TYGlobe

The turn of the year marks a critical period for game companies to sprint for annual business performance, as intense as a team fight in esports competitions. However, even amid fast-paced operation and explosive output growth, no complacency shall be entertained. If the "blind spots" in corporate internal control are ignored, it is tantamount to being ambushed in the jungle during a game, which will cause heavy losses and ruin the promising business prospects. The author hereby reminds all practitioners of game companies to pay attention to the following high-risk pitfalls, all of which are real lessons drawn from others' practical experiences. All relevant personnel are required to make preventive arrangements well in advance.

Pitfall 1: Unclear ownership of rights over works created in the course of employment leads to misappropriation of the hit work immediately upon its launch

Q: Xiao A, Xiao A! All aspects of our company's game, from gameplay design to art production and copywriting, are completed by the collective wisdom and efforts of our internal team. Now that the game is about to go live, isn't our company awesome? <(￣︶￣)>

A: Don't get too cocky yet, Little Q. Let me ask you: have you reached a clear agreement with your team on the copyright ownership of your game-related works of fine art and written works?

Q: Xiao A, I know what you mean. You are referring to works created in the course of employment, right? All of these were created by them during their term of employment, so the ownership thereof shall certainly vest in our company.

A: That is not necessarily the case. Is there any stipulation in your team's labor contract on the ownership of copyright of work made for hire?

Q: This...

A: Judging by the circumstances you have presented, it appears that there are none.

Q: ...

A: The issue of ownership of works created in the course of employment is a "hidden pit" that can be easily overlooked by you. According to the provisions of the *Copyright Law of the People's Republic of China*, a work created by a natural person to complete work tasks assigned by the company shall indeed be deemed as a work created in the course of employment. However, generally speaking, the company only has the priority right to use such works within its business scope, and the copyright of the aforesaid work created in the course of employment shall remain vested in the author instead of the company. This has also resulted in the circumstance where after a large number of games gain huge popularity upon launch, the designers suddenly claim ownership of the relevant works, demand the company to pay high remuneration or delist the games, thus putting the game company in a passive position.

Pitfall 1: Risk Avoidance Guide:

When entering into labor contracts with employees such as designers and developers, a game company shall explicitly specify the "ownership of rights in works made for hire" in the contracts, and stipulate that all intellectual property rights of all game development-related works completed by employees during their term of employment (including gameplay design, code writing, artistic creation, etc.) shall be wholly owned by the game company, so as to avoid ownership disputes from the source.

Pitfall 2: Mid-term departure of employees may give rise to the risk of trade secret disclosure

Q: A, /(ㄒoㄒ)/~~, I spoke too soon. The original illustrator working on my game resigned suddenly halfway through the development, leading to the postponement of the game's launch. Will there be any legal issues with my game? Oh, by the way, I have already had him sign the document on ownership of rights for works created in the course of employment.

A: Certainly!

Q: Σ(っ °Д °;)っ

A: ( ﹁ ﹁ ) ~→ Unfinished games and semi-finished designs may not yet meet the constitutive requirements for a "work" within the meaning of the law. Documents stipulating the ownership of rights over works created in the course of employment may not necessarily be binding on such content. However, core gameplay parameters, code frameworks, plot settings, graphic designs, copywriting, posters and other contents contained in these "semi-finished products" are all core components of a game project. If a former employee discloses such content without authorization or provides it to a competitor, it is highly likely that the competitor will "copy your work" and launch similar products first, leaving all upfront investments of your company completely wasted.

Q: Xiao A, you must have a way to deal with it ~ (☆▽☆)

A: Ahem, please take the following legal risk avoidance guide for your own use.

Minefield No. 2: Guide to Avoiding Pitfalls

Upon termination of employment, an employee shall complete all work handover procedures in full, return all development materials (including local files, cloud backups, test versions, etc.), and sign the Confirmation of Materials Handover.

2. Verify whether confidentiality obligations are specified in the employment contract signed by the former employee, and whether the scope and term of the aforesaid confidentiality obligations are clearly defined. If there are no relevant provisions or the provisions are ambiguous, confidentiality-related documents shall be executed. It is recommended that such documents explicitly include provisions prohibiting former employees from publishing semi-finished games they participated in developing, core design ideas and other relevant content on platforms such as resumes and self-media accounts.

3. Non-competition clauses may be agreed upon with core developers, which explicitly stipulate that such personnel shall not take up employment with competing enterprises in the same industry within a specified period (not exceeding 2 years) after the termination of their employment, and reasonable non-competition compensation shall be agreed upon at the same time.

4. Establish a trade secret protection mechanism, such as conducting encryption processing on core codes and design schemes, setting up hierarchical access permissions, so as to prevent the leakage of undisclosed information.

Pitfall 3: "Sole decision-making" seems to be highly efficient, yet compliance risks are hidden therein.

Q: Xiao A, I have already resolved the risks arising from employee resignation! Mr. Lucky of our company is truly extremely capable, he is simply our "core backbone". Any problem can be resolved smoothly once it is handed over to him. All core creative ideas and decisions are finalized by him, and the team only needs to follow up and implement them accordingly, which makes our work super easy.

A: That sounds pretty good. The company won't be a place where he has the final say on all matters, will it?

Q: No, no, he is very receptive to opinions from all relevant parties.

A: That is good. The single-core decision-making model can unify team objectives and ensure efficient advancement, but single-person decision-making tends to overlook compliance risks due to subjective judgment and cross the "red line" of administrative supervision. For example, as the Spring Festival approaches, many game companies urgently launch activities such as blind box draws and limited-time lucky draws to attract traffic and boost sales, yet they ignore that pursuant to relevant regulations in China, information including draw probabilities and prize lists must be publicly disclosed. As a result, they are subject to penalties imposed by regulatory authorities, which not only requires payment of fines, but also damages brand reputation, and the losses far outweigh the gains.

Pitfall No. 3: Avoidance Guide:

1. Establish a dual-track parallel operation mechanism of "Development Track + Legal Affairs Track. Before product promotion plans (especially those involving lottery draws and prize-attached sales) are made public, mandatory prior legal review shall be conducted to identify and eliminate compliance risks.

2. Formulate the *High-Risk Gameplay List*, and include such gameplay forms as gacha draws, virtual currency transactions, large-sum tipping and blind box draws into the list. No relevant gameplay shall be launched without the review and approval of the legal affairs department.

3. Functions involving user payment and virtual property transactions shall be designed in strict compliance with regulatory requirements, such as explicitly publicizing relevant probabilities, imposing consumption limits on minors, retaining transaction records, and preserving records of the entire real-name authentication process, etc.