Using third-party intellectual property (IP) in arcade games requires careful attention to licensing agreements to avoid legal issues. Developers must secure proper licenses from IP owners, which often involve negotiations for rights, royalties, and usage terms. Common IP types include characters, music, and branded content. Failure to obtain licenses can lead to lawsuits or game removal. Always consult legal experts to ensure compliance with copyright and trademark laws. Proper licensing not only protects developers but also enhances game credibility and appeal.