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«Rights, Camera, Action! IP Rights and the Film-Making Process Creative industries – Booklet No. 2 Rights, Camera, Action! IP Rights and the ...»

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This type of deal structure is now standard in transactions between producers and lead actors across the independent film community in the Anglo-Saxon world. In insisting on such terms, actors and their agents are lining up with Hollywood practice, albeit with lesser figures involved. In essence, against the commitment to take modest fees advances in order to facilitate the making of a low budget film, they will insist on becoming investors in the film.

This approach has its ambiguities:

– On the one hand, it allows small projects to – as it were – punch above their weight and guarantees a strong opening for the film in cinemas, due to the presence of popular actors in the cast list. This is a vital competitive factor for many independent films tackling more difficult subjects and whilst competing for an audience used to escapist Hollywood blockbusters.

Rights, Camera, Action! – IP Rights and the Film-Making Process – On the other hand, the agents now insist that the revenue “corridor” going back to the actors as part of the deferral deal, should be calculated from the first dollar of income from commercial exploitation. In the industry’s jargon, these types of arrangements are referred to as gross deals because the actor is meant to receive his/her share from first dollar instead of having to wait until the full costs of production have been recovered.

The difficulty for independent low budget producers is that they are dependent on international film exporters (known in the business as “sales agents”), to provide realistic forecasts of the total value of the sales of the film’s distribution right in various countries.

In order for the producer to raise the production budget, he needs to be able to persuade them that accumulated sales values will exceed the cost of making the film.

The lead actors’ demand for a revenue share-out based on gross income, deducts a significant amount in advance from the value of those sales, making it more difficult to match them to the film’s budget and thereby making the risk seem greater for the financiers.

The way out of this quandary is to offer the actors an intermediate deal whereby they are entitled to a “corridor” of income, not from the first gross dollar earned but from this same dollar, after the distributor has deducted the costs of film prints and marketing, and before his commission. In the business, this is often known as “adjusted gross” Although this improves the chances of matching budget with estimated sales.

values, it is generally still far from optimal from the producer’s point of view.

With non-star actors, producers will tend to agree to deals made-up of advance fees (or salaries), based on published union rates, combined with residual payments calculated either as a fixed amount for each sale of the film rights in a variety of media and territories, or a royalty based on a small percentage of the value of the sale. Standard actors’ union agreements vary in Anglo-Saxon countries in that respect. There are also some differences in the share-out of net profit. In some agreements, there is no specific clause providing for a share-out of a film’s net profits in favor of the actors – the negotiation on this aspect of an actor’s remuneration is left to the negotiating power of the agents, which is itself predicated on the perceived value of their clients to the project. In practice, this means that if a standard agreement does not have clauses for profit sharing, only the leading roles tend to impose such terms on the producers because of their perceived market value.

Rights, Camera, Action! – IP Rights and the Film-Making Process Other union agreements ensure that every one of their members hired on a production may choose to claim a profit share: in the UK, the Actors’ Equity agreement with independent producers gives the actor a choice between a profit share (2 percent of net profit to be shared out between all), or a royalty based on the value of all sales of the film rights, after sales revenues have exceeded 50 percent of the cost of producing the film.

3.iii In the Director’s Chair – author vs technician-for-hire

The director is widely recognized as the most pivotal creative artist and technician in the making of a feature film. The mystique surrounding the work of world class directors attests to the powerful influence of a consistent personal vision behind the success of many films. Over many decades and through many memorable films, great directors have often shaped a body of work with an instantly recognizable style signature, recurrent themes and narrative devices.

Under some legal regimes, the director is presumed to have the initial authorship in the film and his contract with the producer will be structured around the transfer or licensing of all exploitation rights, against negotiated remuneration and a participation in revenue streams. The contract will also define the respective powers of the producer and the director, especially with regard to the strategic issue of who has the final cut.

In France, the producer hires the director under two separate and inter-linked agreements: a technician’s contract to direct the film and an author’s contract taking a transfer of all exploitation rights in the work and laying out the specific arrangements for revenue sharing.

In this configuration, the director’s advance remuneration is typically split into two halves, with one sum allocated as a one-off fee for technical services and the other as a minimum guarantee deductible by the producer against future revenues.

The final cut refers to the power to decide about the final shape of the film. Under a droit d’auteur legal regime, it would be contrary to IP statute for the director to have this power taken away from him; he will see it as an important expression of his moral right, whereas the moral right itself cannot be waived, transferred or assigned.

Rights, Camera, Action! – IP Rights and the Film-Making Process In regular custom and practice however, pragmatism always prevails: it is therefore standard for French directors’ contracts to provide that the final cut will effectively be a joint decision between the producer and the director. The agreement also typically provides that “the director will have the possibility to supervise foreign versions [of the film]” This is another example of how the exercise of the moral right is.

accommodated through contractual practice, as there is no mention here of the director having to authorize the said foreign versions, despite the fact that these may include cuts made to accommodate censorship requirements in foreign countries.

Elsewhere, the contract even specifies that no modification may be made to the final cut of the film without the director’s prior written approval, “except however, those demanded by censorship”.

This type of director-as-author agreement is very detailed with regard to the director’s further income streams as an author of the film: each market, from theatrical down to small ancillaries such as theatrical or radio spin-off programs, carries a percentage pegged either to the price paid by the public (gross deal), or the producer’s share of net income from exploitation.

In the US, the director’s status recalls that of the actor in that it is normally a workfor-hire contract involving no characterization of neighboring rights to be transferred:

the director is remunerated for providing a service over the life-span of the production, which will include pre-production and tasks linked to the development period, such as script meetings, etc.

The US director’s treatment as a technician rather than an author does not necessarily mean that his actual contractual terms will be any less advantageous than the director in droit d’auteur countries: the difference between the two regimes in this respect is that whilst the droit d’auteur contracts will provide an innate set of advantages (final cut, participation in film revenues) to all directors, the work-for-hire system will only grant such advantages in the context of a market-driven negotiation based on the perceived competence and box office drawing power of each director.

It is a known fact that, although moral rights do not feature in the negotiations, a few of the most famous A list Hollywood directors will insist on a final cut provision or – at the very least – a joint final cut. This facility is made somewhat easier by the fact Rights, Camera, Action! – IP Rights and the Film-Making Process that directors operating at this level in the Hollywood hierarchy will often be involved as producers as well as directors on their projects. Even for the less powerful directors, union agreements provide for the director to initially deliver his version of the film’s cut, before any final decision can be made. This director’s cut may be exploited separately at a later stage.

Equally, while the majority of work-for-hire directors have to contend with the standard residual payments negotiated through their union, those with a sound commercial track-record will negotiate hefty shares of a film’s net profits or – in some rarer cases – a percentage of revenue from before the point at which the film’s cost is fully recovered (adjusted gross deals; c.f. section on actors, above).

In the UK, a hybrid contractual system prevails. Since it was harmonized in the midnineties with the dominant droit d’auteur continental system, the Copyright Act has provided that the principal director of a film is its author or one of its authors. Prior to this, the British film director was hired along similar lines to his US colleague, and – much like the US – copyright law established the producer or production company as the sole author of the film.

The statutory change of the British director from a technician-for-hire to an author has not led to any substantive changes to his contractual position. Most directors’ contracts take an assignment of all the director’s rights against advance remuneration. UK producers, like their US counterparts, also insist on a waiver of the

director’s moral rights. A standard waiver clause will read like this:

“[…]… and the director hereby waives the benefits of any provision of law known as moral rights of authors or the “droit moral” or any similar law in any country of the universe and hereby agrees not to institute, support, maintain or permit any action or lawsuit on the ground that any Film and Soundtrack [..] produced and/or exploited by the company in any way constitutes an infringement of any moral rights or “droit moral” of the director or is in any way a defamation or mutilation of the Film…” The reasoning behind Anglo-Saxon moral rights’ waivers is that leaving the work open to an author exercising his moral right would be a devastating deterrent to most film investors, all of whom want legal certainty before deciding whether or not Rights, Camera, Action! – IP Rights and the Film-Making Process to take a substantial risk on a film. They argue that whilst custom and practice in the film industries in droit d’auteur have had decades to adapt to non-waivable moral rights and developed a number of risk-minimizing practices, the only existing recourse under existing Common Law would be blunt instruments such as an injunctive relief.

The prospect of a film being stopped in its tracks over a moral right dispute is one that Anglo-Saxon film industries find difficult to adjust to, given the high risk nature of the film business and the size of the financial investments required.

3.iv Licensing by Numbers – collective management and talent rights Certain rights pertaining to the talent are normally not under the direct control of the producer. These are very specific rights whose exercise requires collective consent and licensing rather than individual transactions in order to make practical sense.

A perfect example of this type of right can be found in the music industry: it involves the use of musical tracks by radio and television broadcasters who air a large volume of recorded music across their schedules on an ongoing basis. No such broadcasting service would be remotely viable if individual clearance was required for all such usage.

In this instance, artists’ rights are represented through large collecting societies which provide blanket authorization for use and negotiate umbrella rates with the broadcasters, collect bulk revenue from them and re-apportion this revenue to individual authors or performers through a complex set of calculations.

Collectively-managed rights that are specific to the audiovisual medium consist mainly in cable re-transmission rights and home video copying levies.

The cable retransmission right is exercised at the point when a non-encrypted program-carrying signal from a television broadcaster overspills across a country’s borders, there to be picked up by a cable company which then re-distributes the signal into the homes of its subscribers. In this instance, individual licensing of rights would not be a manageable proposition since the broadcaster’s original signal is an ongoing stream of audiovisual content and clearance is required for a considerable volume of works.

Rights, Camera, Action! – IP Rights and the Film-Making Process In this instance, actors and authors may have assigned the cable re-transmission rights to the producer as part of their engagement contracts. In this event, the producer may be made responsible for collecting the talent’s cable royalties, accounting and remitting the amount back to them. The more usual agreement structure however, entails the author or actor either assigning this right independently to his collecting society or granting it a mandate to give consent and collect cable retransmission revenues on his behalf.

In this eventuality, the contract with the producer will specify that nothing in the contract will prejudice the actor or author’s assignment or mandating of this right to his collecting society and to receiving revenues accordingly.

Some jurisdictions specify that authors and actors may only be permitted to license their cable retransmission right and collect cable revenue through a collecting society of their choice.

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