Chris & Dave: The 12-month time restriction is short. It’s understandable that Activision doesn’t want to dig up years of records for an audit; however, Activision must keep those records for several years anyway (for tax purposes). Audits are expensive, so most developers can’t do them every year. One compromise would be to allow the developer to audit previous years if an audit of the current year discloses a discrepancy of more than 5%.

Tom: If the audit reveals more than a 5% shortfall in payments to the developer, Activision pays for the audit (12.2). Royalty statements are deemed accepted if not objected to within 12 months (12.3). Any CPA engaged for an audit can not be compensated on any sort of contingent or other value added basis (12.4). The Audit accountant is required to sign a statement affirming that he is not being compensated on a contingent basis and also agreeing to provide copies of all his reports and work sheets to Activision, regardless of the result (12.5). So, in the unlikely event that an overpayment occurred, Spark could actually take a hit as a result of exercising its audit rights.

Chris & Dave: Section 12.5 contains an interesting typo. It refers to “Infinity”, which is presumably Infinity Ward, the developer Activision acquired in 2003. This suggests that the Spark agreement was based (at least in part) on Infinity Ward’s 2002 development agreement with Activision.

Tom: Marketing and Distribution. Activision is responsible for all marketing and promotional aspects of the Game (13.1) and agreed to a minimum of $2,000,000 commitment to marketing and promotional costs related to the initial Game (13.2). Spark was required to cooperate with the marketing and promotional efforts by conferring with Activision, doing interviews and press tours, doing photographs and artwork under Activision's direction, promoting the Games online, All media contact with Spark are required to be cleared through Activision (13.3). Activision retained sole discretion regarding the pricing of the Games (13.4). Spark was required, as part of the required milestone deliverables, to provide various screen shots, graphic images, character sketches, illustrations of weapons, vehicles, buildings and environments, and a hi-rez magazine cover art (13.5). Of course, Activision makes no warranty that the Game will be successfully marketed or that its marketing efforts on this Game will be on par with its other titles (13.6).

Chris & Dave: Activision claimed there were significant delays and additional costs in developing the game, which would have made the game much more expensive to successfully market. Accordingly, Activision found it difficult to justify spending more on marketing.

Tom: Credits and Notices. Activision agreed to give Spark appropriate credit for the Games by placing the Spark logo on the box and in advertising and promotional materials, except television (14.1).

Chris & Dave: The credit clause is good from Spark’s perspective. It’s more comprehensive than you’ll often see. This would have been important to Spark as a new company because Spark did not have a well-known brand at the time the deal was struck. Of course, a lawsuit can do the trick too!

Tom: Spark also was to receive 100 free copies or each Game or one for each individual in the Development team identified in the credits and Spark could buy additional units at cost, but could not under any circumstances sell them (14.2). Spark was also allowed to use the title, Trademarks and artwork in its portfolio and for promotional purposes on its web site (14.3).