Rights are a key element of the value chain in the film industry.

Economic rights are based on two fundamental rights: the right to reproduce a work and the right to communicate the work to the public. Shooting a film is a reproduction of the work. So are DVDs. Showing a film in a theatre or on television is a communication to the public.

In most European countries the rights originally belong to the authors and have to be transferred in order to make possible the production and the exploitation of the film. In many countries authors also have moral rights which are generally not transferable.

Transfers of economic rights are made by way of sales of rights or licenses.

A sale of rights means that the ownership of the rights is transferred to a third party.

A license is an authorization to exploit the work given by the rights holder to a third party.

A license is usually granted:
– for a specific territory (a country or a group of countries),
– for a specific duration (e.g., 7 to 10 years)
– for certain specific forms of exploitation (theatre, broadcasting, DVD, VoD etc.).

A license may be exclusive or non-exclusive.

When an exclusive license is granted, the beneficiary is the sole holder of the rights licensed for a given territory, a given period and one or more given forms of exploitation.

In the case of a non-exclusive license, several persons may be authorized to exploit the same rights on the same territory and for the same time period.

When producing and exploiting a film, the parties may choose the type of transfer of right they want. Usually, authors will sell their rights to the producer who then becomes owner of these rights. The producer will grant exclusive licenses to distributors (there is usually only one distributor per territory) while distributors will grant non-exclusive licenses to exhibitors (a film is usually shown on a large number of screens in a given territory).

Transfers of rights are made by contract.

Contracts are not “just a formality” before the real work begins. Contracts are agreements that create obligations. This means that the parties to the contract are obliged to fulfil these obligations. In case of non-fulfilment, the defaulting party may be sentenced to pay damages.

Contracts must be carefully prepared and negotiated. They will not only bind the parties for a long time; they are also the only proof of any transfer of rights as there is no register of rights. In the event of any dispute, the successive contracts (attesting the chain of title) will be the only evidence that a work is lawfully exploited.

For this reason, it is very important to define the rights transferred as clearly and completely as possible.

Contracts are also an evidence of the content of the parties’ agreement. This agreement should not be limited to defining transfer of rights and compensation. These clauses are essential. But so are also clauses that anticipate conflicts and facilitate the performance of the contract.

Experience shows that litigations often begin with a problem of communication. For this reason, every contract should stipulate an obligation to inform the other party about everything that is important for the performance of the contract. This information must be given rapidly. It is easier to tell your contractual partner that a problem might arise because of an event that just happened than to say that there is a problem because of something that happened one month ago.

Regarding solutions: it is much easier to define how a problem will be solved as long as the problem does not exist. Human beings may have conflicting interest. It is wise to accept this reality and to anticipate possible conflicts in a contractual relation. By defining in advance how disagreements will be solved, parties may save a lot of time and money.

An efficient an inexpensive solution is to jointly choose a conciliator, a person known by both parties that will be appointed with the objective of conciliating the parties in case of disagreement, before this disagreement becomes a conflict. The advantage of the (good) conciliator is that he thinks in terms of “interests” where the disagreeing parties think in terms of “rights”. Rights are concurrent where interests may be united.

It may nevertheless in some cases be necessary to go to court. Parties to a contract should remember that judges usually do not know a lot about the film business and that, except regarding the protection of authors, there are usually no specific provisions on film contracts in the law. For this reason it is important to define in the contract all the elements which the parties intend to consider as non-performance of the contract.

A precise clause about what shall constitute breach of contract is also helpful in preventing non-performance of the contract. When both parties know exactly what will be considered non-performance and what is going to happen in such a case, the risk of non-performance diminishes as there is less room left for speculation based on the fact that the contract is not clear and precise.

by
Michel Gyory
Attorney at the Brussels Bar
Lecturer at the Universities of Liège and Vienna