GROWING GAMES 7 – GETTING THE DEAL THROUGHBUSINESS APPLICATION OF LEGAL ISSUES

Hans Abildstrøm, partner, certified IT Lawyer

6 October 2014

page 2

o Welcome

o Speed Springboard

o Preparing for any major deal – in line with your strategy

o Workshop 1: Trademarks (live test and relevant tools)

o Lunch (12:00 – 13:00)

o Due Diligence “Keeping a clean house”

o Workshop 2: Negotiating with investors and business partners – lessons learnt

o Break (14:30 – 15:00)

o Pitch Training

o Drinks and snacks (16:00 - )

AGENDA

page 3WORK ON YOUR STRATEGY FROM DAY 1

page 4

I'm leaving Mojang

September 15th, 2014

I don't see myself as a real game developer. I make games because it's fun, and because I love games and I love to program, but I don't make games with the intention of them becoming huge hits, and I don't try to change the world. Minecraft certainly became a huge hit, and people are telling me it's changed games. I never meant for it to do either. It's certainly flattering, and to gradually get thrust into some kind of public spotlight is interesting.

A relatively long time ago, I decided to step down from Minecraft development. Jens was the perfect person to take over leading it, and I wanted to try to do new things. At first, I failed by trying to make something big again, but since I decided to just stick to small prototypes and interesting challenges, I've had so much fun with work. I wasn't exactly sure how I fit into Mojang where people did actual work, but since people said I was important for the culture, I stayed.

I was at home with a bad cold a couple of weeks ago when the internet exploded with hate against me over some kind of EULA situation that I had nothing to do with. I was confused. I didn't understand. I tweeted this in frustration. Later on, I watched the “This is Phil Fish” video on YouTube and started to realize I didn't have the connection to my fans I thought I had. I've become a symbol. I don't want to be a symbol, responsible for something huge that I don't understand, that I don't want to work on, that keeps coming back to me. I'm not an entrepreneur. I'm not a CEO. I'm a nerdy computer programmer who likes to have opinions on Twitter.

As soon as this deal is finalized, I will leave Mojang and go back to doing Ludum Dares and small web experiments. If I ever accidentally make something that seems to gain traction, I'll probably abandon it immediately.

Considering the public image of me already is a bit skewed, I don't expect to get away from negative comments by doing this, but at least now I won't feel a responsibility to read them.

I'm aware this goes against a lot of what I've said in public. I have no good response to that. I'm also aware a lot of you were using me as a symbol of some perceived struggle. I'm not. I'm a person, and I'm right there struggling with you.

I love you. All of you. Thank you for turning Minecraft into what it has become, but there are too many of you, and I can't be responsible for something this big. In one sense, it belongs to Microsoft now. In a much bigger sense, it's belonged to all of you for a long time, and that will never change.

It's not about the money. It's about my sanity.

IT'S NOT ABOUT THE MONEY. IT'S ABOUT MY SANITY. MARKUS PERSSON, CREATOR OF MINECRAFT

IN TOUCH WITH YOUR STRATEGY?

page 5

Step 1

− NDA – Non Disclosure Agreement

Step 2 – Optional

− Term Sheet

− MOU – Memorandum of Understanding

− LOI – Letter of Intent

Step 3

− Long-form Agreement

THE PAPER TRAIL

page 6

− Get information on your business partner before revealing anything− Network− Advisors

− Sign a mutual NDA before revealing any specifics

− Have your own standard NDA− Term− Remedies− Choice of law− Enforceability

− A good NDA makes it easier to enforce ”theft” of your ideas, designs and other IPR infringements

NDA – NON-DISCLOSURE AGREEMENT

page 7

− Expedites the process

− Binding or non-binding?

− Fixates the main financial elements – ”difficult” to renegotiate!− Price − Royalty rate (but not neccesarily the royalty base)− License fees

− Exclusivity period for negotiating a long-form contract

− Choice of law

− Venue for resolving disputes

TERM SHEET

page 8

The key offering terms in such a term sheet include

− amount raised

− price per share

− pre-money valuation

− liquidation preference

− voting rights

− anti-dilution provisions

TERM SHEET – VENTURE CAPITAL IN BRIEF

page 9

Is it a good idea?

Well……

TERM SHEET

page 10

− Non-compete / exclusivity

− Representations and warranties

− Liability

− Approval process

− Time table for production – who is responsible?

− Budget holder?

− Sequels and ancillary products − First option, right of first refusal− Film, merchandise, etc.

LONG-FORM CONTRACT – ADDITIONAL OBLIGATIONS

page 11

WORKSHOP 1

HOW TO FIND A TRADEMARK

BRANDING NEW PRODUCTS

page 12

'A trademark may consist of any signs capable of being represented graphically, particularly words, including personal names, designs, letters, numerals, the shape of goods or of their packaging, provided that such signs are capable of distinguishing the goods or services of one undertaking from those of other undertakings.'

Article 2, Directive 2008/95/EC of the European Parliament and of the Council

WHAT IS A TRADEMARK?

page 13

Word mark

− A word mark is represented using words, letters, numbers or any other characters that can be typed.

Figurative mark

− A figurative mark is represented using pictures, graphics or images.

Figurative mark with letters

− A figurative mark containing letters combines the use of pictures, graphics or images with words or letters.

TRADEMARKS

page 14

3D mark

− A three-dimensional mark is represented using a three-dimensional shape, such as the actual product or its packaging.

Colour per se mark

− A colour per se mark is used only to register an actual colour to distinguish products or services.

Sound mark

− A sound mark must be represented graphically using, for example, musical notation . ♫

TRADEMARKS

page 15

Free on-line tools – a good place to start

− Danish Trademark and Patent Office www.pvsonline.dk

− Danishs Business Authority (Erhvervsstyrelsen) www.cvr.dk

− DK Hostmater www.dk-hostmaster.dk

− OHIM www.oami.europa.eu

HOW TO FIND A TRADEMARK?

page 16

LUNCH

page 17

Due Diligence is the process of evaluating a prospective business decision by getting information about the financial, legal, and other material (important) state of the other party.

Due diligence is used most often when buying a business, as the buyer spends time going through the financial situation of the business, legal obligations, customer records, and other documents. The prospective buyer wants to validate his/her opinion of the business to see if it is truly a good decision.

DUE DILIGENCE

page 18

− The deal is OFF

− The deal is on BUT − Reduced price− Additional representations and warranties− Part of the money shall remain in escrow (”you

will not get it now”)− Personal guarantees

− The deal is ON

DUE DILIGENCE – WHAT’S THE IMPACT ON THE DEAL?

page 19DUE DILIGENCE

TECHNICAL

LEGAL

FINANCIAL

page 20

− Request list− All possible (and impossible) issues

− Cultural differences− US/UK vs. DK/EU traditions

− Legal differences− Tax is often an issue

DUE DILIGENCE – LEGAL

page 21

PRODUCT DEVELOPMENT

− List of Company products and services from inception (starting with current base).

− List of employees who worked on the development of, or whose work or intellectual property was or is incorporated into, Company products or technology. Provide any invention assignments, or proprietary information agreements with such employees, and any additional employment agreements not provided in Section “Employment and Benefits”.

− List of other individuals or entities who developed, or whose work or intellectual property was or is incorporated into, Company products or technology, and provide a copy of all agreements with all such individuals or entities.

− Agreements entered into by Company for the development of technology by Company or for Company by others (including joint development and research and development).

− List of agreements under which Company is obligated to pay a royalty and each such agreement.

− List of “open source or other third party” material incorporated into any of Company’s products, or used in the development of any of Company’s products, and a copy of license agreements authorizing such use.

− Terms of usage rights related to any “open source or other third party” software.

− Description of how Company uses open source or other third party in Company products and how such incorporation is documented.

− List of Company products or technology that incorporate Java code or utilize Java specifications (including Java applets, Java classes, a Java runtime interpreter, a Java virtual machine or a Java compiler), along with the underlying license agreements authorizing such use.

DUE DILIGENCE – REQUEST LIST (NO. 90-99 OF 340)

page 22

IPR

PEOPLE

DUE DILIGENCE – CORE LEGAL ISSUES

page 23

− Keep track of your IPR

− Assignment of all IP to Game Developer Co.− Students − Freelancers− Employees

− Register relevant IP− Trademarks− Designs

− Source code

DUE DILIGENCE – IPR

Artist: Paulo Zerbato

page 24

− ”We are investing in your team”

− Employment contracts for everybody− including the founders, owners, management

− Official and unofficial retention programmes− ”you work for nothing but you will get shares someday”

− Identification of ”key employees”

DUE DILIGENCE – PEOPLE

page 25

− Privacy (data protection)− Increasingly relevant− Relevant consents for processing user data?

− Blogs− Defamatory content?− What goes on on your blog?

DUE DILIGENCE – OTHER ISSUES

page 26

COLLECT

STRUCTURE

SAFEGUARD

UPDATE

DUE DILIGENCE – TOOL

page 27

WORKSHOP 2

NEGOTIATING WITH INVESTORS AND BUSINESS PARTNERS – LESSONS LEARNT

page 28

− Corporate documents− Incorporation− Articles of Association− Shareholders’ Agreement

− Employment Agreement

− NDA

− IPR Assignment

− Trademark Registration

HORTEN’S LEGAL DEV KITS

page 29

REFRESHMENTS

page 30

Hans Abildstrøm is specialised in IP and IT and has comprehensive experience advising on matters relating to IT and the media and entertainment industry – especially concerning computer games and mobile apps – with focus on all contractual issues related to the industry.

Hans has successfully advised on financing of games developers and the subsequent expansion of their business.

Hans Abildstrøm is an experienced litigator and has also conducted several arbitration cases between international parties.

Hans Abildstrøm

Partner

Practice areasCommercial contractsCompany lawIT, e-business and telecommunications Litigation, arbitration and mediationMedia and entertainment

Mentioned inLegal 500 - Telecoms, Media & entertainment and Intellectual Property

Dir: +45 3334 4182Mob: +45 5234 4182E-mail: ha@horten.dk

Certified IT-Attorney, 2010Horten, partner, 2003Global Crossing, 2001Right of audience before the High Courts, 1994Admitted to the Danish bar, 1992Nyborg & Rørdam, 1989Master of Laws, the University of Copenhagen, 1988

PROFILE| HANS ABILDSTRØM

page 31

Christian Kragelund advises on all aspects of intellectual property rights focusing in particular on trademarks and domain names. He advises national and international clients in complex and strategic cases on establishment, maintenance and validity and/or infringement of intellectual property rights. He has special expertise advising international companies on administration of complex IP portfolios.

For more than 15 years, Christian Kragelund has gained specialist knowledge within all aspects of IP law and advises on local and international IP law through a wide international network. Christian has conducted many cases on international IP conflicts in countries such as China, Japan and the USA and before the European Trade Mark Office and has in-depth knowledge of case law in many different jurisdictions.

Christian Kragelund

Junior Partner

Practice areasIntellectual property rights

Dir: +45 3334 4347Mob: +45 5234 4347E-mail: ckr@horten.dk

Junior Partner, Horten, 2013Attorney, head of the Trademark department, Gorrisen Federspiel, 2010-2013E*MBA, SIMI, 2010Admitted to the Danish bar, 2010Partner, Chas. Hude A/S, 1995-2010Dansk Patentagent, 2000European Trademark and Design Attorney, 1996Assistant attorney, Advodan, 1995

Trainee Attorney, Patentanwaltskanzlei Maikowski & Ninnemann, Berlin, 1994Master of Laws, the University of Aarhus, 1994

PROFILE| CHRISTIAN KRAGELUND

Horten AdvokatpartnerselskabPhilip Heymans Allé 7DK-2900 Hellerup, Copenhagen

Tel. 3334 4000Fax 3334 4001info@horten.dk horten.dk