Author:  Billy Hinshelwood Lawyer

Development

The underlying rights in the screenplay are the most important rights that the producer has at the beginning of the film making process. It is, therefore, most important that the producer has clear agreements in place with the holders of all the rights that constitute the underlying rights in the screenplay (including the screenplay itself and any source material) at the earliest possible opportunity - producers should ensure that all of these rights are fully tied down before they approach financiers for development financing.

The writer's agreement should cover the following areas:

how much will the writer be paid and what the producer will expect in return (in terms of number of drafts, re-writes, revisions etc.)
• how the payments will be staged
• delivery dates for treatment and first draft and the amount of time that will be allowed for subsequent revisions
• the amount of time that the producer will take to review drafts and provide comments to the writer
• whether the writer can undertake other work while contracted to the producer
• the timing of payments, including how much to be paid on delivery of the first draft and how much will be paid at the beginning of principal photography
• any profit participation for the writer. A usual arrangement would be 2.5% of 100% of the net profits, but this would depend on the writer's power in the market

The rights being acquired also need to be clearly spelled out. The producer should try to ensure that they acquire all rights in the screenplay, including:

the original film
• sequels
• remakes
• television spin-offs
• publication and novelisation
• stage show

Additional payments will probably be demanded by the writer of an original screenplay in the event of any further use of his idea or characters beyond the original film. Typical payments are 50% of the original fee for a re-make and 33% for a sequel (on top of which fees will also be payable if the original writer writes the new material). Writers may also receive a share of net revenues from the publication of the screenplay and if the film is adapted into a stage play. Where the writer is also to be the film's director, separate contracts will be needed to cover the two elements of their contribution. All negotiations will be handled through the writer's agent.

As a matter of English law (and that of certain other jurisdictions eg. France) , the writer has moral rights in their screenplay which gives them the right not to have their work tampered with or altered in a derogatory manner. The producer should ensure that the writer waives these moral rights (not least because any studio interested in acquiring the film would expect this to be the case) and accepts that their work may be changed with or without their agreement.

The terms of writer's deals are usually agreed on the basis that the writer will receive sole credit but producers should not give a firm commitment that this will be the case. Circumstances might dictate that other writers have to be brought in on the project, in which case certain agreed payments would be reduced in accordance with an agreed formula. This applies, for example, to further compensation such as box office bonuses or net profit points which are usually allocated to the writers in aggregate rather than to each writer separately. The Writers' Guild of Great Britain will arbitrate if there is a dispute over who should take what writer's credit on the film.

Turnaround: If the producer has not made use of the rights in an original screenplay after a certain amount of time has passed, the writer may want to re-acquire those rights to try to get the film made by someone else. However, the producer may already have assigned or sold the rights on to a financier or distributor, who will expect to receive a premium on the price that they paid and any interest that they have incurred while the project has been in development. They may also insist on a share of net profits when the film is eventually made and released by a different team. The producer must not put themselves in a position where they end up paying more to re-acquire the rights than they might receive from the writer in return for re-assigning the original rights back to them.

Optioning Source Material

The most important point when optioning source material is for the producer to be precise about what rights they are acquiring and ensure that this is written down to the satisfaction of both parties. This agreement also needs to cover how long the option is to last and what will be paid. The option period needs to be realistic to reflect the length of time that it takes to develop and finance a movie: it should be at least two to three years if possible with a right to renew for further periods. The typical cost to exercise an option is around 2.5% of the film's eventual hard cash budget (ie. excluding contingencies and financing costs etc) within agreed minimum and maximum limits.

The producer should aim to acquire as many rights as possible at this stage including:

original film
• sequels
• re-makes
• rolling option on all titles in the series if other books have been or are to be written
• creation of own material using the author's characters when all the published stories have been used
• television spin-offs
• games and internet use
• merchandise

Writers usually retain the stage and radio rights, but the producer can still try to tie these up so that they are given first refusal on whether or not to use these rights. It is also possible to insist that, in the event that the writer does not assign all of these rights, no one else will be allowed to use them for a specified time after the first film is released.

Where the producer does not have the money available to purchase the option prior to receiving development funding from another source, the author may be willing to grant a period of exclusivity during which time they will not grant to anyone else the rights to their property. Although this enables the producer to make some progress with the development of the project, it can still leave them exposed.

Other Rights

Where the film includes copyright material within it (but which is not the original source material on which the film has been based) the rights in this material also have to be cleared. Using real people as characters in films also creates difficulties as they may be able to argue that the film has infringed their privacy if the use of their character has not been cleared with them in advance. The producer also has to ensure that all references to that person are absolutely accurate (including accurate representation of dialogue) to avoid a claim of defamation against that person. If the person is dead then permission to represent that person does not generally need to be obtained from their surviving family. The dramatic representation of historical facts can be protected by copyright if the author of a book about those events can prove that the film is based on their original account of those events. Obtaining all of these clearances is vital in order to provide the financiers and distributors with unencumbered Errors & Omissions insurance, which is a basic delivery requirement.

Ideas cannot be copyrighted - only the words that describe them are protected by copyright and can be characterised with the international copyright symbol © and the year in which the work is written - though copyright is automatic in the United Kingdom even if the symbol is not present. If a writer or producer's ideas are used by someone else without credit or payment, one form of recourse is for breach of confidentiality against the person who has taken that idea. It is important, therefore, that when submitting ideas to possible financiers or partners, it is made clear that one is doing so on a confidential basis. It is an acknowledged precaution to write "submitted in confidence" on any letters or material and verbally to state that it is a "confidential relationship".

Raising Finance

Having gone to all the trouble of acquiring the rights in the script and any source material, the producer may then immediately have to assign them on to someone else in order to secure the development finance for the film. Since these rights are the producer's greatest asset at this stage, they should not be given up lightly and the producer needs to ensure that the transfer of rights is commensurate with the contribution that is being made by the financier and that the circumstances in which they can revert to the producer are clearly spelled out and agreed. The length of time that the financier can retain the rights before they transfer back to the producer also needs to be clearly set out in the agreement.

Distributors and sales agents can commit funds (or at least minimum guarantees against which funds can be raised) at the development or production stage in return for rights in certain territories. The producer has to make sure that these sales agreements will bring enough cash into the production, at the time that it is needed, to ensure that the film does not run out of cash during production. The producer should also seek assurances about the level of marketing spend that the purchasers will commit in each territory and how costs will be allocated across the slate of films that they have bought. In any deal, producers should carry out due diligence to make sure that other party is reliable and has an established track record and, for sales contracts, should ensure that effective collection and reporting arrangements are in place.

Top Tips

• The underlying rights in the screenplay are the most important asset that the producer has at the beginning of the film making process. The producer must secure clear agreements with the holders of all these rights as early as possible.
• Producers should try to acquire as many rights as possible in the original material, including the rights for sequels, re-makes or re-versioning of the material.
• Producers must not put themselves in a position where they have to pay more to re-acquire the rights than will be paid to them by the writer in a turnaround situation.
• When selling on rights to financiers or development partners, the producer must ensure that they receive funding commensurate with the rights they are giving up.