Nasir and Matt welcome Jesse Lindsleyto talk about people are ripping off successful mobile games and answer the question, "My partners and I have been developing an online software and a mobile app, but we are wondering if we should split the mobile aspect of our business into a separate LLC since not everyone is developing that and the app could stand on its own. Is that advisable?"
Full Podcast Transcript
NASIR: Welcome to Legally Sound Smart Business!
This is Nasir Pasha.
MATT: And this is Matt Staub.
NASIR: Welcome to our podcast where we cover business in the news and add our legal twist and also answer some of your business legal questions that you, the listener, can send in at firstname.lastname@example.org and we’re ready to go.
MATT: Yeah, I hope we make this a good one. The Wednesday episode seemed to be the most popular one.
NASIR: Yeah, it’s the hump of the week and the top of the week, I think, for us.
MATT: Don’t screw up, Nasir.
NASIR: I know. It’s a lot of pressure now. Great.
MATT: Let’s get into the story we have for today. It has to deal with this game, 2048, which I’ve heard of but I never play. I actually downloaded it yesterday.
NASIR: Really? Okay.
MATT: Just to see what it was and played it a couple of times. I get the gist of it and I can get how it would be addicting. I try not to do any of these games just because I don’t want to get sucked in.
NASIR: I agree. I’ve played it and I admit that I actually have played it quite a bit but I’m not much of a mobile app gamer, I would consider myself, but for whatever reason, I heard other people playing it so I took a look and I like puzzle games. I got sucked in, I suppose.
MATT: I’m surprised you’ve played because anyone that listens to this podcast knows that your math skills aren’t always 100 percent.
NASIR: Oh, wow, that’s a low-blow. That is a low-blow. I was a computer science major. Math was important at that time. But, anyway, my AP Calc teacher is going to be upset at that comment from high school. I was just joking.
MATT: So, what we’re dealing with here, the underlying story is the intellectual property behind these games and, more importantly, I guess the infringement thereof. But when we’re dealing with mobile games and I think they talked about board games as well, not everything you think would be able to be protected is protected. They mentioned how the protection is of the expression of an idea but you can’t protect the idea itself.
NASIR: Yeah, and if you notice these 2048 games are everywhere and apparently it’s some kind of version of some game called Threes and I think everyone knows that, well, I never played but that game Flappy Bird which became really popular but then went off the market and then everyone put clones up, the reason is basically there was no patent on that idea and there’s maybe copyright as far as the graphics go and so forth but there’s limitations on that. But I wanted to get Jesse from Thrust. They have a pretty cool mobile app development company and kind of want to get their perspective. I’m sure this issue has been brought up in their development as well.
Jesse, how are you doing?
JESSE: I’m doing great. Thanks for having me.
NASIR: Very good.
So, you kind of heard about what’s going on with 2048. You’ve seen all these clones and it’s weird. I use an Android. If you go to the top ten mobile apps that are free downloads or whatever, I think three of them are 2048 variations. I don’t know if you’ve ever had any experience with these kinds of issues dealing with your development.
JESSE: Yeah, we come across this kind of stuff all the time. As developers, we get frustrated when people copy our ideas. I’ve been involved in these kinds of discussions from the gaming gambling days, early 2000 to the Facebook launching of games and a lot of the games were launched by Zynga and others were pure copycats of other games.
So, it’s pretty standard and there’s court cases where sometimes the little guy wins but, to your point, it’s usually when somebody has infringed on some sort of the graphics or branding of the game. You’re seeing more of the bigger guys are gobbling up things like the saying “Words with Friends” and nobody else can use that but we could use a game, we just would need to call it something different.
We deal a lot with startups – people that have great ideas and, before they invest in it, they want to make sure that they can protect it. So, we work with folks on how you can go about protecting things and usually it’s a combination of four or five different things that would make yours different that somebody could maybe take one of them or maybe you’re either taking something that you’ve seen before but you’re making it different. So, yes, it’s part of the business, for sure.
NASIR: Yeah, and that’s an interesting approach because, if you think about it, when you have startup companies, let’s say there is some kind of patentable idea – and, by the way, games in itself aren’t necessarily patentable but there are concepts that you can do that and I’ve seen some examples of that. But my point is that, if you have a startup company and you have an idea, because once you publish it to the world, you have like a year to go basically to file that patent. How is a startup going to afford $10,000 or whatever much it’s going to cost in order to do that when they don’t even know that their game is going to be successful. I would assume, Jesse, that the success rate for these apps – percentage-wise – are pretty low.
JESSE: Yeah, you’re absolutely right. The budgets range anywhere from $25,000 to get a decent experience out there to a quarter of a million dollars. But, if you look at the legal fee if say $10,000, you’re not going to spend half your budget on that. We’re dealing with this with a client of ours, Kate Chua. She wrote this idea on a napkin. It was, “I want to combine Scrabble and Poker.” It didn’t have a huge budget.
NASIR: Hold on, let me write that idea down. I’m going to steal that – Scrabble and Poker.
JESSE: What’s interesting is we came up with four ideas and we could have gone either way and we ended up going with one and we just released it to the App Store I guess three weeks ago and it’s crossed 100,000 downloads and it’s called Words and Cards. But, yeah, we have the mechanics of that game kind of patented and we’re making sure that it’s something that we want to move forward with but then, like I said, there’s also three other versions of this that may be patentable. Crossing our T’s and dotting our I’s and if Kate’s thing does take off then we can protect ourselves.
MATT: So, Jesse, when someone comes to you with a new idea – like the one you just discussed or something else – is there a process you go through to kind of see? Is there something you look at and see we can protect this, we can protect that? What kind of goes through your mind when someone comes to you with a new idea? What’s the best way to protect their idea from having it be copied by other people?
JESSE: First, we call it a discovery. We go through even just looking at what’s out on the marketplace because we want to make sure, if we are doing something similar to something else, that we’re different enough. We’re protecting ourselves in that way. But then, it’s really about that cart before the horse. We don’t look to protect anything because we have to come up with something great. So, that game then Scrabble meets Poker, it was a lot of paper prototyping and we wanted to make sure that this was going to be a fun game and you don’t know. It may be fun to play on a tabletop but it may not translate to a phone. But, once you get to a point where you’re doing what we would call a minimum viable product, it probably doesn’t look good but you start to get a feel of those game mechanics, then we’ll know, “Hey, we’re on to something. This is the right direction,” and then we’ll start to frame up what a lawyer might need to do proper due diligence and seeing if nobody thought of this and, if they haven’t, how we might position it.
NASIR: I think your best bet is trademarks and copyrights are pretty inexpensive in the beginning. And so, you have to decide pretty quickly if your game is going to be worth patenting and it’s patentable pretty soon.
Let me ask you this, Jesse; how long does it usually take to determine whether or not it’s a successful game or not, after it’s been released in the marketplace?
JESSE: I absolutely do not know the answer to that question. I mean, there are trains of thought that these games are overnight successes. Everybody thinks Angry Birds is an overnight success. Angry Birds was a six-year thing where he was mortgaging his home, dad mortgaged his home and eventually it hit it big. I’m not a fan of you put it out and it doesn’t get immediately picked up that you should abandon it. I think you have to get things out there, get early adopters, listen to what your customers want, and try to be nimble enough.
Now, there are games that may become a fun game to play but you may not be able to monetize it. Therefore, it may not be an ongoing business concern and we’ve had to make those kinds of hard decisions but that’s why it’s one of those cart before the horse, too. If you’re totally thinking about monetization and how this is going to be a business versus “Is this going to be a fun game?” You can dilute that game. At the same time, you can really shoot yourself in the foot if you don’t think about that before you release something. There are definitely challenges and there’s no silver bullet.
NASIR: Yeah, wise words, I think. That’s good insight.
In my opinion, I don’t care how long I spend time on it; if it’s not a success after one day, I’d probably just quit. That’s just my advice.
NASIR: All right, let’s get to the question of the day, Matt.
MATT: “My partner and I have been developing an online software and a mobile app but we are wondering if we should split the mobile aspect of our business into a separate LLC since not everyone is developing that and the app could stand on its own. Is that advisable?” This is from Dallas, Texas.
NASIR: This is interesting because I would split it up into two companies just for the mere fact that you have different people involved in different projects but, at the same time, they’re going to be related. So, I would assume you’re going to have maybe some contractual relationships – whether it’s through a licensing agreement or whatever. That brings another point in the sense that you may even want to separate your intellectual property from that entity. It may even have three entities, for example, because I assume, like I said, I have a tech background but I assume there’s going to be some crossover from the online software to the mobile app even if they’re both standalone.
MATT: Yeah, I mean, that’s pretty much exactly what I was going to say. I think that’s kind of the smart way to approach it – the legally smart way to approach it – not to get into the name but, yeah, that’s exactly what I was thinking. You just stole my thought.
NASIR: Oh, that’s what I do.
MATT: Good thing I filed for a protection on it so you just infringed on it.
NASIR: Oh, crap.
Get Jesse’s opinion. I mean, Jesse, I’m sure some of your mobile apps that are developed aren’t just a mobile app. Sometimes they have an online browser version or through some other console.
Do you have any kind of thoughts or experience on that?
JESSE: Yeah, that’s why you guys bring folks on like me. I disagree 100 percent with what you guys said.
NASIR: Yeah, that’s what we’re looking for.
JESSE: We’ll make it interesting.
At the end of the day, there really is a blur of online and mobile. You’ll see games that are mobile-only. You’ll see games that are Facebook-only. They’re really struggling. The reason why king.com really crushed Zynga is that every Facebook game they launched had a mobile component.
NASIR: Good point.
JESSE: And we had a client that had a musical identification game – really well-polished – and then SongPop came out of nowhere. SongPop launched on Facebook and drove people to mobile. There is a whole distribution strategy and monetization strategy why they did that but they crushed our client that was mobile-only.
At the end of the day, I’m a big fan of separating things based on demand or based on maybe what that exit might be. And so, to your point, that IP would live on the web and the mobile and so keeping that separate from say the underlying technology would allow you to, you know, I could license my technology to somebody else that wanted to create a different-skinned version. But the code that I need to support a mobile and a web app, the underlying server technology, that’s all going to be the same. They probably have two different clients.
It doesn’t make any sense to separate it – mobile game and the online game. They’re the same game but you might be able to separate this IP of this brand versus this underlying technology. Somebody may want that technology and not your brand or vice versa. Keeping those separate can sometimes be valuable.
NASIR: That’s a great position. Here’s the counterargument – I think the main concern is that, like you mentioned King and so forth and you have all these different versions – whether it’s Facebook browser and mobile app or variations – it’s all part of this same distribution. The trouble with splitting it up is then you have different kinds of thought and control over this one particular app or game.
One of the benefits though of splitting this up is that you can still maintain the same kind of control through management agreements, shareholder agreements, et cetera, or even doing a series LLC where you take the same LLC and divide it into parts. You know, that’s a little bit beyond our conversation but still able to have different ownership structures based upon the different successes. I’m only going based upon the person’s question in the sense that it may not be a game itself but I would agree with you that king.com is a great example of how they leveraged these multi-platforms.
If you were coming to me, I’d be like, “Yeah, let’s just keep it in the same company,” but if another client was like, “Okay, well, we have three or four different people and we basically have two teams and we want to find a way to divide the ownership structure or the equity structure and so forth,” I might be able to find a better solution for them.
JESSE: Yeah, that’s interesting. I would say that, in this day and age, you said there might be two teams. If there were two teams, I would say that that might make sense. I would also say, if there’s two teams, that they’re not leveraging what they should be and if there’s an economy of scale there that they’re not taking advantage of.
NASIR: Yeah, that’s true. They need to be working together right?
JESSEL Yeah, the tools that we use, we develop on one platform and we push to those platforms. We use UNITY I would say in 80 percent of the games that we develop on and we can support mobile with that same code, we can support web, we can support console. So, yeah, you’ll make tweaks to it but it’s the same code base. I would say, in that kind of situation, you would really be making it a lot scarier than it needs to be.
NASIR: Very cool. All right, Matt. You were silent in our little discussion there but I think we covered that question pretty well.
MATT: Yeah. Well, I’ve just been developing my own idea going back to the article. It’s based on Shoots and Ladders. It’s called Lawsuits and Ladders. That’s a new game I came up with for attorneys in the legal world. Just throwing that out there.
NASIR: Just throwing it out there.
JESSE: As long as it doesn’t look like Shoots and Ladders, I think you’re totally legit.
NASIR: Nice. Okay, we’ll have a conversation afterwards. We’ll talk about that. But we’ll cut Matt out. I’ll just take that idea. It’s fine.
Jesse, thank you for joining us. Do you mind telling us a little bit about your background as far as what your company does and just kind of give a little bit about what you do so that people can tune in? We’ll put your website on the show notes, et cetera as well.
JESSE: Yeah, absolutely.
We started ten years ago. We actually started in the gambling gaming space. I was competing against king.com back then. We were doing games like backgammon and dominos for money, competing against poker rooms and hosted in Costa Rica and so it was an exciting time. And then, the laws changed and we found ourselves in the virtual world space of same kind of technology, browser-based, massive multiplayer experiences. We built five huge virtual worlds – the largest being barbiegirls.com for Mattel. It has six million signups in the first five months and found out way into 3D and mobile and developments in 2009. And so, we make games for Mattel and Mercedes and the NCAA and even guys in their garage or guys that have never released games before. And so, it’s super exciting. No project is the same and that’s a challenge from how you put together a team but we’re a 12-person studio and have been together ten years and we’ve released some time last year was over 150 games that we’ve released over that time and so we’re always looking for a new challenge of somebody saying, “Hey, I want to do a game that does this” or “I want to do something that would reach this audience, what platform should I be on?” We like when people come to us with problems and we come up with what a interactive or gaming solution might look like.
NASIR: Very cool! I appreciate that. That’s impressive.
Jesse from Thrust, thank you for joining us!
JESSE: Thank you, guys! Thanks for having me!
MATT: Thanks, Jesse!
JESSE: You bet.
NASIR: All right, guys. Well, that’s our podcast for the episode or that’s our episode for the podcast.
MATT: Ah, almost had it.
NASIR: Almost had it. Almost ended it smoothly. Of course, I had to mess it up but thanks for joining us.
MATT: Yeah, keep it sound and keep it smart.