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With transfer seasons upon us, we can expect to see movement amongst your favorite esports players and teams. European esports lawyers Pete Lewin, Isabel Davies and Jas Purewal from Purewal & Partners explore what teams and players should do legally to ensure a successful transfer season.

It’s the end of the year, and with many leagues entering offseason, it’s time again to dust off those contracts. As the industry continues to professionalize, player transfers and signings are becoming more complicated. There are a number of things for teams and players to consider before putting pen to paper. Let’s explore.

When can teams and players actually talk (legally)?

If a player is not under contract and there are no applicable publisher/league rules limiting transfer ability, that player is a ‘free agent’ and free to talk with teams.

[perfectpullquote align=”right” cite=”” link=”” color=”” class=”” size=””]Teams and players need to know whether the player is a true ‘free agent’ or actually still under contract but looking to transfer.[/perfectpullquote]

On the other hand, some players may still be under contract, but are nonetheless able to talk with a potential new team under certain circumstances—usually because there is a transfer season either agreed with the current team or required by the publisher/league.

Teams and players need to know whether the player is a true ‘free agent’ or actually still under contract but looking to transfer. Both raise similar issues (see below), but the latter is more complicated and introduces a number of other things to consider, such as contractual confidentiality obligations and rules on poaching/solicitation.

For the sake of simplicity, the rest of this guide assumes that we’re talking about actual free agent signings rather than player transfers.

Are there applicable publisher rules and timeframes?

Many publishers and league organisers have implemented rules which teams must follow when signing new players. These should be at the forefront of a team’s and player’s minds, since getting things wrong here could undo a lot of hard work. For example:

League of Legends. Riot has introduced substantial rulesets for both its League Championship Series and Challenger Series . These specify not only when transfers can occur (i.e. specific dates between splits), but also roster composition restrictions, rules around contract negotiations (admittedly more relevant for players ‘transfers’) and mandatory contractual requirements.

Dota 2. In 2015 Valve established a short set of rules (not as substantial as Riot’s) regarding the transfer process for Dota 2 players. The latest rules can be found here and include roster lock deadlines and roster confirmation procedures.

CS:GO. CS:GO rules are largely set by the league organisers. For example, the ELEAGUE season 1 rulebook does not permit a team to replace any more than 2 players on its roster during a season.

Player due diligence

Once a team is seriously beginning to consider signing a player, the next step should be to carry out what’s known as player ‘due diligence’, which means a team should do its homework on the player (and vice versa). This includes looking at:

Money. Do the player and his/her previous team owe each other anything financially (e.g. prizes, stickers, expenses, salaries etc.)? A new team won’t automatically become liable for outstanding amounts simply by signing the player, but it’s important to be aware of these issues since it could prove a headache in the future. Ideally a player should exit the previous player contract on a ‘clean-sheet’ basis with all sums paid up in full.

Intellectual Property Rights. A player joining a new team will invariably be asked to grant certain rights over the use of his/her name and image. This is essential for teams so that they can legally promote their players, make promo videos, sell merch etc. But when a player leaves a team, it’s crucial for the new team to understand which rights the player has retained. If a player’s image rights were previously ‘assigned’ (i.e. transferred) or permanently and exclusively licensed to the old club, this puts the new team in a difficult legal position as it can’t legally use those rights itself. These problems can normally be remedied by reversing previous licenses/transfers, but it can get complicated.

Why does this matter? In the future, a lot of sponsorship and other types of money will depend on teams being able to show that the team has proper ‘chain of title’ (i.e. the right to use) regarding the necessary player IP rights, so it’s important for teams to acquire the correct licenses from players when signing.

Restrictions. Player contracts may contain clauses that restrict the ability to join a team such as ‘non-competes’, which are basically clauses saying that the player can’t play for another esports team or business within X months of leaving the old one. The law can be quite complicated regarding if/how these clauses can be enforced in practice, but it is still fairly standard practice to ensure that these rights are waived by the old club (which shouldn’t be a problem in a commercial deal).

Merchandise. Tying in to the point above, what ability (if any) does the player’s old team have to continue to sell merchandise featuring the player’s name/image, even after the player has left? This can be important as old player merchandise could complicate or even remove the ability of the new team to create their own new club/player merchandise and it could cause problems with sponsorship deals. This is usually a resolvable problem in practice, but again it needs to be checked and actioned – particularly since merchandise will continue to grow as a revenue line for teams and players.

Sponsors. Does the player have any personal sponsors and, if so, how are these impacted by the player joining a new club? Is there any potential clash – e.g. what if the player and team each promote different energy drinks, use different headsets, stream on different platforms etc?

Other stuff. There are a number of other legal and business matters that are worth checking to avoid problems. Is the player an adult in his/her country of residence? What is the immigration status of the player? Are there any previous criminal convictions or disciplinary proceedings with the former teams? Is the player in good standing in the industry generally?

What’s the deal?

The key to any player transfer is of course the business terms. Key factors to consider include:

Transfers and Termination. When and for what reasons can either side terminate the deal? It is standard to have termination rights for e.g. material breach or gross misconduct, but there could be specific termination factors. Will there be a buyout clause/transfer fee, or are transfers completely prohibited during the contract? If transfers are permitted, are there any rules (in addition to publisher/league rules) which players must follow when considering transfers?

Money. The financial terms (i.e. who gets what, how much and when) will be some of the most important parts of any deal. The parties should discuss how revenue streams will be handled – prize money, monthly compensation, streaming, bonuses, expenses, any personal sponsorship or merchandise deals etc. It’s also essential to agree when payments will be made (e.g. it’s common for prize payments to have a different timeframe from regular monthly payments) and who will pay the tax on it. Financial disputes are some of the more common within the esports industry so it’s in the business interests of everyone to be as clear as possible about these issues from the start.

Duration. How long is the team signing the player for? Does this automatically renew (if that is even allowed by the publisher/league)? Does the end date coincide with applicable transfer windows/roster locks from publishers and leagues? If the duration is for a year or more, will there be any scheduled renegotiation of the key commercial terms (e.g. financials) at any point?

Obligations. What does the player get from this deal? What does the team get? Here it’s important to not only think about the obvious things (e.g. play at events/pay the players), but also the other important parts of the deal. For example, does the player have to stream a minimum number of hours per month on a particular platform, produce content for the team’s website, promote the team’s merchandise, be available for interviews, signings etc? Are there any other team sponsorship obligations that teams need to make sure players agree to? Will the team provide accommodation, food (if so, how many meals), gaming equipment, clothes, gym memberships, physio, nutritionists etc?

Get a (good) contract

It is essential to have player contracts both for the players (see our earlier article on player contracts here) as well as the teams, for three reasons:

If the team later decides to transfer the player (increasingly in return for lucrative transfer fees) it is much easier to do this if the underlying player contract has been properly structured and written; and

A good player contract helps both the player and the team to enter into a productive relationship together where each side understands the deal;

As truly significant sponsorship and other commercial deals are negotiated, there will be a strong expectation of solid player contracts.

A well drafted player agreement should cover off all the important matters, be clearly written and (as a general approach) serve the interests of both parties reasonably. Seriously, the time it takes to get this done right can open up doors and will far outweigh the problems that can come up later down the line.

One more thing: whether the player is signed as an employee or a contractor will have significant impacts for both the club and player. Watch this space for a forthcoming article from us on the employment/contractor issue in esports.

TL;DR – Our top tips for transfer season:

Do your homework. Signing a new player is a big commitment for all parties involved and it should be respected as such. Following the points discussed above will hopefully help prevent some future headaches.

Think about the deal. While salary and duration are important parts of any deal, don’t forget about the other equally important issues mentioned above. Reaching agreement on as many of these as possible before signing is crucial for both teams and players.

Get a good player agreement. A comprehensive and clear player agreement will be faster and easier to negotiate, result in a more productive relationship and protect and even grow the investment the parties are making in each other.

Allow enough time. Give yourselves and the players enough time to properly review and negotiate the agreement. Understandably this can be tough sometimes given the rush not to lose the player to another offer, but don’t forget that this player agreement is what will govern potentially hundreds of thousands of dollars or even millions that the player and team will hopefully make together.

It’s a living document. Contracts are living documents which can and should be updated as the relationship develops or things change. We expect to see continued rapid evolution in esports law as the industry grows and player contracts will need to keep pace.

Work together. Negotiating a deal is a two-way street – we have always found the most successful deals are where both sides keep things professional, realistic and balanced.

How do you find out more?

Please contact Pete Lewin (peter@purewalandpartners.com / @LegalGamerUK), Isabel Davies (Isabel@purewalandpartners.com / @IsabelDavies_) or Jas Purewal (jas@purewalandpartners.com / @gamerlaw). Needless to say, please do not rely on this note as legal advice and always take advice specific to your facts and circumstances.