The Importance of Reading Contracts: Warner Bros. Gets Smacked Down

It's been a lively week for copyright law - Barbie totally banked (more on that in another post - although that was technically last week), and Fox cooked up and served a big fat can of whoop-ass for Warner Bros. in a Central California Federal District Court. Copyright nerds like myself jump up and down and start clapping like little 'tweens at a Jonas Brothers' Concert when stories of convoluted copyright issues make their way to the mainstream media, and the Fox v. Warner Bros. [Case #: CV 08-889-GA, Twentieth Century Fox Film Corp. v. Warner Bros. Entertainment, Inc., et al.F] story has certainly seemed to do just that over the past weeks. However, for those of that have better things to do in your life (like, maybe actually attend a Jonas Brothers' Concert, although it's really questionable whether that's a "better" used of your time...), here's the lowdown:

Warner Bros. is making a movie out of the graphic novel (NOT comic book! See a local nerd near you for the difference) "The Watchmen," originally owned a published by DC Comics. Somehow Fox legitimately acquired the rights to make the graphic novel into a movie in the mid 80's, but, through a series of quitclaim deeds and complex contracts with options, it is unclear whether Fox actually still holds those rights. A man named Gordon was part of one of the original deals giving Fox domestic distribution rights to the movie, along with a company called Largo. Fox later quitclaims (sells) their rights to Largo, but retains the right to distribute the film if Largo decides to make it. From '93 to '94, Gordon acquires all Largo's rights -- arguably including Fox's retention of the right to distribute. After that, Gordon puts out of the deal and settles with Fox, leaving him with the option to buy Fox out if he chooses to make "The Watchmen" a movie.

Here's where it gets a little complicated. Gordon then quitclaims his rights to Warner Bros, and now they're making the movie. (You can watch the trailer here although I'm not sure how long it will be up, since I'm sure an injunction by Fox against WB is in the works as I type.) Now, Fox is suing mad. They brought 2 claims in Federal Court this week: First, a copyright infringement claim alleging that Fox still owns rights to "Watchmen," including the right to make and a distribute it as a motion picture; and second, a contractual interference claim alleging that Warner knew that Fox still possessed these rights and intentionally messed up the deal with Gordon.

You can read the whole case here, courtesy of loeb.com. It's not that long because the judge basically went to town on Warner, ripping apart their motion to dismiss the case. Fox alleged that Warner "misstated" that Gordon was transferring all Fox's interest to Warner, but withheld from stating whether Warner actually knew that what they were stating in the agreement with Gordon was false (nice move, Fox legal team! Never thought I'd say that...). Instead, Fox went straight the jugular and stated that Warner knew (independently) that Gordon did not hold, nor could he transfer, Fox's rights via Gordon's option to buyout.

Warner tried to come back with the allegation that it was Fox that held the option and failed to exercise it before Gordon transferred the agreement (clearly contrary to the agreement, in which it was clear that Gordon held the option personally, making that part of the agreement, at least, nontransferable). Warner also alleged that they could not be sued for contractual interference because they were now a party to the deal and had assumed obligations under it. (Can't you feel the excitement? It's like a pay-per-view boxing match!)

Not surprisingly, the judge sided the Fox and dismissed the motion. In fact, that opinion baldly states that Warner will need more than they have now to win the case. I salute the uphill battle you face, Warner Bros. God's speed.

I go through all of this for two primary reasons: 1) I love copyright law and want to share its marshmallowy goodness with the world; and 2) it is so imperative, in every deal, to do your homework! Most of us don't want to hear this, but you really should read every contract you sign. Obviously, Warner's legal team did this (they wrote it!) but, as you can see, that alone isn't always enough when you're working with a series of owners and split-up rights to a piece of art.

Copyright is unique, even in the world of Intellectual Property, because its rights can be split up at least 6 (simple) ways - the rights to copy, distribute, prepare derivative works, publicly perform, public display, and publicly perform via digital transmission. Within the licensure and transfer of these rights, a myriad of different owners can succeed one another, making it difficult to figure out exactly who owns what. Most of you will never have to deal with this particular issue, but most of us do deal with it in the context of real property. When you buy a house, you'd better hope someone is doing the homework on your title if you're not. Like intellectual property, real property is very valuable to its owner and you don't want some stranger coming along and trying to take your stuff, right?

See? Law is relevant.