From "Pizza Attack" Battle to Brand Strategies: Legal Insights in Gaming with Don McGowan

April 19, 2024

From “Pizza Attack” Battle to Brand Strategies: Legal Insights in Gaming with Don McGowan

Join us as we sit down with Don McGowan, former General Counsel at Bungie. If you're in the game industry, you've likely heard about Bungie's groundbreaking lawsuit protecting employees from online threats, aka the "Pizza Attack." Don orchestrated the whole process and is here to share the behind-the-scenes details in full. Don's career in the entertainment industry also included stops at The Pokémon Company International and Xbox Game Studios Publishing, where he launched some of the biggest IPs in gaming. Tune in as we dive into the legal side of the gaming industry.

🎧 Here’s a glimpse of what you’ll learn:

Fostering Inclusion Clubs at Bungie and Pokémon
How Game Studios Can Protect Their Employees
The "Pizza Attack": Don's Direct Involvement in Protecting Employees at Bungie
Legal Perspectives on Brand Revival Strategies: IPs, M&A, AI
Thoughts on Epic vs Apple Antitrust Lawsuit

Resources Mentioned in this episode:

Sponsor for this episode...

This episode is brought to you by Here’s Waldo Recruiting, a boutique recruitment firm specializing in the video game industry that prioritizes quality over quantity and values transparency, communication, and diversity. We partner with companies, creatives, and programmers to understand the why behind their needs and provide a white-glove experience that ensures a win-win outcome. The industry evolves. The market changes. But at Here’s Waldo Recruiting, our commitment to happy candidates and clients does not. We understand that searching for the best and brightest talent can be overwhelming, so let our customer-first staff of professionals do the leg work for you by heading over to hereswaldorecruiting.com.

Episode Transcript

Welcome to the Here's Waldo Podcast, where we sit down with top visionaries and creatives in the video game industry. Together, we'll unravel their journeys and learn more about the path they're forging ahead. Now, let's get started with the show.

Lizzie Mintus: Hi, I'm Lizzie Mintus, founder and CEO of Here's Waldo Recruiting, a boutique video game recruitment firm. This is the Here's Waldo Podcast. In every episode, we dive deep into conversations with creatives, founders, and executives about what it takes to be successful. You can expect to hear valuable lessons from their journey and get a glimpse into the future of the industry.

This episode is brought to you by Here's Waldo Recruiting, a boutique recruitment firm for the game industry. We value quality over quantity, transparency, communication, and diversity. We partner with companies, creatives, and programmers to understand the why behind their needs.

Today we have Don McGowan with us. Don's time in the entertainment industry has included stops at Bungie, Pokemon, and Xbox. While at Pokemon, Don stick handled the launch of Pokemon Go, produced the number one feature film, Pokemon Detective Pikachu. While at Xbox, he launched some of the biggest IPs in gaming. Let's get started. Thank you for being here and what a delightful shirt you have on today.

Don McGowan: Thank you, Lizzie. I picked out one of my very best blouses for you. Anybody who has had the misfortune of coming across me in the world knows, my collection of blouses. I get so few chances to wear them these days that I had to go get a good one for you.

My wife vetoed my first choice, which was orange. She's like, maybe pick a color that's not the same color as your skin. I was like, do I have orange skin? She's like, you don't not. So here I am with blue.

Lizzie Mintus: What a great start to the interview. You're awesome. Can you talk a little bit about what you're up to these days?

Don McGowan: Sure. As you pointed out, I was at Bungie. I actually did two stints at Bungie. I was Bungie's lawyer, and I was actually the guy who spun Bungie out of Microsoft on behalf of Microsoft. Then took a small 12 year hiatus to go work at Pokemon and came back to the Bungie world in March 2020.

I led the team doing the transaction to bring Bungie into Sony. Then I suspect Sony woke up one morning a few months ago and said, why do we have two legal departments for the exact same subsidiary? And so now my mild legal department for Bungie, there's one guy left. And the rest of us are all out in the world, taking our knowledge and using them in new ways.

I've gotten myself involved with a law firm that I did a lot of work with when I was a Bungie, called Kamerman, Uncyk, Soniker, and Klein or KUSK. They were the guys that did all of our anti cheat litigation. For example, they stick handled and coordinated that. So I've obviously had a good relationship with them for a few years.

When I got out into the market, they said, would you like to come and be a part of us? So now I'm working with a law firm. There is a fortunate thing for those of us from the games industry who have that kind of an opportunity. Not a lot of people have it and I feel very fortunate to have it.

I look at it as if you know anything about the linear media business, you have people that are studio executives And they're studio executives for a few years, and then they go out and they run their own production company for a few years. And then they come back in and be an executive at another studio. I think that's a paradigm that we'll start to see more and more in the games industry and sort of the back office, G&A functions, spinning out and working inside in the industry for a few years, coming back in and working at a different company.

I don't know that my time in games is done. It could be. I don't want it to be, but the way the industry's going, who knows.

Lizzie Mintus: Hey, it's supposed to pick up. I mean, things cannot be bad forever, and then soon you'll have offer letters without even interviewing, like, three years ago. It's just a cycle.

Don McGowan: That was in fact exactly, uh, so Bungie, although I ran the gauntlet of Bungie's interview process, which was like 10 different interviews with 12 people. I met the entire Bungie leadership team before I joined it, which was interesting. That came up because a friend of mine who was, and still is actually in the Bungie leadership team, reached out to me when I was at Pokemon and said, listen, we need a GC. Can you come help us?

And so I ended up going over to Bungie. My Pokemon job was a little bit more of a weird sort of headhunting situation. There is a particular recruiter in the legal industry in Seattle who basically has cornered the market to the almost complete exclusion of every other recruiting agency out there.

Her name is Victoria Harris. Victoria Harris, I've known Victoria for a lot of years, obviously, and I knew her back when I was at Xbox. And Victoria used to call me to see if I had people that I could suggest for various roles she was recruiting for. And she called me one day and said, I'm recruiting for the General Council of Pokemon.

And I said, well, I'm in play for that job. And she was like, wait, seriously? So I got past the headhunter screen that easily. Sorry, I shouldn't call them headhunters on a recruiter's podcast.

Lizzie Mintus: No, that's okay. I think when you're a headhunter, you're out there finding people opposed to a recruiter might be more inbound. So I think the distinction is fine. The word is a little grotesque, but it is what it is.

Don McGowan: That's why I say I shouldn't use it in a recruiting person's podcast. Many apologies.

Lizzie Mintus: No apologies needed, Don. I like that you have this sweet memory of your recruiter. A lot of people have that, so. Makes it worthwhile. Makes all the odd situations in recruiting worth it. Talk to me about the inclusion clubs you created at Bungie.

Don McGowan: So I don't know that I'd say I created them. I've actually had two pass throughs doing inclusion activities. One was I was the executive sponsor of accessibility at Bungie.

And then previous to that, when I was at Pokemon, I was the executive sponsor for all of the inclusion clubs that Pokemon created while I was there. Mostly because when I was at Pokemon, I had a strange situation of having budget and authority to make decisions and authority to authorize activities.

And so combine that with a guy who is a little bit maybe, I'm going to call it a little bit maybe more socially minded than some other folks. That got me interested. We had a rule at Bungie that every accessibility club or every inclusion club had to have an executive sponsor.

And so I said I'll take accessibility because it's a cause that's near and dear to my heart. I went several years with a misdiagnosis of macular degeneration and I've been told I was going blind. And so the idea of accessibility activities became very personal to me at that particular point.

Turns out I'm not going blind. You can just think so from my shirts.

Lizzie Mintus: You're great. So tell me about what game studios can do to protect their employees in 2024.

Don McGowan: Such studios that want to protect their employees have a lot of opportunities to do it. I say euphemistically. I have a very strange perspective on layoffs having been a part of one. People in my situation aren't usually counted in the layoff situation, right? We usually are kept inside the company. In fact, usually it's your general counsel who's doing the layoff. Not who's being done to.

And so, I think the first thing folks can think about is, do they have the employee balance that they want? If they do, fantastic. If they don't, then obviously you've got to think about whether or not the employee balance is the issue or the product balance is the issue. You're not going to convert an artist into a QA person overnight. Unless the artist wants to become a QA person, in which case, fantastic. There are opportunities for them all over the industry.

When I was at Pokemon, we didn't do significant layoffs when I was there, in large part because, the perspective of the company, we were hired for life. It's a very old school Japanese perspective.

The games industry has started to go much more in the direction of the linear media business. And the linear media business is very much, everybody has what's called a run of show contract where you're associated with the project, either for the duration of your role or the duration of some activity that you're performing or you're associated with the project for run of show, which is while you know the length of the series or the length of the production of the film.

If the video games business wants to keep to that model, I think it's a good model. It works great in the linear media business. If the video games industry wants to keep that model, then I think you're gonna see a lot of pressure around what I'll euphemistically call worker organization.

I am a fairly strong advocate of worker organization, which is kind of surprising being the guy you used to call when people talked about worker organization. But I think the IATSE, the International Association of Television and Screen Employees, they have a push going on to bring organization to the video game space that I think they're the natural union for it. I'll use the dirty word. They're the natural union for it, and they could provide benefits that both employees and studios would see, like health insurance after you've been laid off.

Lizzie Mintus: Yeah.

Don McGowan: The health insurance costs for studios, COBRA costs are expensive. Not having to pay COBRA would make the ability to scale up and scale down a lot more feasible for game studios. Perhaps more significantly, it would give people in things like the art and animation business, a lot more ability to move back and forth between linear media and games, right? And I think sort of harmonizing the labor practices and the employment practices of the video game industry to the business that it's most liked, which is linear media, I think will lead to a lot better environments and a lot better experiences for the people that are taking parts of their life to build this content that we love.

Lizzie Mintus: What do you think the argument is on the other side as a lawyer?

Don McGowan: The argument on the other side is basically, it's more difficult to engage in certain at-will employment practices if your workers are organized, you might have in the collective agreement, you might have requirements around notice periods, et cetera. You can't just fire them all tomorrow.

Lizzie Mintus: Yeah.

Don McGowan: Right. You can't just call everybody into a meeting on October 30th and tell them they have no job as of 5 p. m. today and stop paying. You're already done paying their health insurance that their health insurance is coming to them through their union. But, you stop providing them with benefits as of October 31st. I mean, that's a different conversation, right? And so there's that one.

I think also, American companies don't like the idea that they have obligations towards their employees.

It's funny. I remember hearing a lot of people talk about, oh, well, you don't have an office in France because of the labor practices there. And I'm like, the labor practices in France are fine. You just have to give people notice.

Lizzie Mintus: What is it? 90 days?

Don McGowan: It's 90 days in France. Yeah, the notice period is long.

Lizzie Mintus: Yeah.

Don McGowan: It requires some amount of planning. Both sides.

Lizzie Mintus: Right. So if you quit, you have to give 90 days, which from a recruiting standpoint is challenging. But I guess to summarize, if you really plan ahead on either side, you could make it work. You just have to open your rec sooner or manage finances.

Don McGowan: A lot of companies in those kinds of environments will put you on garden leave. We'll say, okay, you're 90 days. Thank you for the 90 days. You can stop coming in tomorrow.

Lizzie Mintus: Yeah.

Don McGowan: We'll keep paying you for the 90 days. But if you get another job, that's fine. Do what you got to do, right? That happens a lot in those environments.

It's funny. In the UK, for example, there's the custom of putting people on garden leave. One thing a lot of people don't know about places like the UK, and specifically the UK, is there's a requirement in the UK that if you want to give someone a package, their lawyer has to sign the package paperwork.

Lizzie Mintus: Oh.

Don McGowan: Which leads to this incredibly weird custom over there, where the company that's letting somebody go will pay a lawyer for them so that they can have independent counsel. And the independent counsel can say, I advise this person of their rights and they waive them by signing this package. It's on them. I did my best.

Lizzie Mintus: Yeah, the funny thing about that is that people who maybe need the most protection are least able to get it.

Don McGowan: Correct

Lizzie Mintus: Legal fees. Yeah, good old america. What can companies do to protect their employees from trolls online?

Don McGowan: Another thing near and dear to my heart. While I was at Bungie, I was involved in a situation. I can give a little bit of the backstory on it because, obviously I was the guy.

We had one of our community managers who, I'll euphemistically refer to as D. G. We only ever identified them by initials in the court proceedings. So some guy in West Virginia, we found out he was in West Virginia during the course of this, who was pretty super racist, found DG's wife's phone number online somehow and started calling her and leaving super racist voicemail messages on her voicemail.

Like, hey, tell your husband that Bungie needs to create some n word killing DLC. He didn't write the word n word. I said the word n word, because I'm not going to say the other thing out loud. In the old John Mulaney bit of, if there's two words and one you won't even say, that's the worst word. I'm not going to say that word, but he was perfectly happy to say that word into DG's wife's voicemail.

And then, he found an old phone number for DG and started trying to call it, but it didn't work for him anymore. I was on a group chat with DG at the time. And the group chat, DG at a certain point sent a message like, Oh, this asshole calling and leaving messages on my wife's voicemail. And then five seconds later, a text came in that said he just sent me a pizza. He knows where I live.

And so the first thing I did was, I have some friends in some very weird businesses. I called up a friend of mine who handles executive protection services and we had executive protection on DG's house within 15 minutes. Because sending a pizza, all of us in the games industry know, is the way we say, I know where you live.

So and the next thing that's gonna happen is swatting. And so we wanted if the SWAT guys showed up there to be, sort of neutral big dudes sitting outside to say, hey, if anything's fucking going down in here, to use the technical term, we would know and we would be in there stopping it. Right?

And so second thing is if the SWAT team comes and they don't want to talk to anybody, then we have big dudes outside who can stop the SWAT team from kicking down this guy's door. And so we put executive protection on his house. We then scrambled the fighter jets a little bit. And said, Okay, well, all we have is a pizza, which he sent C. O. D. Through the Domino's app.

Explain to me someday why Apple takes a C. O. D. Purchase. I'll never fully understand that. In the instructions, he had to knock loudly. I'll probably be wearing headphones. So he sent this thing to C. O. D. with instructions, hey, probably not gonna answer the door. And make sure I answer the door because D. G. I'm not gonna pay for it. So that's a good way for him to get in a fight with the pizza delivery guy. Also it's a good way for our West Virginia racist to send a pizza and not have to pay any money.

Lizzie Mintus: Right.

Don McGowan: Like I said, we scrambled the fighter jets.

The next thing we did, we had a pizza delivery, which meant there had to be a phone number attached to it in some way, because the Domino's app requires a phone number. So we found out it was a VoIP number, and the VoIP provider in Canada is one that is fairly well known for, what I'm going to call, euphemistically called customer privacy.

So we did a lot of work when we were doing our anti-cheat investigations. We did a lot of work with cyber security investigators. I actually was a cyber security guy before I was a games guy. So helpful, even more helpful I'm Canadian. So we got a VoIP provider in Canada. I got lawyers all over that country, I got old colleagues everywhere.

This is a VoIP provider that was outside of Toronto. We reached out to a guy who used to work up in Toronto and got him engaged. He went and got this very strange Canadian court order. A lot of court orders get the name of the case that they were first used in. So the name of this order is Norwich Pharmacol, because it was first in a case involving a company called Norwich Pharmacol.

Norwich Pharmacol orders are a requirement to give information about a subscriber and not tell them. And so we got this order from this VoIP company that was required to give us the information about this guy and not tell him what they told us. So that's how we found out he was in West Virginia. Because we did an I. P. Trace. We got his I. P. Address. We traced her back. We found out he was in West Virginia.

Then we dropped a second set of people on this guy's house, to make sure that we knew if he was gonna leave and go to the airport. Because we had that court order within two days. Amusingly, while all this was going on, my Bungie stories have a lot of very weird locational aspects to them. In this one, my wife's daughter went to school in San Luis Obispo at Cal Poly. It was her graduation weekend while I was dealing with all this. So I had to sign the affidavit remotely.

To do an affidavit remotely in Canada, they have to see you sign it. So my wife's standing there with her phone video recording me as I'm signing the affidavit on my phone, standing in Morro Bay, California, because we were down there for my stepdaughter's graduation.

So we get this guy's info. We're long lenses through his house. Apparently his neighbors all thought it was the FBI, which is kind of funny. We then got a restraining order against him.

Lizzie Mintus: Excellent.

Don McGowan: On behalf of our employee DG. So, West Virginia, restraining orders have to be served by the sheriff. The sheriff was a buddy of this guy's dad. He's not serving his friend's kid a restraining order. We end up getting a default judgment against him. We brought civil proceedings in Washington also, basically for the deterrent factor and to have something to hold over this guy's head. We also banned him from the game.

Spoiler alert, guess what was the only thing he cared about?

Lizzie Mintus: Getting banned from the game.

Don McGowan: Yep. This guy could not have cared less that we got a restraining order against him, could not have cared less that ultimately got a $500,000 judgment against him, a $500,000 default. He didn't contest anything because all he wanted to do was get let back into the game, which I assume still hasn't happened. Hadn't happened as of the time I left Bungie.

Lizzie Mintus: Probably not. Yeah.

Don McGowan: Yeah. So we got this judgment that basically said two things. One, any amount of money that Bungie spends or an employer spends investigating harassment is damages to the company. And two, since you can only attack a company by attacking its employees, you can't attack Bungie. You can't attack Microsoft. You can't attack Sony. You can only attack the people who work for a company. So harassment of them is harassment of the company. Therefore, the company has an obligation to protect its employees. And has an obligation to spend that money to investigate harassment to stop it from happening, right?

Corollary to the obligation of a safe workplace, you can't just have stairways with no railings on them, right? It's a very similar, a very analogous situation to that. It's funny, my colleagues at the law firm that did this for us, it's a brand new theory of law. And I'm like, it's actually super not. It's just OSHA without a regulatory agency.

Employees having an obligation to provide a safe workplace. There's nothing new about this, but, okay. Everybody seemed to think it was this big deal.

Lizzie Mintus: Well, it was a big deal. I mean there was Gamergate. There were so many awful things and I have heard stories I won't repeat on the podcast. So many, especially women, were not protected by their companies. So what a great example

Don McGowan: And I just want to throw this out there. This is an additional thing. To viewers, if this happens to you, Your company has an obligation to protect you. Lizzie knows how to find me. I am the world's most hyper online lawyer.

Lizzie Mintus: It's true.

Don McGowan: I am not difficult to find. Go find me on LinkedIn and see pictures of my dogs.

Lizzie Mintus: Biscuits and Gravy. I was wondering if they were going to get brought up.

Don McGowan: Biscuits and Gravy. They're downstairs right now letting the construction guys who are outside doing work on our house know that they'd like to go play with them.

Lizzie Mintus: My dog is in the garage letting people who walk or drive by know the same thing. Yes.

Don McGowan: Biscuits are half husky. We did the DNA tests. She's half husky. So she doesn't bark. She just yells.

Lizzie Mintus: Yeah.

Don McGowan: Gravy is 105 pounds and German Shepherd slash pit slash all the hounds. So, he has a good loud alarm bark, which means the construction guys know Gravy is there right now.

Biscuits, they may not have realized. They may not realize it's a dog.

Lizzie Mintus: Follow Don for more Biscuits and Gravy content and updates.

Don McGowan: And for those who are curious, Gravy got his name because the shelter found his litter on Thanksgiving. So his brothers were Turkey, who's now been renamed Kobe for some reason. Turkey, Gravy, Rolls, Mashed Potato, Stuffing, and Green Beans. We have met Rolls in the wild, and Rolls is like a twin of Gravy. Turkey looks he's a little more shaggy.

But yes, I will also absolutely proselytize for the Adams County Pet Rescue, which is where we got both of those dogs. They are in Eastern Washington shelter. Eastern Washington is full of dogs and apparently full of puppies constantly. So if you ever want a puppy, these people have fantastic amounts of dogs. Their dogs are wonderful and please help and support them as and as you can.

Lizzie Mintus: Yeah, it's nice you had a good name for your dog. My dog's name was Bullet when we adopted him, so he is now renamed to Hans.

Don McGowan: Biscuits was Voodoo when we adopted her, and I don't think that's a nice name for a dog because, you know.

Lizzie Mintus: No, because it's not.

Don McGowan: No. and I think that might be why she was still at the shelter.

Lizzie Mintus: Yeah, but maybe you can change the name, but

Don McGowan: yeah,

Lizzie Mintus: when. Can you talk about how companies can revive an IP and build a brand?

Don McGowan: Yes to a certain degree. I'm going to keep a little bit of my secret sauce because...

Lizzie Mintus: for people to pay you.

Don McGowan: Yes, because I charge money for this. So, um, I would say, here's my thoughts. I was one of the five people that helped bring Pokemon back around. I think one of the things that benefited us with Pokemon is a thing that's difficult to replicate, which is having been so super popular the first time, right?

Because we had to wait through the years when all the fans were in high school, because on a kid's property, there's this natural gap. You get them when they're kids and then around 10 or 11, maybe 12, you start to lose them. And then they go through high school and then they get to college where it's okay to be into things. And they don't have to deal with the peer pressure of a high school situation. And so then they go back and they rediscover the things that they enjoyed.

I think we also benefited from the fact that, you know, parents would see the kids watching Pokemon and be like, I used to watch that when I was a kid.

Lizzie Mintus: Yeah.

Don McGowan: And you know, you have a five and a six year old, it's still cool to do stuff with your parents.

So I would say the first step is, sit and take your brand and think about what are its natural extensions. For example, you have a brand. I have to do this because this is how the brands are thought of, even though I don't necessarily know that I love the gendering of this.

You have a boy's brand. Okay, boys brands naturally migrate into certain product categories. The natural migration of that is entirely predicated upon retail buyers. People underestimate the importance of the retail buyer in a retail situation. So, retail buyers for things like t-shirts, shoes. I'll just use the third one. Bedding. Those are natural brand extensions. Get one of those deals, if you can. You have your brand, you bring it back. That's the first sign.

If you can get one of those deals, you're showing that this brand is back, right? If you see a T shirt hanging on the rack at Walmart, that's a statement of popularity about the IP.

A lot of people think of merchandising in ways other than this. I look at it as basically an extension of brand marketing, right? So it's very important.

If you can't get it on the shelf at Walmart or Target, find another retailer. Like Kohl's does deals, etc. Find those buyers. Get yourself there. That's sort of the first one if you're a games brand and GameStop is still around and has a very strongly developed retail merchandise section. And they like the retail merchandise business because it gets people into the store where they can sell them games and peripherals also. And you know now maybe less games more game code cards, but also sell the peripherals, right? So get yourself in that store.

If your brand is rebooting, if you have a new game that you're launching, a GameStop push will get some press. Because GameStop gets media, because when GameStop does a thing, they're still like, oh, GameStop's still around. That goes around legacy media and goes around the gaming media. People pay a lot more attention to that, especially in the more sort of traditional space because they're surprised to see GameStop is still a thing.

Sorry, I just keep talking to you and you may have other questions.

Lizzie Mintus: No, I think it's really interesting. I think about this a lot. I have kids, which I always tell everyone on my podcast. I'm a mom. I'm a separate mom. I'm the mom I never thought I would be. But anyways, my kids love Peppa Pig and Paw Patrol. You know why? Because we go to this little playground that has all this plastic shit out. Like all these plastic cars, stuff you don't actually want to ever buy yourself, so it's great that it's accessible there. They have Paw Patrol cars. Then we go to Target. They have band-aids with Paw Patrol and then I feel like they just start seeing it, seeing it, seeing it. And what really put us over the edge is this little Tony box that plays stories, but you get all the characters and then soon they're like, oh, I love this. And it's so interesting to watch.

Don McGowan: A suggestion that I give to parents. I do it less now that I'm not a Pokemon, but I did it a lot when I was at Pokemon because I had a natural platform to speak to it, sit down, spend some time and learn about the various things that are available to kids. Pick an IP that you like the underlying message of, and steer the child towards that, right? If you're interested in making sure that your child does stuff with friends, Pokemon is a great choice.

Well because Pokemon is an IP that's naturally built around friend making, right? Like this is actually a thing that was involved in the discussion that got me hospitable to making a move over to Bungie. Back at the beginning of Covid, I was talking to one of my colleagues and I said, you know, we built a really big business on kids being in a place, doing a thing. What are we gonna do if moms don't want kids to be in places anymore? And I didn't really love the answer that I heard. So I was receptive to the idea of going to Bungie because I said, well, we may need to think about what we're going to do if mom doesn't want kids to be in a place doing a thing.

And so then I went to a company whose whole business was built on people not being in a place. And that's the thing. Pokemon is a brand built around kids being in a place, doing a thing with other kids. Ash might have been the world's worst Pokemon trainer, but he was still a friendly kid.

It's funny. Why Pikachu of all the Pokemon? My thinking on that is because when you think about Pikachu, pikachu in the anime is presented like a puppy. He's a puppy that follows Ash around, but he's a puppy that'll fight for you. He's the coolest puppy a kid could have.

He's a puppy that farts lightning. I mean, he's actually a mouse in the IP, obviously, but he acts like a puppy and he spits lightning. Yeah. I always used to describe him as a yellow mouse who farts lightning.

Lizzie Mintus: I bet Pokemon love that, but if they have any complaints, they just go to you anyways, right?

Don McGowan: Exactly, like I'm known to say, I'm the guy you report me to.

Lizzie Mintus: Yeah. I saw that on your Twitter, X, or whatever it is, and it made me laugh. So you work for Xbox and handle M&A, including acquiring Lionhead and divesting Bungie. You've done a bunch of M&A. What should a company consider who wants to sell from a legal perspective.

Don McGowan: So my first thought is if you want to get bought, I'm going to describe it like that rather than sell. It's more a get bought if you want to get bought, which maybe you don't necessarily even want, but your financial backers probably want an opportunity for you to get bought.

If you want to get bought, frankly, there's a couple of new risks. The biggest risk I think is AI. If you want to get bought, keep the AI out of your company.

Lizzie Mintus: I was so excited to talk to you about AI. So this is perfect.

Don McGowan: I will put a pin in that. We'll pivot back to it in a minute.

Lizzie Mintus: Okay.

Don McGowan: The second thing, if you want to get bought is make sure you know what you own. There's going to come a moment in M&A, we call it due diligence, where everything you own and everything you think you own is going to get put into a box.

It's going to get looked at by people in my line of work, whose whole job is to say they don't actually own that. And so you want to make sure you know what you own.

Third thing you want to do is you want to make sure your relationships with your employees, your key employees, are very locked down.

That's a little known thing about the Bungie acquisition. And this is me telling tales out of school, is a lot of the people who have senior roles at Bungie have strong retention incentives. There was a lot of talk around the Bungie layoffs about, well, didn't they have a lot of money for employee retention? And what those people were thinking of was the employee retention packages, right? Because when we did the deal, we described them as ways to encourage people to stay around. And that got reported as money to keep employees.

Lizzie Mintus: Golden handcuffs.

Don McGowan: It's not so much golden handcuffs as it is incentives. Right? Golden handcuffs are a useful term. I think it's a term that's best used to describe keeping people who don't want to be there anymore, right? As opposed to no retention incentive, which is for people who still want to be around.

Lizzie Mintus: Okay.

Don McGowan: There are definitely golden handcuffs in this life, right? Company compensation instructors can lead to some very perverse incentives. When I was involved in Pokemon, most of my comp at Pokemon was paid as bonus, which is interesting because bonuses are withheld. The withholding tax on bonuses is very different from the withholding tax on regular income.

Lizzie Mintus: Which candidates. rarely consider when looking at total comp.

Don McGowan: Correct. And that's why I'm bringing it up to you, of all people, because you know this, but other people don't.

Lizzie Mintus: I have many educational conversations.

Don McGowan: Yes. And so what folks don't realize is that bonus is being withheld at, and I'm going to use the actual numbers, 22%. But your income tax bracket might be 31 or 35 or 38, depending on how much you get paid. And so you're going to get a fun surprise from the IRS next year.

It doesn't mean your bonus was actually taxed at 22%. It means that's all your employer is going to withhold. You're still going to owe the rest of the tax yourself, right? And so that was always a big surprise, right? If you're looking to get bought, make sure that your employees aren't going to have any negative surprises like that.

Lizzie Mintus: Good point. Yeah. The surprise from the IRS is maybe one of the worst surprises out there.

Don McGowan: I euphemistically coined the term negative surprises for those moments.

Lizzie Mintus: That would be very much. Yeah.

Don McGowan: The additional one is make sure you're entirely buttoned up on anything that could get you investigated by any government agency.

Make sure all your advertising is completely perfect because the last thing anybody wants to buy is a government investigation.

Lizzie Mintus: Do you have any more specific examples in terms of what could go wrong?

Don McGowan: Oh, I was about to give you one. And I'm going to give you one based on a regulatory agency that everybody in the space knows to fear, which is the Australians.

The Australians have a particular set of rules around advertising that if you don't abide by them, gives them opportunity and cause to investigate you. And a small game developer might say, well, I don't live in Australia, I don't care, right? But you're getting bought by, I'll use an example, there's not a company I've worked at, you're getting bought by Ubisoft.

Okay, Ubisoft has offices all over the world. They gotta care about all sorts of crap. And so they gotta care about the fact that, well, we have employees in Australia, so we're subject to jurisdiction there. And so, we wanna make sure we don't make the Australians angry. And if the Australians get angry, they have very punitive fines.

If you're Ubisoft and you have an office in Australia, then you probably have bank accounts in that country that are susceptible to being seized. Once you get bought, you're about to have a big target painted on you by every regulatory agency in the world, because, think back to the Microsoft Activision thing, right?

Why did the UK get a vote on Microsoft buying Activision? I'm pretty sure Activision has an office in the UK, but I know Microsoft has too. Three if you count Lionhead, but they also have their main Soho office where they do their MSN work, which is still a thing. And they have Thames Valley Park, which is where they do their research work.

And so Microsoft is amenable to jurisdiction in the UK. Has employees there, has other business activities there, et cetera, right? So that's why the UK got a vote on Microsoft Activision. And so anything that Activision was doing went under the microscope because they were being bought by a large company that makes news inside those territories. That's where I say, make sure you're all buttoned up on everything you need to be buttoned up on or settle out any investigation you may have going on very quickly, because if you don't, although I don't have any knowledge of this, I feel confident that when we saw about three weeks ago, Activision announced their settlement with California. And people were like, well, it says in there that they didn't admit to any wrongdoing. Well, that's what all settlement documents say. But I suspect that happened because Microsoft probably made them do it as a condition of closing.

Lizzie Mintus: Right.

Don McGowan: Because that's the kind of thing that happens to the condition of closing is you have an obligation to make sure you're not being investigated by any government in the world or settle out the investigation as part of closing.

Lizzie Mintus: And the more I think people don't think about this who are employers, the more locations you have, the more liability that you have.

Don McGowan: And that's one of the fun things about remote work.

Lizzie Mintus: Oh,

Don McGowan: you're now exposed

Lizzie Mintus: from an employer. Yes.

Don McGowan: You're now exposed in territories where you didn't even think about it.

Lizzie Mintus: Yes. And they send you awful notices about your UI notice and all these different things. And yes,

Don McGowan: I mean, it's funny to me how much employment law is based on location. In two ways, one, the state in which you are, and two, so much of it is predicated on there being a job site. I remember when I was at Bungie, Bungie was, and I believe still is, a remote everybody company.

There were exceptions to that. On site building security, for example, had to go to the office. So those jobs weren't remotely eligible, but anybody else, yeah. We would get notifications from various states requiring us to post posters in the break room, because we had an employee in that state, and it'd be like, how the fuck do you post a poster in the break room? You don't even have an office. Like I'm not going to go to this person to say you have to put this up in your kitchen.

Lizzie Mintus: Please. Yeah.

Don McGowan: So we eventually just decided, what they must mean is there has to be somewhere on your internet. I think this was a huge missed opportunity for states during COVID was to make themselves more amenable to remote work.

In fact, there are some states, I had a conversation like back in 2018 with West Virginia Senator, Joe Manchin, about how can we make West Virginia more attractive destination for tech employers. Speaking of a state that missed its moment entirely during covid because the first thing they should have done was to revamp all of our labor requirements to make it so that they're not office dependent.

Lizzie Mintus: And, maybe in the case of Vermont, you have to get something notarized with the witness. I mean, they're dinosaurs. Vermont does not do tech. But it's so unappealing.

Don McGowan: Yes. Even better is when you're dealing with people outside of the United States and you have to deal with this thing that's called an apostille. We refer to it as consularizing a document. If you want to send something, for example, the government of Brazil, that's a U. S. Corporate record, right? Like proof that your company is registered to do business in the state of Washington, say, you need to send that to the Brazilian government for some reason.

Okay. Well, how do you prove that to the government of Brazil? The Washington Secretary of State is the repository for all corporate documents. Okay, but how do you prove that? Well, you get the United States Secretary of State, or State Department, to certify that the Washington Secretary of State is where those documents are kept.

So you have to send a document to a local state government office, and then to Washington, D. C., and then you send it to the Brazilian Embassy to the United States. And they certify that in the United States, it would be the Department of State that would tell you that the Secretary of State of Washington can say that.

Lizzie Mintus: That is the most mind numbing is the best word.

Don McGowan: It takes five months. It's the most ridiculous thing ever. And these countries are like, we want you to pay tax here. I want to pay my tax too. They're like, but how do we know you're real? You want me to, you want me to go through 15 layers of bureaucracy so I can pay you tax?

Lizzie Mintus: It's wild. I remember I was trying to open a business in another state and I had to call some phone number. I was doing it myself, which was early on in my business. Obviously a mistake. That's not a me activity. For my personality, but I had to call some numbers to get some code, but the number didn't work. That just makes my eye twitch. Like, what do you want me to do? I'm just trying to comply. Yes, what more are you asking from me?

Don McGowan: And one thing that's fun is that, in the U. S., you have to go through all this nonsense because of state tax. States that don't have state tax make it a little easier, but you still got to go through a lot of this shenanigans.

The U. S. is the only country that works like this.

Lizzie Mintus: I'm not surprised.

Don McGowan: American companies don't realize that everybody else isn't like this, right? Like, go back to the discussion that I was talking about with respect to working in France a few minutes ago, right? People don't realize France doesn't do this.

In the U. S. it's so bad that you get companies that are remote first, will tell you, okay, but if you're on vacation, you can't work while you're on vacation.

Lizzie Mintus: Yeah.

Don McGowan: You just exposed us to a new tax problem. It's funny. I know people that work in the hedge fund industry.

And one of the things they do is they're like, we fly private everywhere because if we're in a high tax state, we don't want to wait overnight for our flight. Because that exposes us to so much tax that it's actually cheaper for us to fly private.

Lizzie Mintus: Well, that's a nice excuse. Right. The airport is a similar experience to me calling a number that doesn't work.

Don McGowan: Oh yeah. I spend 125 days on the road every year at Pokemon. I know my way to the airport.

Lizzie Mintus: I have an efficient system too, but the airport is still my personal hell. Just, even just waiting in line. Okay, talk to me about AI and games.

Don McGowan: AI and games.

Lizzie Mintus: Yes.

Don McGowan: The big risk on AI is you can't copyright any of it.

So, go back to the discussion of why it came up in the discussion of you're getting bought. You don't own any of your assets because you made them with AI. So, anybody can rip you off. Not only you don't own it, but nobody can own it. The position that the U. S. Copyright Office is taking is AI generated assets are impossible to copyright.

Okay, fantastic. Nobody can own it. You're selling your company. What do you own when you're a company? The thing that is the object of commerce in a corporate acquisition is three things. Your code base, your collection of contracts, and your collection of IP. At least one of those doesn't exist because you don't have any IP, right?

It's funny, inside the games business, we use the term IP in a very non standard way. I had a fun conversation with a colleague of mine when I was at Pokemon, because for historical reasons, all of the Pokemon IP is originally registered by Nintendo.

This guy made this amazing to a lawyer statement to me. Nintendo doesn't own the IP, they just own the copyrights. And I was like, what the hell do you think the IP is? Do you know what IP stands for? It's the term of art for copyrights and trademarks. But of course, he meant the brand, right? In the way that we all in the industry use it. The point being, the brand instantiates in the world by a bunch of registrations of copyrights and trademarks.

Basically, trademarks are an exclusion. Copyrights are a permission. You have the right to be the only person can reproduce this thing. Trademarks are, you're the person who has the only right to associate this thing to a category of merchandise.

Lizzie Mintus: So what if you want to make a bunch of assets for your game, AI spits them out for you, and you tweak them a little bit. Is it okay then?

Don McGowan: Copyright offices. The U. S. Copyright offices said we won't let you register that either.

Lizzie Mintus: And how is that proven?

Don McGowan: So it's funny. I'm doing some advisory work with a company that does AI detection and they mentioned this. I was like, you guys know they're just gonna lie, right? Of course, they're just gonna lie on their forms. Everybody's just gonna lie. They're like, Well, what do you mean? I'm like, they're gonna lie. And then what's gonna happen is it's gonna be out there in the world. Oh, it's time for us to generate these assets. Okay. Fine. You hired a third party artist to develop 15 pieces of character art. Okay. They AI'd them. There's your hypothetical example.

Lizzie Mintus: Yeah.

Don McGowan: They AI'd them. You had a clause in your contract that said you won't use AI. Okay. The guy lies. Because the choice is get paid or not get paid. They're going to get paid. And so they're going to lie. And so what's going to happen is you're going to put this thing out in the world. And it's already going to exist inside your game. You better be able to patch your game. Live service game at least you can patch it on the fly. Mobile game you can patch it on the fly. But if you're just dealing with regular box product

Lizzie Mintus: Yeah,

Don McGowan: good luck with that, right? If you're developing a mobile game And you deploy the mobile game through, let's use iTunes as my example. Apple has a fairly robust patching process, so they can force a patch down. This is analogous to a thing that actually happened to me.

And it's a story that's public, so I can tell it. When I was at Xbox, we made as a launch title for the 360, cause that's how far back I go. I did the launch of the Xbox 360. We had a game called Perfect Dark Zero. Perfect Dark Zero had a battle scene in a temple. And the floor of the temple had what the artist thought was an art design on it. But it wasn't an art design. It was Arabic calligraphy. And what it said in Arabic was, there is no god but Allah and Muhammad is his prophet.

Lizzie Mintus: Oh, yikes.

Don McGowan: And there was a gun battle on that. And we found out because somebody put it up on a forum and said, what the fuck is this? And so we were like, okay, patch this thing out right away. We had just launched Xbox live so we could patch the title but there was no forcing anybody to patch it the way you could today with the series X or PS5. Where you can just sort of, okay, we're gonna force it down. That's the kind of thing.

And now you had Kate Edwards on here a few, a little while ago. I used to work with Kate when I was at Xbox. She's fantastic.

Lizzie Mintus: Yeah.

Don McGowan: I remember that call to Kate and she was like, what the fuck. What did two people do? Was absolutely like, yep, this is a thing. We did it.

That made me ready to go into the world of the Nintendo non-connected devices for 12 years. You got one chance to get it right. You got to get it right the first time.

Lizzie Mintus: Very.

Don McGowan: But yeah, you generate the asset with AI. You don't own it. So the people who are going to buy you just knocked a zero off the price of your company.

Lizzie Mintus: Yeah, but let's say you're making Red Dead Redemption. How many people even worked on it, right? And you get some contract artist in whatever other country. How are you supposed to verify that now?

Don McGowan: There are tools.

Lizzie Mintus: Okay, Call Don for more.

Don McGowan: I was gonna say do the tools work? From what I've seen the one that I'm working with does. Yeah, but do they work perfectly? We're seeing it all over the press right now people are getting tagged with like, oh they used AI to generate this art. People are taking very public positions on this stuff and it's a challenge. I feel for some of the folks that i've seen.

You know, It's funny. i'm deliberately and obliquely, not naming one company but I know the people in their legal department that you know got tagged with this problem when it happened. And I feel for them.

Lizzie Mintus: Hard times. Okay. I have one last question.

Don McGowan: Fire away.

Lizzie Mintus: It's kind of a big one. Tell me your thoughts on the Epic Apple antitrust lawsuit.

Don McGowan: So back in the day, I say this by way of opening, back in the day before I got to Microsoft even, so like in the early 2000s. I was a competition lawyer, which is the non U. S. word. Yeah, which is the non U. S. word for antitrust. So by I say this by way of, that's my bona fides, is I have been a competition lawyer.

So I think the court got it entirely wrong. When you do the market definition exercise, the market is games and the market is devices. And so when you're looking when you're looking at the iPhone, there is only one market. It's called iTunes, and Apple has monopolized it.

Go back to the old Microsoft Internet Explorer lawsuit. Right. And the question was, functionally, can you have an operating system without a web browser? If the answer to that is yes, Then the web browser is not an integral part of the operating system, and the court reached the decision. The answer was yes. And so there you go. So can you have a phone without an app store? The answer is obviously yes, right?

All the natural purposes of a phone calling messaging, the only thing that an app store is for is to turn the phone into something more than a phone. So just like turning a computer operating system into something more than a computer operating system.

Apple wasn't tied selling. I actually teach entertainment law. I do a class on this. Was it tied selling? It's absolutely tied selling. You can't buy an iPhone without getting access to iTunes. So there's your answer. They are requiring you to go through their one tied selling method.

And yeah, maybe there are consumer advantages. I mean, here's my phone. You may not be able to see the logo through the case, but that's an iPhone. I use an iPhone, right? Like, I'm not morally opposed to the Apple environment, by any means. But the court just got it wrong. And the decision last week, or this week, to deny certiorari to the Supreme Court, the Supreme Court got it wrong, too.

And why they got it wrong is because they're all, there is this thing among lawyers. It's called the Federalist Society. You may have heard of it colloquially. I'm not going to go on to one of my usual rants about the Federalist Society.

This is a more oblique one. The Federalist Society is very associated to libertarian economics, and libertarian economics is very associated to a school called Law and Economics Theory and the University of Chicago School of Economics, and a judge named Robert Bork.

And for us olds, Robert Bork was a guy that Ronald Reagan tried to name to the Supreme Court in the 1980s. And he was blocked because it turned out he was a terrible person. But also, he was terrible at judging, because Robert Bork was the guy who came up with the idea that the only thing we should care about is consumer prices. And that's just wrong. The other thing we should care about is whether or not anybody else can start a business doing this thing, right?

Going back to the Microsoft Internet Explorer case, you know, that was brought because Netscape wanted to start a web browser and Microsoft foreclosed them out of the market. And so the U. S. government said, well, we think there should be a competitive market in this kind of thing.

And, so too, you'd think, I mean, I used to teach the Apple, Epic case by saying Epic should win. I think it's just an absolute error of law that they lost. I could blather on about this forever except I know we've hit the hour

Lizzie Mintus: Thank you for letting me poke you with that final question. It was a delight

Don McGowan: Here to help.

Lizzie Mintus: Yeah, you're funny. We've been talking to Don Mcgowan. Don, where can people go to find out more about you, follow along Biscuits and Gravy?

Don McGowan: Follow along Biscuits and Gravy. I am on most of the social media platforms. Well, I have an Instagram account that I don't use. Biscuits and Gravy have an Instagram account that my wife maintains.

I am on all the other regular social media platforms. If you look for me on Twitter, it changed its name. Or if you look for me on blue sky, I go under the handle at legal minimum, which was my first failed attempt at branding when I was going to start writing guides. The legal minimum you need to know about X. And then I realized nobody's going to pay money for it. And that was a stupid idea, but I come up with a lot of stupid ideas. Maybe many of the things I said today were some of them. Who knows?

But yeah, or follow me on LinkedIn. My actual name. I use LinkedIn like Instagram, so I don't really maintain an Instagram account. You'll see a lot of pictures of my dogs. And or the output of my dryager.

Lizzie Mintus: And maybe your workout set up as well.

Don McGowan: Oh, I was going to say, and my home gym.

Lizzie Mintus: And hopefully your rooftop deck.

Don McGowan: The roof deck that I just had furniture delivered for. It's funny. This wall behind me is completely white for a reason is because I'm eventually going to take the various thing I have and start hanging.

When I was at Bungie, I'm also an internet minister as so many of us are. I did the wedding for one of the people on my team and he gave me one of the groomsmen gifts. Which is a Nordic battle axe. So I have a Nordic battle axe that I need to hang somewhere. So that wall behind me is solid wood. And waiting for me to hang the battle axe on it. It's solid wood so that the anchors won't rip out of the wall.

Lizzie Mintus: You need it there. You'll be the most badass lawyer of all.

Don McGowan: Right. And it's funny, I had a bunch of space for various relics and other things. Behind me or behind the screen on shelves, there are what my wife refers to as my collection of treasures. Having worked in games for 20 years, I've got a very good collection of ship gifts. It's actually up there, which is why I'm looking up. I have the world's most cursed Microsoft ship it. Every cursed product Microsoft ever launched is on that ship it.

Lizzie Mintus: Social media post. You need to post it.

Don McGowan: The Xbox live vision camera. Remember the always on camera, the Strip Uno camera? I have a ship it for that. I have a ship it for Viva Piñata party animals. The minigames version of Viva Pinata, just every cursed product Microsoft ever launched is commemorated on my shipment.

Lizzie Mintus: Follow Don.

Don McGowan: Shadowrun for Vista.

Lizzie Mintus: We need to see it. The people need to see this, Don.

Don McGowan: I feel like I need to stand up and grab it, but then you'll see that I'm wearing my pajamas.

Lizzie Mintus: Podcast issues. I'm definitely not on the bottom, so. Thanks again, Don.

Don McGowan: Thanks to you. See you, Lizzie.

Thanks so much for listening to the show this week. To catch all the latest from Here's Waldo, you can follow us on LinkedIn. Be sure to click subscribe to get future episodes. We'll see you next time.

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