(This post was submitted by Patrick Hankins, a rising 3L at Marquette University Law School and an intern at Quiles Law)
In the recently filed complaint against FaZe Clan, Turner “Tfue” Tenney alleges that FaZe signed H1ghSky1, an eleven-year-old gamer, and lied about the minor’s age (claiming that he was thirteen, which has proven true) in order to meet the minimum age requirements for Twitch streaming and competitive Fortnite events. It has been alleged that to maintain the charade, FaZe Clan also pressured H1ghSky1 and his family to maintain the lie. Unfortunately, H1ghSky1’s Twitch account has been banned, presumably due to his actual age not satisfying Twitch’s terms of service.
Given the recent discussion of underage players triggered by this incident, this blog post explores the various potential legal issues of signing a minor to a player contract and methods to prevent these issues from affecting an organization.
Minors Can Disaffirm a Contract
Minors only have the capacity to enter voidable contracts. Generally, jurisdictions allow minors to “disaffirm” a contract before or reasonably after turning 18 years old or if the minor dies within the contract’s effective period.
Disaffirming a contract is any conduct or statement by the minor giving notice of intent to disaffirm, or otherwise leave the contract. To disaffirm a contract, express notice is not required. Typically, this is accomplished by the minor’s oral or written declaration of intent not to fulfill the contract.
Void vs. Voidable Contracts
Void contracts, as the name suggests, mean that a contract is void from the beginning. There is no need for a party to disaffirm the contract because the contract is not enforceable. Contracts that delegate the minor’s authority to contract, any contract by a minor relating to interests in real property (i.e. land ownership), and contracts relating to personal property not in the minor’s immediate possession are considered void at their inception.
In contrast, voidable contracts have the status of potentially becoming void at the request of the wronged party. A contract with a minor is a voidable contract, but it is not void until the minor disaffirms the contract. If the minor does not void the contract, it remains effective even if the contract is voidable.
Generally, parental consent (along with additional terms for the parent) is included in contracts with minors to retain the parent as a guarantor for the minor’s services. Should the minor disaffirm a contract, the disaffirmance does not also apply to the parent’s obligation as a guarantor. The parent would remain liable, based upon the terms of the contract, regardless of the minor’s disaffirmance.
Legally emancipated minors may enter into contracts as if they were 18 years old. Emancipation is the permanent release of parental control and authority over a minor. Effectively, this allows a minor to collect personal earnings and terminates legal parental duties to support the minor. Some states allow minors to emancipate through an express agreement by parent and minor, or an implied agreement from acts and conduct that indicate consent. Other states even have laws that outline procedures which require court petitions that confirm the minor’s emancipated status.
Misrepresentation of Age
Generally, a minor who misrepresents their age will not be bound to a contract. The voidability of the contract depends on the minor’s actual age; the misrepresented age has no effect on whether the minor can disaffirm the contract. In fact, some courts allow minors, despite their fraud, to seek recovery of the consideration paid or seek other equitable remedies.
However, a minority of jurisdictions have established statutes that prevent a minor from disaffirming a contract based on age misrepresentation or if the other party had good reason to believe the minor was able to enter the contract. In those locales, a party’s reliance on a minor’s statements regarding age can serve as the basis of recovery. There, the minor must be retaining benefits provided by the contract which causes substantial harm to the other contracting party.
Some states allow a minor’s contract related to art, entertainment, and professional sports if a court has approved the contract. Once a minor’s contract has been approved by a court, disaffirmance of the contract is only permitted in statutorily provided instances. The states that require court approval also require a parent or legal guardian to establish a trust that keeps a percentage of the minor’s earnings which are not distributed until the minor turns eighteen or otherwise obtains a court order.
What can esports orgs do?
Contracting with a minor is a risky business practice. If an esports organization is seeking to sign a minor player, they should ensure that their contracts adhere to local law not only where the organization is operating, but also where the minor is located, to ensure that sufficient changes to the contract are made, if necessary.
Further, organizations should maintain a rigorous age screening process as misrepresentations of age, even a seemingly insignificant leap from eleven to thirteen years old can have larger ramifications such as violations of streaming platforms’ terms of service or games’ competitive rules. A violation of these terms means ineligibility for streaming or competition, which can have a significant negative impact for the organization.
Thus, esports organizations should not fully shy away from signing minors to player contracts, but keep in mind the extra steps required to establish an amicable agreement that serves both players’ desires as well as organizations’ needs to compete, stream, and influence across multiple platforms.
As we have discussed previously, intellectual property is a core part of every business. Intellectual property encompasses a variety of works including trademarks, copyrights, patents, trade secrets, and propriety data, amongst other things. Assets like a company’s trademarks (i.e. logo or slogan) can be extremely valuable in commercial affairs because, if properly maintained, these rights provide owners with an exclusive right to use and monetize their creations. This means owners have sole control over who is able to use their intellectual property and how it can be used. Oftentimes, intellectual property owners will use these rights strictly for their own monetary gain, but owners can also sell these rights, or uniquely license them to another party.
What is Licensing?
Licensing is a business arrangement where the owner of certain intellectual property rights (licensor) agrees to authorize another party to use such rights (licensee) in exchange for compensation. This compensation can vary in form, but will typically comprise of a one-time, upfront fee or a percentage of all gross or net revenues received from the use of the licensed intellectual property, otherwise known as royalties. One common example of licensing occurs in the retail market, where a company may enter into a retail licensing deal with an apparel company that allows the apparel company to use its trademark (i.e. the licensor’s name or logo) on all types of clothing sold in exchange for a percent of the profits from apparel sales using the licensed mark.
Businesses frequently use this kind of arrangement because it provides them with another way of profiting off of their intellectual property without completely transferring or assigning all of their ownership rights to another party. Through licensing partnerships, a company is able to use the expertise of another business that operates in a different sector, like manufacturing, to reap commercial benefits from that sector at minimal cost. For example, a company that only creates comics books may license its characters to a toy company without having to use its resources on costs or labor associated with the production of action figures. In most cases, the comic book company would not have to take an active role in any of the production, distribution, or marketing of the action figures, and would still receive a percentage of any sales of this product. Licensees welcome these partnerships because they are able to profit off the popularity of the licensor’s brand.
Licensing arrangements are most effective when they are solidified through a written contract. This provides all parties with necessary control and reduces the risk associated with the agreement. Parties in a licensing deal are able to determine when (duration of term), where (territory of use), and how (scope) the intellectual property can be utilized. By defining these terms effectively, a business has the ability to profit from different sectors (i.e. apparel, entertainment, etc.) in an efficient manner. Additional protections can also be added to ensure that a partnership is operating successfully. A licensor may require that certain benchmarks be met in order for the licensee to keep the using its rights. For instance, a licensor can require that the licensee meet a minimum annual revenue target in order to ensure that the licensee is adequately marketing the product bearing the licensed intellectual property. Licensing agreements that include provisions like this may provide for the return of all intellectual property rights to the owner if these goals are not met. These types of provisions can act as added security in the event one side fails to meet certain quality control or performance standards.
Licensing in Esports
Licensing partnerships are especially apparent within the esports industry. Game developers, like Riot, Activision Blizzard, and Epic Games, license their games to tournament organizers through various types of licenses so that these organizers can use games like League of Legends, Overwatch, or Fortnite in their tournaments. Additionally, esports teams will often enter into licensing deals with apparel companies to produce products like performance wear, fanwear, and other accessories. Influencers can also enter into their own licensing deals for branded products. Most recently, Ninja, through his partnership with Red Bull, entered into an exclusive licensing deal with Walmart for the sale of his unique headband. Sponsorship agreements will also oftentimes include language that defines terms of licensing, if any, between the parties as both parties will use of each other’s intellectual property (logo, slogan, etc.) in sponsorship activation. The amount of licensing opportunities within esports is endless and these types of partnerships will continue to make up a significant portion of all business transactions within the industry as it grows.
Any time intellectual property is involved, which is almost always certainly the case, companies will have the opportunity to license it for commercial gain. Through a licensing arrangement, both parties to the transaction can reap certain benefits. Licensors may be able to use a licensee’s production, distribution, and marketing network, while licensees can profit off of the licensor’s brand appeal. Still, while these types of deals seem easy to complete, there are a number of concerns that must be considered before executing a deal. Be on the lookout for a future post where we will address these concerns.
(This post was contributed by Alan Conklin, a third year law student at the Villanova University School of Law and intern for Roger Quiles, Esq.)
A FIFA YouTube gaming star and his business partner appeared in court on February 6, 2017 to defend allegations that they violated the UK’s Gambling Act.
During Monday’s hearing at the Birmingham Magistrates’ Court, Craig Douglas, better known under the YouTube alias NepentheZ, pled guilty to charges of advertising unlawful gambling and being an officer of a firm that provided facilities for gambling without a license. For his actions, the Court ordered Douglas to pay £91,000 (est. $97,000).
His business partner, Dylan Rigby, was forced to pay a much heftier fine. Rigby, who created and ran the gambling website, pled guilty to two charges of providing facilities for gambling and one charge of advertising illegal gambling. For these offenses, Rigby was ordered to pay fines and costs of £164,000 (est. $175,000).
The website, FUTgalaxy, allowed users to gamble virtual currency they earned playing FIFA 17 on real life matches played in the UK, France, Germany and Italy. If successful on their bets, users could then transfer the virtual currency back to the video game or exchange it into actual currency through an online black market.
Gambling in the UK
While it is typically legal to gamble on sporting events in the United Kingdom, the country’s Gambling Act of 2005 strictly forbids providing facilities for gambling without having an operating license. The United Kingdom’s Gambling Commission (the “UKGC”) has made it clear that the Act extends to popular forms of esports gambling that involve virtual currency.
In August 2016, the UKGC published a discussion paper entitled “Virtual currencies, eSports and social gaming.” In the paper, the UKGC addressed virtual currency betting, a type of gambling that has become prominent in the esports community over the last few years. Virtual currency betting is identical to traditional gambling but instead of using monetary currency, players use in-game items they have earned which have assigned values. For example, in FIFA 17, players can earn FIFA coins by winning matches and competitions in the game’s Ultimate Team mode. These coins can then be traded for different items that have assigned values. The fact that this type of currency can be traded for items with real values, or for actual currency, has led the UKGC to consider it a “de facto virtual currency.” Accordingly, the UKGC requires any facility that fosters gambling with this type of currency to have an operating license. This license requirement is intended to protect consumers, especially children and other vulnerable people who may be exploited by this new form of gambling.
Here, Douglas and Rigby did not have an operating license for their gambling site, effectively making it illegal. Additionally, Douglas often promoted the unregulated site to his 1.4 million YouTube subscribers, many of which were under the UK’s legal gambling age of 18. In one video from his YouTube channel, Douglas even acknowledged the age limit and stated, “You don’t have to be 18 for this, because this is a virtual currency.” The unregulated site had no age restrictions and allowed minors to use a credit card to place bets in the form of FIFA coins. FUTgalaxy generated a pre-tax profit of around £96,000 (est. $103,000) between July 2015 and February 2016.
More to come?
This case is an important milestone in the esports industry, as it marks what may be the first successful government prosecution of a person involved in unlicensed gambling of virtual items. It will be interesting to see whether this ruling will have any impact on future virtual currency issues across the globe, including the United States, which has much stricter gambling regulations.
In the United States, one State has already had to address the issue of virtual currency gambling. In October 2016, the Washington Gambling Commission (the “WGC”) ordered Valve Corporation, the creator of Counter-Strike: Global Offensive (“CS:GO”), to stop its skin transferring system, which allowed CS:GO players to use skins, or in-game items that can be used to change the appearance of game characters or guns, as virtual currency. Unregulated gambling websites, similar to FUTgalaxy, allowed skins to be bought and sold for actual currency, essentially assigning the skins a real-world value. On these sites, players were able to bet their skins on esports matches, coin flip games, lotteries and casino games like blackjack and roulette. This unregulated market was on pace to exceed $7 billion in 2016 prior to the WGC’s order. Trevor Martin and Tom Cassell, popular YouTube personalities, owned one of the most notorious skin gambling websites, the now defunct CSGO Lotto. Value Co., Martin and Cassell are currently in a class-action suit that alleges the parties created and promoted an illegal gambling market. However, unlike in the FUTgalaxy case, US and state government agencies have yet to take any action against these parties since the gambling sites have been shut down.
With the rapid growth of the esports industry in today’s world, it is very unlikely this will be the last gambling case involving virtual currency.
The eSports industry at large has had difficulty curbing the problem of poaching, the practice where one team inappropriately entices a player to join its team while that player is still under contract with another team. Without fail, every few months a new poaching scandal arises. The frequency of these poaching scandals begs the question as to how teams can protect themselves from this happening. Without stricter league governance to disincentivize poaching, the only other option for a team to protect itself is through a lawsuit for tortious interference.
Currently, there is a dispute between two prominent League of Legends teams, Team Solo Mid and H2K, over whether a player entered into a binding agreement with H2K before Team Solo Mid made a counteroffer which the player accepted. However, what makes this particular incident unique is that H2K has made it known that they are considering pursuing legal action against Team Solo Mid for its tortious interference with the player’s agreement with H2K.
Many of the facts surrounding this incident are still unknown and such a lawsuit between these two international businesses raises many questions (like what jurisdiction the case could be brought in). This blog post will address one of the most basic questions involved, specifically, what is a claim for tortious interference? Although the question of jurisdiction will alter the analysis of what’s needed to prove such a claim, this post will examine the cause of action under New York law (as that is where I’m licensed to practice).
In order to prove a claim for tortious interference with a contract in New York, the Plaintiff must show:
In the esports poaching context, this means that the aggrieved team must show:
Although tortious interference can give eSports teams some protection under a poaching scenario, that protection is measured due to the difficulty of proving the claim. In New York, succeeding on such claims has become difficult for a several reasons, one of which being that the complaint asserting the cause of action must specify with particularity how each element of the claim is met (as opposed to making generalized assumptions/conclusions).
Due to the required particularity that a complaint must have in order to assert a viable cause of action, that standard effectively requires that the aggrieved team has sufficient knowledge of the other team’s actions and intentions prior to starting the lawsuit in order to allege facts which support the claim. However, there is no black and white test to determine if a team can allege a sufficient amount of facts to support the cause of action. Of course, the more facts that can be alleged the better. But, this means that bringing any such claim lacks certainty of success from the outset.
Further, such claims may be difficult to prove from an evidence standpoint, as intent and knowledge have high bars of proof to satisfy. What may be particularly helpful from an evidentiary perspective are logs of any online communications, as much of the eSports industry relies upon Skype and similar programs for communications. However, obtaining such communications during the discovery process of such a lawsuit is no easy task as well.
Lastly, it is difficult for tortious interference claims (in general) to succeed due to the availability of the Economic Interest affirmative defense. For reference, an affirmative defense is a set of facts which if the Defendant proves successfully can mitigate or negate liability. In order to prove the Economic Interest defense, the Defendant must show that it acted to protect its own legal or financial stake in the third party’s business. However, the bare fact that the Plaintiff and Defendant are competitors is not enough to justify Defendant’s alleged actions and avail them of this defense. In the context of a poaching situation in eSports, this defense would likely not be available unless a team can show a valid economic interest and not just assert that they were trying to gain a competitive advantage.
Although it may be difficult for an eSports team to pursue a lawsuit for tortious interference when another team has poached a player, it is nonetheless a viable option for a team seeking to protect its interests. Unfortunately, the few governing bodies of esports leagues have done little to disincentivize poaching, forcing teams to either accept the situation, or attempt to avail themselves of their legal rights. However, the cost of legal fees associated with pursuing a lawsuit may discourage teams from enforcing their legal rights. Unfortunately, those costs and the lack of significant league action may force teams to simply accept that their player has been poached.
Its important to remember that poaching, or tampering, is not unique to the esports industry. However, other industries have found more effective ways of disincentivizing the problem. The professional sports industry has had tampering issues arise, but set strict rules and penalties for all tampering offenses, including steep fines, the suspension of the offending person, forfeiture of draft picks, and the prohibition of signing the player being tampered with. Without stronger league governance regarding poaching, like we see in the pro sports industry, teams are left to navigate the costly and difficult road of pursuing legal action for tortious interference if they want to protect themselves.
Here's my latest post for The Legal Geeks. In this post, I discuss the difficulties that pro gamers have experienced in obtaining visas to work abroad. Although the United States allows pro gamers to obtain athlete visas, much confusion exists as to how, if at all, pro gamers and their teams can satisfy the visa requirements.
Give the article a read and let me know your thoughts in the comments below!
Recently, I was interviewed by eSports Guru on the topic of player-team contracts in eSports and their importance. I've added the article to the Media tab above. Check out the article about the interview and let me know your thoughts!
Performance enhancing drug (“PED”) use in eSports has long been an issue whispered about within the gaming community. These PEDs are not steroids and human growth hormone as we know from other sports, but are instead prescription drugs known as psychostimulants or neuroenhancers. These kinds of drugs (Adderall, Ritalin, Selegiline, etc.) are abused by players as a means of enhancing focus, calmness, or to otherwise act as a stimulant. However, due to the lack of drug testing by professional eSports leagues and tournament bodies, there have been very few instances of confirmed PED use during matches. Unfortunately, there is now another example of such drug use.
On July 12, 2015, a Youtube video was posted where professional Counter Strike: Global Offensive player Kory “Semphis” Friesen asserted during an interview that he and his team took Adderall during a major ESL tournament. The relevant portion of the interview is as follows:
Friesen: “The ESL [team communications] were kinda funny in my opinion. I don’t even care, we were all on Adderall [laughs]”
Interviewer: “Really? [laughs]”
Friesen: “I don’t even give a fuck, like its pretty obvious if you listen to the [team communications]. I don’t know, people can hate it or whatever.”
Interviewer: “Everyone does Adderall at ESEA Lan right?”
Interviewer: “Just throwing that out there for the fans, that’s how ya get good”
In addition to the disappointing language encouraging others to violate tournament rules and abuse prescription medications, such PED use can impact the player and team’s contractual relationships.
Many contracts, especially sponsorship agreements, contain morals clauses. This type of clause allows a contracted party the opportunity to cancel their remaining obligations under the contract should the other party act in a way that is harmful or damaging to its own brand. The reasoning behind such a clause is that by cancelling the contract, a party can protect themselves from being associated with the brand damage caused by the other party. In the sponsorship context, this allows a sponsor to exit a sponsorship should the sponsee player or team be engaged in a scandal or otherwise illicit activity.
Although there has not been a reported contractual exodus in this matter like when Lance Armstrong was found to have been using PEDs, the use of PEDs in eSports can trigger a contract’s morals clause in the following ways:
It is unknown whether or not Friesen and his team obtained the Adderall licitly and for a valid medical purpose. However, in the event that the individuals obtained the substance for an illicit purpose such as those described above, that action would likely be enough to satisfy a morals clause. Importantly, a morals clause can also be placed in a player-team contract, thus putting the players’ livelihood at stake should they utilize PEDs.
Additionally, the team itself could face legal backlash over its players’ PED use from sponsors, as sponsorship agreements routinely contain morals clauses. Depending on how the morals clause is drafted in the team’s sponsorship agreements, the actions of all players (or even a substantial number of them) may be sufficient to trigger the morals clause and permit the sponsor to cancel the sponsorship agreement. As Friesen’s admission has caught the attention of many people in the eSports industry at large, time will tell if there is any sponsor backlash.
Eventually, the eSports industry is going to have to implement effective methods for curbing its PED problem. Until then, teams should keep in mind that any PED use can impact the sponsorships that they have worked hard to obtain, and thus discourage any PED use by its players. No team or player would want to lose their contracts because a morals clause was triggered in an effort to gain a competitive advantage. Even worse, potential sponsors or teams may be hesitant to sponsor or employ a player and/or their team due to past PED use. Statements referring to taking Adderall as how you “get good” are not only irresponsible for encouraging activities that may cost players and their teams contracts, but also because they effectively encourage criminal behavior.
On May 22, 2015, Riot Games, Inc., creator of League of Legends, announced changes to the League of Legends Championship Series rules. One of the notable changes is the addition of Rule 11.3, the “Best Interests of the LCS” rule. This rule states:
"LCS officials at all times may act with the necessary authority to preserve the best interests of the LCS. This power is not constrained by the lack of any specific language in [these rules]. LCS officials may use any form of punitive actions at their disposal against any entity whose conduct is not within the confines of the best interests of the LCS." (Emphasis added)
These rules are known as “bests interests of the game” clauses, and some derivation of this clause exists in most, if not all, professional sports. This clause is an important addition for Riot, as it grants Riot the authority to act in response to matters which are not explicitly covered by the rules. It also brings Riot’s rules a bit closer to those which exist for professional sports.
Professional sports leagues have used these clauses to punish activity of both players and teams that do not neatly fit into the predefined rules and provisions established through the collective bargaining process. A recent example of such a clause being invoked was Alex Rodriguez’s suspension from Major League Baseball for 211 games (which was later reduced to 162 games) for his use of performance enhancing drugs and attempting to obstruct and frustrate Major League Baseball’s (“MLB”) investigation into his conduct. MLB specifically noted that Rodriguez’s punishment was based upon his violation of the prohibition against using banned substances and the “best interests of the game” clause.
On one hand, the vague nature of a “best interest of the game” clause is necessary because it is impossible to foresee all potentially harmful events and subsequently create a rule barring such activity. However, the broad language of the clause creates the opportunity for abuse, to which there is little recourse, unlike in professional sports. In professional sports, a decision to punish a player by the sport’s commissioner can be challenged in arbitration because the commissioner’s authority is granted by the collective bargaining agreement between the league and the players’ union. However, as the LCS Rules are not collectively bargained, Riot has the ability to create and enforce rules as it sees fit, with legal impunity.
What is even more troubling is the fact that Riot explicitly denies appeals for its discipline. Rule 11.1 explicitly states “All decisions regarding the interpretation of the rules…and penalties for misconduct, lie solely with the LCS, the decisions of which are final” and “LCS decisions with respect to these Rules cannot be appealed.” Effectively, the new “best interests of the LCS” rule authorizes Riot a broad disciplinary power to which there is no recourse at law or even an appeal.
At the very least, an appeals process should be implemented to curb some of Riot’s unyielding disciplinary power and grant a modicum of rights to the players. However, as the LCS is not collectively bargained, such a decision would have to come from Riot themselves, which would be unlikely. Given the finality of Riot’s disciplinary system, it will be interesting to see how Riot utilizes this rule in the future.
(This article also appeared on Gods of Mayhem)
At the beginning of any relationship between an eSports player and their team, a contract should be entered into that describes the services the player is to perform, compensation, and the duration of the agreement, amongst other clauses. Depending upon how this contract is drafted, a player will either be considered an employee of the team or an independent contractor. This distinction is critical in establishing the obligations that a team has to a player and the rights that the player holds. In the eSports business, the trend has been to attempt to classify players as independent contractors.
ESports teams, like many other businesses, would prefer to employ independent contractors instead of employees for several reasons, including:
How Courts Determine Independent Contractor Status
However, what eSports teams may be unaware of is that calling players independent contractors is not enough to actually be considered such. In fact, many of these contracts, if challenged in Court, would be found to create an employee/employer relationship. Due to the overwhelming benefits to a business using independent contractors, Courts have scrutinized independent contractor agreements by utilizing tests to determine whether such a relationship is sufficiently established, or if the agreement instead creates an employee/employer relationship. New York Courts utilize two tests, the first being the Economic Realities Test, which is as follows:
The second test is the Common Law Test, which is as follows:
In both of these tests, the totality of the answers of the above questions will be examined to determine how to classify the parties' working relationship. It is worth noting that these factors are not exhaustive, and the Court may undertake additional inquiry. An example of an additional factor in the eSports context would be whether the player is required to wear a uniform.
Analyzing Player Contracts: Economic Realities Test
Teams typically exert a great amount of control over their players in a variety of ways. This could include booking player travel, requiring players to use equipment provided by team sponsors, requiring players to promote team sponsors, requiring players to be active on social media/Youtube/streaming services, requiring players to live in a team house, and more. This factor is extremely important, as independent contractors are supposed to maintain a great deal of control over their work and environment.
Secondly, players are very invested in the team. Their actions and cooperation with other players are how the players (and team) can profit by winning matches and tournaments. This factor may also weigh against eSports players being found to be independent contractors by a Court. However, the third factor supports the notion that players can be independent contractors, as the work requires highly skilled individuals who may work at their own initiative (in some circumstances).
The fourth factor is completely determined by the contract itself. Generally speaking, the longer or more permanent a contract seems, the more likely it is that they are not an independent contractor.
The fifth and final factor strongly holds in favor of finding an employee/employer relationship, as the players are a crucial component of the team's business. From the totality of the factors within the Economic Realities Test, it appears likely that a professional team would be found to create an employer/employee relationship with its players.
Analyzing Player Contracts: The Common Law Test
The Common Law Test is unclear in this scenario. An argument could be made that the first factor, whether the worker works at his/her convenience, could go either way in Court. Certainly there are things the player must do at certain times (matches, tournaments, etc.) but they may not be on a strict timetable for content creation. This factor would be determinate upon each individual team's practices.
The second factor, whether the worker is free to engage in other employment, slightly holds in favor of an employee/employer relationship. Players can be free to partake in tournaments without their team should the team not participate, but players cannot play for multiple teams in the same events. By default, in those situations a player cannot work for multiple teams.
Fringe benefits is an interesting factor in this analysis, as it can arguably be in favor of or against a finding of an employee relationship, depending upon the specific team's actions. Independent contractors technically should receive no fringe benefits (meals, company car, benefits, etc.). However, if a team allows a player to keep items that were provided by third parties, namely sponsors, or allows the player to live in team subsidized housing, then the player can be said to have received fringe benefits. In those examples, this factor would lean towards the finding of an employee/employer relationship. However, any benefits are team specific.
The fourth factor, whether the player was on the team's payroll is also team dependent, as some teams pay salaries and some do not. Generally, a salaried worker is much more likely to be found to be an employee and not an independent contractor.
The last factor in this test, whether the worker was on a fixed schedule, is very similar to the first factor. As stated in analyzing the applicability of the first factor to the eSports team/player relationship, this factor can go either way.
Importantly, the Court can examine additional factors to each test. A factor that has been employed by New York Courts was whether the worker is required to wear a uniform. In the eSports context, a uniform can be said to be a team's jersey. This factor could realistically go either way in determining whether an employee/employer relationship exists. Although players are largely required to wear team jerseys at events, many, if not most, are not required to do so when creating content.
Effectively, players who are classified by a team as being independent contractors may not be held to be independent contractors by the Court, if their contract is challenged. Should the Court find that an employee/employer relationship exists, then a team loses all benefits of hiring the player at independent contractor status and is then subject to the totality of laws involving employee/employer relations. Therefore, the team would incur increased costs and liability. Although each State's law will differ as to how these contracts are analyzed, it appears that there are strong arguments to be made under New York law that eSports players are actually employees of their teams and entitled to benefits as such.
What is one thing that all eSports players, teams, and organizations have in common? Their need for sponsorships. But once a sponsor is interested in a sponsorship opportunity, which may be difficult to achieve, a sponsorship agreement must be carefully drafted that identifies the terms of the sponsorship. This can be tricky if you have never drafted and negotiated such an agreement before. Below are 10 important elements to every eSports sponsorship agreement. This list is not meant to be all inclusive, but is an introduction to the bulk of the provisions which should be included in a sponsorship agreement.
1. Identify the parties
For clarity, identify the parties right away in the contract. That includes both the Sponsor and Sponsee (the organization/team being sponsored) and their respective addresses.
2. Length of Agreement
How long is the sponsorship agreement to last for? If the sponsorship is for an event, you want to make sure that the term of the agreement lasts through the expected duration of the event, and perhaps also leaving some additional days for timely rescheduling.
3. Identify what is being sponsored
Is this an event sponsorship? A team sponsorship? Whatever the case may be, you want to specify what is being sponsored. If you’re a team, then briefly discuss the team, what you play, and maybe even some recent accomplishments to remind the Sponsor why they want to align with your brand. If you are putting on an event, then discuss the details of the event (i.e. if it’s a tournament, how it’s structured), and how it is broadcasted (if at all).
4. Sponsor Responsibilities
This is where sponsorship agreements begin to get tricky. In this portion, you want to clearly define what the Sponsor’s responsibilities are. If the Sponsor is providing money, as many do, then specify how much, and the dates by which payment must be made.
If the Sponsor is providing products, defining the Sponsor’s responsibilities can be difficult. The Team would want this clause to be as broad as possible, allowing it greater access to products (in terms of amount or frequency). However, the Sponsor would want this clause to be narrow and tightly defined in order to limit its obligations to the team. Like with the cash sponsorships, time frames should be established when the products are to be provided. If the sponsorship is for a period of time where it would be expected that multiple rounds of products would be provided to the team, then it should also be defined how additional product requests will be made and handled. This contentious point must be negotiated thoroughly.
5. Team/Organization Responsibilities
Conversely, the Sponsee’s responsibilities must be defined. Effectively, this section describes what the team or organization will be offering the Sponsor in exchange for the sponsorship. It can also be used to retain some exclusive rights (i.e. control over certain aspects of a tournament). The team or organization would want this provision to be drafted as narrowly as possible, to limit their exposure and obligations to the Sponsor, while Sponsors could seek to broaden this provision.
This provision is especially important, as it defines the exclusivity, or lack thereof, of a Sponsor. Teams and organizations obviously want to have more than one sponsor, so exclusivity provisions must be carefully drafted. Sponsees should seek to categorize the sponsorship narrowly, that way it can offer exclusive sponsorships in many categories. However, sponsors may seek to broaden any category they feel is too narrow. For example, a team would want to categorize a prospective soda sponsorship as an exclusive soft drink sponsorship, specifically excluding energy drinks (as there are some soda alternatives to energy drinks). This would allow the team to offer exclusive sponsorships for soft drinks and energy drinks, respectively, thus potentially increasing its sponsorship dollars.
7. Sponsor’s promotional entitlement
This section describes what promotions the Sponsor is entitled to in exchange for their sponsorship. This section can be drafted broadly or narrowly, depending upon the specifics the Sponsor requires. Some examples of narrow provisions are specifying the size of the Sponsor’s name and logo that will be used on a stream, how often the stream’s casters mention the Sponsor, and the specifics of website promotion (banner size, placement, etc.). An example of a broad provision would be limited social media promotion at the discretion of the Sponsee.
8. Intellectual Property
Promotion of the Sponsor necessarily entails that intellectual property will be used, including the Sponsor’s name, and possibly logos. It is necessary to include a provision stating that the Sponsee can use such intellectual property to further the goals of the sponsorship agreement. Also worth including is a provision allowing for the limited use of the Sponsor’s intellectual property in the future, as it pertains to recordings or repackagings of the event or team during the sponsorship term. This gives Sponsees the flexibility to use old content without having to blur any names or logos.
9. Cancellation provisions
These provisions are extremely important, as they define when the Sponsor and Sponsee may cancel the agreement. Such provisions are very context dependent, and as a result, vary from contract to contract. One such example would be the cancellation of a sponsorship if a certain number of teams withdraw from the event being organized by a Sponsee.
10. Miscellaneous provisions
Several miscellaneous provisions should be added to the end of the contract, including, but not limited to, choice of law, arbitration, indeminity, waivers of liability, warranties, notice, and severability.
Drafting sponsorship agreements is no easy task, but the above should serve as a basic intro guide to drafting the meat of the agreement. It is important to remember that the strength of any contractual relationship is equal to the strength of the contract itself. If you need any assistance drafting or negotiating sponsorship agreements, contact me at Roger@RRQlaw.com or (917) 477-7942.
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Attorney Advertising. The information presented in this site should not be construed to be formal legal advice nor is it intended to form any attorney/client relationship. Our attorneys, collectively, are licensed to practice law in the States of New York, New Jersey, and Pennsylvania. Copyright Roger R. Quiles, Esq., 2019. All rights reserved.