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The War For Watchmen

The battle between Fox and Warner Bros. over the rights to the comic book adaptation Watchmen cooled off a bit Tuesday when a federal judge set a January 6th trial date for the case.

Wouldn’t it be great if the video journal released on that date was the attorney’s opening statements?

But U.S. District Court Judge Gary Allen Feess said FOX should forgo any attempt to get a preliminary injunction against Warners to stop the release of the film because the issues were far too complex to be resolved on an interim basis, sources said.

Instead, Feess told both sides to build a factual record and start expedited discovery and depositions immediately.

FOX still could ask Feess to permanently enjoin Warners from releasing the film following the discovery phase.

At issue is whether Fox still holds the rights to Watchmen. The studio sued Warners in February, just as principal shooting for the film was wrapping up in Vancouver, for copyright infringement and interference with its contract rights under a 1991 agreement between Fox and Largo Entertainment producer Larry Gordon.

Under that deal, FOX “quitclaimed” its right to Watchmen to Largo, with the understanding that if the production company proceeded with making a big-screen version, then the movie would be distributed by FOX. It later negotiated a “turnaround notice” with Gordon that established a buyout formula for the studio if Gordon wanted to buy out FOX’s rights. But, according to Fox, Gordon failed to follow that deal.

Gordon negotiated a quitclaim contract with Warners in 2006, which it claims gave them the rights to Watchmen. But FOX contends it retains the rights because of Gordon’s failure to buy out the studio’s rights. Warners said FOX gave up its rights in 1991.

The Fox-Warner battle royale turns on matters potentially more troubling to the film industry at large. Central to FOX’s complaint is that dirty little word — turnaround.

At face value, turnaround is a contractual mechanism that allows a studio to release its interest in a dead film project, while recovering costs, plus interest, from any rival that eventually adopts the project. But turnaround is a stacked deck.

The turnaround clauses in a typical contract are also insurance for studio executives who do not want to be humiliated by a competitor who makes a hit out of their castoffs.

That trick turns on a term of art: “changed elements.” A producer of a movie acquired in turnaround who comes up with a new director, or star, or story line, or even a reduction in budget, must give the original studio another shot at making the movie because of changed elements, even if a new backer has entered the picture.

Now, Larry Gordon has not respond to any media requests for comment. Warner, both in court and in a statement last week, said it had done everything legally necessary to make the film.

In the Watchmen case, it remains to be seen whether Judge Feess will grant an injunction blocking the movie’s release while sorting things out. But in 2005, Judge Feess issued an injunction blocking the planned release of Warner’s film Dukes of Hazzard in a rights dispute, leading to a settlement under which the studio paid $17.5 million to a producer who claimed infringement.

So what’s the bottom line? Well, I’m guessing the January 6th court date took a lot of wind out of FOX’s sails and give them that much less leverage to turn the screws on Warners since a ruling will happen almost two months before the film’s release. My guess is between now and January 6th, there will be a settlement. What remains to be seen is how much money FOX will be able to ply from WB.

9.3.08 Source: New York Times, Reuters

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