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Avoiding the Trump Effect in Your Creative Contracts

Added on August 18, 2015 by Gamal Hennessy.

National politics has been obsessed with Donald Trump since he announced his bid for the presidency. Whether you agree with him or not, his brand of political discourse creates an “us vs. them” mentality the media can’t resist. When he talks, people often react in extreme ways.

Many businesses reacted by terminating their contracts with Trump and his companies. After his now infamous quotes about Mexicans, Chinese and immigrants in general, NBC cut him from The Apprentice. Celebrities dropped out of his beauty pageant. High profile chefs refused to build new restaurants on his properties (See Trump Litigations Pose Questions for Restauranteurs). Trump responded by suing everyone who tries to distance themselves from his comments. While the Trump show has moved on to other acts in its political circus, I’d like to take a look at things creatives should consider when dealing with public image in their contracts

The Impact of Reputation on Business

Even before the rise of social media, the image of a person or company could be the difference between the success and failure of an entertainment release. Associating a new sneaker or film with a star could guarantee millions of dollars in sales. An arrest or scandal at the wrong time could destroy a franchise or an entire company. In the world of Twitter, Facebook and Instagram the same rules are applied with the speed of thought. No one is immune from the critical eye of public scrutiny. The most modest and low budget film, graphic novel or musical release needs to have some kind of escape route if one party pulls a Trump.

Types of Contract Protections

Contract law deals with damaged reputations in four distinct ways. The first two come into play more often in media employment and endorsement contracts, and the last two are more universal ideas. Each of them could deal with a Trump in a different way, with different levels of effectiveness.

The Morals Clause prohibits a party from engaging in certain behavior in that party’s private life. For example, an actor for G-rated family films might have a morals clause in their contract making arrests for DUI, drug use, solicitation of prostitutes or other scandals grounds for terminating the deal.
The Non Disparagement Clause prohibits a party from discrediting, dishonoring or lowering the esteem of the other party. So if a writer sells her book to a movie studio, a non-disparagement clause might prevent her from going to the press and criticizing the movie or the studio
The Confidentiality Clause could prohibit any public discussion of any aspect of the agreement. In some cases, a party might not even be allowed to discuss the existence of the agreement itself. We sometimes see this when actors are put under a gag order to limit leaks for an upcoming release.
The At Will Termination Clause is the broadest type of termination clause. It gives a party the right to walk away without giving any specific reason for termination. It often doesn’t allow for a cure period (where whoever is at fault gets the chance to fix things) and creates the most precarious type of contract.

It is unclear which if any of these clauses were in the restaurant or beauty pageant contracts, or how the cases against Trump will play out. It is clear that as more creatives and corporate executives get treated as public figures, the more these clauses will come into play for future deals.

Finding the Protection

When a creative person looks at a contract, the focus is often on the money, the deliverables, and the deadlines. They might not be willing to slog through the swamps of boilerplate language to consider the impact of confidentiality or morals clauses. Without professional advice, they might do or say something to put their deal at risk even after it’s signed. Or they might find themselves publicly connected to a media nightmare. In the modern digital landscape, it pays to have a professional review all the aspects of your deal to point out pitfalls unrelated to dollars or deadlines (See Why Artists Need Lawyers). Not all of us can be Donald Trump and say whatever we want. Over time, we might find out he can’t do it either.

Have fun.

Gamal

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PLEASE NOTE: THIS EMAIL IS NOT A SUBSTITUTE FOR LEGAL ADVICE. IF YOU HAVE A LICENSEING OR INTELLECTUAL PROPERTY ISSUE, DISCUSS IT WITH YOUR LEGAL ADVISOR OR CONTACT C3 AT gamalhennessy@gmail.com FOR A FREE CONSULTATION.

How a Lawyer Beat Darth Vader

Added on August 1, 2015 by Gamal Hennessy.

By Gamal Hennessy

Star Wars is one of the most well-known franchises in modern entertainment. Return of the Jedi holds a special place in the mythology of the Jedi saga. But the film that gave us Darth Vader’s last moment of redemption is also the film that continues to disappoint at least one actor.

Several news sites reported on a recent interview with David Prowse, the actor inside the Darth Vader suit for Return. According to letters received from Lucasfilm to Mr. Prowse, Return of the Jedi has never made enough money to trigger a net royalty payment for his performance. In spite of the film making more than five hundred and seventy million dollars in the box office since its initial release over thirty years ago, Mr. Prowse, and actors like him, are not in a position to get paid beyond their initial salary for the project.

Gross vs Net

While the story is notable for the popularity of the character and the prestige of the film, the elements of it are fairly common in contracts of all types, not just entertainment related ones. The difference between gross and net in the calculation of revenues can be the difference between being paid indefinitely and not being paid at all.

A while back, I wrote a piece about the difference between gross and net payments in creative contracts (See Your Slice of the Pie: Part 1). I explained Gross revenue or gross profits as the pure income that a product or service generates while Net revenue or net profits is the income that a product or service generates minus certain expenses. Taking a very simple example, if you acted in a film and were promised a cut of the gross revenue, you’d get paid based on how much money the movie made. If you agree to take a cut of the net revenue, you get paid based on how much is left after all the expenses for the film are paid. If the expenses of the film are never paid off, then you never get any royalty, even if you are the most dread Sith in the galaxy.

Hollywood Accounting

The film industry is often blamed for manipulating accounting methods to avoid paying artists. The term “Hollywood accounting” refers to concepts like using net profits instead of gross to pay creatives and then extending expenses out forever to ensure a film never gets to a stage where royalties need to be paid. Hollywood might use these tactics in the most spectacular ways, but they are by no means the only entertainment industry with this practice. In fact, it is not just the entertainment industry. Any type of contract where payments are based on future earnings can be manipulated by the gross vs. net concept.

Eyes Wide Shut

People may mock actors like Mr. Prowse who agree to net profits, but these deals have to be considered in context to be understood. In many cases, a creative person is so eager to cash in on his big break that they agree to bad terms just to get the deal done (See You Signed the Contract, but Do You Know What It Says?). In other instances, an artist often doesn’t have the negotiating power to push for the best terms. (See David and Goliath in Contract Negotiations) Sometimes, an artist doesn’t have any legal advice when signing a contract. This often leads to situations far worse than Mr. Prowse (See Why Artists Need Lawyers)

One word or concept can make a world of difference to a contract. If you’re not trained to find it, not even The Force will be able to help you.

Have fun.

Gamal

All for One and One for All: Artist Collaboration Agreements

Added on July 21, 2015 by Gamal Hennessy.

by Gamal Hennessy

Most of the contracts I deal with are between an artists and publishers. I take the publisher’s standard contract and explain it to the artist in language they can understand so they know what they are getting into, for better or worse. What clients don't normally ask me to do is create agreements between the artists working together on a project to define their relationship with each other. What they often don't realize is that this type of contract is just as important as the one between the artist and the publisher. Without this type of agreement an otherwise successful partnership can lead to misunderstandings, conflict and disputes down the road that can be just as costly as any disagreement with a publisher.

Keeping the band together

Certain creative endeavors like comics, movies, films and theater are normally created through a collective effort. While there are some creators who do everything, most projects are created by the continuing collaboration between the members of the group. In the same way that a band combines the talent of each instrument to make music, a creative team comes together to make other types of commercial art (even if they only come together in a cloud server that they upload the work to).

Just like a band or a movie crew; each member of the team should know what he or she is getting out of any deal that involves the property they work on. This might not be significant when you are selling a couple hundred books a year on your website and losing money on the cost of production. This becomes a huge issue when a property is picked up for a film, TV show, video game or merchandise deal. It helps to have all the issues squared away before Hollywood starts calling. If you wait too long, anger, resentment and actual litigation could tear the team apart just when things start to take off. That is where the collaboration agreement comes in.

Putting the ducks in a row

A well drafted collaboration contract contains six elements:

Who is responsible for creating each element of the property
How is the copyright for the property going to be distributed between each creator
How will the revenue be distributed between each creator
Who has decision making authority for the property
Who is the primary contact for the property
What happens when someone leaves the creative team

While the contract can be overly complex with just these elements, the best ones address these issues without a large amount of legal gymnastics. At the same time the elements of a collaboration agreement should not conflict with the terms of any agreement with a third party publisher or licensee of the property. Your legal advisor can review both contracts to ensure there is harmony between them.

Other options

Of course, there are cases where only one or two of the artists on a project will actually own the copyright and the other participants may participate on a work for hire basis. Also there are some instances where the creative team actually forms a separate company to manage and exploit the property. In those cases, as with the collaboration agreement described here, a contract should be in place before any work is done to protect the rights of each artist in relation to each other as well as to a publisher.

Have fun.

Gamal

PLEASE NOTE: THIS BLOG POST IS NOT A SUBSTITUTE FOR LEGAL ADVICE. IF YOU HAVE A LICENSEING OR INTELLECTUAL PROPERTY ISSUE, DISCUSS IT WITH YOUR LEGAL ADVISOR OR CONTACT C3 ATgamalhennessy@gmail.com FOR A FREE CONSULTATION.

A Framework for Creative Contract Negotation

Added on July 1, 2015 by Gamal Hennessy.

by Gamal Hennessy

Creative people just breaking into their field often see contracts as a necessary evil. At worst, they ignore it as much as possible, hoping the other side will treat them fairly. At best, they look at it as an obstacle to overcome, something they just have to get through with as much speed and as little pain as humanly possible (See Understanding Contract Law: Don’t Wait Until It’s Too Late). Budding creative professionals like this often lose legal control of the stories, characters and worlds they’ve created. They trade a potential source of revenue for a painful lesson in contract law (See Deal With the Devil: How Creators Get Their Rights Stolen).

Seasoned creative see contracts as an opportunity to turn their talent into profit. They might spend weeks or months negotiating a deal, hiring attorneys, accountants and other professionals to hammer out all the details. They learn from their peers and the people who came before them to figure out what to give up and what to ask for. They turn their characters into merchandise, their stories into books and film and their worlds into franchises.

One of the main differences between the new creator and the veteran is the tactics and framework they use to negotiate and close deals. Alex Furmansky recently published a piece in Inc. Magazine where he discussed seven concepts for contract negotiation (See: Don’t Sign Anything Without Knowing These Seven Contract Negotiation Tactics) including:

Control the first draft
Ask for the kitchen sink
Keep the relationship healthy
Make sure the other side can look good
Deal with the decision maker
Use an intermediary
Learn everyone’s real motivations

This list isn’t specific to creative contracts, but it does offer some useful concepts we can use. The last five are key in any contract you do. Take the last tip as an example. If you’re negotiating a publishing contract with a comics company, but he insists on getting the film and merchandise rights, does he really want your book, or is he looking for a really cheap way to acquire properties to option to a studio? Taking some time to learn his motivations will help you figure out what’s really important.

In addition to Mr. Furmansky’s list, I’d like to offer three more items to round out the framework for your deals. I try to discuss this with each of my clients and most of them have found it to be helpful:

Understand what you want from the deal: Not everyone wants the same thing from their contracts. Some people are looking for recognition to build their portfolio. Others want money up front. Some want back end participation. Many want creative control of the property. Some people want it all. The only way for you to know what you can and can’t agree to is to know what you want to walk away with when the deal gets signed. (See Losing Control and Loving It)
Understand what each section of the contract means: The first couple pages of a deal often have the basic terms both sides have agreed to. They’re like the frosting on a cake. You need to make sure what’s under the frosting is actually cake and not a pile of manure. Contract language can be dense, circular and confusing, but that’s where the money and control are won and lost. The devil is in the details (actually, the lawyers are in the details here, but sometimes that’s the same thing) and you need to know what’s going on in the details. (See You Signed the Contract, But Do You Know What It Says?)
Decide when you need to walk away: Not every deal is worth signing. If you have to give up everything just to close a deal, it might make sense to walk away. This can be a difficult proposition, especially when someone has worked for years to get their big break, but the creative industry is littered with artists who gave away their life’s work, watched it become a hit and get nothing in return. At least if you walk away from a bad deal, you still have the potential to shop property somewhere else. (See How to Reject a Bad Contract)

Taken together, these ten concepts can be a helpful guide for any contract you encounter. They won’t replace professional advice on contract drafting and negotiation, and they won’t guarantee you get the best deal, but you’ll be in a better position with these than if you just ignore it and hope the other side treats you fairly.

Have fun.

Gamal

If you want more tips and insights on creative contracts, sign up for the free Creator Contract Newsletter.

PLEASE NOTE: THIS BLOG POST IS NOT A SUBSTITUTE FOR LEGAL ADVICE. IF YOU HAVE A LICENSEING OR INTELLECTUAL PROPERTY ISSUE, DISCUSS IT WITH YOUR LEGAL ADVISOR OR CONTACT C3 AT gamalhennessy@gmail.com FOR A FREE CONSULTATION.

Before You Sign on the Dotted Line.

Added on June 9, 2015 by Gamal Hennessy.

by Gamal Hennessy

When an artist, writer or other creative person gets a contract from a publishing or distribution company, it can be a confusing and stressful situation. Many artists work for years, dreaming of the day when a large company is ready to give them a contract, but very few of them understand the language in contracts and how that language will affect their ownership of their creation or the money they can make. This is the point where an artist needs professional advice from someone who understands how contracts are written.

This is the service that I provide. The main specialty of C3 is providing legal analysis of contracts for artists and creators. I break down and explain each paragraph of the contract in straightforward terms, so you can make an informed business decision on what conditions you can and can't agree to. This will give you the confidence you need to discuss the agreement with your potential business partner and sign a contract that protects your rights and puts you in a position to profit from your creativity now and in the future.

There is a long list of creators in music, publishing, television and film who signed away all the rights to their original work because they didn't understand the contracts they signed. The analysis I provide is designed to prevent that. Of course, there are many situations where the main goal of the artist is upfront payment or exposure. There are times when you might be willing to accept a deal that is not set up in your favor. But even in those cases, it is better to know what you are signing and how it will affect your rights and income going forward.

A C3 review will give you that.

If this is something you are interested in, please leave a comment below or contact me at gamalhennessy@gmail.com and we can set up a free call to discuss the specifics of your situation.

Best

Gamal

PLEASE NOTE: THIS BLOG POST IS NOT A SUBSTITUTE FOR LEGAL ADVICE. IF YOU HAVE A LICENSING OR INTELLECTUAL PROPERTY ISSUE, DISCUSS IT WITH YOUR LEGAL ADVISOR OR CONTACT C3 AT gamalhennessy@gmail.com FOR A FREE CONSULTATION.

Opportunities and Obstacles

Added on March 24, 2015 by Gamal Hennessy.

by Gamal Hennessy

I hope the weather is warm or at least warmer, where you live. I also hope your business prospects are warming up as well. Before the spring hits and productions of all types get under way, consider these three essays on the state of entertainment contracts.

What the Valiant Movie Deal Means for Movies, Comics and You: Is the reported nine-figure development deal a desperate money grab or a new avenue for creative artists?

Your Exclusive Engagement: Can you afford to put all your creative eggs in one basket?

The Cautionary Tale of A Wheel of Time: Franchises like Harry Potter, The Hobbit and Game of Thrones show the potential of bringing fantasy books to a wider audience, but what happens when a deal like that goes wrong?

Contact C3: If you have a contract you need reviewed or help protecting your art and your career, please contact C3 for a free consultation.

Have fun.

Gamal

Your Exclusive Engagement

Added on February 26, 2015 by Gamal Hennessy.

By Gamal Hennessy

Many people don’t read the contracts they sign. Even fewer people read the “boilerplate” language often found at the end of the agreement. People want to know things like when they’ll get paid, how much they’ll get paid, and what they have to do to get paid. Avoiding so-called “boilerplate” might be a natural response to getting a contract, but the clauses at the end of an agreement have a significant effect on, and could completely alter where and how the money flows.

Over the next few weeks, I plan to shed some light on typical boilerplate clauses in entertainment contracts. This isn’t going to be a definitive treatise on legal concepts or the final word on the current status of contract provisions. This also isn’t going to be a replacement for actual legal advice about your specific contract. My goal here is to help artists, writers and other creative people become better informed about various aspects of contracts they might be confronted with.

In this second installment, we look at the concept of exclusivity.

The word “exclusive” is often used in entertainment marketing to trumpet some special event or limited time offer. We hear about exclusive engagements in theaters, exclusive releases in video games and exclusive production deals in film and television. While the word designates a special event in ad copy, the term exclusive has even more impact when it comes to creative contracts. The restrictions and the costs of exclusivity are important considerations for any artistic professional.

Concept

Exclusivity is a concept modifying a grant of rights or access to goods and services. You are in essence, excluding everyone else from the right, good or service. The opposite of exclusive is non-exclusive.

The easiest real world example I can offer is a car vs. a cab. When you buy a car, you and the people you designate are the only people who can use the vehicle, until it is repossessed, stolen or destroyed. When you hail a cab, you can use the vehicle for a little while, but before you got in and after you get out anyone can use that vehicle, assuming the cabbie will stop for them.

The entertainment industry is filled with examples of exclusivity. When I worked at Marvel, we often signed A-List writers and artists to exclusive deals to keep them from working with DC. Film distribution companies always push for exclusive domestic distribution rights to a film. Publishers can obtain exclusive rights to an image used in a cover. An actor or director could be retained on an exclusive basis for a period of time for a particular project. Almost every avenue of entertainment and media has some relationship with exclusivity, so understanding its impact is important to everyone.

Economic Impact

In any exclusive agreement, there are at least two parties who need to deal with the scope and the cost of the contract: at least one side gives exclusive rights and at least one side gets them. The side you’re on dictates what your goals and obstacles are and how you can massage them in your favor.

The person or company giving away exclusivity limits their ability to generate revenue based on the rights granted. For example, if you release a book through Amazon’s KDP select program, you can’t publish the book on any other platform for at least 90 days. Likewise, a screenwriter who has an exclusive deal with a production company gives up the ability to generate multiple streams of revenue by writing for other artists. Parties in this position naturally try to charge more to get into an exclusive deal to cover the lost revenue streams. At the same time, they try to limit the length or term of the exclusivity to reduce the financial impact of the arrangement (See Eternity is a Long Time in Creative Contracts)

The person or company getting exclusivity limits competition in the market. If only one company can show a movie, release a game or throw a concert, that entertainment is perceived as more valuable because of its scarcity. Exclusivity doesn’t always work directly. In video games, an exclusive PS4 title still sells at the same price as a multi-platform game, but if the system has more high-quality exclusives compared to the competition, the value of the PS4 system increases, not just the value of the game. To maximize the benefits of an exclusive, the side who gets it often tries to keep their rights forever.

The Shell Game

Like most legal concepts in contracts, there are situations where the impact of a word changed its initial meaning. Under certain circumstances, the grant of an exclusive license in certain media can amount to a change in overall ownership and control, especially if the rights granted are broad and the term is forever. For example, I’ve reviewed graphic novel licenses for my clients where the publishers wanted exclusive print publishing, film, television, video game, internet, stage play and other rights everywhere, forever, amen. In this case, a simple deal for print publishing is an attempt to tie up the property in every conceivable form. I try to advise my clients to avoid these types of deals, especially when there is no compensation. (See Get What You Give: Rights and Revenue for Creators)

Even parties who get exclusive rights need to be careful, especially when services are involved. Hiring an independent contractor is easier from a legal perspective than hiring an employee, but getting the exclusive rights to a person’s services might change your legal relationship with them depending on the nature of your working relationship. Producers in film, television, music and even publishing should be familiar with their state’s labor laws and withholding requirements whenever they consider bringing in exclusive talent, or they could find themselves on the hook for several unforeseen costs.

Exclusivity is a powerful aspect of entertainment law. Like fire, nuclear energy and love, it should be handled carefully to make sure no one gets hurt.

Have fun.

Gamal

The Wheel of Time Offers a Cautionary Lesson for Turning Novels into Film

Added on February 19, 2015 by Gamal Hennessy.

By Gamal Hennessy

Imagine you wrote a story. It’s a popular story, selling forty-four million copies over 14 connected novels spanning from 1990 to 2013. Now imagine your type of story is popular, because stories in the same fantasy genre, like The Hobbit and Game of Thrones, have been cleaning up in movies, TV and video games. Finally, imagine you’ve licensed your story to a production company created just to produce your work and they signed a distribution deal with Universal to distribute your story to the masses.

Are you excited? Can you see yourself inviting J.K. Rowling and George R.R. Martin to your castle in Davos for a poker game with solid gold chips? Hold that thought.

What if I told you there is such a story, The Wheel of Time written by Robert Jordan? What if I also told you the only TV or movie adaptation ever made of this story in thirteen years was a half hour TV show that aired on FXX at 1:30 am without any advertising, marketing or official notice? What if I told you the show was thrown together weeks before without the knowledge or consent of Jordan’s estate? (See The Sad Lesson of The Wheel of Time) It’s not as exciting now, is it?

The Wheel of Time problem stems from two related contract concepts. The first is the loss of control a writer gives up in exchange for optioning his book, play or comic to be made into a movie (See Losing Control and Loving It). This is a normal aspect of film licensing. Most of the time, a competent production company can adapt a written story to the aesthetics of the screen in a way that makes money. The production company in this case seems unwilling or unable to bring the book to life.

The second problem revolves around the retention of rights. Many licenses for literary properties only last a certain number of years. This is known as the term. The term can be extended as long as the company holding the license continues to release work based on the story. You can see quite a few examples of this in modern film. To a certain extent, the Spider-Man, Fantastic Four and X-Men franchises all get new films every few years to prevent Disney/Marvel from becoming even more of an entertainment juggernaut than it already is (See Is the New Marvel Universe a Secret War on Fox Super Hero Films?). But in the case of Fox and Sony, the source material gets a big budget treatment and star power put behind it. The movies aren’t thrown on to a third tier cable station in the middle of the night without anyone knowing about it.

Hope isn’t lost for an authentic Wheel of Time TV franchise. Many popular characters, including Superman, Terminator, James Bond and Spiderman had to fight in court before they could fight on screen. But creative professionals need to learn from the Wheel of Time debacle. Not every deal is a good deal. Time frame and control of rights matter, even when you’re a novelist or comic author thinking about movie rights. You might not be in the best position to make a deal (See David vs. Goliath), but you and your attorney should strive to give your property the best chance for success (See Treat Your Art as an Investment)

Double Indemnity: Are You Protected?

Added on February 3, 2015 by Gamal Hennessy.

By Gamal Hennessy

Many people don’t read the contracts they sign. Even fewer people read the boilerplate language often found at the end of the agreement. People want to know things like when they’ll get paid, how much they’ll get paid, and what they have to do to get paid. Avoiding boilerplate might be a natural response to getting a contract, but the clauses at the end of an agreement have a significant effect on, and could completely alter where and how the money flows.

Over the next few weeks, I plan to shed some light on typical boilerplate clauses in entertainment contracts. This isn’t going to be a definitive treatise on legal concepts or the final word on the current status of contract provisions. This also isn’t going to be a replacement for actual legal advice about your specific contract. My goal here is to help artists, writers and other creative people become better informed about various aspects of contracts they might be confronted with.

This week’s topic is a big word with the potential for a bigger impact: indemnification.

What is an indemnity? An indemnity is a promise one party makes to another in a contract to protect against a breach of the contract terms. For example, suppose Jack agrees to write a story for Stan. Stan pays for the story, publishes it and starts making money. Then Bob comes along and sues Stan, with Bob claiming that he wrote the story first. If the contract between Stan and Jack has the proper indemnity clause, Stan can go back to Jack and make him deal with, and possibly pay for, Bob’s lawsuit.

Why is this important? When you make a deal with someone, you want to be protected from potential problems your business partner might create. It does you no good to hire someone to build something for you and then get sued when the defective item hurts someone else. Indemnities are designed to provide protection from potential legal and/or financial problems created by the contract. For example, if you pay $10,000 for a screenplay but then get dragged into an infringement suit for $10,000,000 you probably want the screenwriter to help deal with the issue.

Where can you find the language? Indemnification language is often located near the middle or the end of a long form contract. I often find it close to the representations and warranties section.

What’s included in an indemnity clause? Language varies from contract to contract depending on the lawyer who writes it and the nature of the agreement, but many indemnification clauses contain three elements:

A promise for one side to indemnify the other for losses resulting from a breach of contract
A standard of notification where the side seeking indemnification has to contact the side who is supposed to provide indemnification
A determination of who will control the defense of the lawsuit in question and how each party will deal with each other during the suit

What should you look out for? I get the most comfort from a mutual indemnity, where each side agrees to protect the other from a breach of their contract obligations. This gives both sides the incentive to stick to the terms of the contract and avoid issues later on. If neither side is bound by indemnity language, the protection you lose from the other side might be balanced out by the protection you don’t have to offer, but both sides are working without a safety net. The worst case scenario is where the other side wants indemnification from you but won’t offer you the same protection. Unless the terms of the agreement warrant a one sided indemnity, this is a big red flag.

Closing

There is a lot more to indemnification clauses than what I’ve laid out here. Negotiating indemnity, enforcing the clauses in the face of potential suits and dealing with business partners without the ability to fulfill their indemnity obligations are complex issues that comprise the entire practice of some attorneys. An introduction to the idea of indemnification is helpful for creative professionals to understand the contracts they sign, but it can’t replace professional contract analysis.

Best

Gamal

Entertainment Contracts 101: Creator Owned vs. Work for Hire Deals

Added on January 29, 2015 by Gamal Hennessy.

by Gamal Hennessy

In the creative marketplace, one of the first things that an artist needs to learn is the difference between a license agreement and a work for hire agreement. These are fundamentally different animals and signing the wrong one at the wrong time could be devastating to your future.

Definitions

A work for hire (WFH) is an agreement where you offer your creative services to intellectual property that you do not own in exchange for a fee.

A license is an agreement where you give someone else the right to distribute your intellectual property in exchange for various types of payments.

Example

WFH: You are an artist. Marvel Comics hires you to draw an issue of Spider-Man. You do the pencils. They give you money. You walk away. You don’t own Spider-Man. You don’t even own the pages you created. Your name will appear as the artist, but that’s as far as it goes. This is pure mercenary work.

Creator Owned License: You are an artist. You have an idea for a new story. Dark Horse likes it and gives you a CO deal. You create the book. You might even eat the cost of creation. They sell the book. You get a cut, they get a cut. When you walk away, you walk away with the property. You can do whatever you want with it because you own it.

Historical Example

Frank Miller offers one of the best examples of the difference between these two types of deals. In 1986, Miller signed on with DC to release The Dark Knight Returns. That book reanimated the Batman franchise, solidified a darker vision of comics across the board and was instrumental in redefining the genre of super hero movies. But at no point could Miller claim to own Batman. He had no rights to any of the subsequent film, video game or merchandise revenue that came out of the Batman property. To the best of my knowledge, he got a page rate and he got credit for doing the work. That’s it.

Actually, that’s not it. Because he got so much exposure and critical acclaim for the work he did on Batman (as well as other properties) it was much easier for him to land creator owned deals later on. Frank Miller owns most if not all of the Sin City and 300 franchises. He had major input, control and license fees from those books and subsequent films. That was money he was entitled to because he owned the rights to that intellectual property.

Take Away

There are several successful writers and artists who have done work for hire deals first to establish themselves in the industry and then done creator owned deals once they had the right leverage. Many of them jump back and forth from one type of deal to the other depending on the project. Jim Lee, Todd McFarlane and Greg Rucka are all good examples of this. I’m not suggesting that an artist should never sign a WFH. I am suggesting that you need to know the difference between the two and make sure you are not signing a WFH for your own property because then you are signing away all your rights for little or no money.

And keep in mind, just because a contract says Creator Owned Agreement or License Agreement on the top doesn’t make it a creator owned agreement. It is the language in the agreement and the way the rights are divided that is the key to the contract. When you analyze your agreements (or ask me to do it) always keep in mind who has control over the property. This will be vital when your idea becomes a movie.

Best

Gamal