Attorney, Author, and Business Consultant for the Comic Book Industry

Letters of Intent: Uses and Abuses

Added on February 20, 2016 by Gamal Hennessy.

Contracts come in a variety of flavors. Some are simple one page affairs. Others run dozens of pages. They can be unchanging boilerplate or fluid documents with several amendments and changes overtime. Even a verbal agreement can be enforceable as a contract under certain circumstances. Every contract is a different animal. Being familiar with the variations can save you a lot of headaches in your business.

A letter of intent (LOI) is a very curious beast. It is often used in major deals like business acquisitions or investments, but they are also used frequently in entertainment and media contracts. Sometimes they are called deal memos, short form agreements or memorandums of understanding. Each one has their own nuances and weight in a legal sense, but the basic concept behind each one is a sort of pre-contract; a meeting of the minds before a more formal agreement is negotiated.

In some instances, an LOI is helpful, even vital (See Forbes: The First Step in a Big Deal). In other situations it can signal a dead deal or deceptive maneuvers by the potential partner. Here are some of the pros and cons of LOI’s and what you should look for if they come up in your freelance or small business.

Uses:

A LOI can help you close a deal in several ways, including:

Wrapping Your Head Around the Deal: It can help you figure out what you’re getting and what you’re giving up. If you don’t understand the economics of your contract in a few pages, you probably won’t understand it in a few dozen pages. (See Considering Consideration)
Understanding the Economics: A LOI is a good place to figure out who gets paid, how much they get and when they get it. (See Your Slice of the Pie)
Getting a Feel for Your Negotiation Partner: Contract negotiation can be stressful or easy. A LOI can give you a sense of how hard it will be to both close the actual contract and work with the person once the deal is done. Someone who is easy to deal with for a LOI won’t always be the best business partner, but a difficult LOI negotiation can be a red flag for the road ahead.
Creating Something Each Side Can Bring to Their Respective Camps: If you have partners, investors, attorneys or anyone else who has input on your business, it can be helpful to hammer out a LOI to get their sign off before slogging through a contract. One document with all the major deal points is a useful tool for getting buy in and advice on both sides.
Creating Momentum: A LOI can generate a sense of inevitability in a business deal. Once everyone agrees on the major points, there can be more motivation to work together and close the deal. This psychological impact isn’t guaranteed and it might be fleeting, but it’s useful if you can get it.
Space to Shop: Unless there is a specific prohibition in the LOI, both sides have the ability to continue negotiating with other parties while the deal terms are being laid out. Either side might feel jilted if the other partner decides to leave in the middle of the dance, but a LOI often gives both sides room to maneuver.
Due Diligence: Related to the ability to shop around for a better deal and feeling out the other side, negotiating a LOI gives each side time to investigate and research the other side before the contract is negotiated. Potential problems and issues revealed in this stage can be corrected or avoided without much loss on either side.
Savings: A LOI can be negotiated at a lower cost in terms of time and money than a formal contract. So if the deal breaks down at the LOI stage, both sides can often walk away without much loss.

Abuses:

There are also several ways a LOI can be used as a weapon, including:

Contract Replacement: There are circumstances where one party might negotiate a LOI without any intention of executing a more comprehensive agreement. There have been several court cases where a LOI has been found to be an enforceable contract. If there are aspects of the deal one side was planning to negotiate in the main contract, they’ll never get the chance if the main deal never comes.
Creating Confusion: A LOI often focuses on the business and economic aspects of the deal without much attention to the legal considerations. If this LOI is the only thing the parties have signed, many questions about the deal could go unanswered.
An Inducement to Act: One side can use a LOI to pressure the other side to pay for something or perform some action before the final deal is in place. Once one side acts, their ability to negotiate might be hampered because they’ve already invested in a deal that may or may not exist. The other side can take advantage of this weakness and force a deal they couldn’t otherwise get.
A Delaying Tactic: This is related to the Space to Shop benefit described above. If one side isn’t really looking to make a deal with you, a LOI might give them the space they need to find another partner and waste your time. In addition, if your LOI negotiations are not bound by a confidentiality agreement, the terms of your LOI could be used by your alleged partner as a negotiation tool to close a deal with someone else.

Considerations:

When faced with the prospect of negotiating a LOI instead of a full contract, how will you know whether the document is being used or abused? Every situation is different, but consider these questions when analyzing the situation:

Is a LOI necessary for this deal? Does it make sense to have a LOI given the nature of the agreement or the parties involved? If not, the other side could have ulterior motives. Keep in mind, the larger or more complicated the deal, the more a LOI can make sense.
Can you get some specific benefit from the LOI? If you aren’t exactly clear on the terms or economics, a LOI might be what you need to get comfortable with the process.
Do you see the potential for abuses from the other side? If you don’t see an upside to drafting a LOI, ask for clarification and don’t be afraid to walk away. (See How to Reject a Bad Contract)

If you do decide to move forward with a LOI for any deal, be sure to compare the terms in the main contract to the terms you agreed to in the LOI. It does you no good to make a good LOI and then sign a bad contract.

Have fun.

Gamal

PLEASE NOTE: THIS BLOG POST IS NOT A SUBSTITUTE FOR LEGAL ADVICE. IF YOU NEED A CONTRACT WRITTEN, OR YOU HAVE A CONTRACT YOU NEED EXPLAINED TO YOU, CONTACT ME ATgamalhennessy@gmail.com FOR A FREE CONSULTATION OR VISIT C3 athttp://www.creativecontractconsulting.com/ FOR MORE INFORMATION ABOUT MY SERVICES.

Are You Working for Free? (Considering Consideration)

Added on February 1, 2016 by Gamal Hennessy.

by Gamal Hennessy

Consideration is one of the most important aspects of commercial contracts, especially for freelance professionals and small business owners. In a legal context, consideration is not about being thoughtful. It’s about an exchange of value between you and the other side.

In most cases, a contract is an agreement between two or more parties who trade something of value. A lot of things can be thought of as valuable in these situations: money, goods, services and even promises can be used as consideration under certain circumstances. As an independent artist, freelancer or small business owner, there are four types of consideration you should look for in your contracts. If you don’t find any of them in a particular deal, then the deal might not have any value to you.

The Four Types of Consideration

· Delivery Based Consideration: You get something specific once you deliver the agreed upon material. For example, if you design a website for $300 per hour and you spend 22 hours on the project, then you get $6,600 upon delivery of the site. This type of consideration could be defined as a flat fee, based on some measure of performance. This type of payment is typical of work for hire agreements where you are hired to perform a specific task for a limited amount of time (See Contracts 101: Creator Owned vs. Work for Hire)

· Performance Based Consideration: You get something specific once the project begins to generate some sort of profit. For example, if you are entitled to 20% of the gross revenue of a book, then you make money if and when revenue comes in from the sale of the book. This is a common form of consideration for collaboration agreements, self-publishing platforms like Kobo, KDP and creator owned agreements with certain publishers.

· Combined Consideration: You get paid coming and going. In an extreme example, Robert Downey Jr. allegedly pulls in up to fifty million dollars in direct salary, box office bonuses and back end participation for playing Iron Man in the Marvel cinematic universe (See RDJ Pay Set to Hit Fifty Million). While you might never make as much as RDJ, these can be the most lucrative types of deals because they give the artists both protection against a poor performing project and the benefits of a successful project.

· Production Consideration: You get someone else to pay for the cost of your project. For example, if you have a story you want to publish, but can’t cover the production and distribution costs of the release, someone else can pay those upfront costs to get your work out into the world. Sometimes this comes from single sources, like a production company or publishing house. Crowdfunding is another variation on production consideration. This can be the least lucrative kind of consideration. With a single source, the creator can lose all the rights to their characters and stories for a few thousand dollars that they never receive directly. With crowdfunding, all the revenue might go into the project or you may fail to reach your funding goals altogether. While many of these deals can provide exposure and ego gratification, many people regret signing these deals, especially if the project becomes successful and they have no ability to share in the financial windfall.

One of the first things you need to ask yourself when looking at a contract is ‘what am I giving up and what am I getting for it? Giving up your time and effort for cash is a way to make a living. Giving up your inspiration and creativity for the chance at future success is also a decent idea. Giving up everything for nothing is no way to manage your career. Always try to get some consideration in your contracts, even if the other side isn’t being considerate.

Have fun

Gamal

PLEASE NOTE: THIS BLOG POST IS NOT A SUBSTITUTE FOR LEGAL ADVICE. IF YOU NEED A CONTRACT WRITTEN, OR YOU HAVE A CONTRACT YOU NEED EXPLAINED TO YOU, CONTACT ME AT gamalhennessy@gmail.com FOR A FREE CONSULTATION OR VISIT C3 at http://www.creativecontractconsulting.com/ FOR MORE INFORMATION ABOUT MY SERVICES.

Get What You Give (Rights and Revenue in Creative Contracts)

Added on December 7, 2015 by Gamal Hennessy.

By Gamal Hennessy

At its most basic, a contract is an agreement between one or more groups for the exchange of resources. The exchange could be time and skill for money, goods for services, property for future gains or any combination of those things. The best agreements exchange roughly equal resources. The worst ones have one side trading large amounts of resources for little or nothing in return.

This is the problem that freelance professionals run into with many of the contracts that I see. The most important service I provide is showing my clients what they are giving up in comparison to what they are getting. I’d like to provide an overview of the different types of rights and revenue streams as a general overview for creators looking to get their projects into the market. While independent artists will benefit most from this discussion, elements of it will be applicable to small business owners of all types.

Types of Rights

As discussed in an earlier post, copyright law gives the creator of an original work the right to benefit from the distribution of that work (See Image and Story, Copyright and Trademark). There are various types of ways available for creators to exploit their work. Some of the major distribution methods include:

Publishing (Print, novelization and Digital)
Public Display (gallery displays and public performances of some of the methods listed here)
Theatrical (Movies whether live action or animated)
Television (including network, basic cable, premium cable, subscription, and PPV whether live action or animated)
Home Video (including DVD, Blu-Ray, etc)
Live Performance (including Broadway performances and theme park performances)
Interactive (including console computer or mobile video games)
Merchandise (as discussed in last week’s post)
Audio (soundtracks and audio novelizations)

As new forms of distribution are created, new rights are created for the artists. These rights are universal, but they can be divided or carved out by geographic area, time frame, distribution channel, language and other factors.

Types of revenue

Just as there are different rights that creators can use to get their work into the market, there are various ways that they can be paid. Creators need to focus on four ideas:

A flat fee is a one-time payment that the artist earns upon the delivery of the finished work. For example, a copywriter might get a flat fee for work she does for a website or blog.
A royalty is a percentage that the artist earns for every finished unit that is sold. For example, an artist might receive 30% of every one of their comics that is sold to the public.
An advance is paid before the work is finished. For example, a writer of a novel might receive money up front for her novel based on the proposal not the finished product.
A minimum guarantee (MG) is money paid up before the work is finished, based on anticipated sales. For example, if a toy company plans to sell a new licensed toy for $10 and the creator gets 10% of that sale, then the creator gets $1 per unit sold. If the company expects to sell 100,000 units, then the MG that the artist gets for this deal is $100,000.

These are broad revenue concepts. They are often altered and refined by concepts like gross, net, recoupment, offsets and other variables. (This is a complicated subject that I can talk about later.)

Choices that Artists Must Make

In certain creative circles, the types and amounts of revenue are fairly straight forward. Writers for some mediums often get an advance. A work for hire artist (See Creator Owned vs. Work for Hire) for comics often gets a page rate. There is more confusion for creators pursuing creator owned deals or multimedia works. There is often no advance, no MG and a blanket royalty rate for all forms of distribution. This puts creators in a dangerous position since the lack of upfront money and the uncertainty of any profitable sales in the future means that the creators are really working on spec while at the same time giving up all their rights to their property.

It is understandable why a publisher or other distributor would take this stance in their contracts. Publishers protect themselves from risk by limiting exposure to projects that might not be financially viable. At the same time, they maximize their potential gain by securing as many rights as possible for projects that could be financially viable. Artists need to learn the same lesson. They need to counter the publisher’s position by attempting to limit the rights that a publisher gets for projects that are financially viable and maximizing revenue for every project they do.

I know negotiating power is often limited for artists (See David vs. Goliath in Contract Negotiations). But having a clear understanding of the relationship between revenue and rights and clear goals of where they want to go can help maximize their limited negotiating power and increase their chances of success.

Best

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.

Five Good Reasons Freelancers Need Contracts

Added on November 18, 2015 by Gamal Hennessy.

By Gamal Hennessy

Before I had to focus all my attention on releasing my new book*I wrote an article about getting paid as a freelance professional (See Solving the Payment Problem). One of my main tips was getting your payment terms in writing. Recently, another contracts lawyer (my apologies I couldn’t find the author’s name on the site) recently posted a similar article entitled Why Freelancers Should Bother with a Contract. The article focused on the ways you could be hurt by agreeing to contractual terms you don’t know about because you didn’t use your own contract. I agree with the article and I encourage you to read it (it’s very short). I’d also like to offer my own reasons why every freelance professional should have a contract in place for each of their clients and vendors.

If you want more advice on freelance and small business contracts,

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Five Ways Contracts Can Improve Your Business

You want clear payment terms. This one was important enough to get its own article. Unless your business is not designed to make money, or if you enjoy spending a lot of time chasing clients for missed payments, it helps for you and your client to know how much they’re paying, when they need to pay and how they need to pay. Those points all go in the contract.
You want clear deliverables. A client can order one service and then expect another. They can order one product and then change their mind. You can deliver the agreed upon product and the client could come back with endless requests for modifications, alterations and “one last change”. This pattern of behavior can be reduced with a contract. If your deliverables are in writing, there’s less chance for a dispute when they come back wanting more. You can always give it to them, of course, but with a contract you have the option of getting an additional fee for the additional work.
You don’t want to rely on memories, email chains or texts. Contracts do not have to be in writing to be enforced. Contracts can be created without the formal process of writing and signing something. You don’t want to deal with any of that. Memories and informal agreements suffer from a lack of accuracy, subconscious bias and interpretation. A written agreement can remove most, but not all of those problems.
You want accurate records for your taxes. At least once a year, you have to account for the truckloads of money you made to the IRS and your state taxation authorities. You could rely on Paypal and Fiverr CSV files, invoices and other receipts, but if you have a contract with each client and payment terms in each contract, it might be easier for you to figure out, and explain if need be, where your income came from.
You want to improve the perception of your business. Certain things make a business appear more professional. Your website, your logo, your address all send a message to your potential clients, vendors and competitors. When you put a contract in place with each client you increase the perception of legitimacy in your enterprise. This is more psychological than legal, but it can save you troubles in the long run.

I can feel your cynicism seeping through the internet. You’re right:

Contracts take time to draft and negotiate.
Contracts are not guarantees that your business deals will go well.
I do have a bias towards you getting a contract because I have a business writing contracts.

All these things are true, but they don’t reduce the value of having a written agreement in place. Whether you get your contracts from me or someone else, there are plenty of good ways contracts can enhance and protect your business.

Have fun.

Gamal

If you want more advice on freelance and small business contracts,

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PLEASE NOTE: THIS BLOG POST IS NOT A SUBSTITUTE FOR LEGAL ADVICE. IF YOU HAVE SPECIFIC CONTRACT ISSUES OR QUESTIONS, DISCUSS THEM WITH YOUR LEGAL ADVISOR OR CONTACT C3 ATgamalhennessy@gmail.com FOR A FREE CONSULTATION.

* In case you didn’t know, I’m a writer in addition to running C3. My fourth novel, Smoke and Shadow, came out this week. It’s doing pretty well so far but it’s not selling like Harry Potter so I’m going to keep my day job for now…

Freelancer’s Union Endorses the C3 Contract Negotiation Concepts!

Added on October 7, 2015 by Gamal Hennessy.

by Gamal Hennessy

The Freelancer’s Union is a non-profit organization created to advocate the rights of freelancers, consultants and independent contractors. It has more than 200,000 members across the United States and provides health care to more than 10% percent of its membership. Freelancers Union also maintains a blog called the Freelance Broadcasting Network to discuss issues and topics related to the freelance life.

A couple of weeks ago, I posted an article entitled Twelve Tips for Contract Negotiation. Early this week, Freelancer’s Union found my article and asked for permission to repost it to all its members. I’m always looking for ways to get the word out, so of course I agreed. I wanted to share the new post with you and suggest if you need support, ideas or networking opportunities for your freelance or small business, get involved with Freelancer’s Union if you haven’t done so already.

Click Here to Read the Creative Contract Consulting Article on the Freelance Broadcasting Network

And if you want more advice on freelance and small business contracts,

sign up for the C3 Newsletter

Have fun.

Gamal

Solving the Payment Problem

Added on September 28, 2015 by Gamal Hennessy.

By Gamal Hennessy

As a freelance professional or a small business owner, getting paid on time can be the difference between surviving for another month and financial disaster. For many of my clients, getting paid is just as important as finding new clients. Some of them don’t have the time or the resources to find new clients because they spend so much energy chasing after the money they are already owed.

This isn’t an issue unique to my client base. There are many articles revolving around the freelance payment problem (See She Waited 120 Days to be Paid and Would You Settle for Half of What You’re Owed?) I’d like to offer three techniques to navigate around the payment problem, including the method that I use with my own clients.

Three Paths Around the Payment Problem

1) Set out clear payment terms in writing before you start a job: A small business owner has to wear many hats. At times, administrative tasks are done in a stripped down fashion or ignored altogether to maximize time and resources. Formal and comprehensive contracts often become a casualty of this process, because negotiating a deal can be confusing, stressful, time consuming and might result in lost business (See You Signed the Contract, but Do You Know What it Says?). But not having a contract can be more detrimental in the long term. Without a written agreement, the terms of your engagement are based on vague and biased recollection. Without clear payment terms, you could be at the mercy and cash flow of your clients. Without an actual contract, your legal remedies could be limited.

2) Take advantage of human motivation when defining your payment terms: I have observed a specific aspect of human nature in my practice. When a client wants something, he has more incentive to pay. After the client gets what he wants, he has less incentive to pay. If you structure your payment terms to receive payment weeks or months after you deliver your goods or services, you are working at a disadvantage. I will explain my method of adapting to human motivation below, although I realize not everyone is in a position to be paid before the work gets done.

3) Know which jobs to walk away from: Instinct and experience can warn you when a potential client might pose a payment problem. If your background and reference check of your clients reveal red flags, or if you get the sense in your initial discussions with your new client that cash flow might be an issue. It might make sense to pass on the job and focus your attention on the paying clients. (See Twelve Tips for Contract Negotiation) When you do work for someone who isn’t paying, you not only lose time chasing them down for money, you lose time finding and servicing those clients who are actually growing your business.

If you want more advice on freelance and small business contracts,

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The Tennis Method for Payment Terms

As a lawyer, people expect a certain amount of cold blooded professionalism from me. In almost ten years of independent practice, no client has questioned my payment terms or been late in paying me. I think the method I use is applicable to other types of small business, so I’ll share it with you. Please feel free to modify it for your needs.

The tennis method gets its name from the back and forth dynamic of my business process. A typical engagement has six parts.

1) First contact: A client finds me through a referral or an online post and requests a free consultation online or over the phone.

2) Engagement letter: Once I understand what the client needs and I determine I can do the job, I send the potential client an engagement letter laying out the service I am willing to provide and the payment I require for that service.

3) First payment: The client expresses their agreement to the engagement letter by paying ½ of my fee upfront.

4) Work: I perform all the tasks detailed in the engagement letter (See C3 Services)

5) Second payment: When the work is done, I notify the client and the client delivers the second portion of the fee.

6) Delivery: Once final payment is received, all the deliverables are sent to the client.

Notice how the dynamic plays into human motivation on both sides. Once the client pays, I have the incentive to start working because she gave me money and because I know I won’t get the rest of it until I do the work. The client pays because they know nothing will happen until they pay and after they’ve made the first payment, they don’t want to throw their initial money away by not getting the work. Everyone stays honest and everyone gets what they want.

Fit to Taste

Every small business may not be able to utilize the tennis method. The goods or services you have might not lend themselves to this process. You might not be in a position to dictate payment terms (See David and Goliath in Contract Negotiation). But in extreme cases, it might be better to walk away from a deal you won’t get paid for than to stick it out, hope for the best and not get paid (See How to Reject a Bad Contract). Getting paid is an important aspect of small business and you can only work so many hours in a day. Get a deal in writing that protects your business and let someone else deal with the problem clients.

Have fun.

Gamal

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Twelve Tips for Contract Negotiation

Added on September 19, 2015 by Gamal Hennessy.

By Gamal Hennessy

There are a lot of tactics you can use to negotiate a contract, but the best move might be walking away.

Negotiating contract terms is often a source of anxiety for freelance professionals, independent artists and small business professionals. Many feel that any attempts at trying to get a better deal could lead to losing the business completely. Others are confused or intimidated by the obtuse legalese of contract language. Either way, many detrimental contracts are signed every day, leading to lost revenue, lost control and increased stress on the business.

If you want more advice on freelance and small business contracts,

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Eleven (Plus One) Tips for Contract Negotiation

The site Business 2 Community posted a piece this week entitled “Eleven Tips for Negotiating a Contract Like a Pro”. The unknown author lays out a broad strategy applicable to salary negotiations, sales negotiations and other kinds of contract discussions. His tips include:

1) Make the effort to negotiate

2) Know the basis for your negotiations

3) Search for previous similar contracts

4) Back up your claims

5) Write your arguments down

6) Ask questions

7) Know who you’re dealing with

8) Abandon your inhibitions

9) Be Nice

10) Know your worth

11) Set the precedent

Each one of these points is useful as an element of contract negotiation strategy, although not all of them will be applicable or helpful all the time. I’d like to offer one more tip that will make all the others on this list more powerful.

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Your Breaking Point

You don’t need to do every deal.

Not every contract needs to be signed.

Some business isn’t worth the headache or the potential loss.

Knowing when to walk away from a negotiation will often help you close better deals in the long run.

Late last year I wrote a post about walking away from a bad deal (See How to Reject a Bad Contract). I offered five steps on how to leave a negotiation with grace and preserve your reputation in your industry. What I failed to point out in the earlier post was the inherent power that comes with setting limits. If you know what you are and are not willing to accept before discussions start, you’ll:

1) Have a measuring stick to you can use to compare the other sides offers

2) Display a sense of professional power by not looking desperate to take any deal on the table

3) Gain the freedom to pursue a better deal later

Of course, there will be times when you’re not in a position for aggressive negotiations (See Negotiating Power in Creative Contracts). And some deals will be just fine right out of the box and you won’t need to engage in protracted negotiations at all. But knowing how to push back and when to walk away are powerful skills for freelance professionals and business owners of all types.

Have fun.
Gamal

If you want more advice on freelance and small business contracts,

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Avoiding the Trump Effect in Your Creative Contracts

Added on August 18, 2015 by Gamal Hennessy.

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.