For a publisher to release and commercialize a video game, the developer must grant a license to the game (often while it is still in development). Because the license clause is such a standard element in video game publishing agreements, many developers overlook its importance.
That can be a costly mistake. There are several critical points to consider when negotiating a license clause, as it directly affects how your game and intellectual property (IP) can be used.
What is a license clause in a video game publishing agreement?
The license clause is a clause in a video game publishing agreement in which the developer gives the right to the publisher to use the intellectual property rights vested in a video game in a certain way, mostly to allow the publisher to perform their obligations under this publishing agreement.
Without such a license, the publisher cannot legally release, reproduce, or distribute the game.
What is the importance of a license clause?
A game is typically protected by multiple intellectual property rights, including copyright. Under copyright law, the rights holder alone has the power to reproduce the work and make it available to the public.
When a publisher releases a game, the game needs to be reproduced. For a digital game this happens when a video game is purchased and downloaded; for a physical edition this happens when the physical editions are manufactured.
This means that a publisher cannot do its work without first getting permission from the developer.
Giving permission is done by granting a license, which generally covers five key dimensions:
- Scope: Which game is being licensed?
- Activities: What exactly can the publisher do with the game?
- Platforms: Which platforms does the license cover?
- Duration: How long does the license last?
- Legal characteristics: Is the license exclusive, transferable, or sublicensable?
Example of a license clause in a video game publishing agreement
Below is an example of how a license clause may be worded in practice.
“Developer hereby grants to Publisher an exclusive right during the Term and throughout the Territory to publish, produce, reproduce, perform, promote, advertise, export, import, rent, license, sublicense, translate, localize, manufacture, package, market, merchandise, distribute (through any channels, including electronic distribution by download), display, sell, lease and otherwise exploit the Game, including any Ancillary Products, on the Platforms.”
How to review and negotiate the license clause
Define the licensed activities
Start by reviewing how broadly the activities licensed exclusively to the publisher are described. The nature of an exclusive license is that the publisher who obtains the license is the only one allowed to perform these activities. If it is too broad, it can create problems later.
For example, some contracts also stipulate that the publisher receives an exclusive license to create ports. If this is included without clear agreements in place, it can lead to discussions.
Set the term for the license
In most cases, a license will be valid for the duration of the contract. However, some contracts stipulate that the license is perpetual. This means that a license will be valid even after the video game publishing agreement ends, unless otherwise agreed upon.
It’s best not to agree on a perpetual license. Especially if the agreement doesn’t stipulate that the license will (still) terminate if the publisher breaches the contract, this can lead to situations where you’re locked into working with the publisher.
In practice, we have witnessed several cases where a developer has created multiple sequels, prequels, and spin-off games within the same IP. Because they’ve agreed to a perpetual license with the first publisher, this results in the IP being divided among multiple publishers. This can potentially negatively impact future publishing deals, as a publisher often prefers the option of publishing other games from the same IP, for example, in a bundle.
Align licensed platforms with funded scope
In most cases, a publisher will want to obtain an exclusive license to release the video game on all platforms. This makes sense from the publisher’s perspective, as they invest in the video game’s development and handle the marketing.
At the same time, in practice it’s often overlooked that publishers usually only provide development budget for one or more specific platforms, including PC.
This can lead to a deadlock situation where a publisher has an exclusive license for a particular platform but doesn’t utilize it.
Some examples of situations where this can happen:
- A. The publisher has another video game in its portfolio that’s performing better, so the budgets and attention are focused on that video game;
- B. The publisher declines to invest in porting, while the developer cannot cover the costs of porting either.
For a developer, it can be crucial that the video game is released on as many platforms as possible. However, an exclusive license often creates a deadlock situation, as the developer is prohibited from self-publishing due to the exclusive license.
To avoid this, developers should negotiate clear release obligations or fallback rights if the publisher chooses not to expand to other platforms.
Before you sign: summary and next steps
In short: grant the publisher the rights they need to do their job, and no more. Keep ownership of your IP, define activities clearly, avoid perpetual terms, and make platform expansion a mutual decision tied to budget and timelines.
Do you have a license clause in your draft? Send it in for a quick review…