William Carleton, Counselor @ Law

Light reading

Last night I participated in a "legal best practices" panel at the new WIN Reactor space (near the Seattle Art Museum Sculpture Park).

I'm just getting to know about the Reactor program. Its head, Chip Hallett, described it as a "launch incubator" for startups in the game industry.

The panel was a mix of lawyers and game company founders/CEOs. As anyone would expect going in, the founders/CEOs were more interesting to hear. (That said, Seattle attorney Scott Warner did an uncommonly good job of moderating the discussion; he'd be a good moderator even when the topic isn't legal).

I think the whole show (long – 2 1/2 hours?) is preserved for posterity on video - I can actually see it being a good resource for first time game startup entrepreneurs, because Scott was so careful to cover all the basic topics - so I sure as heck won't attempt anything like a recap here.

What I do want to remark on briefly: the answers the CEOs/founders gave to one of Scott's questions, to the effect of, do you read all the legal contracts that affect your business?

Bob Berry of Uber Entertainment, Matt Wilson of Detonator Games, and Randy Chung of Zhurosoft, each said, yes, of course, every line, you have to.

I knew this is the answer Bob would give, as I and my firm represent Uber and know his style. But I was impressed to hear Matt and Randy equally adamant.

Sensing that he had hit an especially rich vein in the silver mine, Scott pressed everyone for examples of where contracts go wrong, issues presented or sections and legal contracts to be especially wary of. Everyone had great examples. We got into not just legal drafting "gotchas" but also the nitty-gritty of payment terms and how important it is to spell out unspoken assumptions.

If I come across a link to the video archive, I'll try to remember to post it here.

I'll leave you with a link to a video calling card that Bob kindly created for me in the span of about 90 seconds, using a fun app created by a startup which is part of the current WIN/Reactor class, Freak'n Genius. It had me in stitches.

Photo courtesy of Julian Allen, REACTOR community manager.

The forward pass

Have I mentioned that I'm reading Edmund Morris' volume covering Theodore Roosevelt's presidential years?

Inspired by Morris' account of how Roosevelt mediated a coal strike, I wrote and published this treatment for a movie (I think it could be another Lincoln movie).

I'm at the part in the book where Roosevelt has just attempted, unsuccessfully, to get the Government Printing Office to adopt "simplified spelling" in all official documents for the Executive Branch.

Most of Roosevelt's interventions were consequential, of course, and many shaped the 20th Century, not just for the United States but for the world.

But on this day, Super Bowl Sunday, I thought I'd share this bit of TR trivia passed along by Michael Beschloss in a tweet: "Brutality & deaths on gridiron made Pres T Roosevelt 1905 demand forward pass, other reforms to thwart demands for abolition of football."

As if, fresh from reforming robber baron practices to save capitalism from itself, Roosevelt had an eye for things about to collapse of their own weight!

Well, I haven't done the research to verify the Beschloss tweet, but I did find an interesting article from the Washington Post (note: behind a paywall) published in 1906. The piece doesn't mention Roosevelt, but does talk about the forward pass:

 ". . . It is practically assured that there will be a forward pass in football next season under certain restricting conditions. . . .

"Under the head of opening up the play a rule was adopted at any man back of snapper back be allowed to make a forward pass, provided the pass does not extend beyond the line of scrimmage or be to a man who is in the line of scrimmage when the ball was put in play.

"There can be a dozen forward passes behind the line of scrimmage, but none once the ball is carried beyond the line of scrimmage. This rule in itself is a pronounced departure from the game as it has been played. Forward passes heretofore have been paralyzed; now they become part of the game."

Instead of the downfield forward pass that we think of today, it sounds like the reform of 1906 contemplated screen passes and other lateral throws behind the line of scrimmage.

Doesn't really sound like a Rooseveltean reform to me. He would have gone downfield.

Photo: Fenner, Penn; Library of Congress / Flickr.

Anatomy of a successful crowdfunding campaign

Last night IGDA Seattle put on an event at Bungie Studios in Bellevue featuring Bob Berry and Jon Mavor, the founders of the game company Uber Entertainment (a client).

Uber's titles include Monday Night Combat and Super Monday Night Combat, but the reason for the appearance of the Uber founders last night was to dissect the successful Kickstarter campaign Uber completed in September 2012 to fund development of Planetary Annihilation.

The audience wanted to know everything, and little wonder: Uber's Kickstarter campaign was unusually successful, raising $2.2 million.

Bob summarized crowdfunding campaign management this way during an initial presentation before the Q&A: "it's not enough to just launch it, sit back and watch the money come in." 

Which presents a puzzle. For, as it turns out, the Kickstarter site just isn't optimized to manage campaigns that well.

One example: with a single login for the company, and a linear comment thread that doesn't fork or differentiate by topic or poster, the Kickstarter site is a poor way to manage communications with backers.

Uber found constant engagement to be critical, and ending up managing it on multiple sites and through multiple means. One such means was old fashioned e-mail! I think I heard that they received 50,000 emails during the course of the campaign. Jon personally responded to every single one that posed a question.

In the Q&A, Jon got into the very sticky problems of fulfillment, and how Uber has had to create a custom solution to manage that process. (Tip from Jon: don't promise physical goods below a certain pledge level, as shipping non-virtual items is painful and expensive.)

I think the world of the business acumen of Bob, Jon and their team at Uber, so it doesn't surprise me in the least that they found ways to optimize the campaign, nor that they built tools to bridge gaps in the Kickstarter platform. But listening to the presentation last night, and hearing the answers to the really perceptive, nitty-gritty questions from the audience, I was struck anew at how off-track are the Title III provisions of the JOBS Act. The legislation was shaped in the image of blue sky securities regulation, and seems downright hostile to facilitation of communication between and among company and crowd. (Title III of the JOBS Act would prohibit off-portal communication about an offering; interesting, don't you think, that there is no such prohibition in Title II crowdfunding for accredited investors?)

By the way, Bob and Jon both were very complimentary about Kickstarter, saying that the platform was responsible for 30% of traffic to the campaign, and leaving no question that the campaign could not have happened, let alone been successful, without Kickstarter. In this post I am privileging the shortcomings because, as regular readers here know, I have an agenda of trying to assess what it may take for crowdfunding to be adopted successfully in the investment arena.

Ticket to Ride

It used to be, whenever I had my kids home for a winter holiday, we'd play Monopoly.

No more.

The children are grown and they've put away childish things.

Christmas Day we played chess and we played a multi-player board game familiar to them, but new to me and to Helen: Ticket to Ride.

The quest in Ticket to Ride is to build railroad routes between destination cities. It's competitive, insofar as you'll do better (or make more efficient use of resources) if you build along lines before they're claimed by another player. But you can't be shut out of a route already claimed, not altogether. For a price (a mandatory royalty, or a network switching fee, if you will), you can build stations to facilitate the sharing of legs of a route.

It's a more complicated, less nostalgic mirror of the world than robber-baron Monopoly. You still keep score, but winning doesn't entail driving everyone else into bankruptcy.

And no one sits around for hours, like contestants voted off a reality show island, while remaining players duke it out. The game is designed to end at the same time for everyone.

Then it is time for more cake.

Meanwhile, back on the farmville . . .

Let's turn back now to the Alan Patmore / Zynga / Kixeye story (first installment, keying on the Zynga Employee Inventions Assignment and Confidentiality Agreement, here).

Patmore has now filed an answer to Zynga's amended complaint. And it's chock full of . . . affirmative defenses.

I'm not a litigator, so I checked with a former litigator (now a law prof) I know and trust and asked him: aren't "affirmative defenses" what you assert when you basically admit that the allegations being made against you are true, or could be, but that the facts asserted don't matter, because, even if true, some law or doctrine or superseding set of other facts protects you?

And aren't "affirmative defenses" not as good as other kinds of defenses, because the burden of proving the defense is on the part of the person being sued? (Generally speaking, the one doing the suing, the plaintiff - Zynga, in this case - has the burden of proving its allegations.)

Yes, he said, but: California state court practice is wierd; even elsewhere lawyers slip into the habit of labeling every defense thusly; and in any case mislabeling a defense as "affirmative" should not shift the burden to the defendant if it doesn't substantively belong with him.

Complicated stuff. But we need some basic reference point for the term, if not mastery of its uses, to appreciate the strategy of Patmore's answer.

Here, quoted verbatim, are eleven (11) of the twenty (20) affirmative defenses in the Patmore answer:

• "Plaintiff released, relinquished, waved and/or abandoned any right to any of the claims upon which Plaintiff now seeks relief."
• "Plaintiffs claims are barred in whole or in part by the applicable statutes of limitation."
• "Any alleged conduct or omission by Defendant was not the cause in fact or proximate cause of any injury alleged by Plaintiff."
• "Plaintiff failed, in whole or in part, and continues to fail, in whole or in part, to take reasonable steps to mitigate its damages."
• "Plaintiff's claims are barred, in whole or in part, by the doctrine of unclean hands."
• "Plaintiff's claims are barred, in whole or in part, by the doctrine of laches."
• "Plaintiff's claims are barred, in whole or in part, because by virtue of its own conduct, Plaintiff is estopped from recovering from Defendant."
• "Plaintiff is barred from any recovery, in whole or in part because any actions taken by Defendant, if any, with respect to Plaintiff, were based on an honest, reasonable, and good faith belief in the facts as known and understood at the time."
• "At all relevant times, Plaintiff consented to and approved all the acts and omissions about which Plaintiff now complains."
• "Plaintiff's claim is barred by the fact that it seeks to enforce a contract that is void against public policy."
• "Plaintiff's claim is barred by the fact that Plaintiff failed to take reasonable efforts to protect its alleged trade secrets."

In fairness, I should also report that Patmore's answer contains a general denial of "each and every allegation" in Zynga's complaint.

For its part, Kixeye, Patmore's new employer, last month filed a cross-complaint against Zynga (translation: it sued Zynga back), and that filing of Kixeye is much more talkative than the Patmore answer. We may visit the various factual allegations later.

Photo from Kaplan University online civil litigation course (used under a Creative Commons license).

Zynga's Employee Invention Assignment and Confidentiality Agreement with Alan Patmore

I've just started looking at documents filed in the Superior Court of California, County of San Francisco, in connection with a suit brought by the game maker Zynga. Zynga filed the suit initially against its former employee, Alan Patmore, and has since amended its complaint to name Patmore's new employer, another game company, Kixeye, as well.

Patmore is a big deal in the game industry. In an entry that appears to pre-date Zynga's lawsuit, Wikipedia credits Patmore for delivering many succesful games, including one from 2002 based on The Lord of the Rings, which, Wikipedia says, sold 1.8 million copies. "Patmore," Wikipedia states, "is a much sought-after authority within the industry on topics including project management, creative development, and industry trends and practices."

Keep the phrases "project management" and "industry trends and practices" top of mind, because the coutcome of the fight among Zynga, Patmore and Kixeye may well turn on the extent to which distinctions can be drawn between Zynga-specific trade secrets, on the one hand, and general game industry expertise, on the other.

Though we're not going to unpack the various allegations, counter-allegations and defenses in the lawsuit, not today.

Instead, we'll begin our look into the case by reviewing an Employee Invention Assignment and Confidentiality Agreement between Zynga and Patmore, which was appended as an exhibit to Zynga's initial complaint.

Because Zynga is based in California and because Patmore lives in California and worked for Zynga in that state, we know Patmore's agreement with Zynga is not going to include any express post-termination non-compete covenant. To the extent that Zynga wants to impede what Patmore might accomplish for Kixeye, it is going to have to allege and show behavior on the part of Patmore that is unfair, illegal, or in breach of a contractual covenant (other than a non-compete).

Is there anything unusual in that Employee Invention Assignment and Confidentiality Agreement that might tend to give Zynga's claims broader scope?

No and yes.

By and large, the Zynga Employee Invention Assignment and Confidentiality Agreement is standard and what you would expect to see in use by an angel or VC-backed startup or emerging technology company. The Agreement requires the employee:

• to acknowledge that his work for the company is work for hire,
• that he assign company inventions to the company,
• that he schedule out prior inventions he means to retain,
• that he waive moral rights, and
• that he keep the company's proprietary information confidential.

The Agreement also contains a one-year, post-termination covenant to not solicit Zynga employees or consultants.

All of the foregoing is normal. But there are two nuances in the Zynga Employee Invention Assignment and Confidentiality Agreement, pieces of bespoke drafting, that could be important, from Zynga's perspective, in expanding the scope of what may be fairly regarded as trade secrets for purposes of this case.

The first bit of custom drafting is in the definition of Proprietary Information. Here's an excerpt of what the Agreement says are examples of the kinds of information that ought to be regarded as proprietary to Zynga:

"Proprietary Information may include information I learn about or develop in connection with my employment with the Company, such as: . . . (ii) techniques and methods for developing, coding, or improving online social games; (iii) techniques and methods to create 'virality;'  (iv) measurement techniques, and specific functionality that increases monetization and both measures and increases retention metrics; . . . (xi) the particular needs and preferences of the Company's suppliers, platform providers and business partners, and the Company's approaches and strategies for satisfying those needs and preferences . . . ."

Arguably, much of what is described in these examples could fall under the rubric of general industry knowledge or experience gained through work for a succession of employers. By including these items in a "laundry list" of what should be regarded as proprietary, Zynga is doing what it can to shift the balance somewhat, and expand, by virtue of agreement of the parties, the scope of what should be regarded as protected. On the other hand, and as you would expect, the Agreement has a standard carve-out to the definition of Proprietary Information, eliminating from the scope of what is protected such information as is generally known, was previously known, or is independently developed. This carve out will temper the expansive effect of the "laundry list."

And here's the second bit of custom drafting, an entire section of the Agreement that is clearly calculated to secure an employee's acknowledgment of an expansive view of what should be regarded as trade secret:

"14. Non-Solicitation of Suppliers/Customers. During and after the termination of my employment with the Company, I will not directly or indirectly solicit or otherwise take away customers or suppliers of the Company if, in so doing, I access, use or disclose any trade secrets or proprietary or confidential information of the Company. I acknowledge and agree that the names and addresses of the Company's customers and suppliers, and all other confidential information related to them, including their buying and selling habits and special needs, whether created or obtained by, or disclosed to me during my employment, constitute trade secrets or proprietary or confidential information of the Company." 

The title of the section leads you to believe you'll find an express, post-termination restrictive covenant, though the actual drafting is circular. The net intent appears, again, to get the employee's buy-in to an expansive view of the kinds of information that should be regarded as proprietary to Zynga.

To be continued.

Photo credit: VideogameVisionary.com, Alan Patmore in 2008, as posted on Flickr.

Startup Trivia Daily is now on the web!

For those who know the mobile app, Startup Trivia Daily, which Joe Wallin and I curate through The Seattle Dudes, LLC, fun news: Startup Trivia Daily is now on the web!

This web version is Disqus-enabled, so you'll be able to leave and share comments.

Disqus seems to be rolling out products and features that connect content and discussions, and I hope that includes content and discussions across the web. Anyway, part of our bet here is that Disqus will engender more interaction with those playing the game.