Purchasing the Literary Property

Jon M. Garon
Published on : 2009-08-05

This is part of a series of book excerpts from Independent Filmmaking, The Law & Business Guide for Financing, Shooting & Distributing Independent & Digital Films designed as an introduction to the many legal issues involved in the filmmaking process.

To obtain the right to make a movie out of an existing book or play, the filmmaker must license the movie rights from the author or rights holder. Once the proper copyright holder has been identified, a license must be negotiated that awards the filmmaker the right to produce and distribute the motion picture. The nature of the license may vary significantly depending on the type of source material, its commercial value, and its age.

Negotiations for the Motion Picture Rights

Having identified the owner of the film rights, the next step is to enter into negotiations for the rights to make the film. If possible, approach the author. It may be preferable to deal directly with the author rather than an agent because the author may be more flexible on pricing and other terms. Find out if the movie rights are available and what the author wants.

The Literary Property Agreement** may be the first contract for the movie. This may mean buying the rights outright or taking out an “option” on the rights. An option agreement provides for all the terms of the purchase of the underlying rights, but the purchaser makes a small down payment in exchange for the exclusive right to complete the transaction during a specified option period. In other words, the filmmaker may pay $100 for the right to purchase the literary property anytime during the upcoming year. The filmmaker exercises the option by paying the full purchase price, as is specified in the agreement.

Depending on the specifics of the project, the filmmaker may choose to purchase of the literary rights outright or negotiate an option agreement. A common, but misguided, practice is to negotiate only the option portion of the agreement, leaving the rest of the agreement to be negotiated at a future date. This makes the option much less valuable and may lead to disastrous outcomes at the time the option is going to be exercised. By failing to decide the payment terms and identify the rights acquired, the filmmaker may find that he cannot reach an agreement with the literary rights holder when he has finally raised enough money to exercise the purchase option. Instead, the filmmaker should be sure to negotiate and agree upon all the terms of the purchase contract at the time the option agreement is first negotiated.

The negotiations generally focus on the following terms in the literary rights purchase agreements:

* The scope of rights;
* The participation of the literary property rights holder;
* The risk of non-completion of the filmmaker’s project;
* The discretion of the filmmaker; and
* The amount of money being paid for the rights.

The position of an independent filmmaker differs from that of the studio production regarding these negotiations. Typically, the studio production would demand all rights of every kind from the literary property rights holder and absolute discretion on how those rights were exploited. In exchange, the cost of those rights can be expected to be much higher for a studio than for an independent film. For the independent filmmaker, the choices can better reflect the filmmaker’s ability to make the film and the rights holder’s interest in protecting his work.

a. The scope of rights. The filmmaker must acquire the right to use the literary property – whether that is a short story or an unwritten life story – for the film being developed. This is the absolute minimum scope of rights being sought. Despite this, it is better for the filmmaker to acquire rights that are more broadly defined than merely the right to use the story to make the particular film. First, many independent films are produced with poor production quality. If the story is compelling, the filmmaker may have the opportunity in the future to remake the film on a grander scale. The right to make a film does not include the re-make rights unless the contract includes that right. Second, the studio film industry is financed by the success of sequels and prequels. Like remakes, the ability to expand the story by making prequels and sequels will increase the opportunities to sell the completed film. Third, the media in which the film is made may not be film. Since the presumption is that the “film” will be photographed digitally, any confusion should be removed early on.

The best clause states that “the filmmaker hereby acquires the exclusive right to exploit the [literary property] in any media now known or hereafter developed, including without limitation the right to make motion pictures, sequels, prequels, remakes, live or episodic versions.” In a separate sentence, the contract should also provide that “the filmmaker may produce and distribute the work using any media now known or hereafter developed.” The first sentence says that the story can be captured using any technology or media. The second sentence provides that the film, TV show, or Internet broadcast can be sold, broadcast or packaged in any fashion.

Literary property should also be broadly defined so that it includes any copyrighted work, characters, story, plot, theme or action embodied in the literary property. In this way, the filmmaker still exclusively owns even elements of the story that are not copyrightable. While this might not stop a third party from creating a similar plot, it will stop the author of the plot from recycling it into a competing project.

As an independent project, it is possible to negotiate these terms to provide more limited rights for the filmmaker. The seller of the literary property may require it if the work is otherwise being used in other media. The greater the grant of rights, however, the better for the filmmaker because it reduces the chances of two or more similar projects competing in the market at the same time and gives the filmmaker a bigger bundle to sell to the distributor.

b. Participation of the literary property rights holder. In the studio setting, this consideration rarely occurs. Like an uninvited extra cook, the seller of the literary property is often considered a threat to the project and given very little chance to participate. For the digital filmmaker, however, the owner of the literary property may be a resource rather than a burden. This is particularly true if the film is based on true events. The participation of the rights holder may also provide some marketing and press opportunities. The cost for such access is greater interaction between the filmmaker and the person whose story is being told.

c. The risk of non-completion of the filmmaker’s project. Although the chance that the rights holder will see his story actually made into a feature film is very low in both the independent and studio film industry, the fear that the project will not finish is generally greater with independent films. Presumably, this is – at least in part – based on a second assumption that the studio will pay higher rates for the literary material than the independent production.
To overcome this fear, the filmmaker should include specific provisions in the contract that allow the rights holder to reclaim his rights in the event the film is not made. This right – often referred to as the right of “reversion” – allows the rights holder to either reclaim the project or to transfer the project to a new studio. The typical studio conditions regarding reversion include the rights holder’s obligation to reimburse the filmmaker for the payments made to the rights holder as well as the new film production company reimbursing the filmmaker for the costs incurred in preparing the film. The right of reversion often does not begin for five years following the sale of the literary rights to the studio.

The studio approach to reversion may meet with a good deal of opposition and may not set the type of tone or relationship the filmmaker is trying to develop. Instead, the filmmaker may elect to vary these terms in a number of ways. The rights can be returned to the rights holder without charge, or a reimbursement payment can be tied to the completion of the project by another company. This allows the rights holder to give the independent filmmaker a chance without making a decision that becomes financially impractical to fix.

The length of the reversion term can also be varied, but so long as some progress is being made, the term should continue to run. Independent films often start and stop for years, so the filmmaker should not promise that either the movie will be completed in six months or the project is finished. For example, the rights holder may give the filmmaker the rights to the material for one year, but if an agreed upon amount of money is not raised, then the rights revert. If the money is raised, then the filmmaker has three years to begin principal photography. Once principal photography has begun, the rights are generally irrevocable.

d. The discretion of the filmmaker. The biggest advantage an independent filmmaker has over the studios is the ability to earn the trust of the literary rights holder. While the filmmaker generally wants unbridled discretion in telling his story, there are some rights that will only be made available to a sympathetic filmmaker, particularly if the film is based on true events. The filmmaker must negotiate before the work has begun if he is going to limit his control or discretion in the project by allowing the rights holder to observe, participate, or veto decisions of the filmmaker. The legal power to observe, participate or veto should be given away very carefully. The filmmaker can provide the opportunity for the rights holder to observe and participate without contractually promising access to the rights holder, but if the contract provides for such access, the decision cannot be undone.

Participation can occur in the approval of casting, script, filming or finished film. The filmmaker can grant third parties the rights to review choices at any of these stages of development of the film. This is a valuable commodity of the film, but may allow the filmmaker to acquire rights to a story for which he otherwise could not outbid a studio.

* Jon Garon is admitted in New Hampshire, California and Minnesota.

** A sample form is available as Appendix D-1 to the book.