Sep 22 2014 - 12:51 pm

How fair is an LCS contract? We asked a lawyer

The World Championships for League of Legends began last weekend, and the tournament is expected to smash esports records all over again
Dot Esports

The World Championships for League of Legends began last weekend, and the tournament is expected to smash esports records all over again. League of Legends is an esports phenomenon. It's the most played game in the world, boasting 67 million unique players every month. And the company behind it, Riot Games, also pays for a professional competitive league, the League Championship Series (LCS), with hundreds of professional gamers.

It has helped pave the road for perceived legitimacy, making esports competitors comparable to sporting stars.

While it's easy to focus on the big games and multimillion dollar prizes, one thing that's often forgotten is that the players—as in any other professional league—sign dense, complicated contracts for the right to play in the league. Often young adults with little life experience, these players often give their signature without much thought. Their managers, meanwhile, are likewise often too inexperienced to provide needed advice. It's likely that many players have no idea what they are getting themselves into. It's the kind of imbalanced situation that can easily lead to exploitation.

So just how fair is an LCS contract? And are players being taken advantage of? We recently got our hands on a genuine, 2014 contract and immediately reached out to a lawyer to find out. Not surprisingly, the answers are complicated and nuanced. But fundamentally, Riot's LCS contracts are severely slanted in the company's own favor at a detriminent to the players.

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Before anyone can compete in the LCS, they must first sign an “Eligibility and Release Form," in which they agree to certain stipulations and conditions. While there are many parts of the full contract, this section seems to be the most potentially problematic in terms of player rights. And it was this section that we brought to David Phillip Graham, who runs the practice DPG at Law. We chose Graham because he's not only an experienced and knowledgeable lawyer, he's also a member of the community—a dyed-in-the-wool gamer and fighting game community commentator, where he went by the name “Ultradavid.” His love for and work within competitive gaming has given him a unique insight into the issues that esports professionals face.

We asked Graham to read through each section, provide an annotation about what it means in plain English, and to explain any legal ramifications surrounding it. (You can read this part of the contract in full at the bottom of this article.) We didn't discuss every section of the contract—only those with the most potential pitfalls for players. Here's what Graham had to tell us. (Disclosure: The content of this article does not constitute legal advice and should not be used as a substitute for that service.)

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The contract's first section outlines its purposes and definitions. Seems simple enough, but Graham thinks one of the most basic terms in the contract is problematic.

"Riot really likes to use the term esports and the conception that League of Legends is a sport played by near-pro athletes, so there's no surprise in seeing it here. I advise my clients to stay away from this term because I believe it opens them up to some major legal and regulatory schemes relating to education, unemployment insurance, media coverage, labor law, and who can coach, manage, play, and represent clients in a sports league. I won't rehash all of this here but I've written quite a bit about it in the past here and here. In short, I think the term can be legally helpful to the player in some great ways, but maybe not so great for Riot."

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This section probably has the most relevance in terms of recent LCS news. Last month, Andy “Reginald” Dinh, owner of American champions Team SoloMid, was fined $2,000 for prematurely announcing a player the team had signed. According to Riot, Dinh had violated Section 10.2.14 of the official LCS ruleset. This states that “no Team Member may refuse or fail to apply the instructions or decisions of LCS officials.” Riot provided no evidence that Dinh had been told not to make the announcement, despite Dinh’s requests that it do so. At the same time, Dinh's protests revealed that there was no appeals process in place to contest such rulings.

Graham:

“It's hard to know what 'all written and verbal instructions' entails. Is it all reasonable instructions? Is there any recourse for the player? I feel like this could be potentially overbroad, but without actually seeing overbroad actions it'd be hard to say there's any legal problem. Certainly, though, this is a potential worry from a contractual perspective. Ideally, if I were representing the player I would want to see a little more certainty over just what kind of instructions the player would have to follow.”

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In short, this clause means that if a player is injured in any way, regardless of severity, Riot are only liable to pay $25,000 towards the resulting care. While people unfamiliar with contracts of this sort might find this somewhat shocking, Graham said it was hardly abnormal.

“This Limitation of Liability clause (really called, I kid you not, a “LoL” clause) is here to limit the ways and amounts in which Riot can be held accountable if something bad happens to the player. Imagine a scenario where the LCS happens on Riot property on a stage Riot built, when all of a sudden the stage falls through and the players who'd been playing on it are left with major injuries. Who is liable? Or in other words, whose responsibility was that and who has to pay what amount to help the injured player recover? This section of the contract says that Riot will never have to do anything more than pay up to $25,000, even if the player in the falling stage scenario has $100,000 in medical bills.

California allows LoL clauses, but not for fraud, willful injury, or violation of law. So if a Riot employee acting in the scope of employment commits some type of fraud against a player or willfully harms a player, Riot's LoL clause won't help it avoid paying whatever amount or engaging or not engaging in whatever behavior a court demands. The LoL clause in this contract is a bit broader in bark than in bite.

That said, LoL clauses in general are not uncommon. They're great for the parties protected by them! I also don't think that $25,000 is all that stingy; certainly much smaller amounts have been held up in court. But if you're the player in this situation, you really don't like that Riot can avoid helping you if something goes wrong. You'd much rather be able to make Riot fully pay up or even do something else entirely to make it up to you.”

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One of the more surprising aspects of the contract is how much players sign away in terms of their image. This clause specifically means players can have their image or voice used in any way Riot wants to promote League of Legends, without consultation or recourse for the player. This doesn’t even necessarily end after the player retires and has nothing more to do with League.

Graham elaborates:

“This section deals with what are called rights of publicity, or rights to an individual's personal name, voice, signature, photograph, likeness, and so on. Publicity rights aren't exactly intellectual property, but in California they're treated very similarly: They have commercial value, can still be protected after death, and can be licensed, sold, or even used as collateral.

Rights of publicity are important sources of income for lots of people, from the A list to the D list. Think of athletes who trade on their name and likeness to sponsor products or the movie trailer voice actors who trade on their unique sounds. If they were to give up those rights, there wouldn't be much value for them or their business partners in those situations.

Well, that's what's happening here. The player has to let Riot use any right of publicity the player may have for free, forever, and everywhere as long as that use is related in any way to anything made or sold by Riot and its sponsors. The player doesn't even have the right to approve how these rights of publicity are used, which means the player can't stop any such uses regardless of how distasteful they may be. And even if the player were to sue over this, the contract specifically says that Riot and its partners won't be liable for it anyway!

The player can still make publicity rights agreements with other companies of course, but the value of those rights is hugely diminished because of this contract. For example, if a player switched to Dota, it would hardly be worthwhile for Valve to spend money creating an association between the player and Dota in fans' minds when Riot could easily dilute that by continuing to show the player as endorsing, playing, or preferring League of Legends.

To me, this is a very worrisome part of this contract.”

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This section adds to the problems introduced by the previous one, Graham says. It forbids players from participating or competing in any other video game competitions, exhibitions, or other events. "The player can only play League of Legends at Riot-sanctioned events as a member of the player's team," Graham elaborates. "Furthermore, the player won't publicly stream or play any games on Riot's restricted list, which ranges in scope from direct and indirect competitors to games that don't seem related at all."

Graham adds:

"This section doesn't explicitly say how long the player must avoid doing these things. If it's just while the player is playing LoL professionally, then that's one thing. If it applies beyond that, it amounts to a non-compete agreement, in which one party agrees not to compete with the other party's business for some period of time. In California, that kind of agreement is illegal outside of just a few exceptions, none of which is agreeing not to play Dota. But I assume Riot's attorneys know this, so I figure this section only applies when it'd be legal: while the player is actually engaged in playing professional League of Legends.

As in Section 5, this is exploitative and really cuts into the player's potential earnings. Maybe the player is a pro at both League of Legends and Ultimate Marvel vs Capcom 3, able to go deep and make money in both, but while these terms apply, the player has to give up whatever money could have been made in Marvel. Indeed, it doesn't seem like the player would even be able to attend industry gatherings like E3 without Riot's approval, so any extra money the player could have gotten from, for example, making endorsements at an E3 booth is forfeit.”

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This catchall section seems to effectively allow Riot to silence criticism. On top of that, the language is incredibly vague and rife for overbroad and potentially exploitative interpretations. But Graham says this a common type of section in contracts such as these.

“This section forbids defamatory or disparaging remarks with respect to the tournament, Riot, League of Legends, or anything made by or associated with Riot and its sponsors, employees, and investors. That's fairly common! It's something I've put into more than a few player/team contracts before.”

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It’s no secret that Riot takes a lot of feedback from various sources to help improve its game, the players being one of the more accessible and reliable options it has. However, if a player makes a suggestion that Riot implements, the player is ultimately not in line to receive any reward regardless of its success.

“If the player has an idea and gives it to Riot, Riot can use it however it wants. The player can't claim that any idea was confidential, even if the player explicitly said it should be. The player also can't claim any money or reward for coming up with the idea.

This isn't uncommon either, at least in different phrasings. Again, Riot wants to minimize its liabilities, which it accomplishes here by making sure that it can't be sued for using whatever ideas it may get from the player. From the player's perspective, though, this creates a disincentive to give Riot ideas. The player may give Riot ideas on improving a champion or some aspect of Summoner's Rift just to see them improve, but cannot expect to make money directly from doing so.”

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Graham pointed out that not only does this section give Riot huge advantages when it comes to resolving disputes between parties, it's in fact so skewed that might not stand up in court.

"First, this section says that if the player wants to make any claim against Riot for anything, that claim has to come within one year of the problem it stems from. This is way, way less time than the player would get otherwise, since statutes of limitations can be pretty long. But, as we've seen before, Riot wants to minimize its liabilities, and part of that is minimizing the amount of time the player has to announce them.

This limitation can certainly be legal, but it has to be reasonable. In the past, this has been interpreted to mean, among other things, that both parties to such a limitation have similar bargaining power and that the limitation apply to both parties. Well, that's not the case here. Riot has a huge advantage in bargaining power over an individual player, and the limitation only applies to the player. I'm not sure that this limitation would stand up in court.

Second, if a claim does go to court, it won't be heard before a jury. I don't know what this is about. It's impossible to waive the right to a jury trial before a dispute has happened. There are exactly six ways to waive that right, and by contract before filing a dispute is not one of them. This could have been part of a requirement that any dispute go to private arbitration rather than the legal system. That would have been fine, but arbitration can't be required unless the contract is explicit in requiring it. This contract makes no mention of arbitration at all.

Third, no class action lawsuits, or lawsuits in which multiple individuals pool their resources to sue collectively. This is legal, but in California we've only been sure about that as of literally three months ago, when the California Supreme Court said that a U.S. Supreme Court decision allowing contracts to forbid class action applied in full to California law.

Barring class action like this does not make me think very charitably of Riot's intentions. In fact, it makes me think Riot realizes parts of this contract are pretty bad for the players. Class action lawsuits exist because the cost of pursuing a lawsuit is often so high that people cannot seek redress for legitimate, justified claims unless they can band together with shared resources. By preventing class action by players, Riot makes it much less likely that its contract will be challenged, negotiated against with player collective bargaining, or even enforced in those ways that actually do favor the players. Why else prevent players from acting together?”

Graham deemed the rest of the contract to be more-or-less “standard," and saw little point in dissecting it. For those unfamiliar with contracts of this sort, it's likely shocking how much a player has to surrender in order to be part of the LCS. Here's Graham's conclusion:

"To boil it down, this is a great contract from Riot's perspective and a pretty bad one from the player's. Riot can tell the player what to do, limit its liability in a bunch of ways, bar the player from some collective action against Riot, use the player's publicity rights for free and forever, and prevent the player from participating in or promoting things that compete with Riot, League of Legends, and Riot's business partners; in other words, fairly cheap, minimal liability, independent, obedient labor that can't aid the competition. Awesome! But all of that sucks for the player, who has to follow Riot's instructions, gives up potential sources of income, the right to seek all possible remedies if injured, and part of the ability to collectively push for contractual gains or enforcement.

This is a pretty predictable state of affairs. Riot wholly owns its “esport” in a way that would be impossible for the owners of sports leagues to own their sports. Riot has absolute control over access to and use of League of Legends, via contract, copyright, patent, trademark, and more, giving it the ability to essentially dictate terms to whoever wants to compete in it. Few, if any, players command enough of a following among fans or can reasonably expect to be around long enough to be able to negotiate for better terms; they're fungible goods, and Riot knows that. As independent contractors paid not by Riot but by teams, they are subject to few of the collective bargaining and unionization protections traditional employees and pro athletes can count on. I don't see the balance of power between Riot and the players changing any time soon.

But I don't necessarily mean to paint Riot as a bad guy. Oftentimes people act with good intentions and honestly want to see the other party do well, while at the same time drafting contracts that are as much in their favor as they think they can get away with. So Riot can simultaneously act well, as I think it usually does, and use exploitative contracts without invalidating or mutually excluding the other. As the attorney in that situation, my duty would be to represent my client as well as I can, including by giving it the best contracts it can get. But if I were representing the player, well, this would be a tough contract to recommend.”

Riot did not respond to multiple requests for comment at press time. 

Here's the form in its entirety:

Photo by Dwayne Bent/Flickr (CC BY SA 2.0) | Remix by Jason Reed

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