Intellectual property question

May 3, 2004 8:22 AM

AskLegalFilter: As a sort of follow-up to this thread, some friends and I have invented a game and have started to show it to representatives from game companies. There's been some interest, and before we can think about moving forward, I think we have to start with the legal stuff on our end. What sort of legal entity do my friends and I need to become so that someone can license intellectual property (mostly writing, as opposed to a unique style of play) from us and write us checks? And how can we do it for the least cost? Assume that we're more or less equal partners (somewhere between 33/33/33 and 35/35/30).
posted by blueshammer to Law & Government (11 answers total)

The only way to give an accurate answer to this question is to examine the entire situation and all the facts involved. You have a lot going on: entity formation, confidentiality issues, and a boatload of potential IP issues. Setting this up correctly at an early stage will potentially save a lot of strife down the road. Talk to a lawyer.
posted by anathema at 8:45 AM on May 3, 2004

OK, so I am going through something similar, so this might help. You have a bunch of routes, between partnership, LLC, c-corp [a regular corp] or an s-corp [where all revenue is funneled through your personal tax returns]. Go to the Small Business Administration, they are there to help, and your local Chamber of Commerce for advice - it is free. Corporations and LLC's have the greatest level of protection to you and your associates, in case anything goes wrong.

When forming the company, make sure that someone has either a majority owner, or that there can never be a tie when making decisions. If you go the corp route, get a lawyer and an accountant, they will help you through the process. Whatever you do, make sure you have a written contract between all three of you, and a business plan! They are tedious, but things like an exit strategy and how to dissolve a company are not interesting things to think about, but you want protection if things go bad. Trust me. Really, you should get a lawyer anyway, and invest in protecting yourself, your investment, and the company.
posted by plemeljr at 8:48 AM on May 3, 2004

Lawyer yourself up and be glad you did. This is not a job for Partnerships for Dummies (or AskMefi, for that matter.)
posted by PrinceValium at 8:59 AM on May 3, 2004

I second the SBA, though they will not out and out TELL you what to form, as they are not lawyers.

I posted a similar question a few months ago, RE: LLC etc. Check under my username. I would link it , but somehow 'metatalk' is blocked here.
posted by BrodieShadeTree at 9:47 AM on May 3, 2004

You don't need to be a business to license intellectual property. Ordinary human beings can license intellectual property.

People form businesses for two main reasons: (a) tax planning, and (b) formalizing relationships between partners so that there is no confusion about who gets what money, who invests how much, where expenses come from, and so on. Don't underestimate the importance of (b), especially if there is more than, say, $1000 on the table.
posted by profwhat at 10:14 AM on May 3, 2004

Response by poster: I'm not against "lawyering up," but even still, I'm at a loss for where to start. Although I've gotten some offline recommendations as to which firms to consider, what am I looking for in a lawyer? What do I need to have figured out ahead of time to minimze costs? None of us have $1000s to spend on legal services.

plemeljr, I contact the local SBA office and found two very useful area resources. Thanks for the tip.

Brodie-donuts: That thread is here, thanks.
posted by blueshammer at 10:25 AM on May 3, 2004

I see you live in Wisconsin. Start by calling the Wisconsin Bar's lawyer referral service. Explain to them what you are looking for and about how much you can afford to pay. Handling the creation of a company is a relatively routine matter than should not cost $1000s; I'd budget $300 or so.

What are you looking for? Someone who specializes in representing small businesses in transactions. Some knowledge of intellectual property licensing would be helpful, but you probably don't need to shell out the megabucks for an IP licensing genius here.

Before meeting with the lawyer, gather together all your materials--the written stuff you are going to be licensing, letters you've sent or received, notes of phone conversations, printouts of E-mails, and so on. Go through all of it, and make up a short memo or E-mail that you can give your lawyer that tells him or her the whole story, and summarizes exactly what you'd like to have done. This sort of advance preparation helps keep the meeting short and focused.
posted by profwhat at 11:26 AM on May 3, 2004

Maybe not an IP licensing genius, per se, but someone who understands issues relating to IP ownership and co-authorship specifically, and how this can effect how capital contributions are structured etc.
posted by anathema at 11:41 AM on May 3, 2004

People form businesses for two main reasons: (a) tax planning, and (b) formalizing relationships between partners

And avoiding personal liability should someone sue the company.

Three. Three main reasons...
posted by kindall at 1:10 PM on May 3, 2004

If you're looking for a simple way to protect your idea while shopping it around, check with the Writer's Guild of America. For $20 you can register all sorts of ideas/writing/creative intellectual property. You don't have to be a member to do so (though it's cheaper if you are) and you can do it all online. Search their website under "registration" and "interactive media."

As for the distribution of profits, isn't that up to how you negotiate whoever deal you end up making?
posted by herc at 10:06 PM on May 3, 2004

I hope you already have required those companies who have looked at your property (the game) to sign statements of disclosure? Just a document saying you showed them this thing on a certain date. This is the first step in protecting your interest in such a situation.
posted by Goofyy at 12:20 AM on May 6, 2004