Oloh
02-18-2005, 12:46 AM
October 7, 2004 - Okratas Interview
First off, let’s get the introductions out of the way. Tell us your name and a bit about yourself.
My real name is Don Shelkey, but most of you probably know me as "Oloh," which is the name I use when I play, post or chat.
I am a lawyer. I work for a large law firm, Buchanan Ingersoll, in the "Corporate Finance and Technology" section. I guess I am what most people consider a "corporate lawyer" in that my firm usually represents companies instead of individuals. Within the firm, I am a member of a specialized practice group called "Technology Transactions."
I am also a gamer. I have played every mainstream MMOG, many of which I have played at the highest levels. I have to brag a bit. In EQ, I had a 50 Enchanter, 50 Necromancer, 60 Monk and 65 Cleric, each, respectively, at the level cap when I played them. I had a 47 Medic in Anarchy Online during beta (go go bugged flamer!). I had a Master Commando/ Master Smuggler in SWG. I played UO, FFXI, Horizons, Asheron's Call, Asheron's Call 2 and DAoC for a couple months each. I am currently primarily playing Lineage 2, where I have a 44 Dark Avenger. I still play my EQ cleric on Sullon Zek a bit as well.
What kind of educational background do you have, and tell us a bit about your experience.
I went to undergraduate school at a small private school, Duquesne University, for psychology and criminal justice (neither of which are particularly helpful in law school, by the way). I then went to law school at Duquesne. I was elected to the Duquesne Law Review (the lawyer's version of "honor roll"). Buchanan Ingersoll recruited me, and I worked there for a summer. As a long-time gamer, I was immediately impressed by the Technology Transactions practice group, having played many games from companies they represented. They made me an offer to come work when I finished law school. I accepted, and the rest is history.
Technology Transactions? Explain that for that for us in non-legal terms.
Technology Transactions is a term we use to describe agreements that involve the transfer, use or commercialization of Intellectual Property. Intellectual Property is "stuff" that you cannot touch or see but has value. An example of Intellectual Property is a copyright. I am what I like to call a "deal lawyer" as opposed to a "trial lawyer." I do transactions, not trials.
For example, I draft asset purchase agreements (when a company is buying an existing game or other asset), development and publishing agreements (for development stage companies), employment agreements, consulting agreements (to use X product, or to collect Y information), artist agreements, music agreements, merchandising agreements, subcontractor agreements, End User Licensing Agreements (EULA), service agreements, and many other agreements. Simply put, we help companies commercialize their technology products.
You mentioned EULAs. These mysterious documents are filled with legalese that many people do not understand, but are a part of every game. Just what does a EULA do?
You are right. EULAs are very confusing documents, but once you understand how software development works, it becomes clear why they exist, and why they look and feel the way they do. EULAs are legal agreements between software developers and their customers. They grant the customer the right to use the software. The first reaction that people have is usually "No way! I spent fifty freaking bucks on this game, I own this sucker."
Even a low budget game can take millions of dollars to make. At the end of the day, the only asset that a software development company has is the right to sell that game. Certainly, if you wanted to, a company may be more than happy to "sell" you the game, but your cost would be … well, the same millions it cost to make it, plus a nice mark-up to make it worth the company's efforts.
Instead, you can walk into the local video game store, plop down 50 bucks and get the full benefit of a development company's millions of dollars worth of hard work. But, there is a catch … and the catch is the EULA, which is full of restrictions on what you can and cannot do with your license of the game.
If you look at a basic EULA, it contains a statement so that the user knows he or she does not "own" the game. It also contains language that grants you the right to use the game, but not the exclusive right. The EULA prohibits (or limits) your ability to make copies of the game. There are also provisions that state the game is provided "as is" and that you cannot sue the company if the game messes up your system. Other provisions, such as where you have to sue the company and what law will apply, are all designed to protect the company in the event things "go south."
Each of these restrictions allows the company to offer the game at a lower cost by providing protection from things that cost the company money. The net result is that you, as a gamer, can enjoy a multi-million dollar production for a very reasonable price.
The sale of credits and items between players in virtual worlds is common, though standard property law does not quite cover virtual property and companies running these games that may have rights to the contents inside their games. Therefore, what does the law say on this topic? What are your views on this topic?
Because we are now starting to cross into MMOG-specific topics, I feel the need to make a disclaimer (being a lawyer and all). For these MMOG-specific questions, my thoughts are my thoughts alone, and not the thoughts of Brad McQuaid or anyone else at Sigil.
Most main stream companies out there now handle the sale of virtual goods in a simple manner. They prohibit it in the EULA. EULAs are enforceable contracts and there is nothing to indicate that a clause prohibiting the sale of online goods wouldn't be enforced. So, courts should enforce the EULA in the company's favor based on a breach of contract if the company were to proceed to trial on the matter.
The practical considerations are vitally important to this discussion. First and foremost, litigation is expensive, even for a big company. If it can be avoided, it should be. I think the prevailing opinion out there now is that companies would rather put the money into improving their games rather than chasing down some virtual profiteer. Every company to date has pretty much stopped at the practical steps (prohibiting it, banning accounts, etc.), and have not taken the next, more costly step–legal action.
There are some legal issues that have to be addressed. You might be surprised to learn that a breach of contract alone is not enough to win a big recovery in court. The goal of contract law is generally not to "punish" dirty rotten contract breakers, but instead to make the aggrieved party be in as good a position as if the contract was performed. Stated another way, the aggrieved party (in this case, the game developer) must suffer "damages." Furthermore, the damages must be quantifiable. It would be easy to quantify a MMOG developer's damages if, on each day that an illegal virtual sale was conducted, 5 customers left. But it doesn’t work that way. It is hard to tell what "damage" has been suffered by the company based on virtual profiteering.
Marching into court and telling the judge tales about "Oloh's Dungeon of Ill Fated Pharming" which has been overcrowded by pharmers may not be the type of damage that the court is looking at to determine a monetary reward. The same can be said of games that are less "fun" because of virtual profiteering.
Of course, a company can always try and get non-monetary rewards, such as an injunction that prohibits further breaches, but that could cost a lot of money simply to cut off one supplier. While an injunction should solve the problem with that particular company, others will pick up the slack. Compare that to a company getting hit with a multimillion dollar lawsuit, which generally will have a chilling effect on other companies (money speaks louder than injunctions, I assure you).
Now, a lot of you may be saying "so what?" Let them sell virtual property, it is not that big of a deal. There are a few reasons why that is not the proper response for the good of the genre as a whole. Consider the following examples:
The more liquid virtual property comes, the more likely it is to be taxed. (Man, I would LOVE to loot that Cloak of Flames, but I cannot afford to pay income tax on it. By the way, have you filled out your tax report for the Akkirus' Codpiece of the Risen you looted last week?)
The more real world value items have, the more likely a court may decide that players have a property interest in the virtual property. (Unfortunately, OlohCorp cannot nerf the Moss Covered Twig because we cannot afford to compensate the players for their loss of property. Please be advised of the situation.). Far fetched? See http://www.cnn.com/2003/TECH/fun.games/12/19/china.gamer.reut/ (http://www.cnn.com/2003/TECH/fun.games/12/19/china.gamer.reut/)
So where do I see the problem of virtual sales going? I think that virtual profiteers are becoming more organized and entrenched. At the moment, there is a lot of money to be made, and I don't see it going away any time soon. I think it will be expensive to root them out legally, and unless a solution is found that gives a company a reasonable way to enforce its rights and recoup some of the costs for doing so, companies will continue to rely on "in game" means, rather than legal means, to curtail the problem.
Just what perils are involved for game development studios when they sign on the dotted line with a publisher?
I use the term "publisher" in a sense that most would consider loose. To me, a "publisher" is synonymous with "financer" because the legal issues are very similar. In fact, a true "publisher" brings a lot to the table in terms of experience, distribution channels, and the like. But, many gaming companies, particularly gaming companies that do not have a mass appeal, never have a "true" publisher. Instead, they find or are put in contact with someone willing to invest money in them or their products and go from there. Believe it or not, the legal issues involved in these situations are similar to those with more institutional publishers, like Nintendo or Microsoft.
To answer the question, the most perilous part about entering into an agreement with a publisher has nothing to do with the legalities of the agreement. The most important part of the process is putting together a team on both sides that works well together and has a full understanding of what each other is getting into. The biggest problem that I encounter in these types of relationships (gaming company related or otherwise) is that people get "too close to the fire" and set unrealistic expectations. This is particularly true for inexperienced teams dealing with inexperienced publishers.
That being said, there are concerns that exist when negotiating an agreement for financing, publication and the like. Some very common ones that need to be worked out are:
Who owns the finished product?
What will the respective ownership interests in the company be?
Is there an "exit strategy" for one party?
What degrees of creative control are being attributed?
What are the parties' marketing responsibilities?
How are merchandising rights distributed?
Who releases information? When? How?
It has been revealed to us that you have done some work for Sigil Games. How did you come to be involved with Sigil? Was it through your firm, or did you know someone from Sigil before?
Cindy Bowens contacted me. I will never forget the personal ad:
SWF in search of handsome, dashing, younger man that loves MMOGs and is kind of a griefer. Cleric preferred.
Haha! Seriously, I have followed Brad McQuaid's exploits ever since I read reports of a ranger in green armor. I loved EverQuest, and every other MMOG that I tried seemed to fall short. When he left Sony, I cyber-stalked his journey, just like the rest of you, to see what his next project would be. Enter Sigil.
I put the Sigil site as my homepage and followed along. I contacted Cindy Bowens about their plans and to see if I could assist the company in any way and to offer a couple of suggestions. Over the next few months, Cindy and I hit it off, and have since become great friends. When the forums came up, I unloaded all of my MMOG angst into several hundred posts, topics ranging from mini-games to PvP to the little things that make MMOGs smile.
Early on, to prove the game wasn't vaporware (and probably to show off, the game is sick looking guys … honestly … and I don’t mean sick looking for a MMOG, I mean sick looking … period), Cindy contacted a few folks from the community to come visit the office and see "the game." I was one of those lucky folks.
I asked whether Brad had time for a meeting to explain what type of law we specialize in and what we could bring to the company in our area of law. My firm sent me and a colleague to San Diego (where we have an office). We met with Brad and Jeff, and some time later Brad called to see if we could take care of a project.
I suspect that the fact that my firm represents other video game companies, and that Buchanan Ingersoll is a large, established law firm, had a lot to do with his decision. Also, because the type of work involved, speaking the language of MMOGs and gamers in general is helpful and saves a lot of time. (I am sure you have tried explaining to a non-gamer what a MMOG is all about.)
Aside from my speculations, you'd have to ask Brad. 8)
First off, let’s get the introductions out of the way. Tell us your name and a bit about yourself.
My real name is Don Shelkey, but most of you probably know me as "Oloh," which is the name I use when I play, post or chat.
I am a lawyer. I work for a large law firm, Buchanan Ingersoll, in the "Corporate Finance and Technology" section. I guess I am what most people consider a "corporate lawyer" in that my firm usually represents companies instead of individuals. Within the firm, I am a member of a specialized practice group called "Technology Transactions."
I am also a gamer. I have played every mainstream MMOG, many of which I have played at the highest levels. I have to brag a bit. In EQ, I had a 50 Enchanter, 50 Necromancer, 60 Monk and 65 Cleric, each, respectively, at the level cap when I played them. I had a 47 Medic in Anarchy Online during beta (go go bugged flamer!). I had a Master Commando/ Master Smuggler in SWG. I played UO, FFXI, Horizons, Asheron's Call, Asheron's Call 2 and DAoC for a couple months each. I am currently primarily playing Lineage 2, where I have a 44 Dark Avenger. I still play my EQ cleric on Sullon Zek a bit as well.
What kind of educational background do you have, and tell us a bit about your experience.
I went to undergraduate school at a small private school, Duquesne University, for psychology and criminal justice (neither of which are particularly helpful in law school, by the way). I then went to law school at Duquesne. I was elected to the Duquesne Law Review (the lawyer's version of "honor roll"). Buchanan Ingersoll recruited me, and I worked there for a summer. As a long-time gamer, I was immediately impressed by the Technology Transactions practice group, having played many games from companies they represented. They made me an offer to come work when I finished law school. I accepted, and the rest is history.
Technology Transactions? Explain that for that for us in non-legal terms.
Technology Transactions is a term we use to describe agreements that involve the transfer, use or commercialization of Intellectual Property. Intellectual Property is "stuff" that you cannot touch or see but has value. An example of Intellectual Property is a copyright. I am what I like to call a "deal lawyer" as opposed to a "trial lawyer." I do transactions, not trials.
For example, I draft asset purchase agreements (when a company is buying an existing game or other asset), development and publishing agreements (for development stage companies), employment agreements, consulting agreements (to use X product, or to collect Y information), artist agreements, music agreements, merchandising agreements, subcontractor agreements, End User Licensing Agreements (EULA), service agreements, and many other agreements. Simply put, we help companies commercialize their technology products.
You mentioned EULAs. These mysterious documents are filled with legalese that many people do not understand, but are a part of every game. Just what does a EULA do?
You are right. EULAs are very confusing documents, but once you understand how software development works, it becomes clear why they exist, and why they look and feel the way they do. EULAs are legal agreements between software developers and their customers. They grant the customer the right to use the software. The first reaction that people have is usually "No way! I spent fifty freaking bucks on this game, I own this sucker."
Even a low budget game can take millions of dollars to make. At the end of the day, the only asset that a software development company has is the right to sell that game. Certainly, if you wanted to, a company may be more than happy to "sell" you the game, but your cost would be … well, the same millions it cost to make it, plus a nice mark-up to make it worth the company's efforts.
Instead, you can walk into the local video game store, plop down 50 bucks and get the full benefit of a development company's millions of dollars worth of hard work. But, there is a catch … and the catch is the EULA, which is full of restrictions on what you can and cannot do with your license of the game.
If you look at a basic EULA, it contains a statement so that the user knows he or she does not "own" the game. It also contains language that grants you the right to use the game, but not the exclusive right. The EULA prohibits (or limits) your ability to make copies of the game. There are also provisions that state the game is provided "as is" and that you cannot sue the company if the game messes up your system. Other provisions, such as where you have to sue the company and what law will apply, are all designed to protect the company in the event things "go south."
Each of these restrictions allows the company to offer the game at a lower cost by providing protection from things that cost the company money. The net result is that you, as a gamer, can enjoy a multi-million dollar production for a very reasonable price.
The sale of credits and items between players in virtual worlds is common, though standard property law does not quite cover virtual property and companies running these games that may have rights to the contents inside their games. Therefore, what does the law say on this topic? What are your views on this topic?
Because we are now starting to cross into MMOG-specific topics, I feel the need to make a disclaimer (being a lawyer and all). For these MMOG-specific questions, my thoughts are my thoughts alone, and not the thoughts of Brad McQuaid or anyone else at Sigil.
Most main stream companies out there now handle the sale of virtual goods in a simple manner. They prohibit it in the EULA. EULAs are enforceable contracts and there is nothing to indicate that a clause prohibiting the sale of online goods wouldn't be enforced. So, courts should enforce the EULA in the company's favor based on a breach of contract if the company were to proceed to trial on the matter.
The practical considerations are vitally important to this discussion. First and foremost, litigation is expensive, even for a big company. If it can be avoided, it should be. I think the prevailing opinion out there now is that companies would rather put the money into improving their games rather than chasing down some virtual profiteer. Every company to date has pretty much stopped at the practical steps (prohibiting it, banning accounts, etc.), and have not taken the next, more costly step–legal action.
There are some legal issues that have to be addressed. You might be surprised to learn that a breach of contract alone is not enough to win a big recovery in court. The goal of contract law is generally not to "punish" dirty rotten contract breakers, but instead to make the aggrieved party be in as good a position as if the contract was performed. Stated another way, the aggrieved party (in this case, the game developer) must suffer "damages." Furthermore, the damages must be quantifiable. It would be easy to quantify a MMOG developer's damages if, on each day that an illegal virtual sale was conducted, 5 customers left. But it doesn’t work that way. It is hard to tell what "damage" has been suffered by the company based on virtual profiteering.
Marching into court and telling the judge tales about "Oloh's Dungeon of Ill Fated Pharming" which has been overcrowded by pharmers may not be the type of damage that the court is looking at to determine a monetary reward. The same can be said of games that are less "fun" because of virtual profiteering.
Of course, a company can always try and get non-monetary rewards, such as an injunction that prohibits further breaches, but that could cost a lot of money simply to cut off one supplier. While an injunction should solve the problem with that particular company, others will pick up the slack. Compare that to a company getting hit with a multimillion dollar lawsuit, which generally will have a chilling effect on other companies (money speaks louder than injunctions, I assure you).
Now, a lot of you may be saying "so what?" Let them sell virtual property, it is not that big of a deal. There are a few reasons why that is not the proper response for the good of the genre as a whole. Consider the following examples:
The more liquid virtual property comes, the more likely it is to be taxed. (Man, I would LOVE to loot that Cloak of Flames, but I cannot afford to pay income tax on it. By the way, have you filled out your tax report for the Akkirus' Codpiece of the Risen you looted last week?)
The more real world value items have, the more likely a court may decide that players have a property interest in the virtual property. (Unfortunately, OlohCorp cannot nerf the Moss Covered Twig because we cannot afford to compensate the players for their loss of property. Please be advised of the situation.). Far fetched? See http://www.cnn.com/2003/TECH/fun.games/12/19/china.gamer.reut/ (http://www.cnn.com/2003/TECH/fun.games/12/19/china.gamer.reut/)
So where do I see the problem of virtual sales going? I think that virtual profiteers are becoming more organized and entrenched. At the moment, there is a lot of money to be made, and I don't see it going away any time soon. I think it will be expensive to root them out legally, and unless a solution is found that gives a company a reasonable way to enforce its rights and recoup some of the costs for doing so, companies will continue to rely on "in game" means, rather than legal means, to curtail the problem.
Just what perils are involved for game development studios when they sign on the dotted line with a publisher?
I use the term "publisher" in a sense that most would consider loose. To me, a "publisher" is synonymous with "financer" because the legal issues are very similar. In fact, a true "publisher" brings a lot to the table in terms of experience, distribution channels, and the like. But, many gaming companies, particularly gaming companies that do not have a mass appeal, never have a "true" publisher. Instead, they find or are put in contact with someone willing to invest money in them or their products and go from there. Believe it or not, the legal issues involved in these situations are similar to those with more institutional publishers, like Nintendo or Microsoft.
To answer the question, the most perilous part about entering into an agreement with a publisher has nothing to do with the legalities of the agreement. The most important part of the process is putting together a team on both sides that works well together and has a full understanding of what each other is getting into. The biggest problem that I encounter in these types of relationships (gaming company related or otherwise) is that people get "too close to the fire" and set unrealistic expectations. This is particularly true for inexperienced teams dealing with inexperienced publishers.
That being said, there are concerns that exist when negotiating an agreement for financing, publication and the like. Some very common ones that need to be worked out are:
Who owns the finished product?
What will the respective ownership interests in the company be?
Is there an "exit strategy" for one party?
What degrees of creative control are being attributed?
What are the parties' marketing responsibilities?
How are merchandising rights distributed?
Who releases information? When? How?
It has been revealed to us that you have done some work for Sigil Games. How did you come to be involved with Sigil? Was it through your firm, or did you know someone from Sigil before?
Cindy Bowens contacted me. I will never forget the personal ad:
SWF in search of handsome, dashing, younger man that loves MMOGs and is kind of a griefer. Cleric preferred.
Haha! Seriously, I have followed Brad McQuaid's exploits ever since I read reports of a ranger in green armor. I loved EverQuest, and every other MMOG that I tried seemed to fall short. When he left Sony, I cyber-stalked his journey, just like the rest of you, to see what his next project would be. Enter Sigil.
I put the Sigil site as my homepage and followed along. I contacted Cindy Bowens about their plans and to see if I could assist the company in any way and to offer a couple of suggestions. Over the next few months, Cindy and I hit it off, and have since become great friends. When the forums came up, I unloaded all of my MMOG angst into several hundred posts, topics ranging from mini-games to PvP to the little things that make MMOGs smile.
Early on, to prove the game wasn't vaporware (and probably to show off, the game is sick looking guys … honestly … and I don’t mean sick looking for a MMOG, I mean sick looking … period), Cindy contacted a few folks from the community to come visit the office and see "the game." I was one of those lucky folks.
I asked whether Brad had time for a meeting to explain what type of law we specialize in and what we could bring to the company in our area of law. My firm sent me and a colleague to San Diego (where we have an office). We met with Brad and Jeff, and some time later Brad called to see if we could take care of a project.
I suspect that the fact that my firm represents other video game companies, and that Buchanan Ingersoll is a large, established law firm, had a lot to do with his decision. Also, because the type of work involved, speaking the language of MMOGs and gamers in general is helpful and saves a lot of time. (I am sure you have tried explaining to a non-gamer what a MMOG is all about.)
Aside from my speculations, you'd have to ask Brad. 8)