Industry Report: Copyright and legal issue of the audiovisual sector
Legal Review of International Co-production Contracts
by Cartoon, the European Association of Animation Film
- Stéphane Lieser is an international transactional and litigation attorney who earned degrees from New York University Law School and the University of Paris II Law School. In 2009 he formed LIESERlaw, a new entertainment boutique together with experienced attorneys in the U.S.A. and Europe. He spends the majority of his time between France and California.
What are the first elements to check when entering in an international co-production contract?
The first key element is to know how we are dealing with. When a producer finds a partner it is key to know who is this potential partner.
The second step is to know if we are in an official co-production framework: are we discussing in the framework of a treaty or a mini treaty? Between which member states are we discussing? Are we discussing in the framework of the European convention for a feature film? Are we discussing Eurimages or are we just qualifying the work as European for tax incentives?
Some countries has official co-production treaties, some others have only memoranda of understanding which are almost official but less rigid that the treaties.
Another important issue is to know if we are in a business relation already or if it a first time relationship and if we are dealing with one partner or several partners. Is the producer dealing with an EU production company or with an Indian producer? All these elements have an importance in terms of access of information about the partner or about copyright issues.
When a producer should consult a lawyer?
It is better to use the producer’s legal resources beforehand, rather than wait until a legal problem arises.
In addressing legal issues, the producer must think very quickly and decide if he needs legal counselling or not. It is important to check the legal issues of the contract during the negotiation stage.
For example emails are becoming the rules in communication. We have to put disclaimers to emails, because emails have no legal value. It is important to know the formalism you need before entering in a co-production agreement with a foreign partner.
English is the standard in international negotiation. Make sure that your language is clearly understood by your partner. Today’s partner may become tomorrow’s enemy, so it is important that you know the formalism of the communication.
People tend to forget what they signed. Make sure that you can live with what you signed and keep a track record of what you have negotiated in the beginning.
What are the first steps to follow before signing a contract?
First of all the producers should list the negotiating points in a memorandum of understanding. Then they have to establish if the production is done within a framework of an international and official treaty between the two countries. The memorandum has to be used as a guideline. In the framework of a co-production treaty, each partner has very strict duties vis-à-vis the financiers, the distributors, the artistic contributors and authors. Producers really need to make sure that all these duties are reflected in the final co-production agreement.
How to make sure that the intention of each co-producer is reflected in the contact?
It is important to list a preamble or conditions precedent. The more you put in, the best it is.
As introduction to the agreement, producers have immediately to confirm who own the rights. Without a character and without underlining rights, there is no co-production agreement. The contract must specify whether the show is an original script or based on a written published novel, a graphic book or a comic book. Producers have to confirm the partner that they have secured the rights for the purpose of entering into this particular deal. If it is not the case, the parties have to mention it. In the next paragraph you will have a “condition precedent”. Conditions precedent are key steps or conditions that if not met will put the partners where they were prior to enter into discussion about the project. Conditions precedents are requirement to be met: for example the series or the feature has to be qualified as national work by the relevant national authority or the partner has to get access to some tax incentive.
There are official and non official prerequisites.
What happen if one of the parties fails to meet the conditions precedents?
If it has been said in the agreement, there is no harm. The parties will go home and each will keep the rights they could bring to the deal. If for some reasons the producers have already agreed to share copyrights of the property, make sure that these rights get automatically back to you. Said that, as producers have duties towards writers, creators and artistic team, the rights have to return to the creative contributors. It is a matter of chain of rights, make sure that the chain is clean.
Should the partners specify that the agreement is in line with the treaties?
Yes, this point is very important. Being in a framework of a treaty, allows the parties to know what are the elements that qualifies the work as national and the producer can therefore have access to the national subsidies.
Has the producer to identify the individual entities working on the work?
Yes, producers have to know who is working on the project and if potential subcontractors does not disqualify the work.
In the same line, producers have to know eventual arrangements in other agreements that may impact on the negotiation. Producers must declare previous deals and commitments.
What are the financial elements to take into consideration in the agreement?
The first thing is currency. Producers have to avoid any misunderstanding concerning the currency and exchange rate.
Also each producer must be responsible for its own expenses. In this way there should be less problems if one of the parties spend more or less. Of course everything is negotiable if it has been previewed in the agreement.
If the budget rises because of the other partner, is it useful to go to arbitration?
When it comes to money, generally you do not want to go in arbitration. If you are sure of yourself and you can show some evidence that there is an overspend due to the other party, you must try to have an amicable resolution. Arbitration for financing is really vicious.
How producers must treat the recoupment?
Most of the disputes arise from misunderstanding about recoupment. It is important to have a definition of the recoupment. Personally I recommend the Anglo-Saxon method: insert all the definitions in an annex and make sure that everything is covered. Not only the media, but also all the different rights such as VOD, SVOD, catch up, mobile, portable devices…
How should producers deal with the ownership of copyrights?
Producers have to define very carefully the definitions of copyrights. Copyrights are not the same in each country. Some legal systems follow the French model, some others the Anglo-Saxon model. Copyrights are not only protection of properties being own by the entity producing the picture. Copyrights are everything: underline rights, creations of each talent involved in the production (director, scriptwriter and composer).
Do not forget merchandising rights. Producers are so eager to finish the project that they tend to forget for example that they can be co-publisher of the music.
How insurance have to be dealt?
Insurance is key. Canadian or American co-producer normally has to respect strict insurance clauses. Broadcasters are behind them and there are official bodies that control the production liability and errors and omissions insurances. Errors and omissions clauses protect the producer from, for example, previous agreements not declared in the contact or missing rights…
Along with the insurance clause, producers need an audit clause. Without an auditing clause, producers are exposed.
What about future programmes?
It is something that producers forget. Normally all the agreements have to have a clause that defines the modalities for further programmes, sequels or secondary rights.
Where it is better to have the governing law?
The best is to find a place where both companies are comfortable with. It is important to mention “exclusive jurisdiction of such Court”. Producers have nevertheless to try to find an amicable resolution and avoid going to Court.