I want to thank Olantern for once again providing his expert analysis, even if he has to guess a lot. I also want to apologize, but this sort of stuff is exactly the kind of puzzle I like to prize apart and find solutions to. I know what I'm about to engage in is mostly fun-and-gamesmanship, but I am going to give my thoughts and inexpert suggested solution to each of the issues he raises, here.
The parties' goals are clear. NCSoft wants to wash its hands of the game entirely and not have the hassle and responsibility of running it any more while getting the highest possible price for the property. Paragon wants the right to develop the game on its own terms without NCSoft's interference while paying the lowest possible cost.
This much is cool. Everyone involved wants the same overall end result. We are allies in this, and that is probably the most important step to finding any possibility of a mutually-agreeable situation.
I will add that an additional goal is that neither party
wants future legal entanglements or arguments over this. When it's done, they truly want to be
done and not have to argue over whether one side or the other is unfairly using, profiting from, or otherwise involving something to which the other has rights. (At least, I assume this is a goal all parties have; it seems reasonable if generally-unspoken.)
-How much is this thing really worth, anyway? I don't see Blue Book values for MMO's quoted very often.
This is a hard one. I don't really have a way of making even a mildly educated guess on it, but I know it involves projected profits from the continued running of the game, costs of running it and developing more stuff for it, and potential value from being able to
sell the IP to a higher bidder in the future (which is, in turn, weighted against the likelihood of such a higher bidder ever materializing).
It is worth noting, here, however, that NCSoft was, before any negotiations started, planning to simply terminate the game. This would, at Nov. 30, result in immediate and rapidly continuing devaluation of the IP, simply due to loss of audience interest. Even if NCSoft doesn't consider it of $0 value, an immediate sale of the IP is worth more than sitting on it and simply considering all costs sunk. So that is why, even without the PR nightmare they could be facing, selling it is better than just ending it and refusing to. This also gives some negotiating clout to the buyer; "We're making an offer, and even if it's not what you might want, it's better than anything other option on the table for your bottom line."
- Once the parties agree on a value, is it calculated in dollars or won? What if the exchange rate fluctuates violently once agreement is reached?
This one is really just a matter of preference and expected strength of the currency in question. Since the dollar is the reserve currency of the world, it is probably the better choice, and just to nail the value at that dollar amount. I can certainly see counter-arguments, but this does not seem like a point that would be
that sticky compared to most of these others.
- How long does Paragon have to pay? If it pays over time, does NCSoft retain a mortgage-like interest in the property?
Given NCSoft's desire to wash their hands of this product's continued running, a one-time payment by the end of the year is probably the best bet. Honestly, if I were at the table, myself, I would be looking to sign the check by Nov. 30. A lot here depends on what Paragon Studios's financial backers are willing to do. It is here that, if I could get some inkling of the actual dollar amounts involved, I would be pressing much harder with my tenuous connections to see if I can't sell it. Because the less "you have until..." there is in the payment, the better for all involved.
If it DOES go to a payment plan, I honestly think it'd be better for Paragon to incorporate and leave a negotiated-but-less-than-controlling interest in NCSoft's hands. It becomes merely an asset on their books, and they receive a percentage of profits, but otherwise are totally uninvolved. And they can sell that asset later to somebody else if they find a buyer and still don't like the returns they're getting.
- If "all rights" to the game are sold, can NCSoft still mention it in non-CoH advertising (e.g., "We sponsored the development of the innovative City of Heroes in 2004" in a Blade & Soul ad)?
- How long does NCSoft have to get rid of all references to and mentions of CoH in its websites and other materials (many are gone, but what about those pictures of Statesman)?
My suggestion here would be a non-exclusive license, renewed yearly and with a one-month deadline upon renewal not being performed, for NCSoft to use CoH PI in its corporate representations, provided they make no false claims about current involvement and make no promises about the future of CoH IP. If NCSoft wants to wash their hands completely, they simply take the first year to clean everything out. If they don't, they retain the license and use what they feel is important to use. They can't sell the license (so if somebody else wants to say "we sponsored the development..." they need to buy NCSoft, not just the rights to make that claim), but can maintain whatever level of pride they wish for the involvement they DID have.
- Since the "new" Paragon hasn't formed yet, what happens if the parties agree to a sale, then it never forms? Does the IP revert to NCSoft? To all the potential devs as a collection of individuals? Somewhere else?
Two possible solutions here:
1) A "trusted third party" that already exists is the actual recipient, and Paragon Studios is going to form under them. By terms of contract, what "forms" means can be defined, roughly speaking as a list of names in various positions and duties to ensure the third party doesn't violate that trust. This way, if Paragon never forms, the third party is in breach of contract, but the IP has a place it's been handed.
2) Actual completion of the contract is contingent upon Paragon Studios forming as an entity. No reversion; the IP never transfers in the first place. Or, more likely, they come to a general agreement, Paragon Studios forms as an entity, and THEN the contract is signed.
- If someone sues Paragon and/or NCSoft about CoH, who defends the case? If the plaintiff wins, who pays? Does the kind of claim matter? (This is one reason I'm so touchy about people saying they want to sue. No one wants to buy a lawsuit.)
Set a cut-off date of Nov. 30 (or the date of the transfer, whichever seems more reasonable). Any suit involving promises made or damages done before then is NCSoft's responsibility; any suit involving promises made or damages done thereafter is Paragon's. While this could get sticky if somebody wanted to sue NCSoft for an already-made-at-this-point promise that Paragon didn't want to honor, I
think NCSoft has already made all the preparations it needs to regarding those with its preparations for closing down everything on Nov. 30.
- What if Paragon wants to develop a new game based on the CoH property, either the game code (e.g., it's a game about zombie hunters, but it uses the CoH character progression system) or the story elements (e.g., a totally new fantasy MMO set in Oranbega at its height)? Can it do so free and clear? Or does it have to pay NCSoft a royalty? Or can it not do that at all?
Because the nature and spirit of this deal is to let NCSoft wash its hands of this and let Paragon continue development as its own entity, I suggest the "Paragon can do these things free and clear" option. They are buying the IP and all associated properties. NCSoft was not planning to use them anymore, anyway, so trying to piecemeal it out is a bit foolish.
- How can NCSoft be sure its ex-employees aren't using proprietary information in maintaining an NCSoft-less CoH? And if it can't, how much more should it charge to release the IP? (This is the issue Segev raised.)
My answers and suggestions to this one would require that I knew much more about what NCSoft PI is "in jeopardy." It is tricky, especially if NCSoft suspects Paragon would actually deliberately attempt to steal proprietary information during a transfer of "just CoH stuff" from NCSoft servers to separate Paragon-only ones.
- If either party breaches the contract, what should the damages be? In what forum should disputes be resolved (an especially sticky issue in an international negotiation like this)?
This one is outside my experience enough that I can't specify "what damages" there should be. From what little I know, however, if it gets to breach-of-contract, it's going to go to court, and courts notoriously decide the awards for damages. WHERE it will be resolved is an interesting issue. My knee-jerk response is "where the defendant is." This protects both companies if they want to USE the IP in some way that the other tries to prevent. Given the goal is mostly for one to wash their hands while the other uses it, the potential loss of exclusivity is of lesser concern than the potential denial of ability to use.
I would go so far as to say that the agreement may be wise to specify a "no cease-and-desist" clause so that procedures under trial are not halted by court order until the trial is resolved. While there is normally good reason to allow this sort of preemptive "wait before you keep doing something you maybe shouldn't" rule, the goal of this deal, at least for one side, is minimal interruption to CoH being offered to its customers, and there's likely little to be gained by the other by a few months' to a year's halting of "bad faith use" of the IP outside of bullying that, I assume, all sides are currently working in too much good faith to want to provision for.
I don't envy the people working on this. It looks simple to us from the outside, but there are as many potential issues as there are potential problems going forward. That's why I'm being extremely patient and hoping both parties can get what they want. That is the way that we will get what we want, too.
Despite my total outsider status, I actually do wish I could be participating in this. I think I would enjoy it, and I am proud enough of my problem-solving skills to think I could genuinely help. Sadly, I know that my position is just wrong to enable me to get in there. Still, I will offer and volunteer at every opportunity on that very off chance.
All that is out of our hands. The best thing we can do is to continue to demonstrate that the game has a dedicated fan base that makes it both worth selling and a good buy. Keep it up, everyone!
Indeed. I have been very impressed by what everyone's done so far!
