Watchmen Lawsuit Pt. 14: How Did Paramount Acquire International Distribution Rights?

One of the reasons the Watchmen legal case can be difficult to understand is because of the complex chain of ownership in the film rights. At the risk of over-simplification, the current suit is essentially about who has superior rights: Fox or Warner Brothers? There are, however, others who have a stake in the Watchmen movie. Specially, Paramount, who is not a party to the suit, has international distribution rights. This raises a red flag. If Fox did not convey rights to Paramount, where did their rights come from?

Warner Brothers' memorandum in support of their fourth Motion in Limine explains how a convoluted series of deals led to Paramount's involvement in the Watchmen movie. A link to the full document is featured at the bottom of this post but the following summary gets to the heart of the matter.

After his agreement with Fox, Lawrence Gordon entered Watchmen turnaround agreements with three different companies: Universal, Paramount and Warner Brothers. Universal's efforts included hiring David Hayter to write a screenplay. Universal dropped the project. Paramount picked up the project and optioned the screenplay rights from Universal. When Warner Brothers began its own Watchmen project, the company's intent was to acquire rights in Hayter's screenplay in exchange for reimbursement of Paramount's development costs and bringing on the company as a co-financier.

There were a few problems with the deal between Warner Brothers and Paramount. Paramount allegedly failed to exercise its option on Hayter's screenplay, which prevent them from transferring proper title to Warner Brothers. Additionally, Universal still claimed development rights under its turnaround agreement. Universal, Paramount and Warner Brothers all settled their disputes. Presumably, Paramount came on as co-financier and gained international distribution rights in their settlement with Warner Brothers. One has to wonder what Paramount actually owns at this stage.

1. Warner Brothers Memorandum in Support of Motion in Limine No. 4

Watchmen Lawsuit Pt. 13: This Case is Far From Over

It's important to note that the December 24, 2008 Watchmen ruling was related to both studio's cross motions for summary judgment. Fox's original summary judgment motion only requested relief for Claims 1 (copyright infringement) and 5 (declaratory relief) of their original complaint. So, even though Fox won on these two claims, Claim 2 (interference with contract), Claim 3 (breach of contract and Claim 4 (an accounting of incomes, revenues and profits) all remain unresolved. The Hollywood Reporter now reports that the remaining issues will go to trial on January 20, 2008. An attorney for Fox reportedly said the studio will continue to seek an injunction against the March 6, 2009 release while a Warner Brothers attorney reportedly said that a "settlement is unlikely."

Watchmen Lawsuit Pt. 12: More Detail About the Ruling for Fox

By now, it is well known that the judge has ruled in favor of Fox on Claims 1 and 5 in the Watchmen lawsuit. Two useful questions are left unanswered by various media reports: 1) why did Judge Feess reverse his previous position; and 2) what was the specific reason he ruled in this way? The December 24, 2008 order granting summary judgment to Fox provides the answers (a link to the order is featured at the bottom of the post).

Judge Feess provided the following answer to the first question (my emphasis added):

At the hearing on these [summary judgment] motions, the Court advised the parties that it had tentatively concluded that disputed issues of fact preclude a grant of summary judgment for either party. Both sides . . . argued that resolution of the lawsuit ultimately turns on the interpretation of contract terms, a task that is the responsibility of the Court. Having further reviewed the record and the arguments of the parties, the Court concludes that the parties are correct and that the issues presented for summary adjudication can be resolved through the pending motions.

After discussing Fox's relationship with Lawrence Gordon, the judge provided the answer to the second question:

In the Court's view, Gordon's agreement to and execution of the Turnaround Notice indicates a clear understanding that Fox owned important rights in "Watchmen," including, at the very least, a distribution right, and that Gordon was required to comply with the terms and conditions of the buy-out if he wanted to acquire those rights. Because Gordon never paid the buy-out price, he never acquired Fox's rights in "Watchmen," and those rights therefore remain with Fox.

Judge Feess also went a step further in saying that "Warner Brothers exercised its option to acquire Gordon's rights after being place on notice of Fox's claim and having received the documentation upon which this Court bases its ruling. Thus, Warner Brothers cannot argue that its interest in "Watchmen" takes priority over Fox's interest." Ouch.

1. 
   Order re: Cross-Motions for Summary Judgement

Diversification Time

Coverage of the Watchmen suit will continue well into 2009 but posts are beginning to diversify, including topics like the dispute between Fox and The Asylum. Thanks for your support.

The Asylum and The Art of The Movie Knock-Off

Sometime in November 2008, The Hollywood Reporter noted that Fox was in the process of taking action against The Asylum (aka The Global Asylum, Inc.) over their film The Day the Earth Stopped. Apparently, this dispute has not progressed any further than a cease-and-desist letter. There are no related federal or state filings on record and the film is still being marketed and sold by The Asylum.

What is Fox upset about? Remakes, knockoffs and recycled concepts are an integral part of the film industry. The Asylum, however, has turned the knock-off into a science. The company deals in what it calls mockbusters (actually registered as a trademark) or films that bear a resemblance, however large or small, to bigger studio productions. First, the similarity is manifested in stories and titles. For example, the plot for The Day the Earth Stopped is described as follows:

Hundreds of massive intergalactic robots appear in all of the major world capitals with an ultimatum: Prove the value of human civilization or be destroyed.

This is very similar to the plot of The Day the Earth Stood Still. Second, the similarities occur in the marketing materials. Compare the poster for Fox's remake and The Asylum's mockbuster film:

Finally, the release dates of films from The Asylum are even tightly coupled to those of the studio titles, thus allowing the company to ride the publicity wave created by the millions of dollars in studio marketing. For example, The Day the Earth Stopped was released on December 9, 2008 while The Day the Earth Stood Still was December, 12 2008. Coincidence? The following chart compares titles and release dates of other films from The Asylum (left) with those from major studios (right).


As an aside, Sunday School Musical really stuck out when compiling the list.

In any case, one might think this will be smooth sailing for Fox but as is often the case in these matters, intuition is a faulty guide. Some elements of a film are protected by copyright (script or characters but neither character names nor titles) while others may fall under trademark (titles might be protected) or right of publicity laws (individuals may have these claims, depending on state law). If this dispute evolves into actual litigation, it will be interesting to see how Fox frames the case.

Watchmen Lawsuit Pt. 11: Lawrence Gordon Gets a Footnote

Nikki Finke at Deadline Hollywood Daily turned up footnote one from the judge's ruling, which discusses Lawrence Gordon. Most certainly, there are more useful things in the opinion than this footnote, which I transcribed below, but it is intriguing (my emphasis added):

Gordon's testimony regarding the facts, circumstances, and events surrounding the negotiation of the 1994 agreements would have been assistance to the Court in evaluating the objectives of the parties at that time. However, Gordon refused to testify on that subject during his deposition because he supposedly could not separate what he knows based on his own recollection from what he learned from counsel. Gordon's counsel therefore asserted the attorney/client privilege and instructed Gordon not to answer any questions on the subject. The Court takes a dim view of this conduct and questions whether the assertion of the privilege was proper. Moreover, the assertion of the privilege does have a consequence: having now reached a decision the record before it, the Court will not during the remainder of this case receive any evidence from Gordon that attempts to contradict any aspect of this Court's ruling on the copyright issues under discussion.

There is a logic behind invocation of the attorney/client privilege in this way (guess) but its efficacy in the long term is very weak.

Watchmen Lawsuit Pt. 10: Judge Rules in Favor of Fox on Summary Judgment

The previous post regarding settlement status was rather prescient. NY Times is reporting that Judge Feess reconsidered his previous summary judgment decision and has ruled that Fox does indeed own a copyright interest in the Watchmen movie. The paper quotes the judge's December 24, 2008 ruling as stating that “Fox owns a copyright interest consisting of, at the very least, the right to distribute the ‘Watchmen’ motion picture." Furthermore, the judge stated that "the parties may wish to turn their efforts from preparing for trial to negotiating a resolution of this dispute or positioning the case for review." Frankly, this is where the case seemed to have been headed the entire time (recall the previous post discussing Fox's summary judgment motion). The order and related documents will be posted once they become available. It should be noted that this does not necessarily mean the case will be over anytime soon. Warner Brothers might decide to appeal instead of settle, thus prolonging the case longer that a trial would.

Watchmen Lawsuit Pt. 9: Has There Been Settlement Progress?

On December 22, 2008, the presiding judge in the Watchmen suit (Gary Freess) entered a scheduling order setting some critical dates and deadlines. In addition to these dates, this order included some interesting information (my emphasis added):

The pre-trial conference shall be held on January 7, 2009 at 3:30 p.m. Proposed or agreed upon voir dire questions, verdict forms, special interrogatories, joint statement of the case, memoranda of contentions of fact and law, exhibit and witness lists, joint status report regarding settlement, and a joint statement regarding disputed instructions and jury forms shall be lodged no later than December 31, 2008. The parties shall file a pretrial conference order with the Court no later than January 2, 2009.

This means, among others things, that by December 31, 2008, a status report about progress in settling the lawsuit will be filed.  This report should provide the first public indication (if it isn't sealed) of what Fox and Warner Bros. have been doing to end the legal case without going to trial. Commentary will be provided once this and other documents are available.

Watchmen Lawsuit Pt. 8: Motions in Limine

The list of Motions in Limine on both sides is long and technical. Instead of posting them here, I have compiled a list into a PDF (see below). This listing should be useful later on as a reference.

1. Index to Watchmen Motions in Limine

Watchmen Lawsuit Pt. 7: Studios Getting Ready For Trial

On December 17, Fox and Warner Bros. each filed Motions in Limine (Fox filed 8, Warner Bros. filed 6) to exclude certain evidence from being presented at trial on January 20, 2009. That was fast but its obvious they had these documents prepared far in advance. In a related move on December 18, 2008, the presiding judge postponed the December 29, 2008 Pre-Trial Conference and Motion in Limine Hearing until further notice. Delays, delays and more delays! Who is going to balk?

For those unfamiliar with the term, Motions in Limine are heard by the presiding judge who uses the Federal Rules of Evidence to determine whether or not the evidence in question should be heard by the jury. Posts in the near future will examine what each side is trying to exclude from being heard by the jury. Some of it looks strange.

Watchmen Lawsuit Pt. 6: When is the Movie Supposed to Come Out?

Summary judgment motions on both sides were heard on December 15, 2008 and were denied. A written opinion is not available at this point; only the minutes are available (see below). Furthermore, the trial date was pushed from January 5, 2008 to January 20, 2008. If a settlement does not happen, how long would a jury trial last? One month? Two months? Three months? This movie is supposed to come out in March? Maybe.

1. December 15, 2008 Civil Minutes
   

Watchmen Lawsuit Pt. 4: Warner Bros. On The Ropes

On April 7, 2008, Warner Brothers filed a motion to dismiss Claims One (copyright infringement) and Two (interference with contract) of Fox’s original complaint; Fox filed its opposition to the motion on April 21, 2008. On August 13, 2008, Hon. Gary Allen Feess entered an order denying Warner Brothers’ motion to dismiss. Why? To prove interference with contract, Fox needs to show: 1) the existence of a valid contract between Fox and Lawrence Gordon Inc, 2) Warner Brothers knowledge of the contract, 3) intentional acts designed to induce a breach or to disrupt the contractual relationship, 4) actual breach or disruption of the contractual relationship, and 5) resulting damage. Based on Fox’s complaint and evidence as presented in its extensive exhibits, the court found that Fox's "allegations establish the existence of an agreement, Warner Brothers’ knowledge of the agreement, Warner Brothers’ intentional acts that were designed to, and in fact did, disrupt the relationship between Fox and Gordon, with resulting harm. That is sufficient to state a claim for interference with contract."

Similarly, the court found that Fox's complaint “adequately states a claim for copyright infringement even if Fox does not hold the entire bundle of rights.” To clarify, go back to the facts. Fox alleges that Gordon paid no monies in order to execute the turnaround agreement with Fox. This would mean that, according to the terms of the settlement agreement, Fox maintained distribution rights in the Watchmen movie because Gordon had no rights to convey to WB in the first place. As a result, any subsequent production by WB would constitute copyright infringement.

Watchmen Lawsuit Pt. 5: Fox Tries to Finish

On November 17, 2008, Twentieth Century Fox filed a Motion for Summary Judgment in regards to Claims 1 (copyright infringement) and 5 (declaratory relief) of its complaint against Warner Bros. et. al regarding the Watchmen movie. In this motion, Fox requested that the court find that, as a matter of law, Warner Bros. committed copyright infringement of its exclusive domestic distribution rights, its exclusive foreign distribution rights and its exclusive production rights in the Watchmen motion picture. In relation to claim five, Fox requested declaratory relief from the court stating that:

1. Fox, and not Warner Bros., owns copyright interests to use or exploit Watchmen source material to distribute a theatrical picture and other derivative works.
2. Fox, and not Warner Bros., owns the rights to use or exploit Watchmen source material to develop and produce a theatrical picture and other derivative works.
3. Fox, and not Warner Bros., owns the rights to use or exploit Watchmen source material to develop, produce and distribute a theatrical picture and other derivative works based on Changed Elements in the Watchmen project.

Given the judge’s ruling on Warner Bros. 12(b)(6) motion, it will be very interesting to see how he rules on the summary judgment motion. Note the design of Fox’s summary judgment motion: it is only focused on the infringement and declaratory relief claims. This suggests that Fox believes there is enough evidence on the record to have the judge rule to enter a judgment against Warner Bros. on these claims but not the contract interference or breach claims. Indeed, the judge’s statements in the motion to dismiss hint at their moves. The judge wrote that “it is particularly noteworthy that nothing on the face of the complaint or the documents supplied to the Court establishes that Gordon, the claimed source of Warner Brothers’ interest in ‘Watchmen,’ ever acquired any rights in ‘Watchmen.’ Thus, Warner Brothers’ arguments, if they are to succeed at all, will need to find support beyond the face of the complaint and the applicable agreements.”

Remember that if Gordon never acquired any rights, he had nothing to convey to Warner Brothers. Thus, if Warner Brothers produced a Watchmen film, they would be in violation of Fox’s exclusive rights to the motion picture property (obtained through D.C. Comics). Hearings on Fox’s summary judgment are scheduled for December 15, 2008. The trial is scheduled January 2, 2009. The film is scheduled to be released on March 6, 2009. Go back to the original complaint and look at what sort of damages Fox is seeking in relation to Claim 1 (copyright infringement). In addition to requesting actual or statutory damages in accordance with proof of each act of copyright infringement, Fox requested "preliminary and permanent injunctive relief" enjoining Warner Bros. from "reproducing, distributing, publishing, adapting, displaying, advertising, promoting, offering for sale or transfer and/or selling or transferring any production of The Watchmen or any work substantially similar to same." The clock ticks.

Watchmen Lawsuit Pt. 3: Facts

The following facts are largely derived from facts presented in the judge's motion to dismiss order and the various exhibits submitted by Fox and Warner Bros.

Fox purchased the motion picture rights for the comic book Watchmen from D.C Comics (Alan Moore and Dave Gibbons created the property but DC retained the copyrights). Fox then entered a domestic distribution agreement for a Watchmen movie with Largo Entertainment, which was a joint venture between JVC Entertainment Inc., Golar, Inc. (Lawrence Gordon, President) , and BOH, Ltd. Fox executed a "quitclaim agreement" conveying all of its rights in Watchmen to the venture on the condition that if the film was produced, Fox would receive domestic distribution rights as well as interest and a share of the profits. In November 1993, Golar, Inc. and Lawrence Gordon withdrew from Largo Entertainment. Largo subsequently quitclaimed all interest in The Watchmen to Golar Inc., which by then was operating as Lawrence Gordon Inc. Fox then negotiated a “settlement and release agreement” (dated July 6, 1994) with Lawrence Gordon Inc. in which the project would be placed in “turnaround” by Fox. The "turnaround notice" was attached to the settlement and release agreement. This document is the key to the entire litigation.

The turnaround notice gave Gordon an option on Fox's interest in Watchmen. The agreement obligated Gordon to pay a buy-out price (equal to advances, investment and interest) to Fox upon the commencement of any Watchmen production. If changed elements or terms were introduced into the production before the buy-out price was paid, Fox retained the right to review and reject such terms. Exercising the buy option would grant Fox profit participation in the production. Finally, a “no assignment” clause limited Gordon’s ability to assign rights with respect to the project before paying the buyout price without approval by Fox. In May 2006, Warner Bros. entered an "option/quitclaim agreement" with Golar Inc. and LEI Development Projects in which it obtained distribution rights to the Watchmen film. Interestingly, the lengthy list of related materials identified in the agreement does not include the July 6, 1994 settlement and release agreement between Gordon and Fox.

Watchmen Lawsuit Pt. 2: Legal Claims

On February 2, 2008, Twentieth Century Fox Film Corporation filed a complaint in U.S. District Court, Central District of California against Warner Bros. Entertainment Inc. (WB) et. al. in relation to WB’s production of Zack Snyder's Watchmen movie. Fox made the following claims against WB: 1) copyright infringement, 2) interference with contract, 3) breach of contract, 4) an accounting of incomes, revenues and profits, and 5) declaratory relief. As might be obvious, the complaint outlined damages for each claim.

Most significantly, in addition to requesting actual or statutory damages in accordance with proof of each act of copyright infringement found in relation to Claim One, Fox is requesting "preliminary and permanent injunctive relief" enjoining WB from "reproducing, distributing, publishing, adapting, displaying, advertising, promoting, offering for sale or transfer and/or selling or transferring any production of The Watchmen or any work substantially similar to same." In other words, Fox is seeking to bury the Watchmen movie. In fact, on May 14, 2008, Fox notified Warner Bros. et al. through its attorneys that it should cease in any such activity. No injunction has been entered to prevent WB from promoting or advertising the film so WB continues to advertise and promote the film in anticipation of a March 6, 2009 release. Whether the film is released as anticipated depends on a number of things.

Watchmen Lawsuit Pt. 1: Legal Documents

PDFs of documents discussed throughout are featured below. Many of these documents were submitted to the court as exhibits by each side in the suit and organized into long PDFs for electronic distribution. I split them up for ease of use. The agreements (documents 7 - 11) provide a deep view into how studio production deals operate. Filmmakers take note.

1. Fox's complaint
2. Warner Brothers' Motion to Dismiss
3. Fox's response to Motion to Dismiss
4. Judge's Order re: Warner Brothers' Motion to Dismiss
5. Fox's Summary Judgment Motion
6. DC Watchmen Copyright Forms
   
7. Distribution Agreement between Fox and Largo Entertainment
8. Addendum to Distribution Agreement Between Fox and Largo Entertainment
9. Quitclaim Release between Fox and Largo Entertainment
10. Settlement and Release Agreement between Fox and Lawrence Gordon, Inc.
    
11. Quitclaim Agreement between Warner Brothers, Golar, Inc. and LEI Development Projects
    

All Watchmen (Until It Isn't)

The progress of Watchmen from the page to the screen has been glacial. So, it seems fitting that a high-stakes lawsuit would emerge when the film was nearing completion. An interest in the Watchmen comic book, which I first read a few years after it was released, films in general and legal matters has led me to try to unravel what has been happening with the Watchmen law suit. Many of the posts on this site will summarize what I think are key aspects of the suit and its progress through the courts. I have glossed over some things and emphasized other things that I think are interesting. The prose tends towards legalese but this isn't an academic discussion. Formal citation is not used but all documents discussed will be accessible through this site. Updates to these initial pieces will occur as developments warrant.