WatchmenWatch: Will Warners settle or fight to the cartoonishly-stylized death?

By Matthew Belloni

What in the name of Nite Owl is going on in the "Watchmen" case?

At this point it's anyone's guess. First Judge Gary Feess tentatively denies summary judgment and declares that the heated dispute between Warner Bros. and Fox will be tried on Jan 20, a mere six weeks before Warners' planned Mar 6 release of Zack Snyder's potential blockbuster based on the Alan Moore graphic novel. Then Feess changes his mind, issuing an odd 5-page preliminary ruling on Christmas Eve that says Fox owns "at the very least" a distribution right in the film and setting a status conference for today to explain what that means for the case.

So what happens today? Pretty much nothing. Feess stands on his ruling and says a more detailed explanation is forthcoming; trial date remains; the traditional dueling statements begin flying (Warners is still incredulous, Fox remains triumphant). And both sides strategize about what to do next. 

Without a final ruling, it's hard to predict what will happen. But those calling for a quick settlement might be underestimating the rancor on both sides and what Warners has to gain by letting this play out a bit.

It all comes down to whether Feess will issue an injunction. If the judge blocks the release then it's game over, Fox can demand whatever it wants and Warners will pay (like it did back in 2005 when an injunction was issued against "The Dukesof Hazzard"--by, you guessed it, Judge Gary Feess--and the studio quickly settled for a reported $17.5 million).

But despite the judge having apparently become convinced over the past week that producer Lawrence Gordon failed to do everything required of him to get the "Watchmen" film rights back from Fox in Turnaround, an injunction certainly isn't a given here. Under copyright law, a rightsholder still has to show, among other things, that it will be "irreparably harmed" absent an injunction, and it's hard to see how Fox, which basically sat on its rights as the "Watchmen" project bounced from studio to studio, can't wait until a trial to get whatever money it's entited to from any infringement.

And if it's just money the two sides are fighting over, Warners has little reason to settle now. The Burbank studio really believes it's in the right here, and cowtowing to a rival on a chain-of-title issue when the film is about to be released would set a horrible precedent. Plus, given how the judge waffled in his reasoning and seemed to base his decision in part on his displeasure with Gordon (and his lawyer, Dale Kinsella) refusing to testify about key facts, there seems to be plenty of issues on which to hang a fat appeal.  

Or maybe Warners has had enough with this judge. Given all the uncertainty Feess has let linger in the air, it's clear that he, for one, wants this thing to settle ASAP.     

WatchmenWatch: Judge Feess becomes the Grinch who stole Warners' Christmas

By Matthew Belloni

Just when we thought the battle over the "Watchmen" movie would give us the first jury trial between major studios in many, many years, Judge Gary Feess issued his preliminary order on Christmas Eve. And Warner Bros. lawyers are likely crying in their eggnog.  

In short, Fees ruled that at the very least, Fox has a copyright interest in the film and a right to distribute it. Ouch. Here's the five-page rulingJ, which Fees described as a preview of a longer forthcoming order. 

In a nutshell, the ruling hinges on producer Lawrence Gordon's involvement in the project. Indeed, Feess first describes Fox's relationship with Gordon as "critical background" to understanding the agreements. Going back to the early '90s, Gordon was attached to the "Watchmen" project with the understanding that he'd produce the film. When he didn't, Warners claims that Fox's rights in the project ended. Feess disagrees.

Gordon was later presented with a Turnaround Notice from Fox that required him to pay a buy-out fee and agree to other terms in order to get the rights back, and he never complied with the terms. That, Feess reasons, gives Fox at the very least a continuing distribution right in the film.

So what now? Feess all but asks the parties to settle. But he doesn't say whether he'll issue an injunction. That would be the neutron bomb for Warners because it would impact the planned March 6 release. We'll be surprised if Warners doesn't appeal this thing ASAP. First, Feess changed his mind after initially saying these issues needed to be resolved by a jury. Second, there's an odd footnote in the ruling chastising Goron for his behavior at his deposition, perfect fodder for an argument that the judge stretched his authority after becoming annoyed with a Warners witness. And third, Warners has a bunch at stake. The studio isn't likely to pay up without a fight to the finish.   

Two and a half men and a $49 million baby

By Matthew Belloni

Ever wonder how much a TV network pays to air its top-rated comedy? Warner Bros. TV helpfully provides a glimpse of the license fee market in a breach of contract lawsuit filed yesterday in LA Superior Court.

Warners claims CBS, which airs "Two and a Half Men," owes about $49 million in premium fees and reimbursements for production costs based on a "deficit recoupment" schedule the parties agreed on for the show's fifth and sixth seasons. Here's our THR story and here's the full complaint, filed by John Spiegel and Lynn Scaduto at Munger Tolles & Olsen.

Attached to the complaint are the short-form deal letters between the business affairs departments at CBS and WBTV. A couple highlights and food for thought:

• CBS paid WBTV $750,000 per episode to license "Men" for the first season, with modest bumps for the next few seasons. Yet the average cost to produce the show in the first season was $1,219,894. That cost skyrocketed once the show became a hit (thanks in part, we're sure, to star Charlie Sheen's fee).

• As is typical in TV license deals, the amount of deficit recoupment was tied to the show's Nielsen rating at the end of its fourth season. If the show's ranking was in the Top 10, WBTV was eligible for 100% recoupment of the show's deficits; if it was a Top 15 show, it would get 50% of the deficits upon Year 5 and 25% on Year 6; a Top 20 rating would entitle WBTV to 50% in Year 5 but 0% in Year 6. WBTV claims "Men" is a Top 15 show.

• As far as we can tell, the complaint suggests that the parties disagree about whether there was a second ratings requirement to trigger recoupment. Some TV deals require that the show hit a certain ratings threshhold independent of the ranking vis-a-vis other shows. For instance, in another deal memo attached to the complaint, there is a "Miminum Qualifying Rating" requirement that shows achieve a Top 5 ranking AND a minimum 9.1 rating. WBTV alleges that even if there were a threshhold requirement, "Men" met it in its fourth season. But CBS might be taking the position that while "Men" is a top-rated show, like everything else on TV its ratings are down and are thus not high enough to trigger the recoupment.

If that's the case, this lawsuit is far more interesting than just a money squabble between the largest TV producer and the highest-rated network. With broadcast TV ratings plummeting across the board, are more networks going to take the position that the lucrative bonuses and recoupments they promised just don't apply in an era of lower ratings? And if so, will the entire network television model have to be rethought?

News Websites Are Like Movies: Everybody Steals From Everybody

By Matthew Belloni

In one of our favorite scenes from "Swingers," Jon Favreau and Vince Vaughn and crew debate whether Tarantino's slow-motion walking shots in "Reservior Dogs" are cribbed from Scorsese. "Everybody steals from everybody," one of the guys says. "That's movies."

These days that's also pretty true of online news sources. Today we noticed the Huffington Post was accused of over-cutting-and-pasting reviews from the Chicago Reader and other publications. Even the NY Times Co., parent of the Grey Lady and the Boston Globe, was sued this week for copyright infringement by an online media company called GateHouse that claims the Globe's new community Web sites use material from GateHouse without permission.

These cases beg the $64,000 question of online media: how much excerpting is too much? That's a fair use issue, of course, and without any clear guidelines, it's anyone's guess where the line would be drawn on how much sites the Huffington Post can take.

But, at least in our view, there should be a line. And, increasingly, there doesn't seem to be one. Kevin Allman, the New Orleans-based editor of Gambit Weekly, frames the issue nicely (while taking a potshot at the liberal-leaning Arianna Huffington):

In other words: professional newsgathering organizations have paid professional writers to do professional work, and then Arianna comes in, creates links to their creations, and sells ads on her own page. How progressive

The more interesting question is what role the law is going to play in the migration of the news business from print to digital. Traditional notions of copyright infringement and the so-called "hot news" misappropriation tort that protects hard-fought information are going the way of the big-city newspaper--that is to say, they're being killed by the Internet, replaced by a wild-west (and, some would argue, appropriately competitive) mentality that rewards piggy-backing rather and presentation than actual content creation. So while the Huffington Post and other bare-boned aggregators thrive, reporting organizations like newspapers go down the tubes.    

That's not a novel observation. We just wonder whether the law will end up impacting this trend. At this point, it's safe to say it hasn't. An infringement lawsuit against some of the most egregious copiers won't make much of a difference. A wholesale revision of the Copyright Act to reflect the reality of online media might. But that would require lawmakers to care about the future of media. We think Congress is probably too busy reading the Huffington Post.     

Facebook Privacy Czar Wants to Be Attorney General?

By Matthew Belloni  

TechCrunch reports today that Facebook chief privacy officer Scott Kelly is planning to quit his post to run for Attorney General of California. That's interesting news for a couple reasons.

First, it puts Facebook in a bit of a bind, because Kelly (a former lawyer for Wilson Sonsini and Baker & McKenzie, as well as an education advisor to President Clinton) has been negotiating with attorneys general from a bunch of states over Facebook's commitment to various privacy issues; everything from its willingness to share private information with third parties to it becoming a forum for hate groups. It would need to replace him fast.

Second, it could put Facebook's privacy policies in the center of a major statewide political debate. If he's indeed a candidate, Kelly would face off against other declared contenders, including San Francisco District Attorney Kamala Harris, Torrence assemblyman Ted Liu and Pittsburg assemblyman Gerald Canciamilla. They would likely point out that Facebook hasn't had the best record on privacy, most notably when its Beacon program ended up sharing far more information that users anticipated.

Maybe voters wouldn't care. Or maybe, with everyone's lives increasingly being lived online, Kelly's candidacy will lead to an thoughtful debate about the expectations of privacy in the digital age. Oh wait, we're talking politics.

A Touchy-Feely Oral Contract

By Matthew Belloni

We admit to being overly amused when the formality of the civil litigation process leads to inadvertent humor. So we'll understand if you don't chuckle as much as we did at this line from a complaint filed today in LA Superior Court. Screenwriter Ami Mann claims producer Tony Krantz ("24," "Felicity") hired her to write a screenplay based on the life of country singer Shelby Lynne and repudiated an oral contract to pay her $150,000:

On approximately June 24, 2008, Mann delivered to Krantz the detailed written story outline to Krantz (sic). Mann also began writing a first draft of the screenplay. Shortly thereafter, Krantz informed Mann that he was no longer "feeling" the story.

Well then, hard to argue with that. The full complaint is here, filed by Greg Aldisert at Santa Monica's Kinsella Weitzman firm.

An End to Music Filesharing Lawsuits...or Just a Bridge to the Chorus?

By Matthew Belloni

Is it just us, or does something sound not quite right about the RIAA's announcement that it will back away from its aggressive anti-filesharing litigation strategy to instead work with ISPs to prevent music piracy? Sure, on the surface it sounds reasonable: five years of suing more than 35,000 people, some of them kids and grandmothers, hasn't done all that much to prevent P2P piracy. Worse, the strategy has turned the music labels into villians among the hard-core music lovers who should be its biggest fans. 

But the details of the plan suggest (to us, at least), that this isn't much more than a PR move. The labels now say that instead of litigating against individual filesharers, they're going to work with ISPs to identify who's downloading illegally, then the ISPs will ask their naughty customers to stop and, if all else fails, cut off their Internet access. Sounds reasonable. But what if that doesn't work? Or what if the ISPs don't comply in a way that the labels deem sufficient? Conspicuously absent from the announcement was a full list of the broadband providers that are onboard to play cops for the RIAA's benefit. 

And, of course, the RIAA hasn't waived its right to sue anyone. So this "new direction" might just be a gesture of goodwill and an attempt to try another strategy. It's certainly getting them lots of press. But if filesharing doesn't go the way of Sam Goody CD stores and disappear, we wouldn't be surprised if the lawsuits start flying fast and furious once again.      

Century City Bar Honors Two Entertainment Lawyers

By Matthew Belloni

The Century City Bar Assn. boasts that it has more lawyers per square foot than any other geographic location, which sounds to us like a super-nerdy threat to all rival bar associations. Regardless, CCBA has announced its annual Lawyers of the Year, and two entertainment attorneys are among the five honorees.

Congrats to Joe Calabrese (left), the entertainment finance dealmaker at O'Melveny & Myers, who is Entertainment Lawyer of the Year; and to Scott Edelman, who just handled a three-week arbitration for NBC Universal against "Law & Order" creator Dick Wolf and was named Litigator of the Year. 

Calabrese and Edelman (both THR Power Lawyers!) will get their tiaras and sashes at the CCBA's annual installation dinner at the Hyatt Regency Century Plaza on April 7.   

Madea Goes to Court (and Wins!)

By Matthew Belloni

Our latest THR column looks at Tyler Perry and Marshall, Texas. What does the creative force behind "Diary of a Mad Black Woman" and other films featuring the trash-talking grandma Madea have to do with a dustry town that's home to an annual Fire Ant Festival?

Perry recently found himself litigating a copyright infringement case in the notoriously plaintiff-friendly jurisdiction and his legal team lived to tell the story. Marshall is usually associated with patent cases, including Tivo's $73 million verdict against EchoStar over DVR technology in 2006, so it was interesting to us to see a plaintiff who lives in Dallas try to take advantage of the jurisdiction by filing her copyright claim more than 150 miles away in Marshall.

As you can read, the strategy didn't exactly work.

'Watchmen' Watch: Summary Judgment Tentatively Denied; Trial Moved to Jan 20; Fanboys Should Start Getting Nervous

By Matthew Belloni

The first thing I wondered when I read today that Judge Gary Feess has delayed until Jan 20 the trial between Fox and Warner Bros. over the rights to the upcoming "Watchmen" movie is: How long can Warners wait this thing out before it is forced to a) move the film's release date; b) risk opening a movie under the cloud of potentially disastrous litigation or c) settle the darn case? Currently the Zack Snyder adaptation of the famous graphic novel is scheduled to open March 6, which means that the studio will have to start showing it to critics and tastemakers sometime in February. The ad campaign will follow, and I'm hearing that the various studio departments working on the film are still operating full steam ahead.

But what if the movie's fate isn't resolved in time? Shifting the release date would be hugely problematic, of course, because at this point the major spring and summer releases have already been set and the would-be tentpole would thus have to muscle in on someone else's turf. The other option is to pretend that everything is A-OK while betting that the trial will turn out favorably. But there's no telling how long a trial would last, what the outcome would be, or whether a jury would even be able to resolve this complex dispute spanning years and years of development. 

So Judge Feess' tentative refusal to grant summary judgment for either side likely sent the parties into full-on settlement mode. Fox is notoriously tough in litigation, and it has been especially aggressive in this case. But on the other hand, I just don't see Warners letting this spat get in the way of a potential blockbuster's success--even if it means sharing credit on the film or swallowing its pride and writing a bigger check than it would like. Could there be a settlement before the new year? For the sake of fanboys everywhere, let's hope so.