Acquisitions are an integral part of the motion picture business. Before acquiring any literary property, such as music, book, screenplay, teleplay or a motion picture, the buyer will require proof of ownership from the seller, to ascertain the status of the seller’s rights, that is, clean chain of title. There are generally several reasons why you will need to deliver clean chain of title, including, when obtaining a completion guarantee, errors and omissions (E&O) insurance, official treaty foreign co-production, and distribution. Filmmakers’ failure to obtain the agreements or documents establishing clean chain of title over the course of the acquisition of rights and production can create unnecessary risk of potential copyright, trademark, defamation, right to publicity, right to privacy, and breach of contract claims, and failure to secure a distribution deal. What are the documents needed for an independent filmmaker to ensure clean chain of title, and what process is used?
Chain of Title Review
“Chain of title” is the series of legal documents or agreements that establishes proprietary rights or ownership in a motion picture or project, including documentary evidence of assignments, from its concept through completion and beyond. A “clean” chain of title means the chain of title does not have any gaps in the chain in ownership or other issues that raise doubts regarding ownership.
Particularly when dealing with a pre-existing work, a chain-of-title review should be performed. A “chain of title review” is the process of reviewing of all of the contracts related to the picture and a copyright search of the public records held by the United States Copyright Office to verify if there have been any recorded assignments of rights that could negate the transfer of rights to the filmmaker, studio, television network, production company or distributor.
The chain of title may consist of a single document, or it may be lengthy and complex, depending on the type of arrangement needed to acquire the original literary property, raise financing, prepare the final shooting script, shoot and release the finished film.
The licensor, such as the screenwriter, producer or production company, will be responsible for providing the documents that establish the chain of title.
Documents in Order
These documents will usually consist of duplicate originals or legible copies of all agreements, licenses, waivers or other documents that indicate a change of ownership in a motion picture project from its inception, and can ultimately include many of the following:
- Copyright Registration Certificate or filing receipt.
- Assignment agreement of the motion picture and/or the screenplay and concept adaptation.
- Agreement or letter with copyright owner for right to represent and sell.
- Agreement with distributor.
- Agreement with sales agent.
- Option/purchase agreement for the screenplay.
- If it’s not an original screenplay, the acquisition agreement for the underlying literary material on which the screenplay is based.
- Life Story Rights agreement.
- Talent and crew agreements: writer, director, producer, executive producer, actor (which may include principal, day player, weekly player, minor, and stunt performer agreements and nudity riders), casting director, key crew or department head (i.e. costume designer, director of photography, production designer, and film editor), cinematographer, art director, unit production manager, post supervisor agreements, and crew deal memos (i.e. associate producer, unit publicist, still photographer, production auditor, construction coordinator and head of transportation).
- Location Agreements and releases.
- Clearance Agreements (artwork release, logos, costumes, product release, film clip license, still photo release, sound, and other intellectual property that is included in the visual or audio portions of the completed film).
- Product placement agreements.
- Music supervisor, music licenses (master use and synchronization), music composer, lyricist and conductor.
- Assignment of mortgage and copyright.
- Any special photographic, audio and technical processes to be used.
- Any deferments and contingent percentage participations granted or assigned to any third party.
- Financing agreements, including equity investor and bank loan agreements.
- Post-production facilities, including the laboratory and location for production company’s final mix.
- Settlement agreements, releases and waivers obtained from any third parties with respect to the Screenplay.
Although recording a copyright assignment with the U.S. Copyright Office is not required to effect an assignment of copyrights, it ensures a proper chain of title in and to the copyrights.
When a distributor acquires the distribution rights to a motion picture, it ordinarily conducts a copyright search of the U.S. Copyright Office. In addition, as part of its delivery requirements, a production company may need to provide a copy of the Certificate of Registration that it filed with the U.S. Copyright Office verifying the copyright number, copyright owner and year of publication (including extensions and renewals, if applicable) of the picture. If the picture has not been registered for copyright or if the registration has not been returned from the copyright office, it should be sufficient to provide a copy of the application. A copy of the Certificate of Registration can be supplied later.
For a foreign film, a check is made of the central film registries in both France and Italy in order to verify chain of title.
Review of Contracts
Copyright registration is not required to establish rights under U.S. Copyright Law. The copyright exists from the moment the original work of authorship is fixed in a tangible medium. Since you may have clean chain of title without copyright registration, a buyer will almost always review any written agreements you have that prove ownership and any assignment of rights.
Literary Rights Option/Purchase Agreement
The chain of title to a film or television program begins with the original story, treatment or script. If the script is based on previously created material, the copyright to that material as well. Therefore, the option and purchase agreements are key agreements for establishing a production company’s chain of title to a screenplay and any underlying literary material. What kind of rights are conveyed? Does the author of the underlying literary material (such as a book) from which the screenplay is based convey the theatrical rights as well as TV rights? Does the assignment of the screenplay to production company convey all rights in and to the screenplay including all underlying literary material and the right to make merchandising, sequels, prequels, remakes and additional episodes based on the Screenplay?
The chain of title to a screenplay will include all agreements with all writers and contributors to the screenplay and any underlying material.
The contract with the writer of the original screenplay (and if it’s an adapted screenplay, the owner and/or author of any underlying literary property) will be checked regarding any reserved rights. The Writers Guild of America (“WGA”) Theatrical and Television Basic Agreement (“MBA”) contains specific reservations of rights (the “Separated Rights”) for the benefit of its members who write original material. Entitlement to Separated Rights is subject to final WGA determination and may not be negotiated in a writer’s individual contract. For example, if the literary material is an original screenplay, the production company will not be able to acquire print publication, dramatic stage rights (and perhaps other related) rights. Through the MBA, these rights are licensed back to the writer.
“Original” material means that the material is not based on any material of a story nature that has been previously published or produced. An “adaptation” may be based on true stories, feature films, short films, documentaries, webisodes, TV series, novels, short stories, comic books, video games, news stories, stage plays and even songs that are the work of previous authors.
If the writer of the original screenplay is a member of the WGA, he or she may have a reversionary (turnaround or reacquisition) right if the picture is not produced within the applicable time limit. If there is such a right, an exception may have to be noted in the option and purchase agreement.
If there are any profit participations or deferments, these are reflected in the agreement.
The option agreement will be directly with the owners of the work being optioned, who are generally authors, author’s estate, trustee or heirs, assignees or publishers. Very often It might be in the interest of the producer to review a copy of the author’s publishing agreement to be sure the publisher has not been granted any of the rights being requested by the producer.
The purchasers of screenplays are usually producers, studios, networks or production companies. However, writers may also option a work or life story that they wish to adapt for film or television and subsequently sell to a studio, production company or television network.
The production company’s receipt and approval of complete chain of title documentation along with the provision of all necessary releases and assignments to the literary property are often “conditions precedent” to formation of the option and purchase contract.
During development, pre-production, production and post-production of a motion picture, a producer or production company will enter into one or more employment agreements with writers, actors, directors, crew, set designers, film editors, film composers and other personnel. For purposes of copyright ownership and chain of title regarding the creative contributions of talent to the motion picture, the production company will want to ensure that it owns all the results and proceeds of the various contributions as “works made for hire” which, under U.S. copyright law, vests the initial copyright with the employer. In that regard, and to ensure clean chain of title, all agreements for employment of talent will include work-for-hire language.
In the traditional producer employment agreement, the production company or studio directly employs the individual producer to provide his or her services for the motion picture. Where the Producer has acquired or has an option to acquire the motion picture and allied rights in a screenplay or other literary material, the producer is normally required, as a condition precedent to the agreement, to quitclaim to production company all his or her rights in and to the literary work and option agreement. This means, if the production company agrees to finance and produce the motion picture and employ the producer, it must also acquire the producer’s rights in the underlying property by means of an assignment from the producer, together with a quitclaim by the producer of any and all rights in the underlying property.
In that regard, the production company will review the chain of title so that it can verify that it can acquire from the producer the rights it needs to produce and distribute the motion picture, together with any additional or ancillary rights it wants the ability to exploit.
In the event the production company proceeds with production prior to obtaining clean chain of title, production company will want the right to abandon the project if the chain of title is later found out to be defective. The producer may seek a reasonable time to cure any defect before the production company exercises any right to terminate the agreement.
If the music and lyrics have been specifically written for the picture, it would likely be under a “work for hire” so that there should be no question concerning the production company’s outright ownership of the music to be used in the picture. On the other hand, for pre-existing music, created independently of the picture, production company will secure licensing of necessary synchronization and performing rights, preferably prior to inclusion of the music in the picture, and in any event, prior to distribution. The rights acquired normally include the right to exploit the music in the picture worldwide, in all media, for the life of the copyright or in perpetuity, unless there is a specific reason for obtaining a narrower grant of rights.
However, production companies do not have to obtain public performance licenses and clearances as these are licensed to end users, including cinemas, broadcasters and other public outlets, by the applicable performing rights society, that is, American Society of Composers, Artists and Publishers (“ASCAP”), Broadcast Music, Inc. (“BMI”) or SESAC, Inc. (“SESAC”).
Distributors need to know with certainty that the distribution rights they are licensing are free and clear of any liens, encumbrances, potential claims, lawsuits, or competing claims which can interfere with distribution of the picture.
Before acquiring a motion picture, television program or web series, the sales company or distributor will want proof that the production company can legally grant to them the distribution rights. Therefore, the distributor will condition its purchase of the picture on receipt of the chain of title documents. This inquiry into the chain of title usually begins with a review of the option and/or purchase agreement and other rights acquisition agreements for the screenplay and the story upon which the motion picture is based.
In some cases, if the distribution company is confident that the production company/licensor will be able to deliver clean chain of title, it may be willing to proceed with the distribution prior to receiving proof of ownership. In such case, the production company may be given a period of time to deliver clean of chain of title or to cure any defects (e.g., thirty (30) days). If production company fails to deliver clean chain of title within the time specified, then distributor usually has the right to either have a temporary suspension of distribution or terminate the distribution agreement.
In certain instances, if it is a pre-sale or negative pickup agreement involving the payment of any advance (or a minimum guarantee), the production company will be expected to repay the money it received (although the actual refund may be delayed if the production company does not have the money).
Many international co-production treaties require, in addition to the definitive co-production contract(s), the filmmakers to deliver chain of title documents, in order to qualify as an official treaty co-production. With International co-productions, having a chain of title in place makes it clear that the project meets eligibility requirements regarding minimum financial and creative contribution of each producer participating in the making of the project.
Errors and Omissions (E&O) Insurance
One of the delivery items required by the distributor (in the case of U.S. and UK distributors) will usually be proof that the production company/licensor has obtained an errors and omissions (E&O) insurance policy. E&O insurance provides protection from lawsuits. However, production company must present the insurance company or insurance broker with all the documentation normally required for a clean chain of title, before the insurer will issue the insurance policy. If an E&O cannot be obtained by the producer, it may be impossible for the filmmaker to find a distributor willing to distribute the film.
Production lenders will usually require that there be a completion bond in place. However, a complete chain of title materials is normally required in order to obtain a completion guarantee. The fundamental difference between a completion guarantee and production insurance is that the principal purpose of the completion guarantee is to assure the financier, such as the bank or production lender, that the picture will be completed and delivered. If production of the picture is in danger of going over budget or over schedule, the completion guarantor has a variety of remedies it may employ, including taking over production of the picture.
For any transfer or assignment of copyright to be binding, it must be in writing, signed by the parties and must involve the exchange of consideration. Oral agreements cannot form the basis of a copyright assignment, unless reduced to writing and signed by the parties.
Fair Use and Public Domain
Without a clean chain of title, production companies and distributors may be liable to copyright owners for plagiarism or copyright infringement. However, there are situations where it may be legal to use copyrighted material without obtaining permission from the copyright holder, under the doctrine of “fair use”, such as, in documentary films, when reporting news, facts or current events or when the use is for criticism or comment. Works in the public domain, undeveloped ideas, poorly developed characters, general themes, plot, facts or true events (even if they were discovered through original research) are not capable of copyright protection.
If there is any doubt regarding the author/owner’s rights in a copyrighted material, the production legal counsel or attorney for the production company should review all of the contracts and conduct a copyright search prior to the commencement of principal photography to assure that the licensor is the current copyright owner of the work (or assignee of the work), and that there are no other grants of rights or encumbrances on the title that would conflict with the author/owner’s chain of title.