We are watching the lawsuit between This is Spinal Tap creators, Harry Shearer, Christopher Guest, Michael McKean and Rob Reiner, and Vivendi very closely. This case revolves around issues that we always pay close attention to for our creative clients: net profit definitions, copyright termination, and work-for-hire.
On October 20, 2017, Shearer, McKean and Reiner joined Guest in a Second Amended Complaint as individual Plaintiffs. This followed the dismissal of their loan-out companies, which were originally named as Plaintiffs, but found to have no standing. The pre-trial grappling will continue over the next months and this case is expected to have far-reaching implications for Hollywood’s “inventive” accounting practices.
Essentially, studios enter internal contracts with their own subsidiaries that fall far short from arms-length transactions. This allows the studios to deduct enormous expenses against the gross profits of a film, sometimes package them together with the expenses of poorly performing films, declare that there are no net profits in a project, and make no payouts under the net profits provisions of contracts with creatives. These accounting practices have meant that actors and writers associated with such “unprofitable” blockbusters as Return of the Jedi, Ghostbusters, Harry Potter and the Order of the Phoenix, and Forrest Gump have had to bring or threaten legal action before receiving their fair cut of royalties.
Not only have the co-creators of This is Spinal Tap requested a proper accounting of the net profits derived from the distribution and merchandizing of the film, but they are exercising their rights to terminate the copyright assignments in their works. Copyright law permits termination of rights 35 years after the assignment, and the co-creators have filed Notices of Termination. Their suit requests confirmation that the copyrights will revert to them in March, 2019. Reversion of the copyrights will entirely cut off the studio’s ability to distribute and otherwise commoditize the film and brand.
Ironically, the studio has now been placed in a position of fighting to retain interests in a “non-profitable” enterprise. The studio is fighting to retain its copyrights in the This is Spinal Tap brand by arguing that the co-creators were never copyright owners in the first place and that there is no assignment to terminate. The studio is relying on the work-for-hire doctrine to show that it was always the copyright owner of the film and music. At issue is the timing of the development of the copyrighted material—was it already in existence before the studio stepped into the picture, or were the requirements for work-for-hire in place when the material was created?
We love these kinds of cases because they are accessible and interesting to artists, and they help the public understand some of the nuances of copyright law. And, they help the artistic community understand why it is crucial to have an attorney review your contracts and catalogue your creative works. When we work with clients to review contracts, net profit definitions and work-for-hire provisions are often over-reaching and unfair to our clients. These are complex areas of law and are often misapplied in contract language. We work with artists to understand their rights and renegotiate fair terms. We also help our clients track creative assets and file timely Notices of Termination when the time is right.
If you need support understanding your rights under a film or other entertainment contract, contact our Arts & Entertainment Team today.