Legal: Pay Per View or Mobile Phone

Every time a new type of technology is developed in the entertainment industry, including in motion pictures, issues arise regarding whether use of that new technology was intended in the original agreement or license.

When does an agreement or a license granting a company rights to a copyrighted work, include uses not yet discovered? The matter goes as far back as silent pictures when the question was whether the license to use copyrighted material in a silent movie also included the right to use the same material in the new medium of “talkies.” The potential for problems continues to exist for producers today who acquire rights to pre-existing material or who grant their film rights to a distributor. If the terms are not clearly stipulated, the question then is who reaps the entire windfall associated with the new medium—whatever that new medium may be.

Over the years, the courts have continually examined new technology issues. Most of the recent cases involve videocassette rights. Disney, Paramount, MGM, CBS, Lucasfilm, the actor Mickey Rooney, the films Casablanca (1942)and American Graffiti (1973), and even the children’s book character Curious George (which by the way is, or was at some point, licensed by Universal Pictures and Imagine Entertainment), have all been involved in litigation regarding whether a particular grant of rights included future technologies.

Excluding a clear, new or future technologies clause, which covers the DVD market in a licensing agreement for a film or television program, would mean being cut out of a market that grosses $24 billion a year. And that’s just in the United States. These figures are not limited to major studios either (Shrek 2, which in its first three days on shelves sold 12.1 million DVD and video units combined, 11 million of which were DVDs), but also include the independent world with documentaries such as Super Size Me (2004) selling over one million DVD units, and narrative films like Napoleon Dynamite (2004) making over 63 million dollars in DVDs alone, a figure that surpasses its box office receipts.

DVD is hardly a new technology. It does, however, clearly mark the quickness with which technology emerges and how lucrative well-developed technologies can be in the entertainment business. While just about every area of entertainment—including television viewership, movie-going, and even CD sales—was declining, the DVD industry was growing quickly, handily replacing VHS. As recent as 2003, revenues from home entertainment (the video market) were significantly higher than from theatrical box-office returns. By mid-2003, DVD rentals surpassed VHS, pushing studios to stop creating VHS formats and forcing major retail stores to stop selling or to cutback on VHS.

Distribution or licensing agreements that acquire a complete or full range of rights to a film or program will stipulate every form of media imaginable (by way of a very, very long list that only lawyers can get away with writing) and should, after that, venture to include media that doesn’t exist at the time of the agreement. May sound like overkill, but the issue of “new or future technologies” in the film and television industries is a matter that is consistently litigated by major studios and networks because of the revenue earning potential of exploiting copyrighted material.

I won’t spend too much time discussing copyright, other than to say that although the subject can be a bit arcane (and rather dry for that matter), for us law geeks it is a thing of beauty, particularly when it involves film industry agreements such as distribution and licensing. For now, let’s remember that copyright grants you (the owner of the film) five exclusive rights –the right to reproduce, adapt, distribute, perform, and display the film. Meaning you can permit or prevent others from exercising those rights. Transfer of rights or licensing, are normally made by contract.

How far do the rights granted in an acquisition agreement or copyright license permit a film company to go? If there is an agreement or license granting all rights in a work (a script, film, program), then there is no issue. Under those terms, the copyright owner (the screenwriter or producer) has conveyed that everything he or she retains has no present or future use (nothing). Problems come up when, for example, the owner splits the rights, in other words, enters into more than one agreement or licensing arrangement without clearly specifying the media covered and the media retained, particularly future technologies.

Film distributors usually want a full range of rights (especially if there’s a hefty advance or licensing fee), in part because the more rights the distributor secures, the more opportunities he or she has to potentially recoup and profit from exploitation of those rights for the specified years contracted. In addition to commonly known rights such as television and cable, we have the now almost antiquated VHS, the not so new DVD, the relatively new and not as lucrative markets such as VOD (Video On Demand), micro (or mini) movies for cell phones, and other emerging technologies. For example, a complete and full grant of rights (regardless of medium), stipulating that all present and “future” uses are covered, could stipulate:

“The Rights granted herein by Production Company to Distributor include any and all media, whether now known or hereafter discovered or devised, including without limitations Theatrical motion picture rights (including all silent, sound dialogue, and musical motion picture rights); Non-Theatrical including without limitation, airlines and ships serviced from or calling any and all ports, hotels and motels; television including without limitation Pay TV, Pay Per View, Video On Demand, Basic Cable, and Free TV; Internet, digital or online, mobile phones, multimedia and game devices; DVD/Home Video Rights in all forms and formats by any present or future methods or means, whether now or hereafter known or existing [sort of like “discovered or devised”], including without limitation, videograms, videocassettes, laserdiscs, and other audio-visual compact devices of any kind or nature now or hereafter existing; and any and all allied, ancillary and subsidiary rights.”

A producer who wants to retain certain rights, including new and unknown uses, would (i) specifically list and limit the rights granted (theatrical, non-theatrical, cable, free television) and (ii) include a “Reservation of Rights” section in the agreement, specifically stipulating what rights the producer is keeping, including a future technology clause. For example,

Reservation of Rights: “Any and all other rights (and any reproductions or derivative works thereof), whether now existing or which may hereafter come into existence, not expressly granted to Company herein, including, but not limited to, video cassettes, video discs, laser discs, digital versatile discs (DVD), or other devices, whether now known or hereafter discovered or devised, print publication, electronic publication in all media and in all formats other than those addressed herein, are reserved for Producer.”

A single agreement would cover both a clearly enumerated “Grant of Rights” and, where applicable, a “Reservation of Rights,” spelling out what has been granted and what has been reserved, including new or future technologies. With the development and rapid proliferation of new media for exploitation of film, a clear stipulation of what type of rights are granted and/or reserved is more important than ever.

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