LGJ: Welcome to the Big Leagues of Deception

Each week Mark Methenitis contributes Law of the Game on Joystiq ("LGJ"), a column on legal issues as they relate to video games:


There are, in the legal profession, certain kinds of activities that really make a statement after the fact about just how big a company is. One of those activities is using subterfuge in either getting a deal done or in filing with the government. When I say subterfuge, I don't mean with the intent to defraud anyone, but rather with the intent that things be kept a secret. Walt Disney used dozens of companies to acquire the land that would later become Disney World, and now Sony is using alternate entities to file for FCC clearances on the PS3 Slim. Of course, I'm sure many of you are wondering how all this works, and why companies go to all this trouble.

The why is a slightly simpler answer than the how. Put simply: the company doesn't want the public to know. The reasons for the why are pretty varied. In Sony's case, they were trying to preserve the surprise we've talked about in previous LGJ columns. In the Disney case, they were trying to prevent people from either buying up the land they were trying to acquire to then re-sell it to Disney at a huge markup or prevent people from prospectively buying up all the land around the development. While a theme park is an extreme example, the same could apply if, say, Microsoft, decided to build a new campus somewhere other than Redmond.
The why may be straightforward, but the how is slightly more complicated. For the lawyers, it's also the 'fun' part. Having done a few of these kinds of projects in the past, it is actually about as fun as transactional law can get, which I suppose is fairly relative. Let's just say 'Legal Subterfuge: The Game' wouldn't sell as well as, say, Shadow Complex is likely to. In fact, I don't think even an Ace Attorney title based on planning deceptive transactions would do that well.

To put together the how, you need to keep the goal in mind: keeping the public from figuring something out. So from that standpoint, you need to start by figuring out what sources of information might clue people in and resolving those potential problems. In most cases, it's easiest to work backwards, and the Sony case is an easy example. So, Sony knows that people monitor their FCC and trademark filings to predict all sorts of releases. Simple solution? File the filing under someone else's name. People get pretty into research, though, so it would likely be figured out if it shared an address with a Sony office, or if the noted contact was another Sony entity. So, as is pointed out in the article, it uses a residence.

The process wouldn't be too different if one of the game companies was looking at purchasing land for a new headquarters. Following the Disney model, a number of completely unrelated individuals are unofficially hired to use other small, unknown entities to buy land in a given area. Once all the deals have closed, those companies are under contract to re-sell the land back to the original company. This has to be done very carefully, because in the real estate market, even the slightest hint that the lager company is involved during the small company initial buy phase could dramatically alter the value of the land they're trying to acquire and all the land around the land being acquired. Another method that has been used is to set up multiple sets of identical documents for multiple different sites, and only certain key people know which is the 'actual' site. On the closing day, only the actual site is closed on. This really only works to keep speculators looking at surrounding land at bay.

It's interesting to note that this is a pretty significant investment in secrecy, since once the first deal is done or once the first product is released under a different FCC ID, the cover is blown and those entities involved are no longer secret. In fact, it's basically a one shot deal, and then the entities are useless for future secret projects. But, when it's successful, it can really make a difference, so long as the other parts of the system don't leak photos of your secret project onto the internet.

I'm sure some people are wondering if this is legal. Perhaps not as much with the real estate example, as with the government filings. The simple answer is yes, other companies can be authorized to file things like those FCC documents on behalf of the actual manufacturer. It's largely a function of having the proper documents in place authorizing the activity, and those agreements need not be made public.

Perhaps this is a good barometer for whether you should consider law school. If setting up fake entities to facilitate cloak and dagger sales and filings sounds like a lot of fun, then the law may just be for you. If, on the other hand, these activities sound boring, I wouldn't count on that much of the profession being too much more exciting in terms of transactional work. In any event, as more and more game deals become more and more sensitive and secretive, expect to see more of these kind of arrangements. And when you do, you can be fairly certain that the lawyers involved were actually having quite a bit of fun in the process.

[Image Credit: Halloween Jack]




Mark Methenitis is the Editor in Chief of the Law of the Game blog, which discusses legal issues in video games. Mr. Methenitis is also a licensed attorney in the state of Texas with The Vernon Law Group, PLLC and a member of the Texas Bar Assoc., American Bar Assoc., and the International Game Developers Assoc., where he is a board member of the Dallas chapter. Opinions expressed in this column are his own. Reach him at: lawofthegame [AAT] gmail [DAWT] com.

The content of this blog article is not legal advice. It only constitutes commentary on legal issues, and is for educational and informational purposes only. Reading this blog, replying to its posts, or any other interaction on this site does not create an attorney-client privilege between you and the author. The opinions expressed on this site are not the opinions of AOL LLC., Weblogs, Inc., Joystiq.com, or The Vernon Law Group, PLLC. As with any legal issue that may confront you in a particular situation, you should always consult a qualified attorney familiar with the laws in your state.

This article was originally published on Joystiq.