IFTA PUBLISHES ARBITRATION AWARDS

There is a new source of information for those researching the reputations and track records of sales agents, distributors and other companies in the independent film world. IFTA, the Independent Film and Television Alliance, recently decided to publish summaries of the awards made by its arbitrators from 2007 through 2010. They are posted on its website at:  http://www.ifta-online.org/recent-awards

The summaries include the names of the parties, the name of the arbitrator, the date the award was issued and a short summary of the nature of the award.  While IFTA administers the arbitration program, the decisions are solely the prerogative of the arbitrator hearing each dispute.

A review of the award summaries shows that certain companies have been involved in multiple disputes. While this does not necessarily indicate that these companies breached their agreements or are to be avoided, it does offer some insight into disputes that up until recently were not available for public review.  Court records are generally available to the public. Arbitration proceedings, however, are usually private and not available for others to review.

Producers contemplating entering into an agreement with a sales agent, for instance, might want to know if that agent was the respondent in numerous disputes. Sales agents thinking of contracting with a territory buyer might find it useful to know if that buyer failed to live up to its contractual obligations in the past. 

IFTA Arbitration may be used for a wide variety of domestic and international entertainment disputes, such as those arising out of production agreements, motion picture, television and multimedia licensing agreements, financing agreements, film exhibition agreements and sales agency agreements, to name a few.

IFTA Arbitrators are all veteran entertainment attorneys acting as neutral experts who hear arguments, review evidence and issue binding arbitration awards. IFTA Arbitration is usually less formal, faster and costs less compared with litigation in court. Many matters submitted to IFTA Arbitration are settled during the arbitration process.

Filmmakers can use the IFTA Arbitration process if the relevant contract contains an arbitration clause designating the IFTA tribunal to resolve disputes. For disputes arising out of existing contracts that do not provide for IFTA Arbitration, it is still possible to file a claim, as long as both parties agree in writing to use IFTA Arbitration at the time the claim is filed.

Link:  IFTA Arbitration Awards

Full disclosure: I am an IFTA arbitrator and also have represented many clients in IFTA, JAMS and AAA arbitrations.  

UPCOMING SEMINAR with Mark Litwak

SELF DEFENSE FOR WRITERS AND FILMMAKERS

BOSTON,  Friday, February 11, 2011, 8 AM to 5 PM

Writers and filmmakers need to understand their legal rights and how to defend themselves from those who may seek to exploit them. Production companies and distributors often know all the tricks of the trade, while writers and filmmakers know little about how to protect themselves. This seminar, geared towards both artists and attorneys representing artists, explains how writers and filmmakers can prevent problems from arising by properly securing underlying rights, and by encouraging the other party to live up to agreements by adding performance milestones, default penalties and arbitration clauses. In the event of a dispute, participants learn what remedies are available to enforce their rights. Related topics include creative approvals, typical compensation and terms of studio contracts, merchandising deals, and negotiating tactics and strategies. The seminar includes more than 100 pages of useful contracts, checklists, forms and materials.

At Law firm of Fish & Richardson, One Marina Park Drive, Boston MA 02210

Sponsored by the Arts & Business Council of Greater Boston / Volunteer Lawyers for the Arts

The Arts & Business Council of Greater Boston, together with one of its core programs, Volunteer Lawyers for the Arts, strengthens the vibrant arts community in Greater Boston by providing support services to artists and arts organizations, including training, capacity building, legal services, and technical assistance.

To Enroll

 

PARIS HILTON’S “THAT’S HOT”

According the N.Y. Post, Hallmark Greeting Cards has settled a lawsuit with Paris Hilton after she sued Hallmark for releasing a card using her trademarked phrase “that’s hot.”

Paris Hilton is a celebrity known for her lifestyle as a flamboyant heiress and her role in the reality TV program “The Simple Life.” The series placed her and fellow heiress Nicole Ritchie in situations where their privileged upbringing may not have prepared them for ordinary tasks that working class folks regularly perform. In many episodes Hilton stated “that’s hot,” whenever she found something out of the ordinary or humorous. She registered the phrase as a trademark in 2007 with the United States Patent & Trademark Office.

Later that year, Hallmark released a card parodying Hilton’s “First Day as a Waitress” that used the phrase. Hilton claimed that the card’s depiction copied too closely a scene that she made famous on her television series. The card juxtaposes a female face with a cartoon drawing of a waitress’s body, with the composite woman performing the tasks of a waitress and saying Hilton’s trademark phrase. Hilton herself wore a waitress’s uniform, served customers, and said, “That’s hot,” in an episode of “The Simple Life.” However, Hilton did not claim that the card
literally depicted her.

Hilton filed suit asserting three causes of action, misappropriation of publicity under California common law; false designation under the Lanham Act; and infringement of a federally registered trademark. Hallmark moved to strike Hilton’s right of publicity claim under California’s anti-SLAPP statute. “SLAPP” stands for “strategic lawsuit against public participation. It is a law designed to stop attempts to chill a person from exercising their First Amendment rights on a matter of public interest by forcing them to incur the expense and bother to defend against a meritless and abusive lawsuit. In other words, sometimes plaintiffs file lawsuits against defendants without merit just to shut them up and intimidate them. Such suits can stifle a defendant from speaking out, especially if the plaintiff is a well-heeled company and the defendant an ordinary citizen without the means to hire lawyers to defend his/her rights. The lower court denied Hallmark’s motion to strike under California’s anti-SLAPP statute.

Hilton’s claim was for misappropriation of the common law right of publicity. The elements of the claim under California law are “(1) the defendant’s use of the plaintiff ’s identity; (2) the appropriation of plaintiff ’s name or likeness to defendant’s advantage, commercially or otherwise; (3) lack of consent; and (4) resulting injury.” Hallmark did not dispute that Hilton meets these requirements. Hallmark, however, claimed two affirmative defenses under California law, both based on the First Amendment: the “transformative use” defense and the “public interest” defense.

Under California law, “when an artist is faced with a right of publicity challenge to his or her work, he or she may raise an affirmative defense that the work is protected under the First Amendment because it contains significant transformative elements or that the value of the work does not derive primarily from the celebrity’s fame.”

In regard to the public interest defense, California law holds that “no cause of action will lie for the publication of matters in the public interest, which rests on the right of the public to know and the freedom of the press to tell it.” This defense did not help Hallmark, because it only precludes liability for “the publication of matters in the public interest.” The birthday card did not publish or report such information.

The case went up to the Ninth Circuit Court of Appeals, with Hallmark claiming its First Amendment right to free speech insulated it from liability. The appeals court rejected Hallmark’s appeal, however, and the suit was scheduled to go to trial as early as December if the parties had not settled. The court did not find that Hilton was entitled to a judgment as a matter of law, only that there was at some probability of her prevailing on the merits if it went to trial, and so it would not be dismissed.

The amount of the settlement was not revealed.

Read full case at: case

SPEILBERG PREVAILS IN COPYRIGHT INFRINGEMENT SUIT

The U.S. Southern District Court in New York has found that director Steven Spielberg's film "Disturbia" does not infringe the copyright in the short story "Rear Window," which was the basis for the Alfred Hitchcock movie with the same title. U.S. District Judge Laura Taylor Swain found there was no substantial similarity between "Rear Window" and "Disturbia."

Spielberg and the other defendants produced and distributed the motion picture Disturbia; in 2007. For a plaintiff to prevail in a copyright infringement case, two elements must be proved: (1) ownership of a valid copyright, and (2) copying of constituent elements of the work that are original. The defendants conceded access and actual copying. Thus, the only questions for resolution were whether Defendants unlawfully appropriated copyrightable elements from Plaintiff's Short Story, and, if there is no such appropriation, whether Defendants are entitled to judgment dismissing Plaintiff's copyright infringement claims as a matter of law. To prove unlawful appropriation of protectible elements, a plaintiff must show that there is substantial similarity between protectible elements in the two disputed works.

The short story Rear Window spans four days and depicts, through first-person narrative, protagonist Hal Jeffries' observations of his neighbors' activities which eventually lead him to discover and solve a crime through deductive logic. It is set in New York City.
At the opening of the Short Story, the reader learns that Jeffries is incapacitated such that he can only move from his bed to a chair near the window of his second floor bedroom.

The events depicted in Disturbia span more than a year. The story's chief protagonist is Kale Brecht, a troubled teenager who, sentenced to house arrest, spies on neighbors to stave off boredom and, after learning of the disappearance of several women in the area, discovers that his neighbor may be to blame.

The court found that “It cannot be disputed that both works tell the story of a male protagonist, confined to his home, who spies on neighbors to stave off boredom and, in so doing, discovers that one of his neighbors is a murderer. The voyeur is himself discovered by the suspected murderer, is attacked by the murderer, and is ultimately vindicated. Although it is possible to characterize the plots of both works so they appear indistinguishable, such similarity is not, standing alone, indicative of substantial similarity. The law of copyright only protects an author's particular expression of an idea, not the idea itself.”

The court concluded that the expression of the voyeur-suspicion-peril-vindication plot idea is quite different in the two works. This broad plot idea, or premise, is not a protectible element. Similarity at this level of generality is not probative of the question of infringement.

The Plaintiffs also contended that the characters were similar. The court disagreed stating that they are not substantially similar. “While Plaintiff correctly points out that both Kale and Jeffries are confined, single men, such generalized similarities are not protectible.”

The Sheldon Abend Revocable Trust, v. Steven Spielberg et al., No. 08 Civ. 7810 United States District Court, S.D. New York, September 21, 2010. The full decision is posted below.

THE SHELDON ABEND REVOCABLE TRUST, Plaintiff, v. STEVEN SPIELBERG et al., Defendants.

No. 08 Civ. 7810 (LTS)(JCF).
United States District Court, S.D. New York.
September 21, 2010.

HANLY CONROY BIERSTEIN, SHERIDAN FISHER & HAYES, LLP, By: Steven M. Hayes, Esq., New York, NY, MORGAN & MORGAN, P.A., By: Clay M. Townsend, Esq., Keith R. Mitnik, Esq., Orlando, FL., Attorneys for Plaintiff The Sheldon, Abend Revocable Trust.
WHITE O'CONNOR FINK & BRENNED LLP, By: Lee S. Brenner, Esq., Andrew M., White, Esq., Lost Angeles, CA, LAW OFFICES OF SCOTT, GOLDFINGER, By: Scott G. Goldfinger, Esq., Allison S. Rohrer, Esq., New York, NY, Attorneys for Defendants Steven Spielberg, Paramount Pictures Corporation, DW, Studios LLC, Viacom Inc., Paramount Home, Entertainment, Montecito Picture Company, LLC, Cold Springs Pictures LLC and United, International Pictures, B.V.

OPINION AND ORDER

LAURA TAYLOR SWAIN, District Judge:

The Sheldon Abend Revocable Trust ("Plaintiff"), brings this action asserting copyright infringement, contributory infringement, and vicarious copyright infringement pursuant to 17 U.S.C. § 101 et seq. as well as common law breach of contract claims against Defendants Steven Spielberg; DW Studios, LLC; Paramount Pictures Corporation; Viacom, Inc.; NBC Universal, Inc.; Universal Pictures Company, Inc.; Universal City Studios, LLP; United International Pictures, B.V.; and Does 1-10,[1] alleging that the motion picture Disturbia — a film produced by Spielberg, owner of DW Studios, LLC, which is in turn a wholly-owned subsidiary of Paramount Pictures Corporation and its parent company, Viacom, Inc. — infringed upon Plaintiff's copyright in the short story Rear Window and upon the derivative Alfred Hitchcock film of the same name.[2] On October 27, 2009, Plaintiff filed its Second Amended Complaint, adding defendants Montecito Picture Company LLC, Cold Spring Pictures LLC, and Universal Pictures International, GmbH. Plaintiff asserted copyright infringement, contributory infringement, and vicarious copyright infringement claims against these new defendants. The Court has jurisdiction of Plaintiff's copyright claims pursuant to 28 U.S.C. §§ 1331 and 1338.

The case is now before the Court on Defendants' motion for partial summary judgment dismissing Plaintiff's copyright infringement claims. The Court has reviewed thoroughly and considered carefully all of the parties' submissions. For the reasons discussed below, Defendants' motion for partial summary judgment is granted.

BACKGROUND

The following material facts are undisputed, unless expressly noted.
In 1942, Cornell Woolrich wrote the short story Rear Window (also known as It Had to be Murder and Murder from a Fixed Viewpoint) ("Short Story"), which was published in the Dime Detective Magazine. Plaintiff currently holds the copyright in the Short Story.

In 1953, a predecessor to Defendant Paramount Pictures obtained the motion picture rights to the Short Story, which was subsequently made into a film of the same title, directed by Alfred Hitchcock, in 1954. Plaintiff relies heavily on the film in its claims of substantial similarity and copyright infringement.

Defendants produced and distributed the motion picture Disturbia; distribution began in April 2007. The record before the Court includes a published version of the Short Story and a DVD copy of Disturbia.

Plaintiff has also submitted thousands of pages of exhibits, including: expert reports; previous drafts of the screenplay; references to and copies of media articles and film critics' reviews likening Disturbia to the Rear Window film; and many lists, charts and DVDs purporting to identify similarities among the Short Story, the Rear Window film, and Disturbia. Defendants have proffered copies of numerous published works predating the Short Story, in support of their contention that various elements of the Short Story are not protectable and/or not original.

DISCUSSION

Summary judgment is appropriate where the "pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). A fact is material "if it `might affect the outcome of the suit under the governing law,'" and "[a]n issue of fact is `genuine' if `the evidence is such that a reasonable jury could return a verdict for the nonmoving party.'" Holtz v. Rockefeller & Co., 258 F.3d 62, 69 (2d Cir. 2001) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). The evidence is viewed in the light most favorable to the nonmoving party and all reasonable inferences are drawn in its favor. Rubens v. Mason, 527 F.3d 252, 255 (2d Cir. 2008) (citing United States v. Diebold, Inc., 369 U.S. 654, 655 (1962)).

Copyright Infringement

For a plaintiff to prevail in a copyright infringement case, "two elements must be proved: (1) ownership of a valid copyright, and (2) copying of constituent elements of the work that are original." Feist Publ'ns, Inc. v. Rural Telephone Service Co., 499 U.S. 340, 361 (1991). The second criterion, copying of original constituent elements, may be proven with either direct or indirect evidence: to prove copying via indirect evidence, a plaintiff must show (1) defendant's access to the allegedly infringed work; (2) actual copying; and (3) unlawful appropriation of copyrightable materials. See Walker v. Time Life Films, Inc., 784 F.2d 44, 48 (2d Cir. 1986) ("Walker II"); Denker v. Uhry, 820 F. Supp. 722, 728 (S.D.N.Y. 1992).

For purposes of the instant motion, Defendants have conceded access and actual copying. Thus, the only questions for resolution are whether there is a genuine dispute of material fact as to whether Defendants unlawfully appropriated copyrightable (that is, protectable) elements from Plaintiff's Short Story, and, if there is no such appropriation, whether Defendants are entitled to judgment dismissing Plaintiff's copyright infringement claims as a matter of law.

To prove unlawful appropriation of protectible elements, a plaintiff must show that there is substantial similarity between protectible elements in the two disputed works. Laureyssens v. Idea Group, Inc., 964 F.2d 131, 139-40 (2d Cir. 1992). The appropriate test for substantial similarity is "whether an ordinary observer, unless he set out to detect the disparities, would be disposed to overlook them, and regard [the] aesthetic appeal as the same." Yurman Design, Inc. v. PAJ, Inc., 262 F.3d 101, 111 (2d Cir. 2001) (citations and internal quotations omitted); Walker II, 784 F.2d at 51 (noting that Second Circuit generally judges substantial similarity "by the spontaneous response of the ordinary lay observer").

Where, as here, a work is an amalgamation of protectible and unprotectible elements, a "more discerning" ordinary observer test is employed, Knitwaves, Inc. v. Lollytogs, Ltd., 71 F.3d 996, 1002 (2d Cir. 1995), which requires that the court first filter out from consideration any non-protectible elements. The remaining, protectible elements are then analyzed for substantial similarity. Id. ("[W]here [courts] compare products that contain both protectible and unprotectible elements, [their] inspection must be `more discerning'; [courts] must attempt to extract the unprotectible elements from our consideration and ask whether the protectible elements, standing alone, are substantially similar."). Thus, similarities between unprotectible elements in the disputed works may not contribute to a determination of substantial similarity.

Because questions of substantial similarity often present close questions of fact, Arnstein v. Porter, 154 F.2d 464, 468-69 (2d Cir. 1946), court have historically been hesitant to grant summary judgment on copyright infringement claims. See Hoehling v. Universal City Studios, Inc., 618 F.2d 972, 977 (2d Cir. 1980) ("[S]ummary judgment has traditionally been frowned upon in copyright litigation."). However, "[t]he question of substantial similarity is by no means exclusively reserved for resolution by a jury . . . in certain circumstances, it is entirely appropriate for a district court to resolve that question as a matter of law, `either because the similarity between two works concerns only non-copyrightable elements of the plaintiff's work, or because no reasonable jury, properly instructed, could find that the two works are substantially similar.'"[3] Peter F. Gaito Architecture, LLC v. Simone Dev. Corp., 602 F.3d 57, 63 (2d Cir. 2010) (citing Warner Bros. Inc. v. Am. Broad. Co., 720 F.2d 231, 240 (2d Cir. 1983)). In considering the issue of substantial similarity a court must base its determination on "its considered impressions upon its own perusal" of the disputed works. Nichols v. Universal Pictures Corporation, 45 F.2d 119, 123 (2d Cir. 1930); Williams v. Crichton, 84 F.3d 581, 583 (2d Cir. 1996).

Substantial Similarity

A determination of copyright infringement requires a side-by-side comparison of the disputed works themselves.[4] Williams, 84 F.3d at 583. The elements that should be considered in analyzing two works for substantial similarity include "such aspects as the total concept and feel, theme, characters, plot, sequence, pace, and setting of the [plaintiff's] books and the [defendants'] works." Id., at 588.
In considering the similarities between these elements, the proper inquiry is "whether an ordinary observer, unless he set out to detect the disparities, would be disposed to overlook them, and regard [the] aesthetic appeal as the same." Yurman Design, 262 F.3d at 111. The test does not, however, require the Court to ignore dissimilarities. However, if the dissimilarities between two works exceed the similarities and the similar elements "are — when compared to the original work — of small import quantitatively or qualitatively, a finding of no infringement is appropriate." See Rogers v. Koons, 960 F.2d 301, 308 (2d Cir. 1992). Thus, in considering the question of substantial similarity, an analysis of both the similarities and the differences is appropriate. The Court has reviewed both works carefully.

Summary Overview of Each Work

Cornell Woolrich's Rear Window

The Short Story spans four days and depicts, through first-person narrative, protagonist Hal Jeffries' observations of his neighbors' activities which eventually lead him to discover and solve a crime through deductive logic. It is set in New York City.

At the opening of the Short Story, the reader learns that Jeffries is incapacitated such that he can only move from his bed to a chair near the window of his second floor bedroom. (Brenner Decl., Ex. A., 1.) The reader learns little of Jeffries' background and personality, as the character is minimally developed.

To pass the time, Jeffries observes from his window the goings-on in several of his neighbors' homes. He watches a young couple with an active social life, a young widow and her child, and a couple whom he later learns are the Thorwalds. (Id. 1, 10.)

Mrs. Thorwald, he notices, is in chronic poor health. (Id. 2.) At first, her husband, Lars Thorwald ("Thorwald"), appears concerned about her health but, as Jeffries observes the Thorwalds over a period of days, he notices that Mrs. Thorwald has disappeared. (Id. 8.) Jeffries speculates that Thorwald has murdered her. (Id.) He phones his old friend, Detective Boyne, to report his suspicion, and Boyne institutes an investigation. (Id. 10-11.) Following a lead that Mrs. Thorwald's belongings had been shipped to the countryside, the police encounter a woman who identifies herself as Mrs. Thorwald. (Id. 14-15.) Boyne then stops the investigation, to Jeffries' dismay. (Id.)

Undeterred from the belief that Thorwald murdered his wife, Jeffries enlists the assistance of his faithful servant, Sam, in obtaining proof of the murder. (Id. 15.) Sam's character is also minimally developed. Jeffries instructs Sam to slip a note that reads "What have you done with her?" beneath Thorwald's door. (Id.) Upon receiving the note, Thorwald becomes agitated, and paces his apartment nervously. (Id. 16.) His pacing closely parallels that of a realtor showing a newly renovated apartment two floors above Thorwald, but Jeffries does not immediately recognize the significance of this coincidence. (Id. 16-17.) Thorwald's reaction to the note, however, convinces Jeffries that Thorwald is, in fact, guilty of murder. (Id. 16.)

To obtain more concrete evidence of murder, Jeffries phones Thorwald, pretending to be a blackmailer, and convinces Thorwald to meet him in a local park. (Id. 17-18.) When Thorwald sets out to pay off his blackmailer, Jeffries dispatches Sam to Thorwald's apartment with instructions to make it appear as if the apartment has been searched, in order to make Thorwald believe that his blackmailer has obtained concrete evidence of the murder. (Id. 18-19.) Sam does as he is told. (Id. 19.) When Thorwald returns, Jeffries immediately phones him, pretending to have discovered evidence, but Thorwald does not believe him. (Id. 19-20.) Thorwald then unexpectedly phones Jeffries, and, hearing his voice, deduces that Jeffries is his blackmailer. (Id. 21.) After this phone call, Jeffries suddenly recalls the mirrored movements of Thorwald and the realtor two floors above. (Id. 22-23.) He realizes that, when passing from the kitchen to the living room, the realtor's height relative to the window changed while Thorwald's remained the same because, as part of the ongoing renovations to the building, a raised kitchen floor had been poured in concrete for decorative effect. (Id.) Jeffries deduces that Thorwald buried his wife's body in the still-wet concrete of the fifth floor apartment, which was under renovation. (Id. 26.)

Jeffries attempts to phone Inspector Boyne, but the line goes dead: Thorwald has entered Jeffries' building and severed the telephone line. (Id. 23.) Jeffries realizes Thorwald is coming to kill him. (Id.) Rendered unable to escape by his cast, Jeffries conceals himself with a rug, and places a bust sculpture upon his shoulder, hoping that in the dark Thorwald would be tricked by the ruse. (Id. 23-24.) As Thorwald enters and shoots the bust, Inspector Boyne arrives. (Id. 24-25.) Thorwald escapes out the window, climbs to the roof of his own building, then shoots into Jeffries' apartment. (Id. 24-25.) Inspector Boyne returns fire and strikes Thorwald, causing him to fall to his death. (Id. 25.)

From the available information, Jeffries completes his theory of the case for the reader: Thorwald had been poisoning his wife for some time, but killed her outright when she discovered what he was doing; and he concocted a scheme with another woman, likely his lover, to suggest that his wife had gone upstate. (Id. 26-27.) The other woman impersonated Mrs. Thorwald when the police investigated, and was going to stage her suicide. (Id.) In the closing lines of the story, a doctor arrives to remove the cast and notes, ironically, that Jeffries must have been bored while sitting around. (Id. 27.)

Disturbia

The events depicted in Disturbia span more than a year. The story's chief protagonist is Kale Brecht, a troubled teenager who, sentenced to house arrest, spies on neighbors to stave off boredom and, after learning of the disappearance of several women in the area, discovers that his neighbor may be to blame.
Kale is introduced to the viewer while on a fishing trip with his father. In a picturesque wilderness setting, Kale and his father joke and bond. On the trip home, however, while Kale is driving, a horrific accident occurs and his father is killed. A year later, Kale has become a troubled and depressed teenager. After assaulting a teacher, Kale goes to court and is sentenced to three months of house arrest in suburban California. His probation officer outfits him with an ankle bracelet that confines him to a 100-yard radius from the receiver in his kitchen.
Kale begins to entertain himself by watching his neighbors live their unrestricted lives. He observes his new neighbors moving in, and takes particular note of their attractive teenage daughter, Ashley.

Among other things, he notices, almost in passing, Robert Turner, a neighbor who constantly mows his lawn. After hearing news reports about a missing woman, and of a string of missing women in Texas, Kale recalls that Turner's car matches the description of the suspect's vehicle, right down to a dented fender. Venturing outside, Kale spies on Turner. Kale's friend Ronnie joins Kale in his surveillance of Turner and in spying on Ashley. Eventually, Ashley catches them watching her and confronts them. Ronnie explains their interest in Turner, and she joins them in the stake-out. During their stake-outs, a romance develops between Kale and Ashley.

One night, Kale observes Turner escorting a red-haired woman to his home, and then later sees her panicked and trying to escape the house. A reflection of Kale's video camera alerts Turner to the fact that Kale is watching. Kale later sees a redhead leaving Turner's house, and reasons that he may have been mistaken (although the viewer later learns that it was, in fact, Turner wearing a wig). Some time later, at Turner's house, there is a scream and blood spatters across the inside of a window.

Ashley later notices Turner dragging a blood-covered blue bag into his garage. Kale, Ashley, and Ronnie decide to investigate Turner's garage. With Ashley acting as a look-out and Kale watching via live-feed video camera, Ronnie finds the blue bag, in which he sees something decomposing. Ronnie panics, and, fearing for his friend, Kale rushes to Turner's house wielding a baseball bat, triggering his ankle bracelet, and summoning the police. He tells the police about the blue bag, in which they discover the decomposing carcass of a deer.

Upon reviewing the footage that Ronnie shot while sneaking about Turner's house, Kale notices the face of a dead woman, visible in the basement through a heating grate. At the same time, Kale's mother is attacked by Turner in Turner's home. Turner then comes to Kale's house and attacks Ronnie and Kale, rendering them unconscious. Kale awakens, bound with tape. Turner informs Kale of his plan to frame Kale for murdering his own mother and to stage Kale's suicide. Ashley arrives at the last moment, however, and in the course of a struggle, Kale and Ashley escape to safety by jumping off Kale's roof and into Ashley's pool.

Kale then returns to Turner's house, armed with hedge clippers, to rescue his mother. He discovers the body of the dead woman he had seen in Ronnie's video, as well as an operating room filled with gruesome mementos. Summoned by Kale's ankle bracelet, a police officer arrives at Turner's house, but is killed by Turner. Meanwhile, while searching the basement of Turner's house for his mother, Kale falls into a pool of water filled with the dead bodies of Turner's previous victims. Kale locates his mother just as Turner arrives. Kale, his mother, and Turner fight, culminating in Turner being stabbed and falling into the pool.
The next day, Kale's parole officer removes his ankle bracelet, releasing him from house arrest early for good behavior. The film ends with Kale and Ashley kissing while Ronnie attempts to videotape them.

Comparison of the Works

Plot

It cannot be disputed that both works tell the story of a male protagonist, confined to his home, who spies on neighbors to stave off boredom and, in so doing, discovers that one of his neighbors is a murderer. The voyeur is himself discovered by the suspected murderer, is attacked by the murderer, and is ultimately vindicated. Although it is possible to characterize the plots of both works so they appear indistinguishable, such similarity is not, standing alone, indicative of substantial similarity. The law of copyright only protects an author's particular expression of an idea, not the idea itself. Arden v. Columbia Pictures Indus., Inc., 908 F. Supp. 1248 (S.D.N.Y. 1995).

Upon any work . . . a great number of patterns of increasing generality will fit equally well, as more and more of the incident is left out. The last may perhaps be no more than the most general statement of what the [work] is about, and at times might consist of only its title. But there is a point in this series of abstractions where they are no longer protected, since otherwise the [author] could prevent the use of his `ideas,' to which, apart from their expression, his property is never extended.

Nichols, 45 F.2d at 121. Here, as will be explained in the analysis that follows, the expression of the voyeur-suspicion-peril-vindication plot idea is quite different in the two works. This broad plot idea, or premise, is not a protectible element. Similarity at this level of generality is not probative of the question of infringement.

Characters

Plaintiff contends that "[c]haracter elements of . . . Disturbia are derivative of (i.e. substantially similar to) Rear Window, notwithstanding some differences." (See Pl.'s Opp. 24.) "In determining whether characters are similar, a court looks at the `totality of [the characters'] attributes and traits as well as the extent to which the defendants' characters capture the `total concept and feel' of figures in [plaintiff's work]." Hogan v. DC Comics, 48 F. Supp. 2d 298, 309-10 (S.D.N.Y. 1999) (citing Walker II, 784 F.2d at 50) (internal quotations omitted). "No character infringement claim can succeed unless plaintiff's original conception sufficiently developed the character, and defendants have copied this development and not merely the broader outlines." Smith v. Weinstein, 578 F. Supp. 1297, 1303 (S.D.N.Y. 1984), aff'd mem., 738 F.2d 419 (2d Cir. 1984).

The bar for substantial similarity in a character is set quite high. For example, in Adrand v. Columbia Pictures Industries, Inc., the protagonists of the two disputed works were both self-centered bachelors in their mid-thirties who pursued love interests and became trapped in a repeating day. 908 F. Supp. 1248, 1261 (S.D.N.Y. 1995). The district court found that "any similarity between the two characters exists only at a level of abstraction too basic to permit any inference that defendant[s] wrongfully appropriated any `expression' of plaintiff's ideas." Id. In Hogan, the two main characters were both half-human, half-vampires named Nicholas Gaunt; both were young white males with pale skin, a medium build, dark, tired eyes, and dark, scraggly hair; both sought to learn the truth about their origins; both learned about their origins through flashbacks or memories; both faced the choice of pursuing good or evil; and both were indoctrinated into the forces of evil. 48 F. Supp. at 310. The Hogan Court nonetheless found that the two Nicholas Gaunts were not substantially similar because the similarities were among "unprotectible ideas and themes that do not represent any original elements of plaintiffs' work." Id.

Because substantial similarity should be determined based on the Court's "considered impressions," Nichols, 45 F.2d at 123, a comparison of some of the disputed characters is warranted. The protagonists of the respective disputed works at issue here are not substantially similar. While Plaintiff correctly points out that both Kale and Jeffries are confined, single men, such generalized similarities are not protectible. Furthermore, Jeffries' character is far less developed than the Kale character in Disturbia. Kale Brecht is a troubled teen, struggling to cope with the loss of his father, and is confined to his house on house arrest. Hal Jeffries is a male of indeterminate age. Kale has, at least initially, other pastimes to stave off boredom — television, video games, and music — while Jeffries has none. While Kale consistently finds himself in trouble with a police officer, Jeffries' close friend is a detective. Any similarities between Kale and Jeffries are too general to be afforded protection under copyright law, and when the "totality of [the characters'] attributes and traits" are considered, Hogan, 48 F. Supp. 2d at 309, the dissimilarities vastly outweigh the similarities, which are qualitatively and quantitatively insubstantial in this regard. Indeed, the decisions in Arden and Hogan demonstrate that similarities far more numerous can be insufficient to support a finding of substantial similarity.

Nor are the antagonists in Plaintiff's Short Story and Defendants' Disturbia substantially similar. Turner is a single middle aged man who is suspected — and later is confirmed — to be a serial killer. Thorwald is a married man, who kills his wife — apparently the first and only woman he murders — to be with another woman. Plaintiff attempts to demonstrate substantial similarity between the antagonists by characterizing Turner as a neighbor suspected of killing women and Thorwald as a neighbor who murders a woman. (Compl. ¶ 86.) The similarity between these two characters ends, however, with their middle age and their position as the protagonist's neighbor: a serial killer is distinguishable from a one-time killer. These similarities amount to nothing more than age, sex, and status as a personification of evil living next door — a basic character type — and therefore do not rise to the level of protectible expression of an idea. See Hogan, 48 F. Supp. 2d at 310 ("A stock character or basic character type, however, is not entitled to copyright protection.").

Plaintiff also asserts that the supporting characters in each work are substantially similar. Notwithstanding the fact that Ronnie and Ashley are, in fact two people, and Sam is but one, Plaintiff attempts to demonstrate substantial similarity by designating their character types as "the Assistant(s)." (See, e.g., Compl. ¶ 86.) The characters of Ronnie and Ashley however, bear no resemblance to Sam, beyond the most generalized level of supporting characters. Such a basic character type and functional role warrants no copyright protection. See Hogan, 48 F. Supp. 2d at 310.

Setting

Plaintiff contends that there is substantial similarity between settings in the Short Story and Rear Window. Plaintiff's position cannot withstand scrutiny. Disturbia is set in a house in suburban California while the Short Story is set in an apartment in New York City. The setting of the Short Story is Jeffries' bedroom, and more specifically, his chair within that bedroom and the view from that chair. In contrast, Disturbia's setting encompasses all of Kale's house and much of his yard, as well as a shopping center, a parking garage, Ashley's house and yard, a courthouse, the wilderness, a classroom, and Turner's home. Furthermore, where Jeffries' room is impersonal — the only detail the author provides is that the books and sculpture in Jeffries' room were left by a previous tenant — Kale's room reflects his personality, and his house is furnished and decorated with personal items and photographs. Jeffries' world, as expressed in the short story, consists of what he can see from his single bedroom window. Kale, on the other hand, roams from room to room, utilizes windows throughout his home, and goes outside. The role of the windows is similar only at a high level of generalization, and thus is not protectible. See Walker I, 784 F.2d at 48-49 (citing Warner, 654 F.2d at 208) (The Court must determine "whether the similarities shared by the works are something more than mere generalized idea[s] or themes.").

"Total Concept and Feel"

Plaintiff argues principally that Disturbia is, as a whole, substantially similar to the total concept and feel of the Short Story. The total concept and feel of a work is comprised of the way an author "selected, coordinated and arranged the elements of his or her work," Feist, 499 U.S. at 358. Where the total concept and feel of the works is markedly different, summary judgment is appropriate. Denker, 820 F.Supp. at 731.

There is no substantial similarity between the total concept and feel of the Short Story and that of Disturbia. The main plots are similar only at a high, unprotectible, level of generality. Where Disturbia is rife with subplots, the Short Story has none. The setting and mood of the Short Story are static and tense, whereas the setting and mood of Disturbia are more dynamic and peppered with humor and teen romance. The pace of the two works is dramatically different: the Short Story takes place in just four days, while Disturbia spans more than a year and the main action takes place over an indeterminate period of days or weeks.

The Short Story and Disturbia thus are only similar at very general levels of abstraction. Their similarities derive entirely from unprotectible elements and the total look and feel of the works is so distinct that no reasonable trier of fact could find the works substantially similar within the meaning of copyright law. There is, thus, no genuine issue of material fact and Defendants are entitled as a matter of law to summary judgment dismissing Plaintiff's copyright infringement claims.

CONCLUSION

For the foregoing reasons, the Defendants' motion for partial summary judgment is granted. Plaintiff's claims of copyright infringement, vicarious infringement, and contributory infringement are dismissed.[5]

The opinion resolves docket entry 49.

The Clerk of Court is respectfully requested to close this case.
SO ORDERED.

[1] Pursuant to Joint Stipulations (docket entry nos. 40, 53), Plaintiff's claims against Defendants NBC Universal, Inc.; Universal Pictures Company, Inc.; and Universal City Studios, LLP were dismissed on December 8, 2008 (Universal Pictures Company, Inc.) and March 30, 2009 (NBC Universal, Inc. and Universal City Studios, LLP). Because the contract claims in the First Amended Complaint were asserted only against those defendants, those claims, too, have been dismissed.

[2] Pursuant to a joint stipulation dated May 28, 2009 (docket entry no. 61), Plaintiff's claims premised upon similarity of Disturbia to the film version of Rear Window have been dismissed.

[3] Plaintiff, seeking to apply a rule referred to in this Circuit as the inverse ratio rule, argues in its Opposition that Defendants' concession of access and evidence of actual copying lessens plaintiff's burden to prove substantial similarity. That rule, however, is irrelevant here, as it is applied only in the determination of whether there was actual copying. Aldon Accessories, Ltd. v. Spiegel, Inc., 738 F.2d 548, 553-54 (2d Cir. 1994). As noted above, Defendant has conceded copying for purposes of this motion practice.

[4] The opinions of experts or other third parties are irrelevant to a determination of substantial similarity. See Laureyssens, 964 F.2d at 140 (while expert opinion may be relevant to the issue of actual copying, it is irrelevant to the question of substantial similarity); Nichols 45 F.2d at 123 (in copyright infringement cases, expert testimony "ought not be allowed at all"). Nor are lists or charts, in any medium, of purported similarities relevant to a determination of substantial similarity. See Williams, 84 F.3d at 590 (Lists are "inherently subjective and unreliable, particularly where the list emphasizes random similarities scattered throughout the works . . . . Such a scattershot approach cannot support a finding of substantial similarity because it fails to address the underlying issue: whether a lay observer would consider the works as a whole substantially similar to one another."). Furthermore, because "the Court considers the works as they were presented to the public," Walker v. Time Life Films, Inc., 615 F. Supp. 430, 434 (S.D.N.Y. 1985) ("Walker I"), aff'd 784 F.2d 44, 51 (2d Cir. 1986), earlier drafts of a book, manuscript, or screenplay are irrelevant. Opinions of third parties published in secondary materials are also irrelevant. Walker I, 615 F. Supp. at 434; see Crane v. Poetic Prods., 593 F. Supp. 2d 585, 595 (S.D.N.Y. 2009). Accordingly, the Court has focused on the Short Story and the finished film Disturbia, rather than Plaintiff's voluminous submissions of expert reports, similarity comparisons and other materials. The Court has also found it unnecessary to consider the "prior works" submitted by Defendants.

[5] Defendats Dreamworks Home Entertainment, Inc. and Does 1-10 have not joined Defendants' Motion for Summary Judgment. However, because the Court has determined that there was no copyright infringement as a matter of law, the claims against these Defendants are also dismissed.

CREATIVE ACCOUNTING

Filmmakers and profit participants often lament about distributors engaging in creative bookkeeping. This is one area where filmmakers concede that studios are sufficiently imaginative in their thinking. A frequent complaint is that the studios continually devise new and ingenious ways to interpret a contract so that all the money stays in their pockets. The general consensus among filmmakers is that net profits are illusory. Rarely does a share of net profits generate hard cash.

No doubt, there are numerous instances where producers or distributors have cooked the books to avoid paying back-end compensation to those entitled to it. Expenses incurred on one movie might be charged to another. Phony invoices can be used to document expenses that were never incurred. Some ruses are subtler, and not readily apparent to the uninitiated.

The major studios determine profits for participants using their own special accounting rules as set forth in their net profit defi¬nitions. The accounting profession has generally agreed-upon rules called Generally Accepted Accounting Principles (GAAP). There are special guidelines for the motion picture industry called Financial Accounting Standards Bulletin 53 (FASB 53). These rules provide, among other things, for the accrual method of account¬ing. Under this method, revenues are recognized when earned, and expenses are recognized when incurred. But distributors do not necessarily follow these rules. They may use GAAP and FASB 53 when accounting to their shareholders, or reporting to their bankers, but they often resort to their own Alice in Wonderland-type rules when they calculate net profits for participants. They may recognize revenue only when it is actually received, while taking expenses when incurred. So if the distributor licenses a film to NBC, the distributor may not count the license fee as revenue until they actually receive it. Even when they receive a non-refundable advance, they might not count it as income until the time of the broadcast. Meanwhile, they count expenses as soon as they are incurred, even if they have not paid them. This mismatching of revenues and expenses allows the distributor to delay payment to participants. It also allows distributors to charge producers interest for a longer time on the outstanding “loan” extended to the producer to make the film.

The Art Buchwald case illuminates some of the devices Paramount used to deny payment to net profit participants. The trial judge found many of these practices to be unconscionable and therefore refused to enforce them. Paramount appealed, and the case was settled before the Court of Appeals could rule on the issue.

If Buchwald had won the appeal, the precedent would have caused severe repercussions for all the major studios. That is because Paramount’s “net profit” definition was virtually identical to the definitions found throughout the industry. If Buchwald’s contract was invalid because it was unconscionable, then many other contracts could be contested.

In my opinion, Buchwald may well have lost the appeal had the case been decided. The trial court judge in Buchwald used the doctrine of unconscionability to invalidate a contract that Buchwald was trying to enforce. Courts have traditionally embraced this doctrine only when it was used as a defense, or shield, against enforcement of an unfair contract, rather than as a sword to enforce the terms of a contract against another. Courts have typically relied on the doctrine to protect uneducated people who have been taken advantage of. If an unscrupulous door-to-door salesman sells a refrigerator for an exorbitant price to a poor, illiterate consumer on an installment plan using a boilerplate contract not open to negotiation, the judge might refuse to enforce the contract because it “shocks the conscience of the court.”

Buchwald, however, was hardly a poor, defenseless victim. He was an intelligent, wealthy, and acclaimed writer represented by the William Morris Agency. If a judge was willing to rewrite his contract because it was unfair, then why not rewrite thousands of other writer contracts? Indeed, why not rewrite any unfair contract? Where does one draw the line? If any contract can be contested simply because it is unfair, then how can anyone safely rely upon the terms of a contract? How can you conduct business if you cannot be sure your contracts will be enforceable?

Under long-established precedent, courts refuse to invalidate contracts simply because they are unfair. Law students are taught the principle that even a peppercorn—something worth less than a penny—can be valid consideration. This means that if you are foolish enough to sign a contract to sell your $200 bike for a dime, do not expect a court to bail you out of a bad deal. Absent fraud, duress, or some other acceptable ground to invalidate a contract, courts do not second-guess the wisdom of what the parties agreed to.

While the trial judge in the Buchwald case thought the doctrine of unconscionability could be invoked to invalidate a net profit definition, it bears noting that another Los Angeles Superior Court came to a different conclusion. In reviewing the accounting practices of Warner Bros. in the Batman case, the judge found that the plaintiffs had failed to prove that the studio’s net profits definition was unconscionable.

Regardless of whether the Buchwald decision would have been upheld on appeal, the dispute has had an impact on the industry. The major studios have rewritten their contracts, replacing the phrase “net profits” with such terms as “net proceeds.” They want to avoid any implication that the back-end compensation promised participants has anything to do with the concept of profitability.

As a result of many highly publicized creative-accounting disputes, anyone who has clout insists on receiving either large up-front payments or a share of gross revenue. Distributors have consequently lost the ability to share risk with talent. Budgets have escalated to accommodate large up-front fees, with major stars now demanding $20 million per picture. Moreover, stars and directors have little incentive to minimize production expenses, since it doesn’t affect their earnings.

Not all complaints about creative accounting concern accounting errors. Many grievances reflect the inequality of the deal itself. The studio uses its leverage and superior bargaining position to pressure talent to agree to a bad deal. The distributor then accounts in accordance with the terms of the contract and can avoid paying out any revenue to participants because of how net profits are defined. The contract may be unfair, but the studio has lived up to its terms. It is only after the picture becomes a hit that the actor bothers to read the fine print of his employment agreement. This is not creative accounting. This is an example of a studio negotiating favorable terms for itself.

Keep in mind that there is no law requiring distributors to share their profits with anyone. Indeed, in most industries, workers do not share in their employer’s profits. Moreover, when a major studio releases a flop, losses are not shared; they are borne by the studio alone.

Excerpt taken from Mark Litwak’s Risky Business, 3nd edition, 2010.

Filmmaker Battles Chevron

A three-judge panel of the United States Court of Appeals for the Second Circuit in Manhattan issued an order on July 15th in the case of documentary filmmaker Joe Berlinger (Brother’s Keeper 1992) after hearing arguments from attorneys for both the filmmaker and for Chevron. Berlinger had been ordered by the lower trial court to turn over 600 hours from his documentary Crude to Chevron. The documentary chronicles the legal struggle by 30,000 Ecuadorian rainforest residents over Chevron’s illegal dumping of more than 18 billion gallons of toxic water into the Amazon. At least 345 million gallons was crude oil, and Chevron admitted to the dumping in order to save $1-3 per barrel of oil. The suit concerned whether or not a journalist could be compelled to turn over such materials.

The Court of Appeals order was a partial win for each side. The panel concluded that Mr. Berlinger must turn over to Chevron all footage that does not appear in publicly released versions of the movie that depict the lawyers for the Ecuadorean plaintiffs, experts or current or former government officials. However, the many hours of footage that Berlinger gathered alone with the plaintiffs and their families, friends, and neighbor does not need to be disclosed and the court restricted Chevron use of the footage to the legal dispute.

In August Berlinger claimed that Chevron violated the court’s order by making “false and misleading” statements about his outtakes. Several days ago a federal judge in Manhattan ruled Berlinger must submit to depositions in the case and writing that the oil company’s original request to see the filmmaker’s raw documentary footage was not a fishing expedition. Chevron has been continuously fighting the filmmaker and its legal tactics have been criticized by many prominent figures and groups including Robert Redford, Bill Moyers, Michael Moore, the Director's Guild of America, the Writer's Guild of America, the NY Times, LA Times, NBC and HBO.

NEW EDWARD KENNEDY BOOK PUBLISHED

Congratulations to our client historian and journalist Burton Hersh whose new book EDWARD KENNEDY: An Intimate Biography has just been published. In this groundbreaking biography, Hersh combines extensive critical research with more than fifty years of never-before-told anecdotes and observations from his lifelong acquaintance with Edward Kennedy to create an indelible portrait of one of the finest legislators and most influential senators in American history.

The author provides the first full report of the vendetta that developed between Kennedy and Richard Nixon, describing the behind-the-scenes manipulations that Kennedy employed to eventually drive Nixon from office during the Watergate scandal.

Burton Hersh has long been regarded as Edward Kennedy’s principal biographer and is the author of such widely respected nonfiction as Bobby and J. Edgar, The Shadow President, The Old Boys: The American Elite and the Origins of the CIA, and The Mellon Family. A veteran journalist, he has contributed to such publications as Esquire, The Washingtonian, and The New York Times.

WHEN A DISTRIBUTOR DEFAULTS

Many years ago I represented a filmmaker who entered into an agreement with a small home-video distributor. The company had a decent reputation, and since there were no other offers for this $80,000 movie, a deal was struck. The filmmaker was promised a $40,000 advance for U.S. home video rights. The advance was payable in four installments over the course of a year. After the second installment was received, the distributor was acquired.

The new owners stopped making payments to my client. There was no question that the company owed another $20,000, and that my client had fulfilled all of his contractual obligations. The only excuse offered was that the company was experiencing “financial difficulties.” We suggested small monthly payments to retire the balance due. Payments were promised but never made. We initiated arbitration, quickly won an award, confirmed it in court, and obtained a writ of execution directing the sheriff to seize the company’s film library. Miraculously, the distributor’s cash-flow problems immediately disappeared, and full payment was received. But that was not the end of the matter. When I negotiated the agreement, I included a clause enabling my client to demand accelerated payments on default, interest on late payments, and reversion of all distribution rights. So the distributor not only had to pay the balance due with interest, but it forfeited its right to distribute the film. We re-licensed the picture to another home video distributor and received another $40,000 advance, thereby enabling the filmmaker to repay his investors. The film is an example of a picture that performed poorly in exhibition but did great in litigation. Ironically, if the first distributor had not defaulted, the filmmaker would not have been able to re-license the film and repay his investors.

There are honest distributors, but there are also a fair number of disreputable distributors who will look for any real or imagined excuse to avoid paying a filmmaker his share of revenue. Distributors know that the relatively small amounts at stake may not be enough to justify legal proceedings. Most independent filmmakers have limited financial resources, and most, if not all, of that will be spent to complete the film. Attorneys are not inclined to take on such cases on a contingency fee basis (i.e., the attorney gets a percentage of the recovery rather than being paid an hourly rate). That’s why it is often wise to provide for arbitration. With arbitration, disputes can be settled without the expense and delays typical of litigation. The arbitration clause should provide that the prevailing party be reimbursed attorneys’ fees and costs.

Filmmakers need to exercise great caution when negotiating distribution agreements. Even if the filmmaker thoroughly trusts the executives at a distribution company, the contract is signed with a company, and companies can be sold. Your friend who manages the company today could be gone tomorrow. Therefore, filmmakers need ironclad protections no matter which individuals may be running the company.

One of my recent cases concerned a dispute with a home video distributor. The filmmaker made an oral agreement with the distributor and delivered his film. The distributor began to advertise and promote the picture. Six weeks later, before any paperwork had been signed, the company reneged on the deal and pressured the filmmaker to renegotiate its terms.

To protect yourself from such tactics, make sure all promises are in writing. Do not deliver any materials until you have received a fully executed copy of the contract. Always retain possession of your film negative and master elements by providing a lab access letter instead of the actual master elements.

SELECTING A DISTRIBUTOR

Filmmakers may not have the luxury of choosing a distributor to their liking. In many instances, only one or a handful of distributors express interest. The terms may range from bad to worse. But assuming one has a choice, here are some factors to consider:

1. Media: Which media (e.g., theatrical, television, home video) does the distributor serve? Is the distributor an unnecessary middleman, or does it provide valuable resources and expertise? Any company can call itself a distributor. What services does this entity provide? To what extent does it use subdistributors? If subdistributors are used, do they take an additional commission?

2. Territory: What geographical area does the distributor serve? American independent filmmakers often use multiple distributors: a foreign sales company for international sales and a domestic distributor(s) for release in North America.
3. Reputation: Has the distributor left a trail of unhappy filmmakers in its wake? Is the distributor known for distributing films of a similar genre, budget, and stature? Does the distributor have a good reputation among its licensees or exhibitors?

4. Advance/Minimum Guarantees: What is the amount of any advance? When is it payable, and what conditions need to be satisfied? When are minimum guarantees payable? Will the distributor pay this guarantee if the film is not successful?

5. Division of Proceeds: How will revenues be shared? How much does the distributor take in fees or commission? Can the distributor recoup any of its overhead or staff expenses? Are there caps on marketing and distribution expenses?

6. Marketing: Is there a guaranteed marketing commitment? What is the minimum amount the distributor will spend to advertise the film? On how many screens in how many venues will the picture open? What is the marketing strategy? What kind of audience does the distributor think will be attracted to the film? What grass¬roots promotion efforts are planned? Will the film be entered into festivals?

7. Consultation Rights/Final Cut: Does the producer have any input or approval over artwork? Can the title be changed or the film re-edited without the filmmaker’s approval?

8. Financial Health: Is the company in any danger of becoming insolvent or going bankrupt? How long has the company been in existence? How well capitalized is it?

9. Cross-collateralization: Are expenses from one media or territory cross-collateralized with other media or territories?

10. Accounting: How often does the distributor issue producer reports? How detailed are the reports? Will the distributor provide receipts to document its expenses and revenues? Is interest paid on late payments? What kind of audit rights does the filmmaker have?

11. Ability to Collect: How much leverage does the distributor have with exhibitors/licensees to collect revenue?

12. Conflicts of Interest: Does the distributor handle any competing films? Does the distributor produce its own films that might receive preferential treatment?

13. Term: For how long will the distributor have the right to distribute the film? What is the maximum license term that the distributor can grant to others? Are there performance milestones that must be met before the term is extended? Does the producer have the right to regain distribution rights if the distributor per¬forms poorly or breaches the agreement?

14. Personal Chemistry: Does the filmmaker have a good rapport with distribution executives?

Excerpt taken from Mark Litwak’s Risky Business, 2nd edition, 2009.

Google's You Tube Prevails Against Viacom

In March 2007 Viacom filed a $1 billion copyright action against Google's You Tube website for contributory copyright infringement. Viacom wanted You Tube to be responsible for infringements committed by You Tube users uploading content they did not own. Viacom cited more than 100,000 instances of its copyrighted works being posted on YouTube and claimed You Tube knew its works were being infringed. It claimed the “safe harbor” provisions of the Digital Millennium Copyright Act (DMCA) did not apply. Citing the Grokster case, Viacom contended that one who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties.” Grokster, 545 U.S. at 919.

However, the United States District Court for the Southern District of New York rejected Viacom's claim that Google's site was liable for copyright infringement. Instead, the court granted Google's motion for summary judgment and found that YouTube qualified for the “safe harbor” protections of the DMCA.

Under the DMCA, online service providers can avoid liability for copyright infringement by appointing an agent to receive “takedown” notices from rights holders and then acting promptly to remove infringing materials. In order to qualify for this safe harbor, the service provider must not have actual knowledge that the material is infringing or, not be aware of facts or circumstances from which infringing activity is apparent.

“The present case shows that the DMCA notification regime works efficiently,” the court concluded, noting that “when Viacom over a period of months accumulated some 100,000 videos and then sent one mass take-down notice on February 2, 2007. By the next business day YouTube had removed virtually all of them.”

There is no doubt that congress passed the DMCA to reduce legal uncertainty facing online service providers, encouraging the growth of the internet and e-commerce. The ruling is the latest in a series of rulings upholding the safe harbor provisions against the attacks by various entertainment companies trying to restrict uploading of their content without their permission. In this case, Viacom contended that because YouTube had general knowledge that infringing videos were available on its service, it should be denied the safe harbor protections. If the court had agreed with Viacom, the safe harbors would not offer much protection. The court held that “General knowledge that infringement is ‘ubiquitous’ does not impose a duty on the service provider to monitor or search its service for infringements.” Only if the service provider receives specific notice from the owner, must the provider promptly remove the infringing material.”
Viacom announced that it will appeal the ruling.

Viacom International, Inc., v. YouTube, Inc., 2010 WL 2532404 (SDNY June 23, 2010)

ATTRACTING INVESTORS

Many filmmakers begin their careers by persuading private investors to back them. Indeed, unless you are a star like Kevin Costner or Barbra Streisand, it is rare for a major studio to fi¬nance a beginning filmmaker. Banks will not lend money without substantial collateral. Loans based on pre-sales are difficult to obtain because territory buyers want packages with name actors from an experienced director. That leaves most film¬makers looking to Mom, Dad, and whatever they can scrape up from friends, relatives, and MasterCard. While such resources have financed many films, distributor’s expectations have risen over the years. With a glut of independent motion pictures available, many distributors are not interested in acquiring a feature unless it 1) is shot with name actors; or 2) wins an important film festival.

Thus, filmmakers are forced to raise increasingly large sums of money to produce more ambitious movies if they hope to secure distribution. As digitally shot motion pictures gain greater acceptance, some production costs may decline. Nevertheless, numerous producers are chasing a small number of name actors. This competition has driven up the price of talent, even for low-budget indie films.

As a result, the ability to woo investors has become a critical skill—one that is not taught in film school. Perhaps the best preparation for an aspiring filmmaker would be to enroll in business school and learn the intricacies of high finance. Even if you didn’t learn much, you would graduate with a class of MBAs who would eventually earn large incomes and become good prospects to invest in your films. Better yet, go to dental school.

Most filmmakers have an aversion to fundraising. Like other “artists,” they would prefer that someone else deal with the unsavory task of raising money. But filmmakers without personal wealth or a rich uncle may have no choice but to beat the bushes for cash. Most underestimate the difficulty of raising funds. Joel and Ethan Coen spent a year raising the budget for Blood Simple. First they produced a slick trailer. Then they contacted everyone they knew who could potentially invest. Many of their friends who promised to back them didn’t come through. But the Coen brothers were shrewd networkers. Those prospects who were unable or unwilling to invest were asked to suggest other candi¬dates. Whenever they found an interested investor, they would visit them and show their trailer.

The Coen brothers discovered that the motive for people to invest in film has little to do with its financial merits. There are no special tax breaks. As will be discussed later, film is a risky investment. Yet there are many reasons people invest in film. The primary motivation is usually based on their attraction to the glamor of the movie business. Perhaps they think movie¬making will be exciting and fun. They may be turned on by the enthusiasm and passion of the filmmaker. They might want to rub shoulders with the “stars.” They may have a special interest in a topic. They may seek to impress their friends by inviting them to a screening of “their” film. They may desire an “executive producer” credit, a role for their niece, or a role for themselves.

Prime prospects are middle-class professionals: doctors, lawyers, and dentists. Most working-class folks can’t afford to invest in a movie. Wealthy individuals are difficult to approach unless you have a pre-existing relationship with them. They have investment advisors who tend to be financially conservative people immune to stardust. They analyze investments according to financial cri¬teria, under which movie proposals fare poorly.

The ideal investor is a doctor who makes several hundred thousand dollars a year and has substantial assets. He can lose his entire investment and the loss will not affect his lifestyle. This year instead of going to Las Vegas for a week and blowing ten grand, he is going to invest in a film in the hope that the experience will be more entertaining—it certainly won’t be less of a gamble. Investors who will suffer if they lose their investment should always be avoided.

Film investments have a bad reputation, and deservedly so. There are instances where investors were cheated and lost everything. Consequently, investors who have been burned or have heard of such horror stories may be unwilling to consider film-related investments. A filmmaker needs to be persuasive and have done his research if he hopes to raise funds. One needs to convince a prospect that film can be an intelligent investment for a small portion of the potential investor’s portfolio. While film investments are risky, the potential return from a hit can be enormous. Not only can the film earn revenue from box office receipts, but there are also ancillary sources of income. These sources include revenue from television, home video, merchandising, music publishing, soundtrack albums, sequels, and remakes.

Excerpt taken from Mark Litwak’s Risky Business, 2nd edition, 2009.

ALAN LADD PREVAILS AGAINST STUDIO PACKAGING PRACTICE

When a package of movies is licensed, a frequent issue is how to allocate the license fee among the pictures in the package. If all the pictures are of the same commercial worth, a simple division among the films would appear to be fair. But movies are not fungible commodities like jelly beans, and their value can vary greatly. Moreover, the worth of a movie can be subjective.

Producer Alan Ladd claimed that Warner Brothers undervalued and underpaid the license fees attributable to Blade Runner, Body Heat, Night Shift, Tequila Sunrise, Outland, Chariots of Fire, and the Police Academy franchise, consisting of the original and sequels 2, 3, 4, 5 and 6. Ladd was entitled to profit participation from the films.

Warner licensed packages of movies to broadcast television and cable networks. In a practice known as "straight-lining," Warner allocated the same share of the licensing fee to every movie in a package, regardless of its value to the licensee. The gravamen of Ladd's action against Warner is that by allocating the same portion of the licensing fee to every movie in a package without regard to the true value of each movie, Warner deprived Ladd of a fair allocation of the licensing fees to which Ladd was entitled as a profit participant. The complaint included causes of action for breach of contract, breach of the implied covenant of good faith and fair dealing, fraud and negligent misrepresentation.

Ladd's expert testified that in treating every movie as though it had the same value, "the studio was not doing its expert work, as a provider or distributor of content, in weighing the value of each of these titles." Ladd was entitled to 5 percent of gross revenues on all films once Warner recouped its costs, except for Chariots of Fire, on which he was entitled to 2.5 percent. Thus, on the $97 million in under allocated licensing fees, Ladd's profit participation should have been $3,190,625.

In its opinion the California Court of Appeals held that Warner owed a duty to allocate license fees fairly to Ladd's movies. It mentioned that every contract in California contains an implied covenant of good faith and fair dealing that "neither party will do anything which will injure the right of the other to receive the benefits of the agreement." (Kransco v. American Empire Surplus Lines Ins. Co. (2000) 23 Cal.4th 390, 400.) The implied covenant "finds particular application in situations where one party is invested with a discretionary power affecting the rights of another. Such power must be exercised in good faith." (Carma Developers (Cal.), Inc. v. Marathon Development California, Inc. (1992) 2 Cal.4th 342, 372.)

In evaluating its movies, Warner internally assigned each movie a grade of A, B or C. All of Ladd's films were rated either A or B. The problem was that Warner allocated the same proportion of the license fee to each title in the package, irrespective of the letter grade.

The court noted that movies rated C were filler material, which is why they are bundled in a package together with A and B movies. Leslie Cohen, director of film acquisitions at HBO, testified that in one licensing deal, Warner added a group of old Tarzan movies to a licensing package at no cost. Warner then allocated a license fee of $40,000 to each of the Tarzan movies, thereby reducing other movies' allocations in the package.

Ladd's expert also testified that in non-straight lined film packages, movies that were less valuable than Ladd's received greater value. For example, there were times when Daffy Duck and Bugs Bunny animated films were allocated double the money that was allocated to Chariots of Fire, a valuable feature film which won multiple Academy Awards, including Best Picture. Those animated films were wholly owned by Warner, which means Warner kept every dollar generated by licensing fees on those films. Ladd's expert determined that Warner was over allocating license fees to movies that were studio owned or that did not have profit participants.

Warner Bros had appealed a judgment on a jury verdict awarding plaintiffs $3,190,625 in damages. Most aspects of the judgment were affirmed and Ladd was granted recovery of costs on the appeal. Ladd v. Warner Bros. Entertainment, Inc. B204015. Court of Appeals of California, Second District, Division Three. Filed May 25, 2010.

Self Defense Checklist

Here is a summary of some of the most important ways film¬makers can protect their interests:
1. OBTAIN ALL PROMISES IN WRITING. Don’t accept oral assurances from a producer or studio executive. If they promise to spend $50,000 to promote your film, put that promise in writing. If there is not enough time to draft a long-form contract, insist on a letter agreement spelling out the essential terms.
2. REGISTER ALL WORKS WITH THE COPYRIGHT OFFICE. Before you pitch a story, write it out and register it with the U.S. Copyright Office for maximum protection.
3. OBTAIN AN ARBITRATION CLAUSE: Make sure contractual disputes are subject to binding arbitration where the prevailing party is entitled to reimbursement of legal fees and costs. Arbitration is less costly than litigation, and going to court is not much of a remedy if you can’t afford it.
4. WATER DOWN THE WARRANTIES: Warranties are promises. For example, when you sell a script, the buyer will want you to promise that you have not plagiarized another writer’s work or defamed someone. If you make an absolute warranty, you will be liable, even if you made a good-faith mistake and honestly believed that you had secured all the rights. Therefore, it is best to make your warranties “to the best of your knowledge and belief,” rather than making them absolute.
5. RETAIN POSSESSION OF YOUR MASTER ELEMENTS: Independent filmmakers should not relinquish possession of their master materials. Instead, give the distributor a lab access letter permitting it to order copies of your originals held in your lab under your name. This way, if the distributor ever breaches your contract or goes bankrupt, at least it will not possess your masters. You should also retain control of your original still photos and any artwork.
6. OBTAIN INSURANCE COVERAGE: Typically the producer purchases insurance, including Errors and Omissions (E&O) insurance, which protects the producer if he inadvertently infringes another’s rights (e.g., defames somebody, infringes their copyrighted material). It is best to purchase the E&O policy early so that coverage begins during preproduction. If you be¬gin production and a claim is made, insurance companies may decline to issue a policy or insist that the policy exclude the pre-existing claim. E&O insurance will pay (minus a deductible) for your defense and any damages that may arise from liability for inadvertently defaming someone or infringing their rights.
7. CHECK REFERENCES: The most airtight contract in the world offers limited protection against a scoundrel who ignores its terms. Carefully investigate any party with whom you contemplate do¬ing business. For distributors, confer with other filmmakers who have had dealings with a distributor over the course of several years. Check with the Filmmaker’s Clearinghouse on my website (www.marklitwak.com) to see how indie filmmakers rate various distributors. Usually, people who have lousy reputations have earned them.
8. TERMINATION CLAUSE: If the other party defaults, it is best if you have the right to terminate the contract and regain all rights to your film in addition to monetary damages. Writers should insist on a reversion clause so that if a script is bought and not produced within a reasonable amount of time (e.g., five years), all rights revert to the writer.
9. INVESTOR MONEY: Never make any “offers” to investors or accept any investor money without fully complying with all ap¬plicable state and federal securities laws. These laws apply when you offer investments to “passive” investors, which are investors who provide financing but are not actively involved in making the movie. Have an entertainment attorney with experience in securities prepare appropriate disclosure documents (e.g., a Private Placement Memorandum).
10. SAVE COPIES: Retain copies of all correspondence, contracts, and drafts of your screenplay. When you make a story sugges¬tion or enter into an oral agreement, follow up with a letter documenting the extent of your contribution.
11. DEFINE ADVERTISING EXPENSES: Distribution contracts should specify in writing the minimum amount the distributor will spend to advertise and promote a film. It is wise to cap ex¬penses as well. Obtain a detailed definition of which advertising, promotional, and marketing expenses are recoupable, thereby precluding the distributor from reimbursing itself for overhead and any inappropriate or undocumented expenses.
12. INDEMNITY: The filmmaker should be indemnified (reimbursed) for any losses incurred as a result of the distributor’s breach of contract, and for any liability arising from material added to the script/film by the distributor.
13. RIGHT TO INSPECT BOOKS AND RECORDS: The distributor should be required to maintain complete books and records with regard to all sales and rentals of the motion picture. The film¬maker should receive quarterly producer reports with a detailed accounting statement along with any payment due. In the event the filmmaker wants to examine the distributor’s books and records, he should be permitted to do so with reasonable notice. If an audit discloses a significant underpayment (e.g., $5,000), the distributor should reimburse the filmmaker the cost of the audit.
14. LATE PAYMENTS/LIENS: All monies due and payable to the filmmaker should be held in trust by the distributor. In addition, the filmmaker should have a lien on the filmmaker’s share of the gross receipts derived from the film. The distributor should be required to pay the filmmaker interest on any late payments.
15. REMEDIES: A filmmaker should be given at least three years from receipt of a financial statement, or from discovery of an accounting error, to object.
16. ASSIGNMENT: No assignment (transfer) of rights by the distributor should relieve it of its contractual obligations to the filmmaker unless the filmmaker consents to the assignment.
17. FILMMAKER DEFAULT: A distributor should give the filmmaker at least 10 days’ written notice of any alleged filmmaker default (breach of agreement) before taking any action to enforce its rights.

Distributing Your Indie Film

Filmmakers expend so much effort to produce their film that they often don’t give much thought to distribution until the movie is complete. Many filmmakers believe that if they just make a good film, distribution will take care of itself. However, securing distribution is often more challenging than raising financing and producing the movie.

One’s leverage in negotiating a distribution deal depends on whether distributors perceive the film as desirable. Of course, films cannot be appraised like real estate, as every picture is unique and there are no sure-fire criteria to determine a film’s commercial worth. I don’t know of a single industry executive who could have predicted the success of Slumdog Millionaire or Precious. The major studios, despite all their market research and expertise, frequently release big budget flops. While no one can accurately predict the commercial worth of a film, there are techniques and strategies that can be employed to improve one’s prospects. Even filmmakers with low-budget pictures with limited commercial appeal can usually improve upon the initial offer if they are savvy. An experienced negotiator can obtain many concessions just by knowing what to ask for.

In a typical deal, the distributor secures the right to distribute the movie in one or more media (e.g., theatrical, home video, television). The distributor pays for all distribution, advertising and marketing costs. Both parties share revenue derived from the film.

Competition improves terms. Giving one distributor an early peek at your film is usually a bad idea. If the distributor passes on the film, word gets around and other acquisition executives may not bother to view your film. On the other hand, if the distributor likes the film, a pre-emptive bid is likely, and you may only have a day or two to decide whether to accept the offer. If you decline, you may be rejecting the best deal you will ever receive. If you accept, you foreclose the possibility of a better deal tomorrow. Thus, you will be forced to make a decision without knowing where you stand in the marketplace and what other companies might offer. That is why it is important to orchestrate the release of your film to potential buyers so as to create maximum competition and enhance your leverage. Here are some guidelines:

1) NO SNEAK PREVIEWS: It is best not to screen your film for distributors until it is complete. Executives may beg to see a rough cut. They may assure you, "Don’t worry. We are professionals. We can imagine what the film will look like with sound and titles." Don’t believe them. Most people cannot extrapolate. They will view your unfinished film and perceive it as amateurish. First impressions last.

2) SCREEN IT BEFORE A CROWD: It is usually better to invite executives to a screening than to send them DVD. If you send a DVD to a busy executive, he will pop it in his machine and hit the pause button as soon as the phone rings. Then he will watch another few minutes until his secretary interrupts. After numerous distractions, he passes on your film because it is "too choppy."

You want an executive to view your film in a dark room, away from distractions, surrounded by a live audience--hopefully one that loves your film. So rent a screening room at a convenient location, invite all the acquisition executives you think appropriate, and pack the rest of the theater with your friends and relatives, especially Uncle Bob with his infectious laugh. Perhaps the best venue for exhibiting a picture is at a film festival. If the film is warmly received, your bargaining position will be strengthened. If an executive views your film surrounded by an appreciative audience, it may affect his perception of the film.

Moreover, festivals can generate favorable publicity. Most publications only review films about to be released theatrically in their community. Thus films seeking distribution are not reviewed. But entertainment trade papers and selected publications will review pictures exhibited at major festivals.

When arranging a screening, book a theater large enough to hold everyone expected to attend but not so spacious that your viewers are sitting in a sea of empty seats. Filling out the audience with cast, crew and friends may be a good idea as these people are likely to respond positively. At the screening, have someone at the door collecting business cards or taking names of those attending. That way you can determine which companies have seen the film and which have not.

3) DO NOT GIVE AWAY YOUR FESTIVAL PREMIERE LIGHTLY: Carefully plan a festival strategy. I have seen filmmakers give their premiere to minor festivals and thereby disqualify themselves from participating in more significant ones. You can participate in lesser festivals later. If you are turned down by an important festival, the worse that happens is that you incur a small delay in seeking distribution. No one knows which festivals passed on your film unless you tell them.

4) TIMING IS EVERYTHING: You should sell your film when buyers are hungry for product. Distributors that acquire films for international distribution plan their activities around a market calendar. The major film markets are 1) AFM in the fall in Santa Monica, California, 2) Berlin in February in Germany, 3) Cannes in May in Cannes, France. There are also television markets including NATPE in the U.S.A., and MIP and MIP-COM in France.

Distributors are hungriest for product when a market is rapidly approaching and they do not have enough fresh inventory. A distributor may spend $90,000 or more to attend Cannes, and if it appears the company will have nothing new to sell, the executives panic. This is the best time to approach a distributor. Give your distributor enough time to include your film in their marketing efforts. A movie acquired at the last moment will often receive rushed and slipshod treatment. As a result, the film may sell poorly at the first market, which is the most critical market for a picture. At subsequent markets, the film is no longer new product. The best time to approach a distributor is 60-90 days before a market. Assuming a distributor wants to acquire rights to your film, it may take a month or longer to negotiate a deal.