While an in-depth knowledge of the law is not critical for most game developers, there are a few legal principles that all game developers should be at least superficially familiar with. Before getting into the legal issues, first an important disclaimer:
There is no substitute for legal advice provided by a licensed attorney in your jurisdiction; the information provided herein is intended as academic and does not constitute legal counsel, nor the establishment of any privileged communication or work product, nor any fiduciary relationship with the author.
That out of the way, let's talk about the issues*. There are three major areas of law that touch the game industry: intellectual property, contracts, and labor law. Today, we'll be discussing intellectual property, specifically copyright.
* Unless otherwise noted, we'll be referring to U.S. law.
Copyright is perhaps the first IP right that most people think of, and yet it is often the most misunderstood. Copyright protects original works of authorship fixed in any tangible medium of expression. These specifically include things like literary works, musical scores, pictures (both static and motion picture), and dramatic works. It does NOT protect ideas, processes, concepts, or discoveries, and this is where people often get copyright wrong. Copyright covers the text of your design doc, but it does not cover the ideasthe design doc outlines. Copyright does not cover the idea of an orc having green skin; it does cover your artwork drawing that orc, and your notes describing it. The easiest way to remember copyright is that it does not cover the idea, but rather covers the expression of that idea.
There are some limits to copyright that you, as a developer, ought to be aware of. For instance, what is copyrightable? We've briefly mentioned above the general scope of copyright, but there are some other restrictions here. First, the work must be an original work of authorship. This is important because it excludes certain things. For instance, a collection of facts such as a phone book does not rise to a minimum spark of originality, according to the Supreme Court. However, the way that those facts are ordered and ranked, and editorial control over what is included and excluded does. For instance, a person developing a trivia game based on factual information cannot copyright the facts in question. They can, however, copyright the way those facts are presented, such as the specific wording of the question, the order in which the questions are presented, any editorial control over the inclusion of the fact and so forth. Similarly, a copyright holder in a collection of public domain data (i.e., data that is freely useable by any person, but the style in which it is presented is copyrighted) cannot use that copyright to prevent people from using the underlying data, only to protect their copyrightable interest (the format/style and order). So, lets assume our trivia game uses information from a public domain encyclopedia. If someone tries to use the facts themselves in their own game, there's not a lot that we can do about it. However, if they copy our question word for word, or use our fonts, or copy our same list of questions in order, we're in a lot better position to do something about it.
The next question is, when is something copyrightable? Copyright is fixed at the moment of creation, in the U.S. This is very important - the moment that an original work of authorship is fixed in a tangible medium of expression, copyright in that work exists. You may have heard of things like registering copyright with the Copyright Office, or mailing copies of your creation to yourself. These are generally not necessary to gain copyright, but they can give you important benefits if you ever have a legal dispute. For instance, registering your work allows you to recover statutory damages in an infringement suit.
How long does copyright last? Well, that depends on who created the work and when it was created. For most works created after 1978, the protections last for the life of the author plus 70 years. Corporate works (i.e. works-for-hire) last 95 years from the date of publication or 120 years from date of creation, whichever is shorter. Works created between the years of 1923 and 1978 are confusing due to some conflicts and revision of the copyright act changing their duration, and you'd do best to consult an attorney to determine their status. Most works predating 1923 can be considered public domain.
Now, what rights does copyright give you? Copyright grants 6 exclusive rights to the copyright holder. These are:
(1) to reproduce the copyrighted work in copies or phonorecords;
(2) to prepare derivative works based upon the copyrighted work; (3) to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending; (4) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works, to perform the copyrighted work publicly; (5) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works, including the individual images of a motion picture or other audiovisual work, to display the copyrighted work publicly; and (6) in the case of sound recordings, to perform the copyrighted work publicly by means of a digital audio transmission. Collectively, these are known as the "five powers of copyright"*, the right to reproduce, distribute, create derivative works, public performance, and public display. Copyright owners generally have exclusive rights in these things. This means that a case of copyright infringement can arise when you have a validly copyrighted work, and someone violates one of the five powers of copyright as to that work. *Yes, five. Under §106 of the Copyright Act, right (4) and right (6) are both considered the same right of public performance. But sometimes, copyright infringment "isn't" copyright infringement. The doctrine of "fair use" exists to allow what would otherwise be a case of copyright infringement, in limited situations. The important thing to know about fair use is that it is a complicated four-factor test, that gets judged on a case-by-case basis, and depends very heavily on the facts. This makes it hard to know in advance whether a use is fair or not. If you aren't sure, seek legal counsel before doing the fair use. This works both ways -- before deciding to enforce your copyright on something you think might raise a fair use defense, consult counsel! That being said, there are a couple of general things to know about fair use. Attempts to claim fair use for commercial purposes are almost always an uphill battle. Also, just because you're using a small amount of the copyrighted work won't save you, as courts have found amounts of less than 5% to be enough to kill a fair use argument. That being said, it is possible to use significantly more and still be fine. As always, seek counsel's advice on these determinations.
Finally, it's important to note that in the United States, the authority for copyright comes from Article I, Section 8 of the Constitution, which in part states "To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries;" and is further developed in the Copyright Act (Title 17, United States Code). Under U.S. law, federal courts have jurisdiction over copyright claims.
So that's the heads up to copyright. You may be noticing that it's not as strong as you initially thought it was. This is true; copyright has a lot of limitations to counterbalance its incredibly long length.