esports-law-gaming

Consider these legal angles before forming a streaming organization
By Justin M. Jacobson, Esq.

The emergence of One True King (aka OTK) has evolved the traditional esports business model, from the organization’s deal with WePlay Esports, its partnership with a game developer to the team’s organizational partnerships and activations with brands such as Mountain Dew and Chipotle. OTK is an “influencer network and media company built by creators” that was founded by several notable streamers, such as Asmongold, Mizkif, Esfand, and Rich Campbell. Through their collaborative efforts, they’ve positioned themselves as one of the largest streaming organizations in the world. With the creation and success of OTK, other top gaming influencers are certain to band together to pool their collective resources, capital and “influence” to create and operate formal organizations. These talent-led teams are complete with similar internal infrastructure that every other traditional esports organization possesses, such as business development and marketing personnel. When creators do come together to launch a content creation organization, there are several legal concerns that the gaming influencers must be aware of to protect themselves as well as their collective business interests.

Some of these organizations may only field a team in one game; while, other larger organizations, may field teams in multiple games. For example, an organization such as Team Liquid or Cloud9 field teams in a variety of games; while, some teams only have a CS:GO team or other single team. Whether the organization is large or small, the legal and business considerations for their proper functioning are fairly similar. Proper adherence to these formalities is extremely important for the potential short-term success as well as long-term viability and profitability of any organization. While there are many relevant business and legal matters related to the management and ownership of a professional esports organization, the following is an overview of some of the most essential and relevant aspects.

Protections for Esports Talent Collectives and Organizations – Corporations & LLCs

Similar to other esports organizations and businesses, the streamers could create a formal business entity, such as a corporation or limited liability company (LLC). The entity provides protection for each individual creator’s personal assets from any company debts. The created business also enables its owners to execute a written contract that outlines how the organization operates. The document outlines each creator’s share of the organization’s revenue and lists each influencer’s ownership rights in the organization’s name, logo and other company-owned assets. It may also address which individual(s) possesses the rights to approve the finished content and to issue any licenses to use or monetize the name and other IP. In these cases, it’s crucial that the creators agree to each party’s use of the organization’s name and logo, including how they are “billed” while they are an active member of the collective as well as in the case that a member leaves the entity. This might include the former member billed as “formerly of OTK” or potentially entirely restricting the talent’s ability to use name.

A separate business entity also permits the content collective to open a business bank account in the entity’s name. This facilitates easier tracking and payment of the organization’s income and expenses. Like any other income that the creator earns, the organization’s income is taxed so a business operator must be aware of and pay any federal, city and/or state corporate taxes owed on any income that the collective earns.

Trademarks and Copyrights for Esports Talent-led Organizations and Collectives

To further protect a gaming collective, a trademark could be obtained in the organization’s name, logo design, catchphrase, marketing slogan or hashtag that is used to promote or advertise the team and its members (each member can also individually protect their gamertag). In fact, “OTK Media Inc.” is an existing Delaware corporation that owns two separate trademark applications in the organization’s name and in its logo design. Specifically, OTK Media Inc. has applied for protection for its organization name, “OTK” and in its logo design in two international classes, including for “lifestyle apparel, namely, hoodies, jackets, shirts, hats and shorts” and for “live performances by esports athletes and competitive gamers.”

Similarly, a talent collective could file for copyright protection in its logo design as well as for each individual finished content pieces (or just its most popular ones). This protection could apply to stream overlays, emote designs, photographs, an introduction song or sound effects as well as for any animations or video clips that are displayed on stream or incorporated into a content piece. Additionally, a gaming organization might apply for copyright protection in any individual thumbnail images or cover art pieces as well as in any physical and digital merchandise designs, including for any digital collectibles and other NFT creations.

Prior to selecting an organization name and establishing corresponding social media platforms it is prudent to first conduct a trademark search. A screening search is used to determine the availability of the name and to assess the existence of any other confusingly similar marks that may block the team’s application. Once a search is conducted and a name is cleared, a federal or state trademark application should then be filed with the appropriate state department or with the United States Patent and Trademark Office (“U.S.P.T.O.”). Additionally, if the team plans to expand into other geographic markets, international trademark considerations come into play, including utilizing the Madrid Protocol to enable U.S. entities to apply for protection in other countries based on an existing American application or registration.

Streaming Organizations may enter into written contracts and agreements

Accordingly, it is crucial that a talent collective enters into written agreements to provide the entity with written permission and the appropriate rights that the creator of any logo, artwork, animation, or sound clips possesses to permit them to use the work on stream and in any created works prior to utilizing them. The lack of an agreement could subject the organization to liability for infringement or for any other potential causes of action by the original work’s rightsholder. In these situations, the organization should execute a “work for hire” or other similar rights assignment agreement or license with any third party that they work with. This might require the organization to sign a contract with any audio and video engineers and editors, photographers, videographers as well as website, logo, emote, overlay, merchandise, NFT or other graphic and animation designers they employ.

In addition, the esports organization should create a formal written document with any sponsoring brands and paid partners outlining the arrangement terms as well as with any third-party investors, internal employees, and the talent that they sign or otherwise employ stating the agreed upon points. This means that the owner is signing themselves to the organization as “talent” and providing the company with a set of rights in exchange for the agreed upon compensation, which could be an ownership interest in the company. This transaction could involve a full assignment or a limited transfer of any copyrights or other rights that the individual gaming talent has in its creations as well as potentially include a right to use the creator’s “name, image and likeness” in relation to the organization’s commercial and promotional activities. Finally, if a collective operates with non-U.S. citizens, there might be visa and immigration considerations for any involved talent that are non-U.S. citizens and are earning income from a U.S.-based business.

While several creators announcing they are working together and forming an “organization” seems relatively straightforward, there are many pertinent business and legal considerations that these individuals must be aware of to operate their company efficiently and to effectively maximize their potential revenue. The failure to adhere to these types of protections could cause the individuals to be subject to potential liability or financial losses. Ultimately, as more and more gaming talent and creators see the value in this newly developing business model, the need to properly understand an owner’s rights and obligations is of greater importance.

This article was originally posted on the Sports Business Journal/ The Esports Observer.

This article is not intended as legal advice, as an attorney specializing in the field should be consulted.

© 2022 Justin Jacobson Law, P.C.