“It’s hard being an indie game developer” is an understatement. This is especially true for developers embarking on the indie dev journey for the first time, whether on their own or through a newly formed studio. In addition to juggling the demands of game development and publishing, indie developers must now worry about accounting, marketing, localization and porting, and worst of all: legal issues. In this environment, it can be hard to even “know what you don’t know”.

To help with that, we are highlighting six common legal mistakes that indie developers make:

1. Not Having a Legal Entity. One of the most important things an indie developer can do is set up a legal entity. This is often a Limited Liability Company (LLC) or a Corporation. If properly established and managed, a legal entity can protect a developer’s personal assets from liabilities related to the business. For example, if a lawsuit is brought against the developer, or if the developer took out loans to fund development, only the business’s assets would be at risk. However, this protection can be lost if the entity is mismanaged or if there is fraud.
2. Failing to Secure Intellectual Property. An indie developer should ensure that everyone they work with assigns their intellectual property rights in the game and related works to the developer or their legal entity. Without proper assignment, if the developer enlists friends, contractors, or others to contribute to the game, those individuals may retain joint ownership of the some intellectual property. In the case of copyrights, each owner may be considered a “joint owner,” meaning they each hold rights to the entire copyrighted work—not just their individual contributions. This allows them to license, modify, or sell the work without the other owners’ permission. Proper IP assignment agreements can prevent these complications by consolidating ownership under the developer’s legal entity.
3. Lack of Equity Documents. We often see founding teams with an LLC formed in their state, but nothing tying them to the company as owners. Or perhaps worse, only attaching one owner where they intended multiple owners.  Failing to formalize ownership can lead to disputes among founders later, but it can also lead to other adverse issues. For example, if the company receives investment or has substantial sales (and therefore has real value) before equity ownership is established on paper, it may lead to large tax burdens when that equity is officially granted on paper.
4. Lack of Governing Documents. Problems can still arise if multiple partners own a company and no clear decision-making process is in place. Having too many stakeholders without defined roles can lead to deadlocks over important decisions, or disputes about what happens if one person leaves. If a studio has multiple members or shareholders, it’s critical to include provisions in the operating agreement (for LLCs) or the bylaws or a shareholder agreement (for corporations). These should outline the voting thresholds required to take action and specify what happens in the event of a tie. They should also address founder departures.
5. Using Third-Party Materials Without Permission. Many tools, assets, and materials are available to developers, but using them improperly can lead to legal trouble. Depending on the source, certain materials may carry restrictions or may be illegal to use altogether. Even assets labeled as open source or those under a Creative Commons license are subject to specific terms and disclosure requirements. Additionally, tools like game engines or audio software may appear free at first but contain revenue-sharing provisions later on. Developers should carefully review all license terms associated with any third-party tools or content they use.
6. Not Understanding the Rights Being Assigned in a Publishing Agreement. For developers who choose not to self-publish, signing a publishing agreement is a major milestone—but also a potential minefield. Key terms to pay attention to include:

• Net Revenue definitions, which determine what deductions the publisher can make before paying the developer.
• Term length and grant of rights—a long-term, exclusive grant may effectively serve as a “de facto” rights assignment.
• Right of First Refusal, which gives the publisher priority rights to any sequels, prequels, derivative works, or even media adaptations such as films, TV shows, books, or comics.

It’s essential to understand exactly what rights are being granted in a publishing agreement and to negotiate terms that align with long-term goals.

Legal issues are just one of many things that an indie developer will have to learn to identify and manage. Bringing legal counsel early can help prevent issues in the future. For any questions regarding any of the items flagged in this blog post or for legal guidance for an indie game – please reach out to us!