A Little-known but Effective IP Protection For Video Game Developers
OverviewHistorically, video game developers have relied on copyright, trademarks, and in rare cases, patents to protect their intellectual property (IP). While each of these forms of IP ownership is useful in its own way, all come with certain limitations. First, none protects ideas. Second, all these forms of IP protection require prior registration and are therefore time-consuming and expensive.
Video game developers can use a lesser-known form of IP protection known as the Defend Trade Secrets Act of 2016 to protect their IP. A trade secret can be any formula, pattern, physical device, idea, process, or compilation of information that provides a competitive advantage in the marketplace and that is created in a way that can reasonably be expected to prevent its disclosure.
Trade Secret Protection for Video Game DevelopersVideo game developers can rely on trade secret protection to protect a wide array of information including any idea related to the gaming software, proprietary information related to the software, and the less-visible parts of the source code.
By invoking trade secrets, video game developers can prevent others from using the proprietary information unless the other party discovers the secret through legitimate research. In legal terms, a video game developer has the right to prevent others from “misappropriation of” trade secrets.
The primary advantage of the Act is that it does not require any registration and is therefore relatively inexpensive and quick to implement. Further, it provides indefinite protection as long as the proprietary information is confidential. This is not the case with patents, copyrights, and trademarks, which are granted for a fixed term.
Trade secret protection in the US varies from state to state, but the majority of the country has adopted the Uniform Trade Secrets Act (UTSA) by enacting enabling legislation. California uses the California Uniform Trade Secrets Act (“CUTSA”) which is similar to the UTSA.
Non-disclosure AgreementsTrade secrets may not require prior registration but they need to remain confidential. A video game developer must therefore undertake systematic efforts to keep the proprietary information secret from others. The simplest way to do this is with non-disclosure agreements (NDAs).
NDAs are legally-binding agreements that restrict the access or sharing of confidential information. NDAs provide video game developers and game companies with protection against losing their trade secrets.
The prevailing judicial view in the US is that contracts and NDAs are essential for protecting trade secrets though the exact nature of these contracts, including NDAs, varies from state to state. For example, the US District Court of Nevada in Videotronics Inc. v. Bend Electronics held that the omission of a contractual agreement between the purchaser and developer of a video poker game amounts to public disclosure. Conversely, if a software developer gives the lessee notice of proprietary interest in the software, and of the licensee’s responsibility to protect that interest, the video game developer is treating the game software as a secret, according to the Supreme Court of Utah in J & K Computer Systems, Inc. v. Parrish.
Video game developers that hire external agents such as freelancers or other parties who run their own video game companies place themselves at greater risk of losing their trade secrets. Freelancers and knowledgeable employees who are privy to the proprietary information can leak such information unless there are legal mechanisms in place. The absence of nondisclosure and anticompetition clauses in a lawsuit involving misappropriation of trade secrets by a former employee or freelancer is viewed negatively by the courts.
Legal Challenges to Trade Secret ProtectionVideo game developers may encounter legal challenges to their attempts to invoke trade secret protection over their proprietary information:
Publication - Trade secret protection hinges upon secrecy and confidentiality. Once a trade secret is published, it becomes known to the public and no longer subject to protection. Many video game developers prefer to distribute their gaming software as widely as possible. In this situation, the fundamental issue is whether a game which is widely distributed should be entitled to trade secret protection. Presently, there is no clear-cut answer and trade secret protection of widely-distributed gaming software varies from state to state.
Reasonable Measures - Applicability of trade secret protection also depends on the nature of the legal measures the video game developer takes in preserving the trade secret during the licensing and distribution process. There are three common standards video game developers may demand of their partners who are privy to proprietary information: Absolute nondisclosure; “Best Effort” or “Reasonable Effort” to preserve secrecy; and “Comparable Care” in handling the licensed software as the licensee uses in handling its own software.
Which of these standards should be used for protecting proprietary information varies from situation to situation. Different courts have different standards. Some have held that the first standard is required for asserting trade secret protection. Some, however, have held that a combination of the second and the third standard is sufficient.
ConclusionVideo game developers should consider trade secret protection despite the legal uncertainties involved. Engaging with an experienced video game law firm with experience in all aspects of licensing and distribution contracts can assure developers receive the full trade secret protection under applicable law.