Lawyer Limelight: Stephen Smith

Photo provided by Greenberg Glusker

Providing legal services to the video game industry takes a special type of savvy and know-how. That's what Stephen Smith offers as a partner at the entertainment powerhouse Greenberg Glusker Fields Claman & Machtinger in Los Angeles. Smith also represents companies in movie and television matters but developed a special focus in video-game law about five years ago, when a colleague asked him to work on a breach-of-contract dispute involving a game developer.

Smith went on to represent Ubisoft Entertainment, which makes the popular Splinter Cell game series. He represented Ubisoft in its $13-million arbitration award against MGA Entertainment, the owner of Bratz dolls, and also handled Ubisoft's acquistion of rights of best-selling author Tom Clancy's name and likeness for movies and games.

Lawdragon: How did you develop an expertise in video game-related law?

Stephen Smith: About five years ago, a partner at the firm asked me to represent Crave Entertainment in a $1 million breach of development contract case against a developer. It was an arbitration with no discovery. I had to learn how the video game development business operated in a very short time period in order to prove the case. I did that, won that case 100% and was hooked.

Then I was known around the office as someone who knew something about the video game business. I received three new clients out of the Crave case, won or settled those cases favorably and was then put on a large case for Ubisoft Entertainment against MGA Entertainment. That case was also arbitrated, and I won it, big. By the time I was done, Ubisoft was a regular client and I was an "expert."

LD: Which are your favorite video games?

SS: The Splinter Cell series of games published by Ubisoft.

LD: Do you find that playing the games is necessary to help you understand the products out there, the nuances, and thus enable you to better represent industry clients?

SS: It is not necessary, but helpful. It is helpful because it creates a natural, personal interest in the subject matter, which allows one to speak about the business with passion and enthusiasm in terms of what is going on in the business. It is helpful also because there are "entertainment" aspects of games that become relevant legally. For example, the reason the voice actors are not getting any play in terms of obtaining union benefits and comps for their work on video games is because, as any gamer knows in a second, acting does not sell a video game - gameplay. Acting can sell a movie. It does not sell games. Gamers know that in their souls because they play. It does not need to be explained to them.

LD: What types of class actions are being filed against developers? Can you give an example, and describe the sort of line of defense against them?

SS: Mostly wage and hour claims arising from the classification of employees as exempt from overtime and other wage and hour rules. Many developers classify their employees as exempt when those employees are performing jobs that legally do not fall within the defined scope of the exempted class. There were many suits over that over the last five years or so. California recently revised some of the exemptions to make it easier to classify an employee as exempt, which has led to a decrease in the number of such suits. But employees are lobbying hard to have the law changed back.

LD: I understand that game companies routinely stage critiques at the end of every major game project to improve future games. Can you describe that "post-mortem" process and why it is important in the legal context?

SS: You are correct, post-mortems are routinely done and for very good business reasons. But they are a nightmare for lawyers who may have litigation between the developer and the publisher, at least if you represent the developer. The process is that the developer usually drafts a document for the publisher's review describing what went right and what went wrong. The purpose is to avoid on the next project the problems that were encountered on the first project and to replicate on the next project the successes from the first. It is excellent at serving that purpose.

The publishers often then add to the initial draft of the post-mortem describing their own feelings about both the developer's performance and, sometimes, their own performance as publishers. But in litigation on behalf of the developers (who are usually much less legally savvy than the publishers) the post-mortem becomes a list of "admissions" of faulty performance. So, for example, if the developer admits that it "failed" to complete the project within budget, that will be used as evidence the developer later if the parties get into litigation about whether or not the publisher had reason to terminate that project for cause or had reason to not do the second game with the same developer.

LD: What are the most significant legal issues arising relating to the growing virtual worlds?

SS: Intellectual property - who owns what. With virtual worlds, individuals are now fully capable of producing content in a way that is revolutionary. But because they are using virtual tools and games and Internet sites to do it, which are usually subject to End User License Agreements and Terms of Use, they usually do not own what they create. When someone creates something that is really cool and truly valuable, there is going to be a fight about it.

LD: What was involved in the Clancy/Ubisoft deal? What does that allow Ubisoft to do? Can it use all of Clancy's books for possible game ideas? What else?

SS: Ubisoft acquired outright (as opposed to licensing) the name and likeness rights of Clancy and the other IP rights in Clancy books for use in video games and works derived from such games (such as movies based on those video games) for all time. It allows Ubisoft to continue making its Clancy-branded line of video games - Slinter Cell, Rainbow Six, Ghost Recon and Hawx. It allows them to develop new games within the Clancy line. It allows them to make movies (and other media) based on all of the above. It cannot use all of the books, only some of the books. But Ubisoft's "Clancy" games are not based on books to begin with, so that was not the main point of the deal.

LD: What services will be most in demand for the video game industry? What's new and on the cutting edge?

SS: Talent on the creative side - people who develop innovative and "fun" gameplay and tools to make the gaming experience better, which I believe currently is middleware. You have the game and you have the platform on which the game is played. In the "middle" are the peripherals and technologies that allows the gaming experience to be enhanced. Those tools make the virtual worlds ever more immersive and real. The most cutting edge thing I saw at E3 was the 3-D cameras displayed (I think) by Microsoft XBox. They allow the player to himself/herself become the "controller" without having anything in his/her hand. It takes the Wii experience to a totally different, higher plane.

LD: How is representing the video game industry different from representing other creative types?

SS: First, they are younger and more revolutionary in their thinking. The older media industries "Hollywood for example " have an established model with more old school executive management styles. Video gaming disdains that approach altogether. It is all about doing it differently, never doing it the same way more than once. That impacts their approach to legal issues as well. They settle cases more creatively. They decide what to sue or not over very differently (and much more practically). Second, everything is about technology. Communications with my clients is almost entirely by email even if they are down the hall or across the street. Third, they expect (and I deliver) almost instantaneous responsiveness. There is no 9-5. It is 24-7-365. Fourth, it is fun.

LD: What advice would he give to younger, less established game developers?

SS: Focus on content - very good gameplay ideation is key. On the legal side - spend the money to do it right at the outset. I cannot tell you how many times I have had a developer who had a great game get hurt because it did not pay attention to the contract at the beginning. Contracts matter. The fact that the other party may love your talent and product does not mean that they will simply forego an advantage they contracted for. Publishers know their rights and they will take advantage of them to the limit (some publishers, beyond the limit).

LD: What do they have to look out for in terms of their rights?

SS: Who will own the IP if the game development is terminated? The saddest thing to see is a developer with a good idea, who assigned it all to the publisher, who then terminates - so that no one ever makes the game. If the developer gets terminated, it must try to ensure that it can get the property back to shop it to another publisher or release it on its own if it can get the financing the finish the development.