Identifying your role in the esports sector
Anyone wishing to enter the esports sector with a high IP component should first identify its role in the sector whether as a publisher, developer, distributor, service provider, agent, team owner, player, etc. and then create a portfolio of the IP rights owned, or those owned by others, that are needed for the project. Roles can vary from project to project, and understanding this dynamic is critical to navigating the complex landscape of IP rights in the esports sector. Also, the IP rights licensed or assigned can vary from time to time and for each project; however, there are basic principles for negotiating these types of agreements, which we will describe below.
First, when dealing with an agreement involving IP rights, the rightsholder must analyze the asset being licensed or assigned. The language may be similar, but the legal implications are significant.
Licensing an IP right involves granting permission to another party to use the rights under certain conditions, while retaining ownership. The licensor can set terms such as duration, scope and territory of use, and may receive royalties or fees in return. In contrast, assigning an IP right is a complete transfer of ownership to another party. The assignor relinquishes all rights and control over the IP, and the assignee receives full ownership, including the right to use, modify and sell the IP. Licensing allows the original owner to maintain control and continue to benefit from the IP, whereas assignment results in a complete transfer of rights.
Therefore, the second step is to determine whether some IP rights need to be acquired or licensed by the party who wishes to use them in the context of an esports activity.
Anatomy of an IP license agreement
In the contractual relationship between esports companies and rightsholders, the IP clause is essential for defining the terms of use of a licensed video game in, for example, an esports competition. This is generally the anatomy of an IP license agreement:
Scope
The subject matter section usually defines the purpose of the agreement by detailing the rights granted to the licensee to use the video game for the organization and conduct of the competition.
Exclusivity
This could apply with respect to different criteria: territory, time, other stakeholders, elements of the video game, type of rights, etc. The exclusivity/non-exclusivity clause determines whether the licensee has exclusive rights to, for example, use the game for esports events or whether the rightsholder may license the game to other parties. Just one word can make a big difference in how the competition is run as it could dictate whether or not the organizer can have a competing competition in the same territory.
The exclusive license agreement allows non-exclusive licenses to be granted to third parties, covers all the elements of the video game, and regulates the duration and space in which it can be exploited or the mode of exploitation. A non-exclusive license is generally materialized through licenses of use, prohibits sublicensing and allows the exploitation of certain rights of the video game, which may be limited to specific elements.
Duration
The term clause defines the period of time for which the license is valid, ensuring that both parties are clear about the period of use. This could also include basic agreement for continuation or termination of the contract in certain circumstances.
Territory
The territory section outlines the geographic area in which the licensee may exploit the IP, which may be limited to certain countries or regions. In addition, with respect to broadcasting rights, license agreements must be reached with the necessary broadcasters to cover the retransmission in the territories where the content is to be retransmitted.
Rights
The rights licensed clause lists the specific rights granted, such as reproduction, communication to the public, public performance, display and transformation. The scope of use or exploitation defines how the IP can be used, including online, public venues and digital platforms. Rights can also be contractually divided or defined in ways that are particular to that specific contract.
Rights reserved
For clarification, rightsholders usually include a section describing the rights that are reserved and therefore cannot be exploited by the licensee.
Compensation
In an esports IP licensing agreement, forms of compensation can vary. One common form is a lump-sum payment, where a publisher pays to the tournament organizer a fixed amount, in one or more installments, in exchange for the use of the video game in a competition. Sometimes, publishers and tournament organizers negotiate royalties or share revenues from advertising or the sale of merchandising. The calculation of royalties is complex and should be well-defined in agreements, specifying whether they are based on gross or net income and detailing any deductible expenses. Careful negotiation of royalty terms is advisable, as a successful event can result in significant revenue.
Ancillary rights
Licensees usually need some rights to carry out their main activities. However, in the entertainment business, many times other secondary exploitations take place (e.g.: merchandise, promotional activities, online use, etc.) and, for this purpose, ancillary rights must be granted.
Warranties
The warranties section contains representations by the rightsholder that it has the authority to grant the license and that the IP does not infringe third-party rights.
These agreements are complex and typically have many other sections, including editorial control, trademark use, advertising, etc. Taken together, all of these clauses aim to set clear rules for licensors (mostly, video game publishers) and licensees (e.g.: competitions organizers, streamers, broadcasters, etc.), in order to maximize investment, not only in financial terms, but also in resources, creativity, talent, and emotion.
By clearly defining the terms of use, both esports companies and rightsholders can focus on creating engaging and successful events. This structured approach helps realize the full potential of the IP, creates stability and legal certainty, and improves the overall experience for players and audiences alike. Ultimately, well-crafted IP clauses contribute to the sustainable growth and success of an esports project. Many contracts used in the industry are actually standard clauses developed by a publisher or other stakeholder and are used repeatedly.
The contracts that are frequently entered into by esports stakeholders are as follows:
Sponsorship and advertising agreements
These agreements often involve multiple stakeholders, including publishers, agencies, tournament organizers, sponsors and advertisers. Key considerations include brand alignment, ensuring that the sponsor's image aligns with the game's audience and values; exclusivity for a specific sector, so a competitor of the sponsor is not involved in the same event; and rights and obligations of each party, including detailed obligations and use of logos, promotional activities and content creation.
Live streaming agreements
These agreements involve stakeholders such as tournament organizers, game publishers, and streaming platforms, and typically relate to arena and gameplay rights, specifying the scope of content that can be streamed, including live matches, highlights and behind-the-scenes footage. As illustrated, IP rights are the most important elements of these agreements, and where, when and how these rights can be used is highly detailed, especially by the licensor.
Data and game statistics agreements
A game publisher licenses rights to data generated in an esports event to a third party. The IP rights included in the agreement are carefully regulated to ensure that the publisher retains significant control over access and uses allowed. The publisher, as the rightsholder, typically grants licenses that allow third parties to use game statistics, player data and other event-related information under certain conditions, typically provided via an application programming interface or API. These agreements often specify the scope of use, including restrictions on commercial use, attribution requirements and prohibitions on sublicensing to third parties.
In summary, the anatomy of an IP agreement in the esports sector is diverse and tailored to specific uses, with the game publisher retaining as many rights as possible with the goal of licensing them to third parties. These agreements can foster a stable and legally certain environment if they clearly define the terms of use. This allows esports projects and rightsholders to focus on creating compelling and successful competitions, while realizing the full potential of the IP and contributing to the sustainable growth and success of esports projects, enhancing the overall experience for players and audiences alike.