Watchmen Legal Battle: Fox v. Warner Bros. explained

The NY Times (via reports:

HOW could this happen? The question springs to mind as 20th Century Fox claims it has the rights to the graphic novel on which Warner Brothers is basing “Watchmen,” its giant superhero movie.

Peer deeper into the murk of Hollywood’s business practices, though, and the question becomes: How could it not?

The film industry was buzzing last week after a federal judge here allowed Fox to proceed with a lawsuit contending that Warner had filmed “Watchmen” without bothering to acquire rights that Fox says it has owned for 22 years. This eagerly anticipated movie is directed by Zack Snyder, of “300” fame, and is based on the illustrated series (republished as a graphic novel) by Alan Moore and David Gibbons.

Warner, of course, begs to differ with Fox. So the studios are squared off for battle. Fox wants an injunction blocking the movie’s planned release on March 6. Warner wants Fox to go away.

Studios have certainly fought like this in the past. Metro-Goldwyn-Mayer and Sony Pictures Entertainment, for instance, swapped lawsuits a decade ago over Sony’s plan to make a series of James Bond films to rival MGM’s. MGM won, more or less, after Sony settled and dropped its films. But Sony soon wound up distributing a Bond movie, the highly successful “Casino Royale,” as it became financially involved with a reorganized MGM.

That battle grew from a decades-old fight between the filmmaker Kevin McClory and the author Ian Fleming over the rights to “Thunderball” (Mr. McClory had contributed to the screenplay).

The Fox-Warner tiff turns on matters potentially more nettlesome to the industry at large. Central to Fox’s complaint is the mysterious matter of what is called turnaround.

On its face, turnaround is a contractual mechanism that allows a studio to release its interest in a dormant film project, while recovering costs, plus interest, from any rival that eventually adopts the project. But turnaround is a stacked deck.

The turnaround clauses in a typical contract are also insurance for studio executives who do not want to be humiliated by a competitor who makes a hit out of their castoffs.

That trick turns on a term of art: “changed elements.” A producer of a movie acquired in turnaround who comes up with a new director, or star, or story line, or even a reduction in budget, must give the original studio another shot at making the movie because of changed elements, even if a new backer has entered the picture.

Thus, “Michael Clayton” was put in turnaround by Castle Rock Entertainment (which, like Warner, belongs to Time Warner). When George Clooney became attached to star in it, however, Castle Rock stood on its right to be involved as a producer of what turned out to be an Oscar-nominated film.

Fox, in its complaint filed in February with the United States District Court for the Central District of California, contended, among other things, that Lawrence Gordon, a producer of “Watchmen,” was given a somewhat unusual perpetual turnaround right under an agreement reached in 1994. Such rights are conventionally given for a finite period, but Mr. Gordon, as a powerful producer who was once a Fox studio chief, may have had an edge.

According to the court filings, Fox had declared its willingness to part with the project under certain terms in 1991. In any case, Fox says, Mr. Gordon was supposed to resubmit “Watchmen” to Fox every time he came up with a changed element.

There certainly were changes. At one point, Terry Gilliam (“Brazil”) was supposed to direct it, at another, Darren Aronofsky (“The Fountain”), and at still another, Paul Greengrass (“The Bourne Ultimatum”). Writers have included Sam Hamm (“Batman”), David Hayter (“X-Men”) and Alex Tse (“Sucker Free City”), among others.

Paramount, still another party in the mix, was once close to making the film. But its new chairman, Brad Grey, backed away and created a turnaround of his own in 2005.

Tantalizingly, Fox’s complaint, which does not name Paramount, said that Warner settled a dispute with an unidentified “purported rights holder” by sharing part of its own claimed interest. Patricia S. Rockenwagner, a Paramount spokeswoman, says her studio has foreign distribution rights to the film.

Warner gave “Watchmen” the go-ahead when Zack Snyder, immediately after his surprise hit with “300,” took it under wing. Yet Mr. Gordon, by Fox’s account, never checked back with Fox about any of this.

Mr. Gordon did not respond to requests for comment. Warner, both in court and in a statement last week, said it had done everything legally necessary to make the film.

In the real world, of course, turnaround — along with much of Hollywood’s machinery for securing film rights — long operated with a certain degree of messy pragmatism. Elements might change. Producers would proceed on a wink and a nod. When things were stuck, a bit of horse-trading got them moving again.

But the stakes have become too high for that sort of informality. “It’s gotten a lot more difficult,” Larry Stein, a veteran Hollywood lawyer at Dreier Stein Kahan Browne Woods George, said of the entire business of rights protection.

Studios, Mr. Stein added, “are securing their self-interest in every way they can.” After all, who wants to slip up when the fifth sequel to “Batman” can take in half a billion dollars at the domestic box office?

WARNER has been stung lately in some very different situations involving rights. In March, a federal judge here ruled that the heirs of Jerome Siegel, a co-creator of Superman, the studio’s mainstay hero, were entitled to reclaim a share in the copyright of the character. Lawyers for the studio have not yet given up the fight, and proceedings are continuing over what that will mean in dollars and cents. The studio’s New Line Cinema unit is also embroiled in continuing litigation with the heirs of J. R. R. Tolkien over their claim to have been defrauded of profits due from the blockbuster “Lord of the Rings” series.

In the “Watchmen” case, it remains to be seen whether the presiding judge, Gary A. Feess, will grant an injunction blocking the movie’s release while sorting things out. But in 2005, Judge Feess issued an injunction blocking the planned release of Warner’s film “Dukes of Hazzard” in a rights dispute, leading to a settlement under which the studio paid $17.5 million to a producer who claimed infringement.

There will be motions and hearings aplenty, however, before it comes to that. And those who watch closely may see enough of Hollywood’s process to wonder how movies get made at all.

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