The ‘Gravity’ of the Situation: What Hollywood Writers Need to Know Before They Sell Their Rights in Their Literary Works

By now, many have heard about the legal battle between author Tess Gerritsen and Warner Brothers for its alleged breach of a 1999 contract that provided Gerritsen with “Created By” credit and back end profit participation in the motion picture adaptation of her book entitled “Gravity”.

On January 31, 2015 the district dismissed her claim, not because she failed to prove that the wildly successful film “Gravity” was actually based on her novel of the same name, but because she failed to show that Warner Brothers was bound by the 1999 agreement that she entered into with Katja, a wholly owned subsidiary of New Line Productions. At the time Gerritsen signed the purchase agreement, New Line and WB were owned as separate entities by Time Warner, and in 2008, Time Warner made a decision to consolidate the two into one.  Five years later, the film “Gravity” was released by Warner Brothers – with no credit to Gerritsen and no back end payments made as had been agreed to by New Line, through its subsidiary Katja.

When her claim was dismissed, Gerritsen voiced her concern about the potential implications of the ruling, not just for herself, but for the industry at large, and many have echoed her alarm. The decision, if in favor of Warner Brothers, will affect many writers, whether it’s those who have written a book that has been purchased for adaptation into a film, or those who have written original screenplays that have been purchased for production. A precedent would be set that would essentially allow for a parent company to freely exploit the rights of the literary properties it acquires through a merger/buyout without having to honor or uphold the rest of the terms and conditions that the original agreement transferring those rights calls for, such as credit and back end participation points.

For this reason, Gerritsen has not given up her fight against WB. She filed an amended complaint on February 19, 2015 that focuses on the relationship between Warner Brothers, New Line and Katja. The case turns on whether or not the WB, as the successor in interest, agent and/or alter ego of Katja/New Line, will be bound by the 1999 agreement entered into before the consolidation.

DSC_1394-95
CATHERINE MCEVOY
Email: [email protected]
Phone: 310-551-0600
Practice Areas
Business Litigation
Corporate
Entertainment
Fashion and Apparel
Trademark andCopyright

In an industry where rapid evolution of technology is constantly changing how entertainment is created, distributed and consumed, and a handful of traditional players are fighting to maintain market share, mergers, acquisitions, buyouts, and vertical integration are extremely prevalent — and not going anywhere soon. A cursory glance at the major and mini studios and their subsidiaries clearly illustrates the current state of the media oligarchy, and a read through of the first amended complaint describing the long and complicated relationships between Time Warner, New Line and WB will leave your head spinning. This makes the outcome of the case relevant not just for purchase agreements signed with New Line, but will set the precedent and standard for this all too common situation.

What is troubling about this case is that Gerritsen, knowing at the time that Katja was merely an instrument of New Line, attempted to protect herself through not only a standard assignment provision, but also required that New Line execute and deliver a Continuing Guaranty in which it guaranteed the “full and faithful performance” by Katja of all of Katja’s obligations under the Contract. Despite these precautions, “by virtue of a written agreement dated January 1, 2010, all intellectual property acquired by New Line at any time (in perpetuity) is deemed to be automatically transferred to and owned by WB. WB paid no consideration to New Line for entering into this agreement, nor is WB obligated to pay any consideration in the future when intellectual property rights are acquired by New Line and automatically assigned to WB. The express purpose of this agreement “is solely to vest in WB the benefits of specific rights-related provisions of Content Agreements” and per the agreement, “WB assumes no obligations under such . . . Agreements.

With Sony, Dream Works Animation, Lions Gate, and MGM just a few of the possible players currently looking to acquire or be acquired, the ‘gravity’ of this situation should not be overlooked or downplayed.