The past 5 years have seen a rapid and unprecedented boom in the eSports market and, with investments continuing to flood in from a variety of sources, things show no signs of slowing down soon.
As with any sector that experiences growth on this level, there has been an increase in scrutiny for developers and service users and calls for heightened regulation. For anyone looking to operate within this multi-million pound sector, which can be governed by the laws of any worldwide jurisdiction, there are no shortage of potential legal challenges which should be carefully considered at the very outset.
Having recently advised tech start-up, Yakkr, in relation to a six-figure pre-seed investment which will allow them to launch their online gaming platform connecting fans with their favourite eSports celebrities, influencers and gamers, Partner, Alex Wilby, outlines some of the legal considerations for the eSports sector.
1. Intellectual Property Rights
One of the key legal issues which distinguish eSports from other traditional “real world” sports is the fact that eSports teams are operating within licensed intellectual property of the game developer. However, that is not to say that the eSports team do not have their own intellectual property – branding and reputation are crucial to the success of the team in both attracting the best players and in merchandising and monetising their brand. Trademarks and other forms of intellectual property protection will almost certainly be of benefit.
Teams should also have visibility and an understanding of who owns the rights in respect of any broadcast/streamed content and how such content can be used for the benefit of the team.
2. How to structure the team?
It’s key to ensure that the eSports team is structured in such a way as to ensure it achieves all aims of the founding members and any other key stakeholders. Those aims may include monetising the team and this will give rise to associated tax considerations, clarity as to contractual arrangements and separate legal identity, succession planning, dissolution and other key issues. Is a corporate structure appropriate? Might a partnership be deemed to exist in the absence of written governance documentation?
Similarly, how are the members of the team legally positioned? If a company is incorporated, decisions will need to be made as to share ownership, directorships, employment status, contractual terms and other similar points.
3. The laws and regulations applicable to eSports
Before embarking on any venture, it is important to have a good understanding of the laws and regulations which will apply to your chosen sector. Generally, this might be as simple as refreshing your understanding of your legal responsibilities as an employer in the UK or obtaining advice on the terms of your supply contracts and relevant health & safety regulations. However, when your business exists on the digital plain, the legal considerations become much more complex.
As a starting point, it may be necessary to consider the impact of gambling laws, sports laws and laws on prize promotions, as well as other jurisdictional and regulatory issues applicable to eSports, all of which will vary depending on how the business is intended to be structured.
4. The rules of play
As a follow-up to the previous point, it is important to be aware of the variance in terms and conditions which will be imposed by different tournaments and platforms, depending on the area from which they operate. For example, certain jurisdictions do not allow cash prizes to be awarded to players unless specific conditions are first put in place and others have imposed stringent restrictions on advertising and sponsorship due to the potential classification of eSports as gambling.
Similarly, any sponsor will almost certainly have terms that apply that are intended to protect their brand and could see any sponsorship funds returned or the arrangement terminated. It is key to understand the legal terms of any such sponsorship agreement.
Being aware of the relevant terms and conditions and adjusting your own business activities accordingly can avoid the risk of challenge at a later date.
5. Travel and location considerations
An eSports team may play over the internet or meet at physical locations, either as a individual team or at a tournament location with other teams. Each arrangement will have its own considerations. If playing over the internet, clearly practical consideration needs to be given to ensuring a fast and stable connection but does the legal position need to be addressed in respect of outage? Will the team have any liability to any broadcaster/streaming platform if internet outage means they are unable to compete? Alternatively, if people are travelling to a physical location, often internationally, it will be key to ensure that the appropriate arrangements are in place in respect of Covid travel considerations, accommodation, hardware, internet access and other key points.
For further information or advice on any of the topics covered in this article, or for assistance with any other business matter, please contact Partner, Alex Wilby, by phone on 0191 384 2441 or by email at aw@swinburnemaddison.co.uk.
