t’s a tale almost as old as Hollywood itself. A new movie comes out and garners some attention and commercial success and, before the first profit participation checks have been mailed (and even if the movie never turns a profit), a lawsuit has been filed alleging that some element of the movie was stolen from an earlier work – and often an earlier work that has never seen the light of day commercially.
There has been a spate of stolen idea lawsuits over the past few years relating to properties ranging from Avatar (the subject of a number of suits) and Frozen to The Matrix and Premium Rush (our blog post on that case is here). The abysmal success rate of these cases, most of which fall at the first hurdle, demonstrates that succeeding with a “stolen idea” case is extremely difficult. So when is it possible to prevail with such a claim?
A couple of recent cases – Jordan-Benel v. Universal City Studios, Inc. and Gerritsen v. Warner Bros. Entertainment, Inc. – allow us to explore the concept of protecting screenplay and story ideas, and when such a claim might have merit and be able to prevail.
Jordan-Benel v. Universal City Studios, Inc.
Jordan-Benel concerns a relatively small but (on paper, at least) extremely profitable film, The Purge. With a production budget of $3 million and a worldwide box office take of almost $90 million upon its 2013 release, The Purge represents the kind of low budget, high concept success that screenwriters and producers dream of. This success was noticed by plaintiff, Douglas Jordan-Benel, who brought an action alleging that The Purge was based upon a screenplay that he wrote in 2011 entitled Settler’s Day. In his first amended complaint, Jordan-Benel alleged that he sent his Settler’s Day script to David Kramer and Emerson Davis of United Talent Agency (“UTA”). One week after receiving Jordan-Bernel’s submission, Davis replied by email that he intended to “pass” on the screenplay because he had a hard time “buying in the premise.”
The Purge, written and directed by James DeMonaco, was released in July 2013. DeMonaco is represented by UTA. Jordan-Benel alleged that someone at UTA gave DeMonaco the screenplay for Settler’s Day, and that DeMonaco copied large portions of it (including its premise), when writing and directing The Purge. Jordan-Benel brought copyright infringement claims against multiple defendants, and Desny (implied contract) claims against the same defendants plus UTA. UTA filed a motion to dismiss the Desny claim against it.
In order to prevail on a Desny claim (originated by the famous 1956 Desny v. Wilder California Supreme Court case), a plaintiff must show that an idea was submitted in consideration of payment for use of such idea. The agreement may be express, or it may be implied-in-fact. A plaintiff must demonstrate that “he or she prepared the work; that he or she disclosed the work to the offeree for sale; under all circumstances attending disclosure it can be concluded that the offeree voluntarily accepted the disclosure knowing the conditions on which it was tendered (i.e., the offeree must have the opportunity to reject the attempted disclosure if the conditions were unacceptable); and the reasonable value of the work.” Aliotti v. R. Dakin & Co., 831 F.2d 898, 908 (9th Cir. 1987). Courts have held that Desny claims are not precluded by the Copyright Act, because Desny claims have an “extra element” (the implied agreement of payment between the parties) to differentiate them from Copyright Act claims despite them sharing the same scope of claims (the protection of fixed ideas).
Courts have specifically precluded plaintiffs from recovering under Desny claims where the idea is submitted without any understanding that the party submitting wished to be compensated. The Desny court stated “the idea man who blurts out his idea without having first made his bargain has no one but himself to blame for the loss of his bargaining power.”
Here, the court held that Jordan-Benel did not offer any evidence that UTA understood or agreed to the condition of Jordan-Benel receiving consideration for the use of his work. While Jordan-Benel correctly asserted that there need not be an express oral or written representation of compensation, the court held that he offered solely “arguments as to his intent” and not UTA’s understanding or conduct. In order to have prevailed, Jordan-Benel would have had to clearly condition his offer to convey his idea to UTA upon an obligation for UTA (or its clients) to pay for the idea if used. In short, under Desny, a recipient of an idea must know the condition before it knows the idea, and must voluntarily accept the disclosure of the idea. Accordingly, UTA’s motion to dismiss was granted with leave to amend.
Gerritsen v. Warner Bros. Entertainment, Inc.
Gerritsen concerns one of the greatest commercial and artistic successes of the past few years, Gravity. With a worldwide box office of over $716 million, Gravity has reportedly generated a payday of over $70 million for its star, Sandra Bullock. This success did not go unnoticed by best-selling author Tess Gerritsen, who alleged that Warner Bros. had breached the terms of a 1999 agreement by failing to pay her any backend profit participation in connection with the film.
Gerritsen wrote a book also entitled Gravity in 1999 and sold the screen rights to a company called Katka (owned by New Line, now a subsidiary of Warner Bros.) for $1 million, plus a $500,000 production bonus and 2.5% of the defined net proceeds of a movie based on the book. After the release of the movie Gravity, Gerritsen filed suit, claiming that the movie directed by Alfonso Cuaron was derived from her book and, accordingly, Warner Bros. owes Gerritsen at least $10 million in damages. Gerritsen claimed that, after Cuaron become attached to the project, Gerritsen wrote and delivered to Katja additional material written by her that “constituted a modified version of a portion of the book.” This additional material included scenes of satellite debris colliding with the International Space Station, the destruction of the ISS, and the surviving female medical doctor/astronaut left drifting in her space suit, alone and untethered, seeking the means to return to earth. Because Gerritsen’s agreement with Katja defined the property to be acquired by Katja to include the original book “and any and all versions thereof,” this additional work was also owned by Katja.
Gerritsen’s initial complaint was dismissed on the basis that there was no contract between Gerritsen and Warner Bros., before the court could otherwise evaluate the merit of her claims. Although Gerristen alleged that Katja’s obligations to Gerritsen were assumed by Warner Bros. as part of the 2008 deal for Warner Bros. to acquire New Line, the judge stated that Gerritsen alleged no facts to support this allegation, nor her suggestion that New Line and Katja are “shell companies” over which Warner Bros. exercises complete management, control, ownership and domination.
In response to the dismissal of her initial complaint, Gerritsen filed an amended complaint in February 2015 that sought to articulate the relationship between Katja, New Line and Warner. Bros. in a manner that would permit Gerritsen to prove that Warner Bros. is the bona fide success-in-interest with an obligation to assume all of Katja’s obligations under the initial agreement with Gerritsen. Gerritsen’s amended complaint alleges, among other things, that Warner Bros. and New Line have “tried to shield themselves from liability by creating a complicated web of “units” and “divisions”, and that Warner Bros. and New Line formed numerous wholly owned subsidiaries and engaged in mergers in order to “mislead and frustrate creditors.” The amended complaint calls Warner Bros. the “mere continuation of Katja and states that Warner Bros. expressly or impliedly assumed the obligations of Katja. It also alleges that New Line breached its guaranty of “full and faithful performance” of all of Katja’s obligations and alleges that New Line “knew” that if a third party (especially a parent/affiliate) made a movie of Gerritsen’s book, Gerritsen would rely on New Line to secure and enforce her right to receive credit and payment.
It remains to be seen whether Gerritsen will have any more success with her amended complaint, and whether the court will allow her to reach the merits of what may be a very interesting case.
Takeaways
Both the Jordan-Bernal and Gerritsen cases demonstrate, in different ways, how difficult it is to prove an idea theft claim (and, at times, how equally difficult it can be to identify and establish a nexus to sue the appropriate party). However, there are a few specific points we can take away from the facts and procedural history of these respective cases. Firstly, Jordan-Bernal illustrates the importance of the circumstances surrounding the submission of an idea. In order to prevail under Desny, a plaintiff must show that an idea was submitted in consideration of payment for use of such idea. Accordingly, any production company, studio, agency, YouTube multi-channel network, web content provider or other entity that accepts third party submissions must be very careful to manage the dialogue and circumstances relating to such submissions. This can be achieved through using a robust submissions process that makes clear, among other things, that there is no promise or expectation of payment, that the receiving company does not regard third party ideas or submissions as unique or valuable, and that the receiving company is independently developing its own ideas (which may be similar or identical to submitted ideas). On the other side of the deal, the Jordan-Bernal case demonstrates to writers, producers and other creatives the importance of submitting ideas and materials through appropriate channels, in the correct way (usually through an agent or other business representative).
The Gerritsen case is potentially fascinating on the merits, and it will be interesting to follow the case if Gerritsen’s amended complaint survives. In particular, I was interested to note the references in Gerritsen’s complaint to what actually constitutes the “work” at issue. The exact definition of “Work,” “Book,” “Property” and other defined terms is easy to overlook in a rights agreement, but can be crucial in understanding the grant of rights provision, and the owner’s entitlements in connection with subsequent productions and other derivative works. Parties that option, sell, license or otherwise dispose of their intellectual property should make it an absolute priority to clarify these definitions and hammer down on any inconsistencies or ambiguities in their agreements in order to avoid missing out on profits down the line due to a drafting loophole (see another recent case, involving Alvin and the Chipmunks, which turned on the drafting of a profit participation provision).
At the current stage of proceedings, however, the key takeaway from Gerritsen relates to the importance of understanding the corporate structure of the opposing party and the parties’ respective rights and obligations in event of assignment. It is common for creative material to change hands in Hollywood several times before being finally produced and, as the Gerritsen complaint notes, companies customarily form multiple affiliate and subsidiary entities to serve different corporate functions and/or to develop different materials. Thus, even in time-sensitive situations where emotions are running high and all parties want to close quickly, it is beneficial to pay close attention to ostensibly “boilerplate” provisions such as defined terms and assignment provisions in order to anticipate and understand how the relationship of the parties may change in sale, assignment and M&A scenarios. Otherwise, parties may find themselves in business with unfamiliar partners or, worse, unable to stake a claim to what they believe to be their contractual entitlements.
Filed in: Entertainment, Film, Legal Blog
March 30, 2015