
(14:27):
On the federal side,
there are plenty of rules between the different states and the federal government to protect that your proprietary information agreement is your generally the key place to put those,
those different protections in.
But again,
some of those will also be governed by different state rules and regulations on what you have to disclose to the employee, appropriate carve outs,
(14:47):
for example,
with respect to what can and can't be considered confidential information.
For example,
if it relates to a harassment, or sexual assault, or other maybe a discrimination complaint,
different states government in different ways.
So again,
I know it's a common theme,
but the key is you can have,
you can have having the right restrictions in place for the right state can go a long way to protecting your information,
(15:10):
but it's something that you need to make sure you have the right ones applying to the right employees.
And, one other piece of that is it's not just knowing what restrictions you have that you are applying to your current workforce.
Again,
another topic will cover momentarily,
but it's knowing what you're bringing on board when you're going out and hiring different employees.
So, it's a two-way street. Are you bringing employees on board that have enforceable restrictions that cannot work for you?
(15:36):
Or there are restrictions such that it's not practical.
Those are all things that should be looked at.
So again,
while,
restrictive covenants can be an important tool in protecting confidential, proprietary, and trade secret information.
You have to make sure that you know what rules apply to be able to make the best use of them.
And a lot of that comes down to properly drafted agreements. Again, right agreement for the right employee under the right rules. Barath,
(15:59):
you've got probably more to add on that and.
NDAs as well.
Yeah.
Yeah,
I do. Thanks.
So, I think from the I
P
perspective,
first of all,
you want to make sure that you have an a present tense assignment.
what that means is the contract says I hereby assign you know,
my work product to you as opposed to something that says,
(16:21):
I shall assign it to you because if it says I shall assign it to you,
that's a promise to do something in the future.
That's not an assignment.
So,
uh,
once you have that present tense assignment in place,
then, you at least have the protection of if an employer consultant were to take that product to a competitor to a third-party that software they wrote that would be infringement and you have an infringement action that you can bring, right?
(16:49):
So that's not a restrictive covenant like not-compete but it has a similar effect in a way because they can't take that code and share with third-party confidential information is protected through N
D
A
s
or confidentiality agreements.
So it's really important to not only have an N
D
A
s
In place through, you know, P
(17:11):
A
with an employee.
Sorry, a
P
A
means a proprietary information and inventions assignment agreement with an employee which often has a confidentiality clause in it.
You also want to make sure you have NDAs in place with collaborators and third parties with whom you may share confidential information.
They may have protective language in the N
(17:33):
D
A
such an obligation to return any confidential information that is shared which would help the disclosure of confidential information to be able to keep track of the information that's being shared.
The thing to understand though about confidentiality and NDAs especially when you're sharing information with third parties is that it's still really just a right to sue somebody or you know or establishing a legal obligation such that a criminal statute might be violated if that information is appropriated. At the end of the day if there's something that's really, really secret,
(18:09):
The only way to protect it is to not share it.
and the perfect example of that is would Coca-Cola ever share recipe under an N
D
A?
No.
So if there's something that's really, really important to keep secret and it's with an employee,
Be careful which employees are shared with.
Be careful how it's shared and if it's with third-parties,
be careful how it's shared.
(18:30):
Even if there's an N
D
A
in place. So, building off of that,
what if an employment contract is insufficient to protect the company's needs,
how does the company go about correcting that? If you've got an employee that has a problematic or deficient proprietary information agreement or an N
D
A
Or some other employment-based agreement or really even if you have a contractor that has one too,
(18:53):
you have to kind of triage the issue, right?
It could be that the company comes back and looks at it.
It's a relatively simple issue to fix on a go forward basis. In which case they send the wrong agreement with the wrong rule but it's not really hurting you in a backward looking manner.
Okay?
Or they move to another state and now some protections you ever are questionable,
you can amend the agreement or have them sign an entirely new agreement, in either case, superseding the old agreement.
(19:20):
There are some instances, though, where for example,
if you had a defective assignment agreement and this is a,
you know,
someone who is developing sensitive I
P
You know,
there may be instances where it takes you wanna take the time to create a retroactive agreement.
Not one that is just enforceable on a go forward basis,
but one that is also retroactively fixing some pieces as well.
And once you jump into that universe,
(19:41):
you also have to look at little what's appropriate consideration,
right?
Do I need to pay them something?
Give something,
you know,
what do I need to make that sufficient to make that retroactive assignment or adjustment?
Whatever it may be, enforceable?
And that's something that again,
it's kind of a state by state issue,
a state by state analysis as well as an issue by issue analysis in some cases continued employment is sufficient consideration even for updated and retroactive provision.
(20:07):
In other cases, it's not.
So it's kind of,
again,
deciding what the issue is.
Is it important,
is it significant enough in the backward looking that you need retroactivity, or is it something that you can supersede on a go forward basis?
And that's the type of issue that comes up as you can imagine all the time in acquisitions,
right?
You've got young companies,
maybe they pulled some employment agreement off the internet or they took something that they had from another employer and retroactively,
(20:33):
you know,
cobble together something now,
but now they've grown that they're getting funding and,
you know,
counsel is looking at this thinking,
we need to make some changes.
These issues come up,
like I said frequently,
especially young companies that are growing,
they're fixable.
The issue is just what's the right fix for the right situation.
Jason, what about if founders want to hire employees of the company?
For example,
(20:53):
like an acqui-hire,
Does this kind of transaction cause any issues for founders?
Well,
if you're going to have an acqui-hire right,
you know,
in that particular scenario,
it's not really an employee rating,
not really an employee mobility issue.
You're reaching out to the company and you are deliberately,
you know,
contracting to hire their personnel,
whether it's through an asset purchase agreement or some other other type of arrangement,
(21:18):
whether,
you know,
a joint venture, etcetera.
In those cases,
you want to take the time,
do the diligence,
make sure you understand what restrictions they have and if they're sufficient or need to be cleaned up just like any other,
uh,
you know,
M&A transaction and you handle that on a go forward basis where it can get a little bit messy.
However,
is if we're not talking about something,
(21:38):
you know,
where you've approached the company about hiring its staff or maybe some the founder or some other,
you know,
either discrete or larger acqui-hire arrangement,
but you are literally just hiring people from a competitor or someone that's in the same space.
And this gets it.
what I was talking about a little bit earlier,
you know,
and that is,
you know,
are you aware of what restrictions are in place?
(21:59):
Do you know whether or not the folks that you're hiring have potentially enforceable,
non-competes and you're hiring from a competitor?
Do they have potentially enforceable non-solicit?
You know,
whether it's an employee non-solicit and they're trying to get hired on and bring more of their compatriots over or is it a customer non-solicit?
Such that you hire them,
but they're,
you know,
unable to actually do the job you want because they would be competing and going against some of the same customers.
(22:22):
So it's having,
you know,
an honest conversation.
And look at what restrictions those employees have because now you're not necessarily going to the company and asking permission you're hiring and that company,
especially if they're competing with you are in the same space.
You know,
they see that this is a violation which can result in litigation,
not just against the employee for breach of contract,
you know,
(22:42):
but potentially tortious interference and a host of other potential claims,
including misappropriation of trade secrets and other matters depending on the circumstances.
It, even beyond
however,
and this also goes back to the point earlier,
even beyond restrictive covenants such as non-competes and non-solicits.
The other piece you're gonna have to think about,
especially in hiring someone from a competitor or someone in that same space is, what protections do you have in place with respect to confidential proprietary and trade secret information,
(23:11):
uh,
as was talking about earlier,
It's important to protect these with your agreements.
That's one step,
but also looking at whether or not you have appropriate protocols and policies in place.
Have you confirmed with the employee that they have returned all of their prior information to their former employer?
Do you have protective measures in place?
It prohibit third-party external devices being,
(23:35):
you know,
upload,
allowing for them to upload information into your systems.
You have the training programs and so forth.
So, in addition to having solid policies and education with the employee about not bringing information over either directly,
which is obviously a no-no,
or even inadvertently,
not properly returning something and having a competitor's information on your personal device or somewhere you know,
(23:57):
you know,
at your home or wherever it may be that can later result in problems about whether that was inappropriately taken and used for the competitive advantage of the company.
So again,
if you have an acqui-hire scenario,
it is something that is negotiated with the company.
It's really more about making sure all the appropriate agreements are in place for those individuals and doing cleanup going forward as needed.
(24:19):
Not unlike what we talked about before and having proper agreements.
If you're hiring from a competitor,
you need to be able to know what restrictions are out there,
what apply to you and whether or not there are appropriate protocols in place at the company to avoid trade secret misappropriation and other such claims because they can be incredibly expensive.
And to be blunt if you don't have good protections in place,
(24:40):
you're just allowing the competitor,
we may want to use this,
use litigation for competitive advantage.
you're allowing them to them weaponize these provisions to create litigation and create sidelining some of these people are creating drama in the marketplace simply because you don't have the right protocols in place.
Creating a presumption that maybe something might have been taken.
So again,
(25:00):
protective measures knowing what those rules are.
And again,
as we talked about before,
different rules for different jurisdictions to make sure you're educated
when you're hiring people in new jurisdictions.
Jason,
you mentioned a little bit about company protocols and I want to go a bit further into that,
especially in light of the remote work from home scenario that many of us find ourselves in.
Could you both talk about how has remote work caused new legal issues to arise and especially surrounding gaming or just in general.
(25:27):
Sure.
I'm happy to start out and then, Barath can take it from there,
talk more about some of the technical components.
But you know,
from our,
from the employment perspective,
it's similar to what we were talking about before.
You obviously want to have appropriate protections for your confidential, proprietary, and trade secret information.
But as we all know,
when COVID-19 hit and we ended up,
we found ourselves in a global pandemic.
(25:48):
It's not like there was as much planning as people might have wondered for a mass exodus from the workplace in the home.
Some companies were probably better set up for it than others.
But, as we found ourselves,
and,
you know,
a lot of companies found their employees working remotely,
that creates a lot of potential risk for the protection of that information.
It could be inadvertent,
you've got an employee working at home who does not have a secure wifi connection,
(26:11):
someone who has kids,
family,
others working on that same device to be malware.
It's one thing where you have employees working at the work site,
you know,
and you've got them connected to the company's servers or systems,
it becomes riskier,
you know,
when they are,
you know,
you know,
in a different location working remotely and you may not have the same protections in place for monitoring in place or other protective measures to know whether or not your information is protected.
(26:38):
So,
I mean,
it's important,
not only especially on a remote work scenario,
to make sure that you have protocols in place for what you expect of employees
as far as protecting their information.
Appropriate protocols for company use, computer use, WiFi protections, and so forth.
And it's not just,
I mean,
there are those of the inadvertent things,
right?
There's also you might have someone at home that is deliberately connecting devices and downloading things or doing something to set up a competitive venture or taking your trade secrets.
(27:04):
So again,
it's important to have the right protocols in place to understand where your information is going, to make sure you have the right policies in place that it's necessary allowed for monitoring.
And also the right types of protocols and systems in place that would make it much more difficult for somebody to download or to transfer information in a manner that is undetected.
Yeah,
so on that last point which I think is quite interesting,
(27:29):
Jason, is over the last few years, I think a lot more companies have started to do a lot more work in the cloud whether to store their source on GitHub or do their development on AWS infrastructure.
So, there's actually been a gradual move toward companies' most sensitive information being held and stored by third-parties.
(27:52):
So, in some ways, we've been kind of preparing ourselves for this remote work world all along.
I think the issue is that many companies haven't thought through the logistics of this all the time.
And, for example, don't have robust policies in place that say you know all development has to happen in a, in a remote development environment, you know, on a machine that we can do as opposed to people doing coding at home and then uploading it later.
(28:23):
So there are a lot of ways that I
P
can leak or get lost when it's done at home and it isn't being done kind of a regulated way by you know by how companies I
T
security and infrastructure is supposed to work.
So, I think it's important for companies to make sure that they've thought through ways to make sure that I
(28:44):
P
doesn't get leaked out even when people are working remotely and from home. I think past that as we talked about before because remote work has broken down some of the hiring barriers as far as where people sit.
It's important to make sure that especially if you're hiring people abroad that you have the proper I
(29:07):
P
protections in place contractually such that you actually own the work that they do.
So we've covered a lot of ground today and I wanted to chime in as a closing thought.
would each of you mind leaving the listeners with the biggest piece of advice you could give to a fledging game company whose with founders who may not have any legal expertise in this field.
(29:28):
Sure.
Companies especially fast-paced tech companies like those in the gaming space really need to take the time to know what rules govern their workforce.
And I
P
that their service providers are creating, touching, working with, and so forth.
You know the companies service providers can can obviously be their greatest asset but they can also be one of their biggest sources of liability, whether it's misclassification and wage and hour matters, or creating litigation over misappropriation or actually having employees with misappropriate the I
(30:04):
P
that they were supposed to be creating for you.
These companies companies work hard to bring a product to market. And, it takes a lot of time and a lot of effort.
And the key here is sometimes simply having the right agreement in place for the right state or jurisdiction can make all the difference in protecting your company's valuable I
P
(30:25):
make sure that they're classified properly,
you know?
And, I mean it can be confusing for some just because you have a myriad of different jurisdictions, but with the right counsel and the right help,
it's not as complicated as it may seem and it is navigable.
So, again sometimes it just comes down to the right agreement in the right place to protect all that hard fought and hard developed I
(30:45):
P
and bringing that to market.
Yeah, and I'd say just to further that that gaming
companies especially startup ones like to act fast, being nimble,
They don't want to be bogged down with paperwork and legalese,
right?
That wouldn't be fun in the game.
(31:06):
And it's not fun in real life either.
But it's very, very important to invest a little bit up front to get paperwork done correctly to get the right advice,
you need to save yourself a lot of headaches in the future.
(31:27):
And I would say that even though attorneys whether it's us or others,
their hourly rates might seem scary and people don't want to work with lawyers at the end of the day,
you'll be doing yourself a big favor by getting the right advice up front,
such that you don't have bigger headaches and bigger problems down the road.
(31:47):
Ones that often cost significantly, significantly more than the amount of attorneys just getting that one document placed the right way.
A few thousand dollars today can save you tens or hundreds of thousands of dollars later.
(32:08):
Or more, some of the bigger piece of litigation that can go up exponentially. Awesome.
Well,
thank you both for your time today,
Wilson Sonsini advises a wide variety of clients in the gaming industry.
If you'd like more information about legal issues arising in the gaming space,
please check out the Electronic Gaming Group's newsletter.
If you have any questions,
please don't hesitate to reach out to any member of our electronic gaming group.
(32:29):
Thank you for tuning and everyone.
Hi, everyone.
Thank you for joining Wilson Sonsini's Electronic Gaming Group Podcast.
I'm Mary O'Brien an associate at Wilson Sonsini.
I'm thrilled to have you join me as I interview several of my colleagues and dig into key topics surrounding early stage gaming companies.
The information in this podcast episode is for general information purposes only and may not reflect current law in your jurisdiction.
(00:22):
Nothing in this podcast should be taken as legal advice for any individual case or situation and this information is not intended to create and receipt or listening does not constitute an attorney client relationship.
No listener of this episode should act or refrain from acting on the basis of any information included in or accessible through this episode without seeking legal or other professional advice from an appropriately licensed professional in your state, country, or other appropriate jurisdiction.
(00:47):
We're very excited to have Barath Chari,
a partner in our Technology Transactions department and Jason Storck,
a partner in our employment litigation group joining us today.
Could you both tell me a little bit about yourselves and what made you interested in the gaming space?
Sure,
this is Jason Storck,
I can start out,
I'm a partner in WSGR's
employment trade secret litigation group. Our group is others works with clients of all sizes from start-ups to multinational corporation and corporations that includes advising on employment matters of all different shapes and varieties,
(01:17):
including protecting confidential and trade secret information as well as day to day counseling to full blown litigation and supporting transactions.
Um,
as most know,
the majority of our clients are in the technology or life sciences spaces as well as other kind of cutting edge areas. And the gaming space is no different especially with the rise of MMO and other kind of highly confidential I
(01:38):
P
that goes into these more advanced games.
they can be very competitive.
Plus there's just a lot of fun to work with. At WSGR our work with a number of different gaming clients including Epic, E
A,
Bungie, and others. And hey, everybody.
Barath Chari, I'm a partner in Wilson Sonsini's technology transactions group.
So, what technology transactions lawyers are is they are commercial transactional attorneys that that primarily specialize in the monetization and commercialization of I
(02:11):
P.
I came into this practice because prior to being a lawyer, I was a software engineer.
so I've always had a great interest in the convergence of software and the law and I found my way to this practice group.
I think as Jason said,
I like many other Wilson Sonsini attorneys work with a wide range of companies from small two person startups to huge multinationals in a wide range of commercial transactions as well as supporting their M.
(02:44):
& A
and other deals.
And also because of my software engineering background,
I help many of our clients around things like open source counseling.
Now they're more technical areas of the law.
Thank you both.
Well, as we know there's different ways you can bring people on on board into someone's new company.
Jason,
would you kind of talk about the differences between bringing someone on as an employee versus an independent contractor and Barath,
(03:07):
Could you also jump in and highlight the specific I
P
differences that occur when a company would hire an independent contractor versus an employee?
Absolutely.
Look, how to properly classify somebody is one of the most important initial decisions any employer makes,
right?
And it's important to properly classify service providers from the beginning is either an employee or an independent contractor.
(03:28):
There are number of tests out there between the different states and the federal government who can and who can't be an independent contractor.
Most of that ends up coming down to the level of control the company has over the service provider,
whether they're able to control their their daily workflow,
their workspace and so forth.
Also comes down to whether the services they provide go to the heart of the company's business,
(03:52):
as well as whether the service provider regularly engages as an independent contractor.
Are they regularly holding themselves out?
Do they provide other types of services?
For example,
there are consulting services for a wide variety of clients maybe.
But, at the end of the day,
one of the most important pieces is going to be,
whether what they do goes to the heart of the company's business and if so,
(04:12):
they're going to be more likely than not an employee and that's really more than norm,
right?
Somebody, if somebody is coming to the service provider and independent contractors generally to be more the exception than the rule,
right?
Because they're providing something that has ancillary support to that company.
Why is that important?
A lot of that comes down to if you get this wrong,
(04:33):
it can impact a number of different things.
Barath will be talking in a moment about some of the I
P
issues.
But from the employment perspective if you're classifying them as an independent contractor,
for example as opposed to employee,
you're not going to be withholding taxes.
That is if you're handling them properly as a contractor,
you're, you're not going to be offering them company sponsored benefits.
And more likely than not,
(04:53):
you're not gonna be tracking employment related rules and requirements for that specific service provider like overtime or minimum wage or tracking employment hours depending on the services they're providing and so forth.
And that can lead to costly audits,
both tax and wage and hour from state and federal governments as we well as, as we all know class action litigation.
So some of the,
(05:13):
you know,
the intent might be to do,
you know,
to kind of create a flexible role for somebody.
But there are better ways of doing it.
Either part-time service providers like a part-time employee or otherwise at the end of the day.
It can be a very costly mistake that can take valuable dollars from I
P
development into unnecessary litigation.
And just to play off something very astute that just said.
(05:38):
So, the more you get at the heart of what your company does,
the more that this classification risk comes up.
There's two main reasons why we see our clients use independent contractors, in particular, for software development.
The first is they have a specialized skill set.
(06:00):
That is something that a company's developers don't have.
So maybe you don't have uh you know any expertise in some kind of database development or in UI or in certain types of practical development techniques.
The other time you'll often see it is for staff augmentation.
(06:22):
So you just have a big deadline coming up and you just need a little bit extra help to get over the hump.
So you want to hire a few more hired guns to help push the team over the line.
So those are the main reasons we see our clients often hire independent developers.
I think where it becomes more of an issue potentially is where you're hiding hiring developers,
(06:45):
you know work on your you know the core of your game engine for long-term cases etcetera. From I
P
perspective,
a thing to keep in mind is when you're talking about most electronic gaming companies,
they're predominantly concerned around in the copyrights in their software.
(07:08):
Right?
So when you write software you are you are not going to own the copyrights in that software and you're also worried about trade secret protection and confidential information. And the difference between employees and consultants is that if you're an employee,
there's a presumption;
(07:29):
and so let's say you're a software engineer that's employed by a company.
There's a presumption that your employer is going to own the software you write on the job.
Conversely,
if you're an independent contractor,
there's a presumption that you retain what you own.
So as you can see there's a big problem.
They're only hiring independent contractors which is if you don't have a proper I
(07:50):
P
assignment agreement in place,
which says that all my work is assigned to my to the company that's engaging me.
I'm going to keep that in the company that's engaging me is not going to own it.
And this often comes up in financing investments all the way up to M.
& A deal.
So it's really important for companies to have their paperwork done properly up front
such that they actually get ownership of the work that's coming from the independent contractors.
(08:14):
The recent pandemic has now highlighted more than ever that we live in a globalized world that has a lot of outsourced development and support. Jason,
could you talk about any considerations the company needs to make when hiring someone outside of the United States and Barath,
how does international I
P
become implicated in all of this.
Well the first thing, and this will be a common theme that we'll talk about a bit more in this podcast,
(08:38):
but it's knowing the rules,
knowing the playground rules here.
Like what are the rules you know where you have service providers,
the rules regarding intellectual property and employees and how how as other employees,
independent contractors or others interact with I
P
and other matters that they vary from state to state just like they do country to country.
So knowing the local rules and what rules govern,
(08:59):
for example the terms and conditions of employment,
how they're classified,
how you pay them whether, or not they're at will versus for a term and so forth.
Those are all things that are gonna be very country, jurisdiction specific.
That same thing goes for protecting confidential and proprietary information and trade secrets,
knowing that the local rules is critical to having those protections.
(09:20):
And that's something that you can't just make an assumption on.
You know we see that from time to time where you know you'll have a company that says well these these were drafted, these forms were drafted by our counsel here in the United States.
Surely they'll work just fine in Indonesia or the U.
K.
Or Croatia.
You fill in the blank.
Right?
That's generally not going to be true.
I mean maybe you've got something by ___,
(09:41):
right?
But each of these different countries and jurisdictions again has their own rules and regulations and working with council that knows those rules and regulations can really be critical.
Yes,
so a perfect example of the regulations that vary country by country that Jason was just mentioning and why it's really important to make sure local counsels looped in appropriately is for example in many Eastern European countries.
(10:09):
The way software development contracts work is that you can that the contractor can only assign the I
P
rights in the software they developed after the fact.
So the way it's supposed to work is that once the software is developed there's supposed to be an assignment document where the software that was developed as described as some level of specificity.
(10:32):
And there's kind of a log that comes across with that to say that here's what was assigned.
So, we often see you know for example in investments or similar deals where companies you know frequently use Eastern European development shops to assist.
And we often find that the I
(10:52):
P
hasn't been adequately assigned there.
And it ends up being a big to do you know trying to figure out how to get this fixed.
Trying to get assignments from developers after the fact to make everything work out.
So I think it's important to always be aware of where contractors sit or where employees sit.
Especially now when everybody's at home somewhere.
(11:14):
For the most part just to make sure that the I
P
rules of whichever country in which these people sit are adequately addressed.
So now that founders have this unique I
P
from their independent contractors or employees.
How do they keep those people from leaving to their competitors?
(11:37):
Well, there are a number of ways that you can do that and in some ways, you can't do that, right?
So, you go, coming off of a common theme here about different roles for different jurisdictions,
this is a primary example of that.
Um you know,
we'll talk about proprietary information agreements in just a moment but, but you know,
within your proprietary information agreements where you're governing,
you know,
assignment of I
(11:58):
P
and so forth.
You know,
many states will allow you to put in restrictive covenants like a non-compete,
a customer non-solicit,
an employee
non-solicit, I
P
Tail provisions and so forth.
However,
those specific restrictions on employee mobility are highly regulated.
They're highly governed by individual state laws.
And so,
you know,
you may have some states where having a non-compete or a customer non-solicit might be not just impermissible but illegal,
(12:26):
like in California or flatly banned like in the District of Columbia now or many other or a number of other jurisdictions. Or, you may have other states where you have to follow certain tests with respect to them being reasonable and time,
geographic scope and subject matter.
The key is that each individual state is going to have its own legal regime with respect to what can and cannot be enforceable to protect, to have these types of restrictions in place to protect against someone going to a competitor and taking your intellectual property along with them. And understanding those different rules is important.
(13:01):
But this is one area of the law that is just constantly evolving,
especially in the last couple of years,
we've seen more and more states that have allowed non-competes,
putting limitations on what that may mean,
what,
you know,
what type of employee can enter into it when they should not be applicable.
maybe
in a reduction in force,
What consideration is appropriate when you get it.
(13:22):
for example,
is it at the exception of employment or is it down the road?
And so because each of these states have their own rules and regulations with respect to what you can restrict with employee mobility and because it's kind of a moving target,
it's something that you need to keep an eye on.
And especially now, we'll talk about this a little bit more shortly,
but as employees move around as well,
(13:43):
you have to think about whether or not they're,
you know,
moving from one jurisdiction that might allow restrictions to another one that may not.
So again,
it's a bit of a moving target. With respect to proprietary information agreements in general,
you know,
beyond the restricted province,
we talked about those,
they can restrict them from going to a competitor.
You also have all of their other protections in there
(14:05):
that can be critical.
For example,
even if someone is an employee based in California and it's impermissible to have a non-fee or a customer non-solicit,
that doesn't mean that the employee is permitted to go to a competitor and misappropriate trade secret, or confidential, or proprietary information.
Every state and there are federal,
you know,
there's also Defend Trade Secrets Acts as well.
(14:27):
On the federal side,
there are plenty of rules between the different states and the federal government to protect that your proprietary information agreement is your generally the key place to put those,
those different protections in.
But again,
some of those will also be governed by different state rules and regulations on what you have to disclose to the employee, appropriate carve outs,
(14:47):
for example,
with respect to what can and can't be considered confidential information.
For example,
if it relates to a harassment, or sexual assault, or other maybe a discrimination complaint,
different states government in different ways.
So again,
I know it's a common theme,
but the key is you can have,
you can have having the right restrictions in place for the right state can go a long way to protecting your information,
(15:10):
but it's something that you need to make sure you have the right ones applying to the right employees.
And, one other piece of that is it's not just knowing what restrictions you have that you are applying to your current workforce.
Again,
another topic will cover momentarily,
but it's knowing what you're bringing on board when you're going out and hiring different employees.
So, it's a two-way street. Are you bringing employees on board that have enforceable restrictions that cannot work for you?
(15:36):
Or there are restrictions such that it's not practical.
Those are all things that should be looked at.
So again,
while,
restrictive covenants can be an important tool in protecting confidential, proprietary, and trade secret information.
You have to make sure that you know what rules apply to be able to make the best use of them.
And a lot of that comes down to properly drafted agreements. Again, right agreement for the right employee under the right rules. Barath,
(15:59):
you've got probably more to add on that and.
NDAs as well.
Yeah.
Yeah,
I do. Thanks.
So, I think from the I
P
perspective,
first of all,
you want to make sure that you have an a present tense assignment.
what that means is the contract says I hereby assign you know,
my work product to you as opposed to something that says,
(16:21):
I shall assign it to you because if it says I shall assign it to you,
that's a promise to do something in the future.
That's not an assignment.
So,
uh,
once you have that present tense assignment in place,
then, you at least have the protection of if an employer consultant were to take that product to a competitor to a third-party that software they wrote that would be infringement and you have an infringement action that you can bring, right?
(16:49):
So that's not a restrictive covenant like not-compete but it has a similar effect in a way because they can't take that code and share with third-party confidential information is protected through N
D
A
s
or confidentiality agreements.
So it's really important to not only have an N
D
A
s
In place through, you know, P
(17:11):
A
with an employee.
Sorry, a
P
A
means a proprietary information and inventions assignment agreement with an employee which often has a confidentiality clause in it.
You also want to make sure you have NDAs in place with collaborators and third parties with whom you may share confidential information.
They may have protective language in the N
(17:33):
D
A
such an obligation to return any confidential information that is shared which would help the disclosure of confidential information to be able to keep track of the information that's being shared.
The thing to understand though about confidentiality and NDAs especially when you're sharing information with third parties is that it's still really just a right to sue somebody or you know or establishing a legal obligation such that a criminal statute might be violated if that information is appropriated. At the end of the day if there's something that's really, really secret,
(18:09):
The only way to protect it is to not share it.
and the perfect example of that is would Coca-Cola ever share recipe under an N
D
A?
No.
So if there's something that's really, really important to keep secret and it's with an employee,
Be careful which employees are shared with.
Be careful how it's shared and if it's with third-parties,
be careful how it's shared.
(18:30):
Even if there's an N
D
A
in place. So, building off of that,
what if an employment contract is insufficient to protect the company's needs,
how does the company go about correcting that? If you've got an employee that has a problematic or deficient proprietary information agreement or an N
D
A
Or some other employment-based agreement or really even if you have a contractor that has one too,
(18:53):
you have to kind of triage the issue, right?
It could be that the company comes back and looks at it.
It's a relatively simple issue to fix on a go forward basis. In which case they send the wrong agreement with the wrong rule but it's not really hurting you in a backward looking manner.
Okay?
Or they move to another state and now some protections you ever are questionable,
you can amend the agreement or have them sign an entirely new agreement, in either case, superseding the old agreement.
(19:20):
There are some instances, though, where for example,
if you had a defective assignment agreement and this is a,
you know,
someone who is developing sensitive I
P
You know,
there may be instances where it takes you wanna take the time to create a retroactive agreement.
Not one that is just enforceable on a go forward basis,
but one that is also retroactively fixing some pieces as well.
And once you jump into that universe,
(19:41):
you also have to look at little what's appropriate consideration,
right?
Do I need to pay them something?
Give something,
you know,
what do I need to make that sufficient to make that retroactive assignment or adjustment?
Whatever it may be, enforceable?
And that's something that again,
it's kind of a state by state issue,
a state by state analysis as well as an issue by issue analysis in some cases continued employment is sufficient consideration even for updated and retroactive provision.
(20:07):
In other cases, it's not.
So it's kind of,
again,
deciding what the issue is.
Is it important,
is it significant enough in the backward looking that you need retroactivity, or is it something that you can supersede on a go forward basis?
And that's the type of issue that comes up as you can imagine all the time in acquisitions,
right?
You've got young companies,
maybe they pulled some employment agreement off the internet or they took something that they had from another employer and retroactively,
(20:33):
you know,
cobble together something now,
but now they've grown that they're getting funding and,
you know,
counsel is looking at this thinking,
we need to make some changes.
These issues come up,
like I said frequently,
especially young companies that are growing,
they're fixable.
The issue is just what's the right fix for the right situation.
Jason, what about if founders want to hire employees of the company?
For example,
(20:53):
like an acqui-hire,
Does this kind of transaction cause any issues for founders?
Well,
if you're going to have an acqui-hire right,
you know,
in that particular scenario,
it's not really an employee rating,
not really an employee mobility issue.
You're reaching out to the company and you are deliberately,
you know,
contracting to hire their personnel,
whether it's through an asset purchase agreement or some other other type of arrangement,
(21:18):
whether,
you know,
a joint venture, etcetera.
In those cases,
you want to take the time,
do the diligence,
make sure you understand what restrictions they have and if they're sufficient or need to be cleaned up just like any other,
uh,
you know,
M&A transaction and you handle that on a go forward basis where it can get a little bit messy.
However,
is if we're not talking about something,
(21:38):
you know,
where you've approached the company about hiring its staff or maybe some the founder or some other,
you know,
either discrete or larger acqui-hire arrangement,
but you are literally just hiring people from a competitor or someone that's in the same space.
And this gets it.
what I was talking about a little bit earlier,
you know,
and that is,
you know,
are you aware of what restrictions are in place?
(21:59):
Do you know whether or not the folks that you're hiring have potentially enforceable,
non-competes and you're hiring from a competitor?
Do they have potentially enforceable non-solicit?
You know,
whether it's an employee non-solicit and they're trying to get hired on and bring more of their compatriots over or is it a customer non-solicit?
Such that you hire them,
but they're,
you know,
unable to actually do the job you want because they would be competing and going against some of the same customers.
(22:22):
So it's having,
you know,
an honest conversation.
And look at what restrictions those employees have because now you're not necessarily going to the company and asking permission you're hiring and that company,
especially if they're competing with you are in the same space.
You know,
they see that this is a violation which can result in litigation,
not just against the employee for breach of contract,
you know,
(22:42):
but potentially tortious interference and a host of other potential claims,
including misappropriation of trade secrets and other matters depending on the circumstances.
It, even beyond
however,
and this also goes back to the point earlier,
even beyond restrictive covenants such as non-competes and non-solicits.
The other piece you're gonna have to think about,
especially in hiring someone from a competitor or someone in that same space is, what protections do you have in place with respect to confidential proprietary and trade secret information,
(23:11):
uh,
as was talking about earlier,
It's important to protect these with your agreements.
That's one step,
but also looking at whether or not you have appropriate protocols and policies in place.
Have you confirmed with the employee that they have returned all of their prior information to their former employer?
Do you have protective measures in place?
It prohibit third-party external devices being,
(23:35):
you know,
upload,
allowing for them to upload information into your systems.
You have the training programs and so forth.
So, in addition to having solid policies and education with the employee about not bringing information over either directly,
which is obviously a no-no,
or even inadvertently,
not properly returning something and having a competitor's information on your personal device or somewhere you know,
(23:57):
you know,
at your home or wherever it may be that can later result in problems about whether that was inappropriately taken and used for the competitive advantage of the company.
So again,
if you have an acqui-hire scenario,
it is something that is negotiated with the company.
It's really more about making sure all the appropriate agreements are in place for those individuals and doing cleanup going forward as needed.
(24:19):
Not unlike what we talked about before and having proper agreements.
If you're hiring from a competitor,
you need to be able to know what restrictions are out there,
what apply to you and whether or not there are appropriate protocols in place at the company to avoid trade secret misappropriation and other such claims because they can be incredibly expensive.
And to be blunt if you don't have good protections in place,
(24:40):
you're just allowing the competitor,
we may want to use this,
use litigation for competitive advantage.
you're allowing them to them weaponize these provisions to create litigation and create sidelining some of these people are creating drama in the marketplace simply because you don't have the right protocols in place.
Creating a presumption that maybe something might have been taken.
So again,
(25:00):
protective measures knowing what those rules are.
And again,
as we talked about before,
different rules for different jurisdictions to make sure you're educated
when you're hiring people in new jurisdictions.
Jason,
you mentioned a little bit about company protocols and I want to go a bit further into that,
especially in light of the remote work from home scenario that many of us find ourselves in.
Could you both talk about how has remote work caused new legal issues to arise and especially surrounding gaming or just in general.
(25:27):
Sure.
I'm happy to start out and then, Barath can take it from there,
talk more about some of the technical components.
But you know,
from our,
from the employment perspective,
it's similar to what we were talking about before.
You obviously want to have appropriate protections for your confidential, proprietary, and trade secret information.
But as we all know,
when COVID-19 hit and we ended up,
we found ourselves in a global pandemic.
(25:48):
It's not like there was as much planning as people might have wondered for a mass exodus from the workplace in the home.
Some companies were probably better set up for it than others.
But, as we found ourselves,
and,
you know,
a lot of companies found their employees working remotely,
that creates a lot of potential risk for the protection of that information.
It could be inadvertent,
you've got an employee working at home who does not have a secure wifi connection,
(26:11):
someone who has kids,
family,
others working on that same device to be malware.
It's one thing where you have employees working at the work site,
you know,
and you've got them connected to the company's servers or systems,
it becomes riskier,
you know,
when they are,
you know,
you know,
in a different location working remotely and you may not have the same protections in place for monitoring in place or other protective measures to know whether or not your information is protected.
(26:38):
So,
I mean,
it's important,
not only especially on a remote work scenario,
to make sure that you have protocols in place for what you expect of employees
as far as protecting their information.
Appropriate protocols for company use, computer use, WiFi protections, and so forth.
And it's not just,
I mean,
there are those of the inadvertent things,
right?
There's also you might have someone at home that is deliberately connecting devices and downloading things or doing something to set up a competitive venture or taking your trade secrets.
(27:04):
So again,
it's important to have the right protocols in place to understand where your information is going, to make sure you have the right policies in place that it's necessary allowed for monitoring.
And also the right types of protocols and systems in place that would make it much more difficult for somebody to download or to transfer information in a manner that is undetected.
Yeah,
so on that last point which I think is quite interesting,
(27:29):
Jason, is over the last few years, I think a lot more companies have started to do a lot more work in the cloud whether to store their source on GitHub or do their development on AWS infrastructure.
So, there's actually been a gradual move toward companies' most sensitive information being held and stored by third-parties.
(27:52):
So, in some ways, we've been kind of preparing ourselves for this remote work world all along.
I think the issue is that many companies haven't thought through the logistics of this all the time.
And, for example, don't have robust policies in place that say you know all development has to happen in a, in a remote development environment, you know, on a machine that we can do as opposed to people doing coding at home and then uploading it later.
(28:23):
So there are a lot of ways that I
P
can leak or get lost when it's done at home and it isn't being done kind of a regulated way by you know by how companies I
T
security and infrastructure is supposed to work.
So, I think it's important for companies to make sure that they've thought through ways to make sure that I
(28:44):
P
doesn't get leaked out even when people are working remotely and from home. I think past that as we talked about before because remote work has broken down some of the hiring barriers as far as where people sit.
It's important to make sure that especially if you're hiring people abroad that you have the proper I
(29:07):
P
protections in place contractually such that you actually own the work that they do.
So we've covered a lot of ground today and I wanted to chime in as a closing thought.
would each of you mind leaving the listeners with the biggest piece of advice you could give to a fledging game company whose with founders who may not have any legal expertise in this field.
(29:28):
Sure.
Companies especially fast-paced tech companies like those in the gaming space really need to take the time to know what rules govern their workforce.
And I
P
that their service providers are creating, touching, working with, and so forth.
You know the companies service providers can can obviously be their greatest asset but they can also be one of their biggest sources of liability, whether it's misclassification and wage and hour matters, or creating litigation over misappropriation or actually having employees with misappropriate the I
(30:04):
P
that they were supposed to be creating for you.
These companies companies work hard to bring a product to market. And, it takes a lot of time and a lot of effort.
And the key here is sometimes simply having the right agreement in place for the right state or jurisdiction can make all the difference in protecting your company's valuable I
P
(30:25):
make sure that they're classified properly,
you know?
And, I mean it can be confusing for some just because you have a myriad of different jurisdictions, but with the right counsel and the right help,
it's not as complicated as it may seem and it is navigable.
So, again sometimes it just comes down to the right agreement in the right place to protect all that hard fought and hard developed I
(30:45):
P
and bringing that to market.
Yeah, and I'd say just to further that that gaming
companies especially startup ones like to act fast, being nimble,
They don't want to be bogged down with paperwork and legalese,
right?
That wouldn't be fun in the game.
(31:06):
And it's not fun in real life either.
But it's very, very important to invest a little bit up front to get paperwork done correctly to get the right advice,
you need to save yourself a lot of headaches in the future.
(31:27):
And I would say that even though attorneys whether it's us or others,
their hourly rates might seem scary and people don't want to work with lawyers at the end of the day,
you'll be doing yourself a big favor by getting the right advice up front,
such that you don't have bigger headaches and bigger problems down the road.
(31:47):
Ones that often cost significantly, significantly more than the amount of attorneys just getting that one document placed the right way.
A few thousand dollars today can save you tens or hundreds of thousands of dollars later.
(32:08):
Or more, some of the bigger piece of litigation that can go up exponentially. Awesome.
Well,
thank you both for your time today,
Wilson Sonsini advises a wide variety of clients in the gaming industry.
If you'd like more information about legal issues arising in the gaming space,
please check out the Electronic Gaming Group's newsletter.
If you have any questions,
please don't hesitate to reach out to any member of our electronic gaming group.
(32:29):
Thank you for tuning and everyone.
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