Contract Non-Complete Issues...

[CDDevelopment]

So a few months back I drafted up and signed a contract with an international game development studio about creating a game for them. Important things to note, is that the company is represented by two people, so the contract has three signatures (My own, and both of theirs), however they both kind of act as a single party. So for the purposes of this thread we'll refer to them individually as "Thing1" and "Thing2". Also even though they are an international organization, we've agreed the contract will follow US law.

To keep things brief, the contract consists of 4 key clauses:

1. I will act as a developer and designer for the project; they can request for me to make changes, and during the term of the agreement; I will not make any similar work for any competitors without their written permission.
2. They will pay me a percentage of game revenue (the specifics I will not put here)
3. I keep the rights to all work I provide (Meaning my assets are not considered "Work for hire") and I can slap my name on the project where ever I feel necessary.
4. The agreement cannot be amended or terminated unless both parties agree in writing.

The issue is that the game ran for a little while, and profits were not great so even though the game only made it to the beta stage(about 3/4 complete) we all feel that continuing to work on it would be a waste of time.

So I've begun work on a new game that I'd like to put in my own name, and loop in only Thing1, because he and I have determined that Thing2's services really aren't useful anymore. Well Thing2 has come back and said I can't make any work in my name, and I can't work with Thing1 because then we'd be "competitors" and would violate the first clause.

So the issue boils down to if I work with Thing1 on anything, Thing2 will call the contract Non-complete and put me in violation. I can't terminate the agreement because Thing2 simply doesn't want to and we didn't put a specific date in which the contract would become void. I'm pretty sure Thing1 can just act a representative of the second party and terminate the agreement, but he says he can't because he and Thing2 split the studio 50/50.

So what should I do here? Am I screwed never to work again until Thing2 says so? Is there anyway to get around the issue?

They did violate some of the subterms of clause 2, but I haven't called them out on it because I don't see it as that big of a deal. Can I rely on the fact that they already violated a small part of the contract as a defense?

 

[quincy]

Where are you located (what state/country)?

You potentially can buy out Thing2's rights in the work.

 

[adjusterjack]

1. I will act as a developer and designer for the project; they can request for me to make changes, and during the term of the agreement; I will not make any similar work for any competitors without their written permission.

Is that an exact quote of the provision? If not, please quote it word for word.

Well Thing2 has come back and said I can't make any work in my name, and I can't work with Thing1 because then we'd be "competitors" and would violate the first clause.

Could be a valid point.

So the issue boils down to if I work with Thing1 on anything, Thing2 will call the contract Non-complete and put me in violation.

It's "non-compete" not "non-complete."

we didn't put a specific date in which the contract would become void.

That's what happens when people create contracts without the advice of an attorney.

Am I screwed never to work again until Thing2 says so?

Not necessarily. Non-compete agreements are disfavored in most states but are enforceable if reasonable. An open ended non-compete with no time or geographic limit (depending on your state) could either be unenforceable or a court will modify it to provide some protection for the aggrieved party.

They did violate some of the subterms of clause 2, but I haven't called them out on it because I don't see it as that big of a deal. Can I rely on the fact that they already violated a small part of the contract as a defense?

No.

If you waive legal action on Clause 2, you don't get to use the breach as a defense to your breach.

You either stop working on the "similar" project or continue and, if you get sued, you defend based on the non-compete clause being unreasonable. And a third option is, of course, Quincy's suggestion that you buy your way out of the non-compete.

Up to you.

 

[quincy]

Not only does the exact wording of all contracts need to be reviewed but the name of the state is important when discussing noncompete agreements. State laws vary widely on their treatment of these agreements.

 

[adjusterjack]

Not only does the exact wording of all contracts need to be reviewed but the name of the state is important when discussing noncompete agreements. State laws vary widely on their treatment of these agreements.

Didn't I just say something like that?

 

[quincy]

Didn't I just say something like that?

Something like that maybe. But not exactly the same.

 

[adjusterjack]

Something like that maybe. But not exactly the same.

True dat.

 

[quincy]

One question I failed to ask:

CDDevelopment, was the resulting work ever registered with the US Copyright Office? If so, were all three of you listed as coauthors?