By Joseph Esses[1]
The world of esports is growing at an exponential rate, and, as such, so are the number of contracts being entered into by professional players, teams, sponsors, and tournament organizers. These contracts can range from endorsement deals to tournament participation agreements, and it’s important for all parties involved to understand the terms and conditions of these agreements before signing on the dotted line.
As with any contract, the devil is in the details, and it’s essential to understand the terms outlined in the agreement and their potential impact on the parties involved. Here are some key things to look for when reviewing an esports contract:
- Term of the Contract
The term of a contract is a critical component in the world of esports. It outlines the specific time frame during which the agreement will be in effect, setting the beginning and end dates of the contractual relationship between the parties. This is especially important in the fast-paced world of esports, where new opportunities and technologies are constantly emerging.
Having a well-defined term in an esports agreement helps to ensure that all parties are aware of the expectations and obligations that are in place during the term of the contract. It also provides a clear timeline for the completion of any tasks or services outlined in the agreement, such as the provision of sponsorship or representation services. This can be crucial in ensuring that both parties are on the same page and working towards a common goal.
It is also important to note that the term of an esports contract should take into account the constantly evolving landscape of the industry. This means that provisions for renewals, extensions, or early termination should be carefully considered and included in the agreement, allowing for flexibility and adaptability as the industry continues to evolve.
- Payment and Royalties
This is how you get paid! Payment and royalty provisions are essential components of any esports contract as they determine how the parties involved will be compensated for their contributions. These provisions outline how the payment will be made, when it will be made, and what triggers the payment. They also specify the amount that will be paid, how it will be calculated, and any deductions that may apply.
In esports, payment and royalty provisions are particularly important because they help ensure that everyone involved in the agreement, such as players, teams, and tournament organizers, are fairly compensated for their time, effort, and skills. For example, a player may receive a percentage of the prize money won during a tournament, while the team may receive a percentage of the player’s earnings. The agreement should also specify how the payment will be divided among the different parties.
Furthermore, in the rapidly growing and evolving world of esports, it is important for parties to have clear and comprehensive payment and royalty provisions to avoid misunderstandings or disputes down the line. In particular, it is critical to specify what constitutes a “milestone” that triggers payment, such as reaching a certain level of tournament success or reaching a certain number of followers on a social media platform.
- Termination Clauses
Termination provisions in an esports contract are crucial as they outline the circumstances under which a contract can be terminated by a party. These provisions help to protect the rights and interests of both parties involved in the agreement. A well-drafted termination provision allows both parties to understand what actions can result in termination, and what the consequences of termination will be.
For example, the termination provision may state that the contract can be terminated if either party breaches a material term of the agreement. This provides a clear course of action for the non-breaching party in case of a breach. The termination provision may also specify the notice period that must be given prior to termination and the process for termination.
It’s also important to have clear provisions relating to termination in case of a change in circumstances. For example, if the esports industry changes dramatically, the termination provision should outline what will happen to the contract if either party can no longer fulfill its obligations. This helps to provide stability and certainty to the parties involved and reduces the risk of disputes arising. All parties need to know how both themselves and the other party can get out of an agreement.
- Intellectual Property Rights
Intellectual property (IP) provisions play a crucial role in esports contracts. Esports is an industry that heavily relies on video games, trademarks, logos, and other forms of IP. The video games used in esports tournaments and events are protected by copyright laws and other IP laws, and therefore the ownership, use, and protection of such IP is critical in the industry. Similarly, players and teams will have protectable IP whether that be their publicity rights or trademarks surrounding their gamer tags. IP provisions in an esports contract determine who owns the rights to use the IP, who is responsible for protecting it, and what happens if there is an infringement of IP rights.
In an esports contract, IP provisions can include clauses specifying the licensing of IP, trademark and copyright ownership, and the responsibilities of each party in protecting the IP. Additionally, provisions related to IP infringement and dispute resolution can also be included. This helps to ensure that both parties are protected in case of any IP issues that may arise in the future. By including comprehensive IP provisions, an esports contract helps to prevent disputes and ensures that both parties have a clear understanding of their rights and responsibilities in regard to IP. This can help to ensure the stability and success of the partnership or agreement.
- Non-Compete Clauses
Non-compete clauses and other restrictive covenants are commonly found in esports contracts. These provisions restrict the actions of one party from competing with the other party during the term of the agreement and after the contract has ended. These restrictions can include being prevented from working for a competitor, using confidential information, or starting a similar business.
The purpose of these provisions is to ensure that the sensitive information and business relationships developed during the contract period are not used to the detriment of the other party. For example, if a player has a non-compete clause in their contract, they cannot sign with a rival team immediately after their contract with their current team ends. This helps to prevent poaching and unfair competition.
Having a well-drafted non-compete provision can provide an esports company with valuable protection for its business and brand. On the other hand, it is important to ensure that the provision is reasonable and not overly restrictive, as courts may not enforce overly broad non-compete provisions. The term, scope, and enforceability of non-compete provisions should be carefully considered and reviewed by legal counsel to ensure that they meet the specific needs of each individual esports contract. These clauses outline the conditions under which a player or team cannot participate in events or tournaments organized by competitors. It’s important to understand the terms of the non-compete clause and ensure that it aligns with the parties’ expectations.
It’s essential to take the time to understand the terms and conditions of an esports contract before signing on. Working with a contract review attorney can help ensure that all parties involved have a clear understanding of the terms and conditions outlined in the agreement. An attorney can help ensure that the contract protects the interests of all parties involved and provides a clear understanding of the rights and obligations of each party. Not seeking out professional help before entering into a contract can lead to headaches and serious issues down the road.
[1] Joseph Esses, J.D., M.B.A. is an Associate Attorney at the Gordon Law Group assisting clients in the Esports space. Joseph can be reached at joee@gordonlawltd.com
