Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 1 of 102 Page ID #:1349
1 Patricia L. Glaser, State Bar No. 55668 G. Jill Basinger, State Bar No. 195739 2 David Sergenian, State Bar No. 230174
3 GLASER WEIL FINK JACOBS HOWARD AVCHEN & SHAPIRO LLP 4 10250 Constellation Boulevard, 19th Floor
5 Los Angeles, CA 90067 Telephone: (310) 553-3000 6 Facsimile: (310) 556-2920
7 Attorneys for Defendants SWEETPEA ENTERTAINMENT, INC. 8 and SWEETPEA B.V.I. LTD. 9
10 UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA 11 WESTERN DIVISION 12 HASBRO, INC., and WIZARDS OF CASE NO. 13-CV-03406-DMG (JCGx) 13 THE COAST, LLC, 14 Hon. Dolly M. Gee Plaintiffs, 15 DEFENDANTS’ ANSWER AND 16 v. AFFIRMATIVE DEFENSES; AND
17 SWEETPEA ENTERTAINMENT, SWEETPEA B.V.I. LTD’S 18 INC., and SWEETPEA B.V.I. LTD, COUNTERCLAIMS FOR:
19 Defendants. (1) BREACH OF CONTRACT; (2) COPYRIGHT INFRINGEMENT; 20 Deadline.com(3) FALSE DESIGNATION OF
21 ORIGIN; SWEETPEA B.V.I. LTD, (4) TRADEMARK DILUTION; AND 22 (5) DECLARATORY RELIEF Counter-Claimant, 23
DEMAND FOR JURY TRIAL 24 v.
25 Complaint Filed: May 13, 2013 HASBRO, INC., and WIZARDS OF
26 THE COAST, LLC,
27 Counter-Defendants. 28
ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS 823542 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 2 of 102 Page ID #:1350
1 Defendants Sweetpea Entertainment, Inc. (“SEI”) and Sweetpea B.V.I. Ltd.
2 (“Sweetpea”) (collectively, “Defendants”), by and through their undersigned counsel,
3 hereby submit their Answer and Affirmative Defenses to Plaintiffs Hasbro, Inc.’s
4 (“Hasbro”) and Wizards of the Coast, LLC’s (“Wizards”) (collectively, “Plaintiffs”)
5 Complaint for Copyright Infringement, Trademark Infringement, False Designation of
6 Origin, Trademark Dilution and Declaratory Relief (the “Complaint”) as follows:
7 JURISDICTION AND VENUE
8 1. Paragraph 1 states a legal conclusion which Defendants are not required
9 to admit or deny; to the extent a response is required Defendants admit that the
10 Complaint purports to state causes of action arising under 28 U.S.C. §§ 1331, 1338(a)
11 and 2201 and 15 U.S.C. § 1121(a).
12 2. Defendants admit that personal jurisdiction over Sweetpea is proper
13 solely by reason of Sweetpea’s consent for the purposes of this suit and venue is
14 proper as to Sweetpea on the same basis. Defendants deny that Sweetpea transacts
15 substantial business in Los Angeles, California. Defendants admit that SEI transacts
16 business in Los Angeles, California. Defendants deny the remaining allegations of
17 paragraph 2.
18 NATURE OF THE ACTION
19 3. Defendants admit that the Complaint purports to state causes of action 20 for copyright andDeadline.com trademark infringement, and that Plaintiffs seek declaratory and 21 other relief. Defendants deny the remaining allegations of paragraph 3.
22 4. Defendants are without knowledge or information sufficient to form a
23 belief as to the truth or falsity of Hasbro’s statement as to when Hasbro purported to
24 learn information regarding Sweetpea’s plans to produce a Dungeons & Dragons
25 movie and on that basis deny them. Defendants admit that Sweetpea plans to use the
26 “Dungeon and Dragons” trademark in connection with its upcoming Dungeons &
27 Dragons theatrical motion picture. Defendants are without knowledge or information
28 sufficient to form a belief as to the truth or falsity of the allegation that the Chainmail
1 ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS 823542 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 3 of 102 Page ID #:1351
1 script is based upon elements from the Property. The allegation that the Property
2 contains protected elements is a legal conclusion that does not require a response.
3 Sweetpea admits that it has been working with Warner Bros to reach an agreement in
4 principle to produce a Dungeons & Dragons theatrical motion picture with a yet-to-
5 be-determined entity. Defendants admit that Sweetpea has stated that it has the right
6 to produce and exploit and to license to others the right to produce and exploit a
7 theatrical motion picture based on the Property. Defendants deny the remaining
8 allegations of paragraph 4.
9 5. Sweetpea admits that its rights in the Property are based on the
10 Agreement as amended by the First and Second Amendments. Sweetpea admits that
11 the documents attached as Exhibits A, B and C are true and correct copies of the
12 Agreement, the First Amendment and the Second Amendment, respectively. 1 13 6. Defendants admit that the Agreement granted Sweetpea the right to
14 make one live-action theatrical motion picture based on the Property. Defendants
15 admit that Sweetpea exercised that right, inter alia, by producing the first Dungeons
16 & Dragons movie, released in U.S. theaters on December 8, 2000 (the “Picture”).
17 Defendants admit that the Agreement granted Sweetpea the right to make one or
18 more sequels, prequels or remakes. The allegation that the Sequel Rights and
19 Television Rights are separate and independent is a legal conclusion that does not 20 require a response.Deadline.com Defendants deny the remaining allegations of paragraph 6. 21 7. Defendants deny the allegations of paragraph 7.
22 8. Defendants admit that the selected language from the Agreement is
23 accurately quoted. Defendants deny the remaining allegations of paragraph 8.
24 9. Defendants admit that a motion picture titled Dungeons & Dragons:
25 Wrath of the Dragon God aired in the United States on the Syfy Channel on October
26 8, 2005. Defendants admit that a motion picture titled Dungeons & Dragons: The
27 1 28 As used herein, the term “Agreement” refers to the Agreement as amended by the First and Second Amendments. 2 ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS 823542 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 4 of 102 Page ID #:1352
1 Book of Vile Darkness aired in the United States on the Syfy Channel on November
2 24, 2005. Defendants deny the remaining allegations of paragraph 9.
3 10. Defendants deny the allegations of paragraph 10.
4 11. Defendants deny the allegations of paragraph 11.
5 12. Defendants deny the allegations of paragraph 12.
6 13. Defendants deny the allegations of paragraph 13.
7 14. Defendants deny the allegations of paragraph 14.
8 PARTIES
9 15. Defendants are without knowledge or information sufficient to form a
10 belief as to the truth or falsity of the allegations in paragraph 15 and on that basis
11 deny them.
12 16. Defendants are without knowledge or information sufficient to form a
13 belief as to the truth or falsity of the allegations in paragraph 16 and on that basis
14 deny them.
15 17. Defendants admit that Defendant SEI is a corporation organized under
16 the laws of the State of Delaware. Defendants deny the remaining allegations of
17 paragraph 17.
18 18. Defendants admit that Sweetpea is a corporation organized under the
19 laws of the British Virgin Islands. Defendants admit that Sweetpea is the successor- 20 in-interest to SweetpeaDeadline.com Entertainment Corporation (“SEC”) with respect to the 21 Agreement. Defendants deny the remaining allegations of paragraph 18.
22 FACTS
23 19. Defendants deny that the Dungeons & Dragons game contains the
24 character classes “warriors,” “wizards,” or “healers.” Defendants admit the
25 remaining allegations of paragraph 19.
26 20. Defendants admit the allegations of paragraph 20.
27 21. Defendants deny the allegations of paragraph 21.
28
3 ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS 823542 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 5 of 102 Page ID #:1353
1 22. Defendants are without knowledge or information sufficient to form a
2 belief as to the truth or falsity of the allegations that Hasbro owns the worldwide
3 trademark rights in the name Dungeons & Dragons with respect to products and
4 services unrelated to television programs and motion pictures, and on that basis deny
5 them. Defendants deny the remaining allegations in paragraph 22.
6 23. Defendants are without knowledge or information sufficient to form a
7 belief as to the truth or falsity of the allegations in paragraph 23 and on that basis
8 deny them.
9 24. Defendants admit the allegations of paragraph 24.
10 25. Defendants admit the allegations of paragraph 25.
11 26. Defendants admit the allegations of paragraph 26.
12 27. Defendants admit the allegations of paragraph 27.
13 28. Defendants admit the allegations of paragraph 28.
14 29. Defendants admit the allegations of paragraph 29.
15 30. Defendants admit the allegations of paragraph 30.
16 31. Defendants admit the allegations of paragraph 31.
17 32. Defendants admit the allegations of paragraph 32.
18 33. Defendants admit the allegations of paragraph 33.
19 34. Defendants admit that the selected language from the Agreement is 20 accurately quoted.Deadline.com Defendants deny the remaining allegations of paragraph 34. 21 35. Defendants admit that the selected language from the Agreement is
22 accurately quoted. Defendants deny the remaining allegations of paragraph 35.
23 36. Defendants admit that the selected language from the Agreement is
24 accurately quoted. Defendants deny the remaining allegations of paragraph 36.
25 37. Defendants admit the allegations of paragraph 37.
26 38. Defendants admit the allegations of paragraph 38.
27 39. Defendants admit the allegations of paragraph 39.
28 40. Defendants admit the allegations of paragraph 40.
4 ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS 823542 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 6 of 102 Page ID #:1354
1 41. Defendants admit the allegations of paragraph 41.
2 42. Defendants admit the allegations of paragraph 42.
3 43. Defendants are without knowledge or information sufficient to form a
4 belief as to the truth or falsity of the allegation that Dungeons & Dragons
5 “underperformed.” Defendants admit that the Box Office Mojo website stated that
6 the Picture grossed $33,807,422 worldwide on a production budget of $45 million.
7 44. Defendants admit that the non-theatrical motion picture Dungeons &
8 Dragons: Wrath of the Dragon God aired in the United States on the Syfy Channel
9 on October 8, 2005. Defendants deny the remaining allegations of paragraph 44.
10 45. Defendants deny the allegations of paragraph 45.
11 46. Defendants are without information or knowledge sufficient to form a
12 belief as to the truth or falsity of the allegations in paragraph 46 with respect to
13 Hasbro’s knowledge and on that basis deny them. Defendants deny the remaining
14 allegations of paragraph 46.
15 47. Defendants deny the allegations of paragraph 47.
16 48. Defendants admit that Syfy issued a press release that stated, in part,
17 “SYFY ORIGINAL MOVIE DUNGEONS AND DRAGONS: THE BOOK OF
18 VILE DARKNESS PREMIERES SATURDAY, NOVEMBER 24.” Defendants
19 deny the remaining allegations of paragraph 48. 20 49. DefendantsDeadline.com admit that the non-theatrical motion picture Dungeons & 21 Dragons: The Book of Vile Darkness aired in the United States on the Syfy Channel
22 on November 24, 2012. Defendants deny the remaining allegations of paragraph 49.
23 50. Defendants are without knowledge or information sufficient to form a
24 belief as to the truth or falsity of the allegations of paragraph 50 and on that basis
25 deny them.
26 51. Defendants deny the allegations of paragraph 51.
27 52. Defendants deny the allegations of paragraph 52.
28 53. Defendants deny the allegations of paragraph 53.
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1 54. Defendants are without knowledge or information sufficient to form a
2 belief as to the truth or falsity of the allegations of paragraph 54 and on that basis
3 deny them.
4 55. Defendants are without knowledge or information sufficient to form a
5 belief as to the truth or falsity of the allegations in paragraph 55 and on that basis
6 deny them.
7 56. Defendants deny the allegations of paragraph 56.
8 57. Defendant admit that on April 30, 2013, Hasbro sent a letter to Sweetpea
9 in which Hasbro contended that Sweetpea’s Sequel Rights had reverted to Hasbro.
10 Defendants admit that Hasbro demanded that Sweetpea cease development,
11 production and/or distribution activities related to a theatrical motion picture based
12 on the Picture or the Property. Defendants deny the remaining allegations of
13 paragraph 58.
14 58. Defendants admit that Sweetpea responded by letter dated May 2, 2013,
15 and that the letter denied that the Sequel Rights had reverted and that Hasbro was
16 interfering with Sweetpea’s contractual relations and prospective business advantage.
17 Defendants deny the remaining allegations of paragraph 58.
18 59. Defendants admit the allegations of paragraph 59.
19 60. Defendants deny the allegations of paragraph 60. 20 Deadline.comFIRST CLAIM FOR RELIEF 21 61. Defendants incorporate by reference its responses to all the preceding
22 paragraphs of this Answer above.
23 62. Defendants are without knowledge or information sufficient to form a
24 belief as to the truth or falsity of the allegations of paragraph 62 and on that basis
25 deny them.
26 63. Defendants deny the allegations of paragraph 63.
27 64. Defendants deny the allegations of paragraph 64.
28 65. Defendants deny the allegations of paragraph 65.
6 ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS 823542 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 8 of 102 Page ID #:1356
1 66. Defendants deny the allegations of paragraph 66.
2 67. Defendants deny the allegations of paragraph 67.
3 SECOND CLAIM FOR RELIEF
4 68. Defendants incorporate by reference its responses to all the preceding
5 paragraphs of this Answer above.
6 69. Defendants lack knowledge or information to form a belief as to whether
7 the registrations are each valid and effective. Otherwise, Defendants admit the
8 allegations of paragraph 69.
9 70. Defendants deny the allegations of paragraph 70.
10 71. Defendants deny the allegations of paragraph 71.
11 72. Defendants deny the allegations of paragraph 72.
12 73. Defendants deny the allegations of paragraph 73.
13 74. Defendants deny the allegations of paragraph 74.
14 75. Defendants deny the allegations of paragraph 75.
15 THIRD CLAIM FOR RELIEF
16 76. Defendants incorporate by reference its responses to all the preceding
17 paragraphs of this Answer above.
18 77. Defendants admit the allegations of paragraph 77.
19 78. Defendants deny the allegations of paragraph 78. 20 79. DefendantsDeadline.com deny the allegations of paragraph 79. 21 80. Defendants deny the allegations of paragraph 80.
22 81. Defendants deny the allegations of paragraph 81.
23 82. Defendants deny the allegations of paragraph 82.
24 83. Defendants deny the allegations of paragraph 83.
25 FOURTH CLAIM FOR RELIEF
26 84. Defendants incorporate by reference its responses to all the preceding
27 paragraphs of this Answer above.
28 85. Defendants admit the allegations of paragraph 85.
7 ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS 823542 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 9 of 102 Page ID #:1357
1 86. Defendants deny the allegations of paragraph 86.
2 87. Defendants deny the allegations of paragraph 87.
3 88. Defendants deny the allegations of paragraph 88.
4 89. Defendants deny the allegations of paragraph 89.
5 90. Defendants deny the allegations of paragraph 90.
6 FIFTH CLAIM FOR RELIEF
7 91. Defendants incorporate by reference its responses to all the preceding
8 paragraphs of this Answer above.
9 92. Defendants admit the allegations of paragraph 92.
10 93. Defendants deny the allegations of paragraph 93.
11 94. Defendants admit that there is a real and appreciable controversy
12 between the parties and that Hasbro had a real and reasonable apprehension of being
13 subject to a lawsuit if Hasbro exploits the Sequel Rights granted to Sweetpea.
14 Defendants deny the remaining allegations of paragraph 94.
15 95. Defendants deny the allegations of paragraph 95.
16 96. Defendants admit the allegations of paragraph 96.
17 97. Defendants deny the allegations of paragraph 97.
18 98. Defendants admit the allegations of paragraph 98.
19 RESPONSE TO PRAYER FOR RELIEF 20 Plaintiffs’Deadline.com prayer for relief does not contain any allegations. Defendants deny 21 that Plaintiffs are entitled to any relief sought in the prayer for relief.
22 AFFIRMATIVE DEFENSES
23 Further answering the Complaint and as additional defenses thereto,
24 Defendants assert the following Affirmative Defenses without assuming the burden of
25 proof when such burden would otherwise be on Plaintiffs.
26
27
28
8 ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS 823542 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 10 of 102 Page ID #:1358
1 FIRST AFFIRMATIVE DEFENSE
2 (Failure to State a Claim)
3 99. Plaintiffs have failed to state any claims upon which relief can be
4 granted.
5 SECOND AFFIRMATIVE DEFENSE
6 (Lack of Damages)
7 100. Plaintiffs have sustained no damages as a result of Defendants’ alleged
8 conduct.
9 THIRD AFFIRMATIVE DEFENSE
10 (Mitigation of Damages)
11 101. Plaintiffs have failed to mitigate the damages, if any, that Plaintiffs have
12 allegedly suffered.
13 FOURTH AFFIRMATIVE DEFENSE
14 (No Allegedly Infringing Work)
15 102. Defendants have not fixed in any tangible medium a work that contains
16 the constituent original elements, if any, of Plaintiffs’ purported copyrighted works.
17 FIFTH AFFIRMATIVE DEFENSE
18 (Lack of Copying)
19 103. Defendants have not copied the constituent original elements, if any, of 20 Plaintiffs’ purportedDeadline.com copyrighted works. 21 SIXTH AFFIRMATIVE DEFENSE
22 (Lack of Substantial Similarity)
23 104. There is a lack of similarity between the ideas and expression of ideas in
24 the allegedly infringing work, if any, and the Plaintiffs’ purported copyrighted works.
25 SEVENTH AFFIRMATIVE DEFENSE
26 (Fair Use)
27 105. Defendants’ conduct, as alleged in the Complaint, constitutes fair use, if
28 any, of Plaintiffs’ purported copyrighted works.
9 ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS 823542 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 11 of 102 Page ID #:1359
1 EIGHTH AFFIRMATIVE DEFENSE
2 (Attorney Fees Improper)
3 106. Plaintiffs fail to state facts sufficient to permit recovery of attorney fees
4 against Defendants.
5 NINTH AFFIRMATIVE DEFENSE
6 (Copyrighted Works Not Protectable)
7 107. Plaintiffs’ copyright registrations, as identified in the Complaint, are
8 invalid because they contain elements that are not protectable.
9 TENTH AFFIRMATIVE DEFENSE
10 (Public Domain)
11 108. Plaintiffs’ copyright infringement claims are barred because the works
12 for which copyright protection is claimed, or elements thereof, were in the public
13 domain.
14 ELEVENTH AFFIRMATIVE DEFENSE
15 (Innocent Infringement and Good Faith)
16 109. To the extent Plaintiffs’ works were infringed, Defendants acted in good
17 faith, innocent of any knowledge or intent to infringe Plaintiffs’ rights. If such good
18 faith and lack of intent does not, as a matter of law, preclude a finding of liability,
19 any general or statutory damages awarded should be correspondingly reduced. 20 Deadline.comTWELFTH AFFIRMATIVE DEFENSE 21 (No Trademark Infringement)
22 110. Plaintiffs’ trademark claims are not ripe because Defendants have not
23 used the trademark in connection with the sale or advertising of goods or services.
24 THIRTEENTH AFFIRMATIVE DEFENSE
25 (No Use of Trademark)
26 111. Plaintiffs’ trademark claims are barred because Defendants have not
27 used the trademark in interstate commerce.
28
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1 FOURTEENTH AFFIRMATIVE DEFENSE
2 (No Trademark Infringement)
3 112. Plaintiffs’ claim for trademark infringement is not ripe because
4 Defendants have not used the trademark in connection with the sale or advertising of
5 goods or services.
6 FIFTEENTH AFFIRMATIVE DEFENSE
7 (No Likelihood of Confusion or Mistake)
8 113. Defendants’ conduct has not caused any likelihood of confusion or
9 mistake; any likelihood of confusion or mistake is caused by Plaintiffs.
10 SIXTEENTH AFFIRMATIVE DEFENSE
11 (No Dilution)
12 114. Defendants’ conduct has not caused any dilution; any dilution is caused
13 by Plaintiffs.
14 SEVENTEENTH AFFIRMATIVE DEFENSE
15 (Lack of Standing)
16 115. Plaintiffs lack standing to bring all or some of the claims in the
17 Complaint.
18 EIGHTEENTH AFFIRMATIVE DEFENSE
19 (Waiver) 20 116. AsDeadline.com a result of Plaintiffs’ own conduct, Plaintiffs have waived any claim 21 for relief in conjunction therewith, and thus are barred or precluded from maintaining
22 such action or obtaining any judgment or relief whatsoever against Defendants.
23 NINETEENTH AFFIRMATIVE DEFENSE
24 (Estoppel)
25 117. Plaintiffs, as a result of their own conduct, are estopped from prevailing
26 on its claims.
27
28
11 ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS 823542 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 13 of 102 Page ID #:1361
1 TWENTIETH AFFIRMATIVE DEFENSE
2 (Unclean Hands)
3 118. Plaintiffs’ claims are barred by the equitable doctrine of unclean hands.
4 TWENTY-FIRST AFFIRMATIVE DEFENSE
5 (Laches)
6 119. Plaintiffs’ claims are barred by the doctrine of laches.
7 TWENTY-SECOND AFFIRMATIVE DEFENSE
8 (Injunctive Relief Unavailable)
9 120. Plaintiffs are not entitled to an injunction because Plaintiffs have an
10 adequate remedy at law and no basis exists for the grant of equitable relief.
11 TWENTY-THIRD AFFIRMATIVE DEFENSE
12 (Reservation of Defenses)
13 121. Defendants reserve the right to assert such additional defenses in the
14 event that further discovery, investigation or analysis indicates they are proper.
15 JURY DEMAND
16 Defendants Sweetpea Entertainment, Inc. and Sweetpea B.V.I. Ltd. respectfully
17 demand trial by jury pursuant to Fed. R. Civ. P. 38(b) for all issues so triable.
18
19 COUNTERCLAIMS 20 DefendantDeadline.com Sweetpea B.V.I. Ltd. (“Sweetpea”), by and through its undersigned 21 counsel, asserts the following counterclaims against Plaintiffs Hasbro, Inc. (“Hasbro”)
22 and Wizards of the Coast, LLC (“Wizards”) (collectively, “Counter-Defendants”) as
23 follows:
24 NATURE OF THE ACTION
25 1. Hasbro wrote a check it cannot cash by promising Universal Pictures
26 (“Universal”) film rights to Dungeons & Dragons that it does not have. Hasbro even
27 went so far as to file a lawsuit against Sweetpea to delay a deal between Sweetpea and
28 Warner Brothers to produce a fourth Dungeons & Dragons movie. Hasbro’s sale of
12 ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS 823542 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 14 of 102 Page ID #:1362
1 rights it does not own is a violation of Sweetpea’s rights. Only Sweetpea has the
2 exclusive rights to make a Dungeons & Dragons theatrical film.
3 2. Under its license agreement, Sweetpea is the owner in perpetuity of the
4 Dungeons & Dragons copyrights with respect to live-action motion pictures.
5 Sweetpea’s large bundle of rights under the license agreement includes not only the
6 right to use Dungeons & Dragons copyrighted material and trademarks in connection
7 with live-action movies, it also includes the right to exclude others, including Hasbro,
8 from infringing on those rights. Only Sweetpea has the right to use Dungeons &
9 Dragons copyrighted material in a live-action motion picture or television program,
10 and only Sweetpea can sue others for using that copyrighted material in a live-action
11 motion picture. Only Sweetpea has the right to use the Dungeons & Dragons
12 copyrighted material in a live-action motion picture sequel, prequel or remake
13 (“Sequel”), and only Sweetpea can sue others for using that copyrighted material in a
14 Sequel. Only Sweetpea has the right to use the words “Dungeons & Dragons” as a
15 primary title in a live-action motion picture or television program, and only Sweetpea
16 has the right allow others to use the words “Dungeons & Dragons” as a secondary
17 title.
18 3. Hasbro has ignored and willfully infringed Sweetpea’s rights. In the fall
19 of 2012, Warner Brothers approached Hasbro with a spec script, based in part on 20 Dungeons & Dragons,Deadline.com titled Chainmail. Hasbro passed on the script, but decided to 21 make its own Dungeons & Dragons movie. As Hasbro admits, it reached an
22 agreement with Universal to produce and distribute a live-action theatrical motion
23 picture based on the Dungeons & Dragons property and purported to assign Dungeons
24 & Dragons copyrights and other intellectual property to Universal. Hasbro admits
25 that its Dungeons & Dragons movie will directly compete with Sweetpea’s upcoming
26 Dungeons & Dragons movie.
27 4. After realizing that the purported assignment of copyrights and the other
28 intellectual property to Universal was null and void in light of Sweetpea’s license
13 ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS 823542 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 15 of 102 Page ID #:1363
1 agreement—and that the Hasbro/Universal Dungeons & Dragons project was in
2 danger—Hasbro took to the offensive. Relying solely on press reports that Sweetpea
3 had reached an agreement in principle with Warner Brothers to produce a fourth
4 Dungeons & Dragons film, and not knowing what, if anything, Sweetpea had done to
5 develop that film, Hasbro filed a suit for alleged copyright infringement and
6 trademark violations, hoping that Sweetpea would either give up on making its movie
7 or that the lawsuit would interfere sufficiently with the movie that Warner Brothers
8 would give up on making it.
9 5. Hasbro’s Complaint is based on a fundamental misapprehension of both
10 the film industry and the license agreement between Hasbro’s predecessor and
11 Sweetpea. Hasbro alleges that it can sell Dungeons & Dragons film rights to
12 Universal because Sweetpea’s film rights reverted back to Hasbro. This purported
13 reversion is based on Hasbro’s argument that Sweetpea’s prior two Dungeons &
14 Dragons movies were television motion pictures, not non-theatrical motion pictures.
15 First, the premise is incorrect. Sweetpea’s prior two Dungeons & Dragons movies
16 were non-theatrical motion pictures, not television motion pictures, as those terms are
17 understood in the industry and in accordance with the license agreement. But even if
18 they were television motion pictures (they were not), television motion pictures would
19 still be a valid exercise of Sweetpea’s right to make Sequels and would not trigger a 20 reversion of thatDeadline.com right back to Hasbro. 21 6. Assuming arguendo that Sweetpea’s right to make a Sequel had reverted
22 back to Hasbro (it did not), Hasbro is still prohibited from making a Dungeons &
23 Dragons movie. Hasbro’s Dungeons & Dragons movie, and its dealings with
24 Universal, violate Sweetpea’s exclusive rights under the license agreement, which
25 never revert back to Hasbro, including: (a) Sweetpea’s sole, exclusive right to make a
26 live-action motion picture using Dungeons & Dragons copyrighted material and
27 trademark; (b) Sweetpea’s sole, exclusive right to use the words “Dungeons &
28 Dragons” as a primary film title; (c) Sweetpea’s sole, exclusive right to permit third
14 ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS 823542 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 16 of 102 Page ID #:1364
1 parties to use the words “Dungeons & Dragons” as a secondary film title; (c)
2 Hasbro’s contractual obligation to cooperate with Sweetpea with respect to the
3 competitive impact of Hasbro’s use of the words “Dungeons & Dragons” or
4 “Advanced Dungeons & Dragons” in a secondary film title; and (d) Sweetpea’s Right
5 of Last Refusal, i.e., Sweetpea’s right to make a Dungeons & Dragons sequel on the
6 same financial terms that Hasbro has agreed to with Universal. In other words, even
7 assuming Hasbro was correct that Sweetpea’s sequel rights had reverted, Hasbro still
8 has no right to license Dungeons & Dragons copyrighted materials to Universal to
9 make a live-action motion picture. Accordingly, Sweetpea brings this action for
10 breach of contract, copyright infringement, trademark violations and declaratory
11 relief.
12 THE PARTIES
13 7. Counter-Claimant Sweetpea, B.V.I. Ltd. (“Sweetpea”) is a corporation
14 duly organized and existing under the laws of the British Virgin Islands corporation
15 with its principal place of business in Hong Kong, China.
16 8. Upon information and belief, Counter Defendant Hasbro, Inc. is a
17 corporation organized under the laws of the State of Rhode Island, with its principal
18 place of business in Pawtucket, Rhode Island.
19 9. Upon information and belief, Counter Defendant Wizards of the Coast, 20 LLC (“Wizards”)Deadline.com is a limited liability company organized under the laws of the State 21 of Delaware, with its principal place of business in Renton, Washington.
22 JURISDICTION AND VENUE
23 10. This Complaint arises under the laws of the United States, specifically
24 the trademark and copyright laws of the United States, §§ 1114 and 1125 and 17
25 U.S.C. §101, et seq. This Court has jurisdiction over the subject matter of this action
26 pursuant to 15 U.S.C. § 1121 (trademark), 28 U.S.C. §§ 1331 (federal question),
27 1332(a) (diversity of citizenship), 1367 (supplemental jurisdiction), 1338(a)
28 (copyright) and 2201 (declaratory relief).
15 ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS 823542 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 17 of 102 Page ID #:1365
1 11. This Court has personal jurisdiction over Hasbro and Wizards because,
2 among other reasons, Hasbro and Wizards have voluntarily submitted to this Court’s
3 jurisdiction by filing their Complaint in this action.
4 12. Venue is proper in this judicial district pursuant to 28 U.S.C. §§ 1391(b)
5 and (c) and 1400 as this Counterclaim is filed in response to the Complaint in this
6 action.
7 GENERAL ALLEGATIONS
8 A. The Property at Issue
9 13. In its basic form, Dungeons & Dragons is a fantasy role-playing game in
10 which players create “imaginary characters” that they role-play in “imaginary
11 adventures,” which are created from the imagination of the players. There are seven
12 main character classes for players to choose from for use in a Dungeons & Dragons
13 game: fighter, cleric, thief, magic-user, elf, dwarf and halfling. Each character has its
14 own distinguishing traits and specialties.
15 14. A Dungeons & Dragons game can continue as long as there are new
16 adventures for the characters. Even if a character dies, the player can simply create a
17 new character to take the deceased character’s place. In essence, playing a Dungeons
18 & Dragons game is similar to creating a series of stories where anything is possible
19 and where the possibilities of narrative are endless. The rules of the game merely 20 provide parametersDeadline.com for interacting with the other aspects of the game world. Each 21 game that is played is new, comprising new characters and new environments,
22 following its own path, and ending in a different way. In other words, each “story”
23 created in collaboration by the Dungeon Master and players necessarily starts from
24 scratch, using the basic rules of the game, but incorporating whatever creatures,
25 settings, spells, artifacts, and other elements from the universe of Dungeons &
26 Dragons the Dungeon Master chooses for each story.
27 15. The “game” of Dungeons & Dragons does not comprise a single book or
28 board game; it comprises an entire universe of settings, rules, creatures and artifacts
16 ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS 823542 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 18 of 102 Page ID #:1366
1 disseminated in books, magazines and other publications that were sold beginning in
2 1973. In addition, a derivative game called “Advanced Dungeons & Dragons.”
3 contained additional worlds with names such as “Dragon Lance,” “Forgotten
4 Realms,” “Greyhawk Adventures,” “Spell Jammer,” and “Ravenloft.” Consistent
5 with its derivative nature, many of the settings, rules, creatures and artifacts found in
6 the Dungeons & Dragons publications are also found in the Advanced Dungeons &
7 Dragons publications.
8 B. Sweetpea Acquires Exclusive, Irrevocable Rights in the Property, Including the Exclusive Right to Make a Live-Action Motion Picture 9 Based on Dungeons & Dragons 10 16. Growing up in Toronto, Canada, Courtney Solomon had been an 11 enthusiast of Dungeons & Dragons. In 1990, when he was only 19 years old, 12 Solomon wanted to turn Dungeons & Dragons into a feature film or television 13 program. After making a few phone calls, Solomon discovered, to his surprise, that 14 no one had acquired the motion picture rights to Dungeons & Dragons. 15 17. At the time, the publisher of Dungeons & Dragons (and the holder of the 16 intellectual property rights to Dungeons & Dragons) was a company named TSR, Inc. 17 (“TSR”). TSR had been formed in 1973 by Dungeons & Dragons co-creator Gary 18 Gygax and his childhood friend Don Kaye, to publish and sell the rules of the 19 Dungeons & Dragons game. 20 18. SolomonDeadline.com formed the corporation Sweetpea Entertainment Corporation 21 (“SEC”) on or about April 6, 1990, to serve as a fully active production company 22 specializing in live-action motion pictures, especially with respect to Dungeons & 23 Dragons. Solomon and John Benitz held the majority shares. During its first year of 24 operations, SEC devoted the majority of its energy to obtaining the universal rights to 25 the Dungeons & Dragons trademark and property. 26 19. Solomon met with TSR, and proposed a plan to bring Dungeons & 27 Dragons to the theaters, which entailed, among other things, Solomon obtaining 28 funding, producing the film and finding a director. Although TSR had solicited and 17 ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS 823542 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 19 of 102 Page ID #:1367
1 received offers to option the Dungeons & Dragons property in the past, no one in the
2 film industry had expressed any serious interest. It was also hugely important to TSR,
3 a company created solely to publish Dungeons & Dragons materials, that whoever
4 ended up licensing the rights to Dungeons & Dragons have a passion for the game,
5 and a serious intention to turn the property into a motion picture. At first, TSR had
6 little interest in Solomon’s proposal. Over the course of two years, however, after
7 attending several meetings and sending TSR proposal after proposal, Solomon
8 impressed TSR with his seriousness and level of commitment and the parties
9 proceeded to make a deal.
10 20. After extensive negotiations in 1991, TSR and SEC entered into an
11 Option Agreement dated May 3, 1991 (the “Option Agreement”). In exchange for a
12 payment to TSR of $15,000, the Option Agreement granted SEC the option to license
13 the copyrights and trademarks of Dungeons & Dragons. SEC exercised the option on
14 or about April 13, 1992. Nearly two years of negotiations culminated on or about
15 January 5, 1993, when SEC and TSR executed a license agreement (the
16 “Agreement”). A true and correct copy of the Agreement is attached hereto as
17 Exhibit A and incorporated by reference.
18 21. As discussed in greater detail below, the Agreement generally granted to
19 Sweetpea, among other things, a sole, exclusive license to make a live-action motion 20 picture or televisionDeadline.com program based on Dungeons & Dragons, and a right of last 21 refusal with respect to one or more sequels or remakes of the live-action motion
22 picture or television program in various media, including motion pictures, television
23 and live stage. Sweetpea’s rights to produce a live-action motion picture or television
24 program was subject to potential reversion if principal photography on the project did
25 not begin by a date certain.
26 22. SEC assigned its rights under the Agreement to Sweetpea B.V.I. Ltd.
27 (“Sweetpea”) in 1993.
28
18 ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS 823542 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 20 of 102 Page ID #:1368
1 C. Sweetpea Acquires an Exclusive, Irrevocable License to Make Sequels, Prequels or Remakes 2 23. From 1993 through 1997, Solomon worked hard to obtain financing for 3 a Dungeons & Dragons motion picture and to develop the material into a motion 4 picture or television series. He conducted extensive market research on the potential 5 audience for a Dungeons & Dragons motion picture. He prepared lengthy 6 informational memoranda and financial projections for prospective investors. He 7 solicited and secured investors. He negotiated various production and distribution 8 deals. He hired screenwriters and developed scripts, treatments and other pre- 9 production materials. Solomon originally invested his own money in the project, but 10 after he realized he would need more funding, he started shopping the project around 11 Hollywood. He negotiated and worked with some of the biggest producers, 12 production companies and studios in Hollywood. He developed special effects for 13 the film. He drummed up interest among actors, including Academy-Award winning 14 actor Jeremy Irons, and rising stars Marlon Wayans and Thora Birch, all of whom 15 would eventually star in the film. He scouted locations. He hired an established 16 producer, acquired foreign investors, put in some more of his own money and 17 acquired a bank loan. Although Solomon originally had intended on only producing 18 the film, he was persuaded to take the helm as director, in part because he knew the 19 Dungeons & Dragons material better than anyone else. Although the budget of the 20 film was not huge,Deadline.com Solomon was able to get various deferments from actors, special 21 effects personnel, and others, and effectively make a medium-budget film on a 22 relatively small budget. 23 24. The process of producing the film, however, was tumultuous. In 1997, 24 TSR was strapped for cash. In or about May 1997, Wizards, a company that 25 published role-playing games, card games and board games, purchased TSR. The 26 relationship between Sweetpea and Wizards was rocky from the start. In early 1997, 27 before Wizards acquired TSR, Sweetpea began developing a Dungeons & Dragons 28 television series. Sweetpea secured TSR’s assurances that it would cooperate in good 19 ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS 823542 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 21 of 102 Page ID #:1369
1 faith to negotiate an amendment to the Agreement that would grant Sweetpea the
2 right to produce a television series. Sweetpea drafted a long-form agreement
3 memorializing the parties’ agreement, and began investing large amounts of time and
4 money in development of the television series. Even though Wizards purchased TSR
5 with full knowledge of the agreement between TSR and Sweetpea, after Wizards
6 acquired TSR it refused to even respond to Sweetpea’s requests to execute the long-
7 form agreement. Wizards’ radio silence was a thinly-veiled attempted to run out the
8 clock on the period during which Sweetpea was required to begin principal
9 photography on a Dungeons & Dragons motion picture or television program or risk
10 potential reversion of certain rights under the Agreement.
11 25. Although Sweetpea had already invested 60,000 hours and $2 million in
12 the television project, it quickly shifted its focus to producing a Dungeons & Dragons
13 live-action theatrical motion picture. Wizards-controlled TSR began to meddle and
14 interfere with the production. For example, TSR complained that the budget was too
15 low, even though it had no contractual right to do so, and it refused to grant
16 Sweetpea’s request for an extension for the principal photography deadline to take
17 advantage of spring flowers in Romania, where the motion picture was being filmed.
18 26. Sweetpea began principal photography on the motion picture before the
19 reversionary deadline expired. It invited TSR to observe the production, but TSR 20 refused to send Deadline.coma representative. Instead, TSR presented Sweetpea with a low-ball 21 offer to try to buy back Sweetpea’s film rights. When Sweetpea rejected the offer,
22 TSR resorted to making the spurious claim that principal photography was not
23 actually principal photography and that Sweetpea’s film rights had reverted back to
24 TSR. When TSR’s attempt to use the threat of litigation to re-negotiate the terms of
25 the Agreement failed to work, TSR filed a lawsuit for declaratory relief seeking
26 control of Sweetpea’s film rights. TSR, Inc. v. Sweetpea Ent. Corp., et al.; Case No.
27 CV–98–1439–JMI (MANx) (C.D. Cal.).
28
20 ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS 823542 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 22 of 102 Page ID #:1370
1 27. TSR’s lawsuit quickly settled, and the parties executed an amendment to
2 the Agreement. More specifically, on or about March 20, 1998, Sweetpea and TSR
3 entered into an “Amendment to the Exclusive Irrevocable License Agreement, dated
4 September 2, 1994” (the “First Amendment”). A true and correct copy of the First
5 Amendment is attached hereto as Exhibit B and incorporated by reference.
6 28. Pursuant to the First Amendment, Sweetpea retained the right to make a
7 motion picture based on the Dungeons & Dragons property, and the right of last
8 refusal with respect to any sequels, prequels or remakes. In addition, Sweetpea
9 received an outright grant to make one or more sequels, prequels or remakes, and
10 exclusive title rights, as discussed in more detail below.
11 29. After subsequent negotiations, Sweetpea and TSR further amended the
12 Agreement pursuant to an “Amendment to Agreement” dated June 9, 1998 (the
13 “Second Amendment”). A true and correct copy of the Second Amendment is
14 attached hereto as Exhibit C and incorporated by reference.
15 30. The Agreement, taken together with the First and Second Amendments,
16 form an integrated agreement between Sweetpea and TSR. (2nd Am. [Ex. C] ¶ 12.)
17 D. Sweetpea’s Irrevocable, Exclusive Rights in the Property
18 31. The Agreement, as amended, granted to Sweetpea a bundle of 2 19 exclusionary rights. Included among those rights are : (a) the exclusive right to make 20 a live-action motionDeadline.com picture (the “Picture”) based on Dungeons & Dragons property 21 (the “Picture Rights”); (b) the exclusive right to make one or more live-action motion
22 picture sequels, prequels or remakes (collectively, “Sequels”); (c) an exclusive right
23 of last refusal with respect to any sequels, prequels or remakes Hasbro develops alone
24 or with any third party (the “Right of Last Refusal”) in the event Sweetpea chose not
25 to exercise its Sequel rights or those rights reverted; (d) the right to exclude others
26
27 2 The following is not intended to be an exhaustive list of all rights Sweetpea has 28 under the Agreement. 21 ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS 823542 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 23 of 102 Page ID #:1371
1 from using the words “Dungeons & Dragons” and/or “Advanced Dungeons &
2 Dragons” as a primary title in any live-action motion picture or television program,
3 and to exclude Hasbro from permitting third parties from using the words “Dungeons
4 & Dragons” and/or “Advanced Dungeons & Dragons” as a secondary title, and the
5 right to good-faith cooperation from Hasbro with respect to any use by Hasbro of the
6 words “Dungeons & Dragons” and/or “Advanced Dungeons & Dragons” as a
7 secondary title (the “Title Rights”); (e) the right to exercise all rights under the
8 Agreement without any interference or competition from Hasbro (the “Non-
9 Interference Rights”); (f) the exclusive right to sue others for using the Dungeons &
10 Dragons copyrighted material in connection with a live-action motion picture, and 3 11 copyrights in the Picture, Picture Creations and the Sequels; and (g) the right to sue
12 others for likelihood of mistake or confusion and dilution of the “Dungeons &
13 Dragons” trademark. The Agreement provides that Sweetpea’s rights under the
14 Agreement “shall be cumulative and [Sweetpea] may exercise or use any and all …
15 rights, licenses, privileges or property simultaneously with or in connection with or
16 separately and apart from the exercise of any other said rights, licenses, privileges
17 and property as [Sweetpea] in its sole discretion may determine.” (Agmt [Ex. A]
18 ¶ 2(l).) Some of these rights bear further discussion.
19 The Picture Rights 20 32. SweetpeaDeadline.com was granted and has the sole, exclusive right to make a live- 21 action motion picture based in whole or in part on Dungeons & Dragons. More
22
23 3 The Agreement defines “Picture Creations” as the characters, themes, or other 24 elements, created, in whole or in part, by Sweetpea, any third party contracted by 25 Sweetpea or any assignee or licensee of Sweetpea for the Picture or any versions of the Picture, including but not limited to the story idea, story outline, script, format, 26 storyboards, visuals, plots, characters and characterizations, settings, names, whether 27 or not created for treatments, scripts, film, tape, promotion, advertising or other development, production, distribution or exploitation of the Picture. (Agmt [Ex. A] 28 ¶¶ 1(e).) 22 ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS 823542 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 24 of 102 Page ID #:1372
1 specifically, the Agreement grants Sweetpea the sole, irrevocable license, in
2 perpetuity, throughout the universe, to make, produce, adapt, sell, lease, rent, reissue,
3 exhibit, perform and generally deal in and with and to copyright a live-action motion
4 picture (the “Picture”) based in whole or in part on any of the following “Property” 4 5 (subject to certain enumerated exceptions) : the trademark “Dungeons and Dragons,”
6 “all titles, character names, visuals, stories, props, places, identifications, and other
7 copyrights and trademarks associated with the trademark,” “all materials bearing the
8 DUNGEONS & DRAGONS trademark unrelated to the Picture,” “all materials
9 created with the DUNGEONS & DRAGONS licenses for the manufacture of
10 merchandise unrelated to the Picture,” “all art and graphics contained within
11 materials bearing the DUNGEONS & DRAGONS trademark unrelated to the Picture,
12 including but not limited to characters, monsters, settings, items, magic spells and
13 effects, costuming and accessories as depicted in games, rules, adventures, books,
14 references, worksheets, and articles appearing in any of TSR’s Magazines,” “all
15 Materials created with the DUNGEONS & DRAGONS licenses for the manufacture
16 of merchandise unrelated to the Picture, including all materials that exist or that are
17 hereinafter created …,” and all “character classes, spells and magical items used as
18 generic terms which are part of both the D&D and AD&D worlds.” (Agmt [Ex. A]
19 ¶¶ 1(c), 2, 2(a); 2d Am. [Ex. C] ¶ 1.) Theoretically, at one time Sweetpea’s Picture 20 Rights could haveDeadline.com reverted back to TSR if Sweetpea failed to timely commence 21
22 4 The enumerated exceptions are: (a) any of Hasbro’s Dungeons & Dragons products 23 released on or after January 1, 1995; (b) any creatures listed in the index of the Dungeons & Dragons Creature Catalog (9438) that are noted as being from other 24 Dungeons & Dragons products but were originally Advanced Dungeons & Dragons 25 products; (c) Devil Fish (mentioned in Advanced Dungeons & Dragons as Ixitichitls); (d) Hulker (mentioned in Advanced Dungeons & Dragons as the Umber Hulk); 26 (e) Undead Dragons (mentioned in Advanced Dungeons & Dragons as Dracoliches); 27 (f) Greyhawk; (g) Forgotten Realms; (h) Dragonlance; (i) Ravenloft; (j) Planescape; (k) Dark Sun; (l) Birthright; (m) Spelljammer; (n) Al Qadim; (o) First Quest; and 28 (p) Maztica. (2d Am. [Ex. C] ¶ 1.) 23 ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS 823542 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 25 of 102 Page ID #:1373
1 principal photography on the Picture, and comply with separate provisions of the
2 Agreement. After Sweetpea exercised its Picture Rights by releasing Dungeons &
3 Dragons in 2000, however, it became impossible for Sweetpea’s Picture Rights to
4 revert back to TSR (or later, to Hasbro). Sweetpea therefore retains the right in
5 perpetuity to exclude others (including Hasbro) from making, producing, adapting,
6 selling, leasing, renting, reissuing, exhibiting, performing and generally dealing in
7 and with and from copyrighting a Picture.
8 The Title Rights
9 33. Hasbro may not use the words “Dungeons & Dragons” or “Advanced
10 Dungeons & Dragons” in the primary title of any live-action motion picture or
11 television program. Furthermore, Hasbro may not permit any third party to use the
12 words “Dungeons & Dragons” or “Advanced Dungeons & Dragons” in any primary
13 or secondary title of a live-action motion picture or television program. Moreover,
14 Hasbro is required “to cooperate in good faith with Sweetpea on the use of the words
15 ‘Dungeons & Dragons’ or ‘Advanced Dungeons & Dragons’ so as to minimize the
16 competitive impact of any of [Hasbro’s] motion pictures or television programs with
17 any of Sweetpea’s motion pictures or television programs.” Although Sweetpea’s
18 Title Rights theoretically could have reverted back to TSR, since Sweetpea released
19 Dungeons & Dragons in 2000, Sweetpea’s Title Rights have not reverted and cannot 20 revert back to Hasbro.Deadline.com (1st Am. [Ex. B] ¶ 14.) 21 The Non-Interference Rights
22 34. The Agreement, as amended, prohibits Hasbro from exercising rights not
23 specifically granted to Sweetpea in a manner that competes or interferes in any way
24 with or derogates from: (a) any rights or licenses granted under the Agreement
25 (including the Sequel Rights); (b) the Picture or other versions of the Property
26 permitted under the Agreement; or (c) the release, marketing, promotion, publicity,
27 exploitation or merchandising and other permitted versions of the Property under the
28
24 ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS 823542 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 26 of 102 Page ID #:1374
1 Agreement. Sweetpea’s Non-Interference Rights do not expire. (Agmt [Ex. A]
2 ¶¶ 4(c), 4(d).)
3 The Copyrights
4 35. As the exclusive licensee under the Agreement, as amended, with
5 respect to the rights granted to Sweetpea, Sweetpea has the right to sue anyone that
6 infringes the copyrights subject to the exclusive license, including the licensor.
7 Furthermore, Sweetpea is the owner of the copyrights in Dungeons & Dragons,
8 Dungeons & Dragons: Wrath of the Dragon God, and Dungeons & Dragons: The
9 Book of Vile Darkness.
10 The Trademark
11 36. As the exclusive licensee under the Agreement, as amended, with
12 respect to the rights granted to Sweetpea, Sweetpea has the right to sue anyone that
13 uses the trademark in a manner that is likely to cause confusion or mistake, or that
14 dilutes the trademark, including the licensor.
15 The Sequel Rights
16 37. Sweetpea has the sole, exclusive right to make one or more live-action
17 motion picture sequels, prequels or remakes (collectively, “Sequels”) based in whole
18 or in part on any combination of the Picture, Property and Picture Creations (the
19 “Sequel Rights”). (1st Am. [Ex. B] ¶¶ 6, 10.) Sweetpea’s Sequel Rights cannot 20 revert back to HasbroDeadline.com unless (a) Sweetpea fails to commence principal photography 21 on a Sequel within the timeframe set forth in the Agreement, as amended; and (b)
22 Hasbro provides Sweetpea with notice of such breach or default and an opportunity
23 to cure. (Agmt [Ex. A] ¶¶ 15, 19; 1st Am. [Ex. B] ¶¶ 6, 10.)
24 The Right of Last Refusal
25 38. If Hasbro “desires to produce a sequel and/or remake itself or receives a
26 bona fide offer with respect to any such sequel and/or remake rights or in any interest
27 therein,” Hasbro must promptly notify Sweetpea “of such offer or the terms pursuant
28 to which [Hasbro] intends to produce such picture itself, the name of the offeror, the
25 ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS 823542 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 27 of 102 Page ID #:1375
1 proposed purchase price, and the financial and other terms of such offer.” Sweetpea
2 then has the right to elect to produce the sequel or remake on the same terms and
3 conditions Hasbro was to produce the picture. In no event will Sweetpea’s Right of
4 Last Refusal revert back to Hasbro; on the contrary, the Right of Last Refusal is
5 revived “in perpetuity for each and every sequel and remake contemplated or desired
6 …” (Agmt [Ex. A] ¶ 2(k)(ii).)
7 D. Sweetpea’s Sequel Rights Never Reverted Back to Hasbro
8 39. In or about January 1999, Hasbro acquired Wizards, and became the
9 successor-in-interest to TSR under the Agreement and its Amendments.
10 40. In accordance with the Agreement, as amended, Sweetpea exercised its
11 Sequel Rights by commencing principal photography on a Sequel within five years of
12 the release of Dungeons & Dragons. That Sequel, the live-action non-theatrical
13 motion picture Dungeons & Dragons: Wrath of the Dragon God, aired on the Syfy
14 Channel in 2005. Within five years of the release of Dungeons & Dragons: Wrath of
15 the Dragon God, Sweetpea began principal photography on a second Sequel,
16 Dungeons & Dragons: The Book of Vile Darkness, a live-action non-theatrical
17 motion picture that aired on the Syfy Channel in 2012.
18 41. With respect to each Sequel, Sweetpea made payments to Hasbro to
19 exercise its Sequel Rights, as required by the Agreement; both times, Hasbro 20 accepted the paymentsDeadline.com without questioning Sweetpea’s Sequel Rights. Moreover, 21 Sweetpea consulted with Hasbro regarding the content of the Sequels pursuant to the
22 Agreement. At no time during those consultations did Hasbro contend that
23 Sweetpea’s Sequel Rights had reverted or would revert automatically to Hasbro.
24 E. Counter-Defendants Breached the Agreement and Infringed on Sweetpea’s Intellectual Property Rights by Producing the Universal 25 Film Project 26 42. On or about November 15, 2012, Hasbro reached an agreement with 27 Universal Pictures (“Universal”), by which Hasbro purported to grant Universal the 28 rights necessary to produce and distribute a theatrical motion picture based on the 26 ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS 823542 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 28 of 102 Page ID #:1376
1 Dungeons & Dragons property (the “Universal Film Project”). Hasbro and Universal
2 have attached Chris Morgan as a producer and/or writer of the Universal Film
3 Project. (Declaration of Michael Eisner in Opposition to Defendants’ Motion for
4 Summary Judgment or, in the Alternative, Partial Summary Judgment [Dkt 32] (Jul.
5 19, 2013) (“Eisner Decl.”) ¶ 5.) As discussed below, the Universal Film Project
6 infringes on Sweetpea’s contractual rights and violates copyright and trademark law.
7 (i) The Universal Film Project Infringes on Sweetpea’s Sequel 8 Rights
9 43. Counter-Defendants have stated that the Universal Film Project is based
10 on the same overall Property contained in a spec script titled Chainmail that was
11 shopped to Hasbro. (Eisner Decl. ¶ 6.) Wizards has submitted a sworn declaration
12 stating that the Chainmail script is based on the Property. (Declaration of James
13 Wyatt in Opposition to Defendants’ Motion for Summary Judgment or, in the
14 Alternative, Partial Summary Judgment [Dkt 32] (Jul. 19, 2013) (“Wyatt Decl.”)
15 ¶¶ 7–17, 22–28; Ex. B thereto.) Moreover, Counter-Defendants admit that the
16 Universal Film Project contains the words “Dungeons & Dragons” in the title.
17 (Eisner Decl. ¶ 6.) Accordingly, by Counter-Defendants’ own admission, the
18 Universal Film Project is based in part on the Property.
19 44. Sweetpea has the sole exclusive right to produce a sequel, prequel or 20 remake based onDeadline.com any combination of the Property, Picture, or Picture Creations. 21 Counter-Defendants therefore are infringing on Sweetpea’s Sequel Rights by
22 developing and producing the Universal Film Project.
23 (ii) The Universal Film Project Infringes on Sweetpea’s Non- Interference Rights 24 45. As discussed above, Sweetpea has the right to exercise its Sequel Rights 25 without Hasbro’s interference, competition or other derogation of Sweetpea’s rights 26 under the Agreement. In a sworn declaration, Counter-Defendants have admitted that 27 the fourth Dungeons & Dragons movie being developed by Sweetpea is in direct 28 competition and would interfere with the Universal Film Project (and, necessarily, 27 ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS 823542 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 29 of 102 Page ID #:1377
1 that the Universal Film Project is in direct competition and would interfere with the
2 third Dungeons & Dragons Sequel being developed by Sweetpea). (See Eisner Decl.
3 ¶ 7 (Hasbro believes that the project being developed by Sweetpea is “likely to cause
4 direct damage to the Universal Film Project.”).) Accordingly, Counter-Defendants
5 are violating Sweetpea’s Non-Interference Rights by developing and producing the
6 Universal Film Project.
7 (iii) The Universal Film Project Infringes on Sweetpea’s Title Rights 8 46. On information and belief, Counter-Defendants are using the words 9 “Dungeons & Dragons” and/or “Advanced Dungeons & Dragons” as a primary or 10 secondary title in a live-action motion picture and/or permitting Universal and/or 11 other third parties to use the words “Dungeons & Dragons” and/or “Advanced 12 Dungeons & Dragons” as a secondary title in a live-action motion picture. Moreover, 13 Counter-Defendants have not cooperated with Sweetpea regarding the competitive 14 impact of its use of the words “Dungeons & Dragons” and/or “Advanced Dungeons 15 & Dragons” on Sweetpea’s motion pictures. Accordingly, Counter-Defendants are 16 violating Sweetpea’s Title Rights by developing and producing the Universal Film 17 Project. 18 (iv) The Universal Film Project Infringes on the Dungeons & 19 Dragons Copyrights 20 47. AsDeadline.com the exclusive licensee of the Dungeons & Dragons copyrighted 21 material in connection with a live-action motion picture, Sweetpea has the right to 22 exclude others, including Counter-Defendants, from unauthorized use of the 23 Dungeons & Dragons copyrighted material in connection with a live-action motion 24 picture. As Counter-Defendants admit, the Universal Film Project uses the Dungeons 25 & Dragons copyrighted material in connection with a Sequel, which Sweetpea has 26 the exclusive right to produce. Accordingly, Counter-Defendants are infringing on 27 Sweetpea’s exclusive right to use the Dungeons & Dragons copyrighted material in 28 connection with a live-action motion picture. 28 ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS 823542 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 30 of 102 Page ID #:1378
1 (v) The Universal Film Project Is Likely to Cause Confusion or Mistake and Dilutes the Dungeons & Dragons Trademark 2 48. As the exclusive licensee of the Dungeons & Dragons trademark, 3 Sweetpea has standing to sue any other parties, including Hasbro, for trademark 4 dilution, false designation and unfair competition. Counter-Defendants’ admitted use 5 of the Dungeons & Dragons trademark is likely to cause dilution and constitutes false 6 designation and unfair competition with respect to Sweetpea’s upcoming Dungeons 7 & Dragons movie. 8 F. Even If Some of Sweetpea’s Rights Had Reverted, Counter- 9 Defendants Have Still Breached the Agreement by Developing and Producing the Universal Film Project 10 49. Counter-Defendants’ development and production of the Universal Film 11 Project is premised on the incorrect assumption that Sweetpea’s Sequel Rights 12 reverted back to Hasbro. But even if it were determined that Sweetpea’s Sequel 13 Rights had reverted back to Hasbro, the Universal Film Project would still violate 14 Sweetpea’s contractual rights and copyright and trademark law. 15 (i) The Universal Film Project Infringes on Sweetpea’s Picture 16 Rights 17 50. Even if Sweetpea’s Sequel Rights had reverted back to Hasbro, Hasbro 18 would only have a right to make a Sequel. Sweetpea has the sole, exclusive right to 19 make a Picture, i.e., a live-action motion picture based in whole or in part on the 20 Property. As discussedDeadline.com above, Sweetpea’s Picture Rights cannot revert. As further 21 discussed above, Counter-Defendants admit that the Universal Film Project is based 22 on the Property. Accordingly, in the alternative, the Universal Film Project violates 23 Sweetpea’s exclusive right to make a Picture. 24 (ii) The Universal Film Project Infringes on Sweetpea’s Non- 25 Interference Rights
26 51. As discussed above, Sweetpea has the right to exercise its Sequel Rights
27 without Hasbro’s or Wizards’ interference, competition or other derogation of
28 Sweetpea’s rights under the Agreement. As further discussed above, Counter-
29 ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS 823542 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 31 of 102 Page ID #:1379
1 Defendants admit that the Universal Film Project is based on the Property. As such,
2 the Universal Film Project will compete, interfere and derogate from Sweetpea’s
3 right to exploit the 2000 film Dungeons & Dragons. Accordingly, Counter-
4 Defendants are violating Sweetpea’s Non-Interference Rights by developing and
5 producing the Universal Film Project.
6 (iii) The Universal Film Project Infringes on Sweetpea’s Right of Last Refusal 7 52. Even if Sweetpea’s Sequel Rights had reverted back to Hasbro, 8 Sweetpea would still have the exclusive Right of Last Refusal, which is not subject to 9 reversion. Accordingly, even if Sweetpea’s Sequel Rights had reverted, before 10 developing and producing a Sequel with Universal, Counter-Defendants would still 11 be obligated to offer Sweetpea the opportunity to produce the Sequel on the same 12 financial terms that it is producing the Universal Film Project. Counter-Defendants 13 have not offered Sweetpea the opportunity to produce the Universal Film Project, and 14 therefore Counter-Defendants have violated Sweetpea’s Right of Last Refusal. 15 (iv) The Universal Film Project Infringes on Sweetpea’s Title 16 Rights 17 53. Regardless of whether Sweetpea’s Sequel Rights have reverted back to 18 Hasbro, Sweetpea’s Title Rights are not subject to reversion. On information and 19 belief, Counter-Defendants are using the words “Dungeons & Dragons” and/or 20 “Advanced DungeonsDeadline.com & Dragons” as a primary title in a live-action motion picture 21 and/or permitting Universal and/or other third parties to use the words “Dungeons & 22 Dragons” and/or “Advanced Dungeons & Dragons” as a secondary title in a live- 23 action motion picture. Moreover, Counter-Defendants have not cooperated with 24 Sweetpea regarding the competitive impact of its use “Dungeons & Dragons” and/or 25 “Advanced Dungeons & Dragons” on Sweetpea’s motion pictures. Accordingly, 26 Counter-Defendants are violating Sweetpea’s Title Rights. 27
28
30 ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS 823542 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 32 of 102 Page ID #:1380
1 (v) The Universal Film Project Infringes on the Dungeons & Dragons Copyrights 2 54. As the exclusive licensee of the Dungeons & Dragons copyrighted 3 material in connection with a live-action motion picture, Sweetpea has the right to 4 exclude others, including Counter-Defendants, from unauthorized use of the 5 Dungeons & Dragons copyrighted material in connection with a live-action motion 6 picture. As Counter-Defendants admit, the Universal Film Project uses the Dungeons 7 & Dragons copyrighted material in connection with a live-action motion picture 8 based in whole or in part on the Property (i.e., a Picture), which Sweetpea has the 9 exclusive right to produce. Accordingly, Counter-Defendants are infringing on 10 Sweetpea’s exclusive right to use the Dungeons & Dragons copyrighted material in 11 connection with a live-action motion picture. 12 (vi) The Universal Film Project Is Likely to Cause Confusion or 13 Mistake and Dilutes the Dungeons & Dragons Trademark 14 55. As the exclusive licensee of the Dungeons & Dragons trademark, 15 Sweetpea has standing to sue any other parties, including Counter-Defendants, for 16 trademark dilution, false designation and unfair competition. Counter-Defendants’ 17 admitted use of the Dungeons & Dragons trademark will cause and is likely to cause 18 dilution, false designation and unfair competition with respect to Sweetpea’s 19 Dungeons & Dragons motion pictures. 20 Deadline.comCOUNT I 21 (Breach of Contract) 22 56. Sweetpea realleges and incorporates the allegations contained in 23 Paragraphs 1 through 55 above, as though fully set forth herein. 24 57. The Agreement is a valid and enforceable contract entered into between 25 Hasbro’s predecessor TSR and Sweetpea’s predecessor SEC. 26 58. As described above, Counter-Defendants have repeatedly breached its 27 obligations under the Agreement. Among other things, Counter-Defendants breached
28 the Agreement when it: 31 ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS 823542 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 33 of 102 Page ID #:1381
1 a. purported to grant to Universal the right to make a Sequel or
2 Picture using, in whole or in part, the Property;
3 b. developed and produced a Sequel using, in whole or in part, the
4 Property;
5 c. in violation of Sweetpea’s Non-Interference Rights, interfered
6 with Sweetpea’s right to make the upcoming Dungeons &
7 Dragons motion picture pursuant to its Sequel Rights by
8 developing and producing the Universal Film Project;
9 d. developed and produced a Picture using, in whole or in part, the
10 Property;
11 e. in violation of Sweetpea’s Non-Interference Rights, interfered
12 with Sweetpea’s right to exploit the 2000 film Dungeons &
13 Dragons pursuant to its Picture Rights by developing and
14 producing the Universal Film Project;
15 f. purported to grant to Universal and other third parties the right to
16 use the words “Dungeons & Dragons” and/or “Advanced
17 Dungeons & Dragons” as a primary or secondary title of a live-
18 action motion picture;
19 g. failed to cooperate in good faith with Sweetpea to minimize the 20 Deadline.comcompetitive impact of the use of the words “Dungeons & 21 Dragons” and/or “Advanced Dungeons & Dragons” on
22 Sweetpea’s motion pictures.
23 h. failed to offer Sweetpea the opportunity to produce the Universal
24 Film Project on the same financial terms that Hasbro and
25 Universal agreed to;
26 59. Sweetpea has performed each and all of the conditions, covenants, and
27 obligations imposed upon it under the terms of the Agreement, as amended, except as
28 excused, waived or prevented by the acts of Counter-Defendants.
32 ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS 823542 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 34 of 102 Page ID #:1382
1 60. As a direct result of the foregoing material breaches by Counter-
2 Defendants, and each of them, Sweetpea has suffered monetary damages, within
3 interest, in an amount to be established at trial, but which exceeds the jurisdictional
4 minimum for this Court.
5 COUNT II 6 (Copyright Infringement in Violation of 17 U.S.C. § 501) 7 61. Sweetpea realleges and incorporates the allegations contained in 8 Paragraphs 1 through 60 above, as though fully set forth herein. 9 62. Hasbro claims registered copyrights in and to the Property. A list of 10 registered copyrights is annexed to the Complaint in this action filed by Counter- 11 Defendants. 12 63. Sweetpea is, and at all relevant times has been, the copyright owner, 13 pursuant to the Agreement, as amended, as the licensee of a universe-wide, sole, 14 exclusive irrevocable licensee with the right (a) to make, produce, adapt, sell, lease, 15 rent, reissue, exhibit, perform and generally deal in and with and to copyright a live- 16 action motion picture (a “Picture”) based in whole or in part on any of the Property; 17 and (b) to make one or more live-action motion picture sequels, prequels or remakes 18 (collectively, “Sequels”) based in whole or in part on any combination of the Picture, 19 Property and Picture Creations. 20 64. Counter-DefendantsDeadline.com have copied, distributed, advertised and/or sold and 21 continues to copy, distribute, advertise and/or sell an unauthorized work or works that 22 are substantially similar to and copy protected elements of the copyrights in the 23 Property. 24 65. By engaging in this conduct, Counter-Defendants have acted in willful 25 disregard of laws protecting the copyrights exclusively licensed to Sweetpea. 26 Sweetpea has sustained and will continue to sustain substantial damage to the value 27 of its creative works and the creative works exclusively licensed to Sweetpea. 28
33 ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS 823542 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 35 of 102 Page ID #:1383
1 66. Sweetpea has suffered and continues to suffer direct and actual damages
2 as a result of Counter-Defendants’ infringing conduct. Sweetpea is entitled to
3 recovery statutory damages or its actual damages as well as Counter-Defendants’
4 profits generated from the promotion, distribution, sale and offer for sale of Counter-
5 Defendants’ infringing products, pursuant to 17 U.S.C. § 504, as well as enhanced
6 damages for willful infringement.
7 67. Sweetpea has no adequate remedy at law and has suffered and continues
8 to suffer irreparable harm and damage, including but not limited to lost sales and
9 business opportunities and damage to Sweetpea’s reputation and brand as a result of
10 the above-described acts. Sweetpea is informed and belies, and upon that basis
11 alleges that, unless enjoined by the Court, Counter-Defendants’ infringing activity
12 will continue, with attendant and irreparable harm to Sweetpea. Accordingly,
13 Sweetpea seeks preliminary and permanent injunctive relief pursuant to 17 U.S.C. §
14 502.
15 COUNT III
16 (False Designation of Origin and Unfair Competition)
17 68. Sweetpea realleges and incorporates the allegations contained in
18 Paragraphs 1 through 67 above, as though fully set forth herein.
19 69. The trademark “Dungeons & Dragons” is used in commerce, is used in 20 commerce, is non-functional,Deadline.com is distinctive, and has acquired substantial secondary 21 meaning in the marketplace.
22 70. Sweetpea has an exclusive license to use the “Dungeons & Dragons”
23 trademark in a Picture or Sequel.
24 71. Hasbro’s unauthorized use of the registered trademark “Dungeons &
25 Dragons” constitutes false designation of origin and unfair competition in violation of
26 15 U.S.C. § 1125(a)(1)(A).
27
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34 ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS 823542 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 36 of 102 Page ID #:1384
1 72. Counter-Defendants had actual knowledge that Sweetpea has an
2 exclusive license to use the “Dungeons & Dragons” trademark in a Picture or Sequel
3 prior to commencing the conduct complained of herein.
4 73. Sweetpea is informed and believes, and on that basis alleges, that
5 Counter-Defendants intend to compete unfairly against Sweetpea, to trade upon
6 Sweetpea’s reputation and goodwill by causing confusion and mistake among
7 customers and the public, and to deceive the public into believing that the Universal
8 Film Project is associated with, sponsored by, or approved by Sweetpea, when it is
9 not.
10 74. As a result of the acts complained of herein, Counter-Defendants have
11 created a likelihood of injury to Sweetpea and to the reputation and goodwill
12 surrounding the “Dungeons and Dragons” trademark and a strong likelihood of
13 consumer confusion as to the source of origin of, or the relationship between
14 Sweetpea and the Universal Film Project, and have otherwise competed unfairly with
15 Sweetpea.
16 75. Sweetpea has no adequate remedy at law and is entitled to injunctive
17 relief.
18 76. As a result of the foregoing, Sweetpea has been damage in an amount to
19 be established at trial. 20 Deadline.comCOUNT IV 21 (Trademark Dilution)
22 77. Sweetpea realleges and incorporates the allegations contained in
23 Paragraphs 1 through 76 above, as though fully set forth herein.
24 78. The trademark “Dungeons & Dragons” is famous and distinctive within
25 the meaning of Section 43(c) of the Lanham Federal Trademark Act, 15 U.S.C. §
26 1125(c).
27 79. Counter-Defendants’ use and threatened use of the trademark
28 “Dungeons & Dragons” in connection with the advertisement and offering for sale,
35 ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS 823542 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 37 of 102 Page ID #:1385
1 and/or sale of the Universal Film Project is likely to dilute and impair the famous and
2 distinctive quality of the “Dungeons & Dragons” trademark in violation of 15 U.S.C.
3 § 1125(c).
4 80. Unless restrained and enjoined by this Court, Counter-Defendants will,
5 upon information and belief, continue to violate Sweetpea’s rights under 15 U.S.C. §
6 1125(c) of the Lanham Act and irreparably impair and damage the famous and
7 distinctive quality of the “Dungeons & Dragons” trademark.
8 81. Counter-Defendants’ violation of 15 U.S.C. § 1125(c) by use of the
9 “Dungeons & Dragons” trademark has damaged and will continue to damage
10 Sweetpea and the reputation and goodwill surrounding the “Dungeons and Dragons”
11 trademark.
12 82. Sweetpea has no adequate remedy at law and is entitled to injunctive
13 relief.
14 83. As a result of the foregoing, Sweetpea has been damaged in an amount
15 to be proven at trial.
16 COUNT V
17 (Declaratory Relief)
18 84. Sweetpea realleges and incorporates the allegations contained in
19 Paragraphs 1 through 83 above, as though fully set forth herein. 20 85. AsDeadline.com described in detail above, an actual controversy has arisen and now 21 exists between Sweetpea on the one hand and Counter-Defendants on the other
22 concerning their respective rights to the Property. Sweetpea has the following
23 exclusive rights, among others, pursuant to the Agreement, as amended: the Picture
24 Rights, the Sequel Rights, the Right of Last Refusal and the Title Rights. Counter-
25 Defendants have asserted in correspondence to Sweetpea and in this lawsuit that
26 Sweetpea’s Sequel Rights have reverted back to Hasbro. Counter-Defendants have
27 further stated, in sworn declarations in this Court, that Hasbro has purported to grant
28 the Picture Rights, Sequel Rights and Title Rights to Universal; that Hasbro and
36 ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS 823542 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 38 of 102 Page ID #:1386
1 Universal are developing a motion picture based on the Property (the “Universal Film
2 Project”); that the Universal Film Project contains the words “Dungeons & Dragons”
3 in the title; and that the Universal Film Project will directly compete with the
4 Dungeons & Dragons Sequel Sweetpea is developing.
5 86. Sweetpea desires a judicial determination of the parties’ rights and
6 duties regarding the above issues; a declaration that Sweetpea has the sole, exclusive
7 right to make a live-action motion picture using the Property; a declaration that
8 Sweetpea has the sole, exclusive right to make a Sequel; a declaration that Sweetpea
9 has the Right of Last Refusal with respect to the Universal Film Project—i.e., the
10 right to make a Dungeons & Dragons sequel on the same financial terms that Hasbro
11 and/or Wizards have agreed to with Universal; a declaration that Counter-Defendants
12 are prohibited from using the words “Dungeons & Dragons” and/or “Advanced
13 Dungeons & Dragons” as a primary or secondary title in a live-action motion picture;
14 a declaration that Counter-Defendants are prohibited from permitting any third party
15 to use the words “Advanced Dungeons & Dragons” as a secondary title in a live-
16 action motion picture; and a declaration that Counter-Defendants are required to
17 cooperate with Sweetpea so as to minimize the competitive impact of the Universal
18 Film Project on any of Sweetpea’s motion pictures.
19 87. A judicial declaration is necessary and appropriate at this time so that 20 Sweetpea may ascertainDeadline.com its rights and duties as against Counter-Defendants. 21 PRAYER FOR RELIEF
22 WHEREFORE, Defendant and Counter-Claimant Sweetpea B.V.I. Ltd.
23 (“Sweetpea”) respectfully requests:
24 1. Counter-Defendants Hasbro, Inc. (“Hasbro”) and Wizards of the Coast,
25 LLC (“Wizards”) (collectively, “Counter-Defendants”) and all of their respective
26 agents, officers, employees, representatives, successors, assigns, attorneys, and all
27 other persons acting for, with, by, through, or under authority from Hasbro or
28 Wizards, or in concert or participation with Hasbro or Wizards, and each of them, be
37 ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS 823542 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 39 of 102 Page ID #:1387
1 enjoined preliminarily and permanently, from directly or indirectly infringing the
2 copyrights and trademark assigned to Sweetpea pursuant to the Agreement, as
3 amended, in any manner including but not limited to, by developing, producing,
4 marketing, promoting, selling or otherwise exploiting the Universal Film Project or
5 any other theatrical or non-theatrical motion picture based on the Property;
6 2. That the Court find Counter-Defendants’ acts of copyright violations to
7 be knowing and willful, and an exceptional case within the meaning of 17 U.S.C. §
8 504;
9 3. That, as to all claims, Sweetpea be awarded damages, including its actual
10 damages (or statutory damages for certain acts of copyright infringement, if Sweetpea
11 so elects), Counter-Defendants’ profits, treble and punitive damages, as well as
12 attorney fees and costs, in an amount to be ascertained pursuant to applicable laws;
13 4. Declaratory judgment that: (1) Sweetpea has the sole, exclusive right to
14 make a Sequel; (2) Sweetpea has the sole, exclusive right to make a live-action
15 motion picture using the Property; (3) Sweetpea has the Right of Last Refusal with
16 respect to the Universal Film Project—i.e., the right to make a Dungeons & Dragons
17 sequel on the same financial terms that Hasbro and/or Wizards have agreed to with
18 Universal Pictures; (4) Counter-Defendants are prohibited from using the words
19 “Dungeons & Dragons” or “Advanced Dungeons & Dragons” as a primary title in a 20 live-action motionDeadline.com picture; (5) Counter-Defendants are prohibited from permitting 21 any third party to use the words “Dungeons & Dragons” or “Advanced Dungeons &
22 Dragons” as a secondary title in a live-action motion picture; and (6) Counter-
23 Defendants are required to cooperate in good faith with Sweetpea on the use of the
24 words “Dungeons & Dragons” and/or “Advanced Dungeons & Dragons” so as to
25 minimize the competitive impact of the Universal Film Project on any of Sweetpea’s
26 motion pictures.
27 5. Sweetpea have such other and further relief as the Court may deem just.
28
38 ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS 823542 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 40 of 102 Page ID #:1388
1 JURY DEMAND
2 Counter-Claimant Sweetpea B.V.I. Ltd. respectfully demands trial by jury
3 pursuant to Fed. R. Civ. P. 38(b) for all issues so triable.
4
5 DATED: September 3, 2013 Respectfully submitted,
6 GLASER WEIL FINK JACOBS HOWARD AVCHEN & SHAPIRO LLP 7 8 By: /s/G. Jill Basinger 9 PATRICIA L. GLASER G. JILL BASINGER 10 DAVID SERGENIAN Attorneys for Defendants 11 Sweetpea Entertainment, Inc. and Sweetpea B.V.I. Ltd. and 12 Counterclaimant Sweetpea B.V.I. Ltd.
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39 ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS 823542 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 41 of 102 Page ID #:1389
Deadline.com
EXHIBIT A Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 42 of 102 Page ID #:1390
Exh.ibi t 11 "3 11 ~.r.c:..US!"l'/2 !R.~E'V00..3T.;:o LIC~SE AG~~N'!.'
-. · TEIS .~GRE~T made and entered into t.h..is day of , l99_· be~n'een TS:R, Inc., 20·1 Sheridan Springs Road, Lake G..:aneva, Wisconsin 5314 7, a WisconsL"l corporation (hereinafter :::efer=ed to as . lrLicensorn) and Sweetpea Ente~ainment Corpora~ion, an on~ario corpo~ation, JZO Richmond street West, Toron~o, ontario ~~V lX2, Canada (hereinafter refer=ed to as "Licensee").
WTTNE S SE'l':r:
WHER£A.S 1 Licensor is the sole owner t!lroughot.::.~ t.."le universa of all rights in and to the ga.!lles entitled in •,o~hole or in part: 11 DONG:C:ONS & DR.~.GON"S 11 and its "Worlds, any and all associated. trademarks toge"t.."ler with all plots, themes, titles, su.btitle;s,
charac-tars 1 t:-ademar;-c.s and copyrights t..I-J.ereof; and
~"1:.~'\S 1 Licensee, re.lyinc;: upon Licensor .. s re"Oresentations and wa==anties hereu....&de::-, des.:!..::-es to acquire f=cn ~ Licensor an exclusive, i.:::=evoc:able, Wlive.::-se-wiee license o.t cer---ain motion pictu=a, television, videog~~, live stage ~~c allied and . . . . , . . . d :..~ p . ( h . ft ~"lc~aerrt:a_ =..lgn.-cs :.n an · to -.::.u.e _ ropercy as -ere.1na .... e= ce.fL?Jed) ;
NOW, T~~FOR2, ~~e parties hereto agree as f=llows:
l. Def~~i~icns.:
As use~ i~ t~is Agree~ent, ~~e te~s se~ =o~~ i~ ~~is ~a.:::ag::::.-aph shall have t~e following ·!:l.eanings:
(a) '!'he Universe.
11 11 (b) Te:!:::lDeadline.com: In per-pet:u.ity, unless ea.:-2.ier ':e~ination pursuan~ to Pa::-ag:-a?h 15 hereof.
(c) "P:-o~e::-::y": The t=ademar.lc 11 Dungeons anci Dragons", and titles, c~a::-ac~er names, c~a=ac~ers, visuals, s~ories, pro9s, places, iden~:fica~~cns, and o~~e= copyrigh~s a~d ~=ademarks associat:ed •..;it~ -:.J.e t:::-ademark, all ma-c.erials beari..'1.g t!le DUNGEONS & DR~GCNS t:::-ademark unrelat:ed to the Pic~~e, including, ~u~ not li.!ni~e.C ~~, games, rules, adventures, ~SR's magazines, all materials c::-eat:ed •..;i -.:h t..~e Dt.J""NG::C:ONS & DR.3..GCNS licenses for t:.1.e . manu.fac--:'.l::-e cf merchandise unrelated t:o ·':he Pic-ture, including al.!. :tat:e::i.als that exi.st or· are herei:lafter c=-eated solely by Licer>.so:: bl.l't. no-c: in c::mnec~ion wit..'1 t.'"le Pic::u.:::e, all a::\: and c;-::-apn.:!..cs contained w-ithin mat:er-ials bearing the Du~GcONS & DP~GONS ~=-=demark un=elated to the ?ic~~=e, including
bu;: net 1 i::ai ~... en_ ...... w c.:....a_~ac~- ""--... s, ....~ons~ers, · se~~~~gs,· · _; t_=>T;'Is-- 1 magic spells anc et':ec~s, ccs~".. r!!ling and accessories as depic-ted in
Counterclaim, Exhibit A, p. 040 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 43 of 102 Page ID I #:1391 I
games, rules, adventures, books, references, worksheets, and articles appearing in any ot -TSR' s Ma{ja2;ines and all Materials created with the DUNGEONS & DRAGONS licenses for the manufacture of merchandise unrelated to the Pic~ure, including all materials that exist or that are hereinafter created, all of the above being in that original form as originally created by Licensor, unchanged by any elements added by, on behalf of, or created by, Licensee for the Picture or Picture Merchandising. Specifically excluded from.the term Property is ADVANC~D DUNGEONS AND DRAGONS and its· worlds and associated trademarks other than those elements which are also contained in or associated with the Property.
(d) ''Picture": One (1) theatrical or television motion picture based in whole or in part on the Property and including all rights granted in Paragraph 2 hereafter, but specifi-cally excluding the right to an all-animated Picture (but including the right to use ·animation for special and optical effects of characters and other elements in the Picture, provided such use shall be supportive and not dominant). ·
(e) 11 Picture Creations": The characters, story, plotlines, themes, or other elements created, in whole or in part, by Licensee and/or any third party contracted by Licensee or any assignee or licensee of Licensee . for the Picture or versions ·of the Picture including, but not limited to, the story idea, story outline, script, format, storyboards, stills or
excerpts from the Picture 1 usage of the Picture's ·trademarked
logo (s) , visuals, plots, characters and characterizations 1 the using of the likenesses of actors. portraying the characters, settings, names, titles and logos, as depicted by names linked to unique graphic representations, and copyrights thereto that were created in whole or in part by Licensee and/or a third party contracted by Licensee, whether o~ not modifying or based on the Property and/or Licensor owned characters and elements in whole or in part, and whether or not created for treatments, scripts, film, tape, promotion, advertising or other development, production, distributionDeadline.com or exploitation of the Picture. Excluded from the term "Picture Creations" are all settings,
characters, creatures 1 i terns, graphics, game terms 1 trademarks and copyrights originally created and owned by Licensor as they appear in that original form as originally created by Licensor, such as, but not limited to, all settings, characters, creatures, items, graphics, game terms, trademarks and copyrights originally created and owned by Licensor that have not been changed in some manner, whether visual or otherwise,- which distinguishes them as "Picture Creations" of the Picture.
(f) "Picture Logo" shall mean any pictorial, visual or
graphic logo created by Licensee 1 its producer ( s) , distributor(s) 1 or a third party contracted by Licensee, which serves as identification of the Picture for the purpose of exploiting the Picture or any merchandise resulting from the
-2- 2 3 0/LICENSE-02 Counterclaim, Exhibit A, p. 041 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 44 of 102 Page ID #:1392
Picture. "Picture Logo 11 shall also mean the title of the Picture which- may il'lclude t-he trademark name -''Dungeons & DraEJons 11 (i.e. "Dungeons & Dragons: The Movie") pursuant to Licensee's rights to use the trademark as the title of. the Picture or in connection with the exploitation of the Picture as set forth in Paragraphs (2~ (a) -(j) herein. Neither Licensor or Licensee shall have the right to use any Picture Logo created hereunder which incorporates Licensor's trademark for any other purposes except in connection with the Picture and Picture Merchandising pursuant to this agreement, without the written consent of the other. Licensee's use of Licensor's trademark shall in no way entitle Licensee to any ownership rights in or to Licensor's trademark, and shall in no way limit Licensor's use of its trademark, except as specifically set forth in the preceding sentence.
11 (g) "Property Merchandising : Shall mean. all merchandising, publishing or creation of products, or other items, based in whole or in part, on the Property as such term is defined above, which is part of the Licensor's normal business of licensing, merchandising and commercial tie-up rights to ·the -Property, including without limitation the trademark DUNGEONS & DRAGONS, its titles, character names, characters, visuals, stories 1 props, places 1 identifications, plots, ·themes 1 stories and other copyrights and trademarks associated with the trademark, and all materials bearing the, DUNGEONS & DRAGONS trademark as originally created and owned by Licensor as they appear in their original form, unchanged by any. elements added by, on behalf of, or ·created by, Licensee for any Picture Creation, the Picture or Picture Merchandising.
11 Licensee Shared. Property Merchandising 11 shall mean specifically the Dungeons & Dragons game (Product 1070).
"Licensed Property . Merchandising 11 shall mean all Property Merchandising which is licensed to third parties by Licensor an.d not actually manufactured by Licensor. 11 PropertyDeadline.com Merchandising Term" shall mean the period in which Licensee shall be entitled to share in Gross Receipts derived from Licensee Shared Property Merchandising, and New Licensed Property Merchandising, which period -shall commence six (6) months prior to the actual initial theatrical release of the Picture in the United States of America, and end twe"nty-four (24) months after the date of the initial theatrical release of the Picture in the United States. In the event Licensee shall produce and distribute any sequel or remake, Licensee shall be entitled to share in Gross Receipts derived from Licensee Shared Property Merchandising and New Licensed Properi;:y Merchandising for each sequel or remake for a period commencing six (6) months prior to the actual initial theatrical release of each sequel or remake in the United States of America and ending twenty ~our (24) months after the date of the initial theatrical release of such sequel or remake in the United States of America.
-3- 230/LICENSE-02 Counterclaim, Exhibit A, p. 042 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 45 of 102 Page ID #:1393
(h) rrNew Licensed Property Merchandising 11 shall mean all Licensed Property Merchandising which is not currently part of Licensor's nonnal business of licensing, merchandising and commercial tie-up rights in the Property as of the beginning of the Property. Merchandising Term (as defined hereinabove and in paragraph 3 below).
( i) "Picture Merchandising 11 shall mean any and all merchandising, publishing and creation of products or other items based, in whole or in part upon and/or arising out of or in connection with the Picture, including but not limited to, Picture Creations, the Picture, the story, plotlines, titles, graphics, visuals, visual effects, the billing block, script logos 1 themes created by, or on behalf of Licensee for the Picture or versions of the Picture, and any sequel, rema·ke or spinoff or other version permitted to Licensee pursuant to this Agreement and whether based in whole or in part on the Property. The term Picture Merchandising shall include only those elements classified as "Picture creations", or that appear in the Picture, but excludes any product or merchandising, whether now existing or hereinafter created solely by Licensor, that is classified as Property Merchandising, and does not have any elements that appear in the Picture and is not in any other way a Picture Creation, or that has not been changed in some manner, whether visual or otherwise, which distinguishes it as a Picture Creation.
(j) "Videograms" shall mean any cas.sette, disc, tape, or other device now known or hereafter devised which is or are designed primarily for . horne use or other private viewing, by which visual live-action type images with or without sound can be perceived, reproduced or otherwise communicated either directly or with the aid of an electronic, mechanical or other apparatus such as a television receiver or comparable device for displaying the Picture in whole or in part. Videograms shall not include interactive computer and video games, magnetic ·game diskettes, personal comp~terDeadline.com games and virtual reality games.
2. Grant of Riahts.
Licensor hereby grants, conveys and assigns to Licensee, its successors, licensees. and assigns exclusively, in perpetuity
(but subject to Licensor's rights in Paragraphs 5 1 15 and 19(c)), the sole, irrevocable license throughout the universe (herein the "Exclusive License 11 ) to produce, distribute, exhibit and exploit in any and all manner 1 medium, media and methods now known or hereafter devised, one (1) theatrical or television motion p~cture based in whole or in part on the Property including v~deograrns thereof and certain allied and incidental rights therein as specifically set forth herein (collectively the "Picture") and, including live stage rights to the Property (as permitted by and subject to Paragraph 2 (b) below) and an
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irrevocable universe-wide license to ·use the trademark~, - eepyrifjh"ts and other component parts --- of the Property ~n connection with the Picture and, subject to Paragraph 2(j) hereof, remakes of and sequels to any. motion , picture or television or videogram or live stage production or other auihorized vers~on, adaptations or uses produced hereunder. Included among the rights granted to Licensee hereunder (without in any way limiting the grant of rights hereinabove made) are the following sole and exclusive, perpetual rights throughout the universe; (a) To make, produce, adapt, sell, lease, rent, reissue, exhibit, perform and generally deal in and with and to copyright one live-.act;ion motion picture or television production, and videogram versions thereof, and live stage productions authorized by Paragraph 2(b) hereafter and all ·other versions, adaptations or uses granted pursuant to this Agreement, based in whole or in part on the Property, of every size, gauge, color or type, whei;her produced for exhibition on televisi.on, theatrically, non-theatrically, or by videograms (including musical motion pictures, television and live stage productions) and, subject to Paragraph 2(k) hereof, remakes of and sequels to any motion picture or television or videogram or live stage production produced hereunder. Licensee· shall, after consultation with Licensor and subject to Licensor's approval pursuant to the time limitations in Paragraph 7 (a) (i), which approval will not be unreasonably withheld, engage a writer -or writers to create a treatment and/or screenplay based on the Property. ·
(b) Notwithstanding anything to the contrary contained in this Agreement with respect to live stage rights, it is agreed that neither Licensor nor Licensee shall produce a live stage production based in whole or in part on the Property without the other party and in any event not until at least five (5) ·years after the commercial United States release of the Picture by Licensee hereunder, after which time Licensor will be free and cJ:ear to assignDeadline.com such live stage rights for any live stage production based, in whole or in part, on Licensor's property. If either Licensor or Licensee des ires to produce or to perm.i t others to produc~ a live stage production based in whole or in part on the Property, it shall notify the other in writing of such desire and Licensor and Licensee shall promptly within five (5) days of such written notice, negotiate in good faith to reach an agreement with respect to such live stage production and the compensation to Licensor and Licensee for such live stage production.
(c) The rights herein granted to Licensee do not include the right to produce an all-animated motion picture or television production, but do include the rights to use special and optical effects without limitation, and the right to use special and optical effects for ~haracters in the Picture
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provided however that any such animation shall be supportive and not dominant in the Picture.
(d) Except in connection with the proauction and exploitation of the Picture or any version thereof (including but not limited to a theatrical or television motion picture' videogram and any live stage production authorized by Paragraph 2 (b) above, and including the script of each such Picture and all of the characters, themes and plots thereof) , Licensor shall not have the right to use any Picture Creations without the express prior written consent of Licensee in each instance. Neither party shall have the right to exploit or otherwise produce any sequels or remakes of any Pictures produced hereunder without negotiation in good faith by bath parties as set forth in Paragraph 2(k) hereinafter.
(e) To record, broadcast, transmit, exhibit, manufacture, perform, sell, lease or reproduce the Picture or any version thereof (including, but not limited to, a theatrical or television motion picture, videograms ,nd any live stage production authorized by .Paragraph 2 (b) above, and including the script of such Picture and all of the characters, themes and plots thereof), in motion picture theatres, by means of television or any process analogous thereto and all other audio visual media whether now known or hereafter devised (including but not limited to commercially sponsored, sustaining and subscription television, pay-TV, . cable, pay-cable, MDS, LPTV, HDTV, satellite broadcast, video cassettes, videotapes,. video discs, compact discs, picture discs, and all other audio visual devices but excluding all computer games, video games and other devices excluded from Videograms) , through the use of motion pictures and television productions produced on film or by means of magnetic tape, ·disc or wire or any other device. now known or hereafter devised and including the exclusive ~ight to produce videograms of the Picture presented by or on film, tape or by any other means now known or hereafter devised.
·(f) Without in any way limiting or derogating from any of the other rightsDeadline.com herein licensed or. granted Licensee, to broadcast and/or transmit by means of television or radio or any process analogous thereto whether now known or hereafter devised, the Picture and excerpts from the ·Picture, including any television or theatrical motion picture, videogram, and live stage production authorized by Paragraph 2 (b) above, or other version or versions thereof permitted by this Agreement, and announcements concerning such motion picture or other ve~sion or versions, for the purpose of advertising, publicizing, promoting and/or exploiting the Picture or other version or versions or any other rights granted hereunder, which broadcasts or transmissions may be accomplished through or by any method, means and media now known or hereafter devised including, without limitation, the use of television, theatrical ,and/or videogram motion pictures (including trailers) reproduced on film or tape or by means of
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film, magnetic tape or wire or through the use of other ~eo-rdinqs or transcriptions.
(g) Without in any way li~iting or derogating from any of the rights ·in and to the Property expressly reserved by Licensor, to advertise, promote, publicize and exploit the Picture. In connection therewith and specifically for the purposes of advertising, promoting, publicizing and exploiting a motion picture or television production based in whole or in part on the Property, and videograms and live stage. v~rsions thereo;f authorized by Paragraph 2 (b) above, to publish, print and sell and copyright or cause to be· published, printed and sold and copyrighted in the name of Licensee or its nominee or designee or writers engaged by ·Licensee in· any and all languages. throughout the universe, in any form or media: synopses not. to exceed 2, 500 words, adapted from the Property, Picture or from any videogram, television or theatrical motion picture, or live stage versions of the Property authorized by this Agreement.
(h) To translate into all languages, to freely adapt,
change 1 transpose, revise, rearrange, vary, modify 1 add to and subtract from the Property or any part thereof, and the title, themes, plots, sequences, incidents, characters and characterizations thereof, to make interpolations in and substitutions for any part of parts thereof, to use any part or parts of the Property or of the themes thereof or any incidents, characters or characterizations therein contained in conjunction with any other work or works, and to separately or cumulatively do any•and all of the foregoing, to the extent as the Licensee, in its sole discretion, may deem expedient in the exercise of any and all rights, licenses or privileges herein conveyed and in the making of any television or theatrical motion picture, videogram versions, live stage version authorized by Paragraph· 2{b) above, or any other versions, adaptationq and uses permitted to Licensee pursUant to this Agre~ment, to interpolate in any such versions or adaptations musical compositions, songs, lyrics and music of all kinds, to set to music any verse, lyric, prose or part or parts of the PropertyDeadline.com and any characters thereof, and to use, print, reprint, publish, copy or vend such songs, the music andjor lyrics (sound on film, magnetic tape, wire, record or other reproducing device, whether similar or dissimilar to the foregoing, and whether now or hereafter known), to use the title of the Property and/or the names of the characters as the title of any television or theatrical motion picture, videogram and/or live stage production authorized by Paragraph 2(b) of this Agreement or in connection with any other versions, adaptations and uses permitted to Licensee pursuant to this Agreement, or as the title of any musical composition contained in any such motion picture or other version of the Property authorized by this
Agreement, and to perform for profit (or non-profit) 1 arrange, ·adapt, and exploit same throughout the universe and to secure copyright therein throughout the universe in Licensee's name or otherwise, and to use, superimpose and/or photograph excerpts
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, . from or translations of the Proper~y for the title, sub-titles., ~--- text___ and- dialogue Of any versions. License~ hereby waives the benefits of any provisions of law or right known as 11 droit moral", or any similar laws, and sl:lall not institute, support, maintain, or authorize any action or lawsuit on the ground that ani television, theatrical or videogram motion pictures or live stage productions authorized by Paragraph 2 (b) above, or in connection with any other versions, adaptations and uses permitted to Licensee pursuant to this Agreement, or sound records or music publishing or other publishing or written audio or audio/visual materials produced therefrom or from other versions or adaptations of the Property authorized by this Agreement in any way constitutes any infringement or violation of any law or right such as "droit moral 11 or a defamation or mutilation of any part thereof, or -that Licensee's use constitutes or contains unauthorized variations, alterations, modifications, changes or translations. (i) To make, copy, vend, license, and otherwise use in any manner that the Licensee may desire, disc or other sound records, sight-and-sound recordings, video cassettes, video discs, sound on film, and any and all other mechanical, electrical and. any other contrivances or devices of any nature whatsoever, for the recordation and re-recordation of the sound, dialogue, musical and any and all other audible or visual portions of any television or theatrical motion picture versions, videograms, live stage versions authorized by Paragraph 2 (b) above, or any parts of any of the foregoing, and for the reproduction, transmission, projection andjor performance of any and all such sounds separately or as part of or incidental to or in synchronization with the' exhibition or performance thereof, whether such contrivances or devices are now known or hereafter known, invented or devised.
(j) .To secure copyright and renewals and extensions thereof in Licensee's name or otherwise (or equivalent protection) in all part~ of the universe for such television or theatrical motionDeadline.com picture versions, videograms, and live stage versions (as authorized by Paragraph 2 (b) above) , or in connection with any other versions, adaptations and uses permitted to Licensee, pursuant to this Agreement, of the Property herein elsewhere granted to Licensee and under any now existing or hereafter created laws, regulations or rules, in the name ot Licensee or its successors, nominees or assignees.
(k) Licensor hereby grants to Licensee, its successors and assigns, the. right of First Negotiation/Last Refusal with respect to all sequels and remakes of any television or theatrical motion picture produced hereunder and any live stage, version . authorized by Paragraph 2 (b) above, pursuant to the following:
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( i) The term 11 Right of First Negotiation 11 means ~l"l.crt (AJ if Licensee notifies Ll:censor of its desire to produce a remake qr sequel to any motion picture 1 television, live stage (as stated in Paragraph i(b)) o~ videogram version of the Property or (B) Licensor desires to ·produce a sequel and/or remake itself or receives notice of interest from a third party in respect of a sequel or remake then, in either event Licensor shall {unless Licensee elects not to utilize its Rights of First Negotiation) immediately thereafter negotiate in good faith with Licensee with respect to such sequel andjor remak_e rights and if, after the expiration of sixty (60) days the parties have negotiated in good faith but no agreement has been reached, then Licensor shall be free to produce the sequel or remake itself on the terms it proposed to Licensee or if it desires to negotiate with a third party then to negotiate elsewhere with respect to such sequel or remake, subject to Licensee's right of. Last Refusal and subject to Paragraph 2(d) above. Licensee's Right of First Negotiation shall again arise for each such sequel or remake contemplated on different terms.
( ii) The term· 11 Right of Last Refusal 11 means that if Licensee does not elect to produce a sequel or remake itself per Paragraph· 2 (k) (i) above, or if Licensee · and Licensor fail to reach an agreement pursuant to Licensee's Right of First Negotiation or Licensee does not elect to utilize its Right of First Negotiation, and Licensor desires to produce a sequel and/or remake itself or receives a bona fide -offer with respect to any such sequel andjor remake rights or in any interest therein 1 Licensor shall promptly notify Licensee by prepaid registered mail or telegram of such offer or the terms pursuant to which Licensor intends to produce such picture itself, the name of the offeror, the proposed purchase price, and the financial an<;l other terms of such offer. During the period of thirty (3 0) days ("Licensee' s· Time Period 11 ) after Licensee's receipt of said notice, Licensee.shall have the exclusive option to purchase the particular sequel andjor remake right or the interest therein referred to in such offer, at the same purchase price and financialDeadline.com terms as are set forth in such notice or if Licensor has elected to produce such sequel or remake itself then Licensee shall have the right to elect to produce such sequel and/or remake in lieu of Licensor on the same terms and conditions pursuant to which Licensor was to produce such picture. If Licensee elects to exercise the said option, Licensee shall notify Licensor of the exercise thereof by registered mail or telegram ·within Licensee's Time Period, otherwise Licensor shall be free to accept said bona fide offer made by another, subject to Paragraph 2(d) above; provided that, if any such proposed transaction is not consummated within thirty ( 3 0) calendar days following the expiration of Licensee's Time Period, or Licensor does not commence production of a sequel or remake, itself on the terms it proposed to Licensee (as applicable) within six (6) months from the date of its election to do so or such date as was proposed l:ly any third party, if
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later, Licensee's said option shall revive and shall apply to ea.ch --arui ev-ery !ur'Ehi:r o-f£er-cr offers at any time received- by Licensor and relating to the sequel and/or remake rights or any interest therein and shall revive for each and every sequel and remake which Licensor desires to produce itself on terms other than those proposed to Licensee by Licensor; provided, further, that Licensee's · said option shall continue in full force and effect in perpetuity for each and every sequel and remake contemplated or desired, and shall inure to the benefit of Licensee's successors and assigns and shall bind Licensor and Licensor's successors and assigns. (1) All rights, licenses, privileges and property herein granted Licensee shall be cumulative and Licensee may exercise or use any and all of said rights, licenses, privileges or property simultaneously with or in connection with or separately and apart from the exercise of any other said rights, licenses, privileges and property as Licensee in its qQle discretion may determine. Subject to the provisions ·. of Paragraphs 5, 15 and 19 (c) , Licensee shall enjoy, solely and exclusively, all the rights, licenses and privileges and property granted hereunder throughout the universe, in perpetuity, as long as any exclusive rights in the Property are recognized in law or equity. 3. Merchandisincr and Commercial Tie-Up Rights: Licensee recognizes that Licensor is engaged in the business of licensing merchandise and colDIUercial tie-up rights in connection with the Property. In reliance upon the. foregoing, Licensee has agreed that the Picture Merchandising derived from or arising in connection with the Picture and/or any elements thereof shall be negotiated, developed, manufactured, distributed and exploited in accordance with the following terms, conditions and understandings, subject however to Licensee 1 s rights in Paragraphs 2(a), (b), (c), (d), (e), (f), (g), (h), (i), (j), (k), · (1) and 3 (h) (vi) below. In connection therewith, Licensee shall use its best efforts ·to obtain from any actors and other creative personnelDeadline.com engaged in the production of the picture, and/or sequel, spin-off or remake, the rights to utilize their names, images, and/or likenesses for purposes of exploiting merchandise and commercial tie-up rights. If Licensee is able to obtain such rights, Licensee shall assign them to Licensor. Licensee will grant Licensor the right to use artwork and photographs from the Picture ·for the purposes of exploiting merchandise connected with the Picture, provided, however, Licensor will be required to make payments to creat~ve personnel as may be ·required in the agreements with said creative personnel (or in applicable collective bargaining agreements) for the use of artwork or photographs. "Licensee acknowledges that all rights in and to the Property Merchandising, Licensee Shared Property Merchandising and New Licensed Property Merchandising are reserved to Licensor; provided, however, Licensee will share in the profits derived from Licensee Shared Property Merchandising
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and New Licensed Property Merchandising as set forth below. All ' - -rights in New Licensed Property Merchan.dising and Picture Merchandising shall be governed by this paragraph 3 and Licensee hereby grants Licensor its rights in said merchandising sUbject to,paragraphs 3(g) (vi) and 3(f) below. (a) The Picture merchandising and publishing items and agreements covered in this Paragraph 3 shall be limited to those that include elements which are derived from the Picture, appear in the Picture, .or are based on any Picture creation, including without limitation, any and all characters (w~ether live or animated, or drawings or special effects) , scenes, locations, plots, themes, storylines, profiles, logos, drawings, special effects, optical effects, computer generated effects, virtual reality elements, and elements of the Picture whether based in whole or in part on Picture Creations owned . by Licensee-, and whether based in whole or in part on underlying characters, trademarks, copyrights and/or elements of the Property owned by Licensor which appear in the P ioture and have been changed. in some manner, whether visual or otherwise, which distinguishes them as Picture Creations. (i) Licensee acknowledges and agrees that nothing contained within this Paragraph 3 gives, grants or assigns to Licensee any trademark ownership rights, in or to all or any part of the underlying property or Property Merchandising based on the underlying Property as origin.ally created and owned by Licensor as it appears in its original form, unchanged by Licensee, all of which remains the sole property of Licensor. (ii) Picture Merchandising and publishing items herein shall specifically exclude free promotional, free business and free corporate tie-ins for the Picture (e.g., the kinds of promotion customarily associated with promotion of a picture such as, without limitation, press kits, limited cast and crew T-shirts and screenings), publication rights of Licensee set
forth in Paragraph 2 (g) 1 and music and sound~rack record rights of Licensee set Deadline.comforth in Paragraphs 2 (h) and 2 ( i) herein, which rights shall be owned, exerci~ed and retained solely by Licensee, its successors and assigns.
. (iii) Picture Merchandising and publishing items 1 agreements, and other merchandising arrangements hereunder shall include all types of arrangements, other than those set forth in Paragraphs 3(a) (i) and 3(a) (ii) above, such as, but not limited to, hard and soft- cover book publishing (written, andjor audio
and/or pictorial) 1 puppets 1 dolls, toys, action figures, play sets, clothing and accessories, apparel, board games, role playing games, video and 6omputer games, headgear, hair goods and accessories, jewelry, paper ,goods, school supplies, household items, costumes, theme parks, notions, glassware, stickers, china, plastic .items, royalty bearing retail and/or corporate tie-ins which are derived from the Picture, appear in the
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Picture, or are based on any Picture creation as defined in Paragraph l. (e) hereinabove (but not free promotional, free business and free corporate tie-ins all of which are reserved herein exclusively to Licensee) .
(b) If the Picture is produced and released theatrically in the United States of America within two {2) years after the earlier of the date of completion of the Final cut (as that term is customarily defined by the Los Angeles entertainment community) of the Picture or the dat~ which is seven (7) months after the date upon which principal photography of the Picture is completed, then Licensor agrees to, and will, subject to.and in accordance with the following terms and conditions, manufacture the Picture Merchandising products and publishing items based upon, the Picture or Picture creations as are set forth in Paragraphs3(b)(E)(i), (ii), (iii) and (iv) below (or·items substantially similar to the items listed in said subparagraphs) (the 11 Picture Merchandising Product commitment"). The extent of Licensor's obligation with respect to the Picture Merchandising Product Conuni tment shall depend upon the final negative cost of the Picture as follows:
(A) If the Picture is classified as a "low budget" p~c~ure, then Licensor shall use its best efforts to manufacture, market, distribute and release the items comprising the Picture Merchandising Product commitment; provided, however, that the selection of the actual products Licensor shall produce shall be at Licensor's discretion, subject to Licensee's rights as set forth in subparagraph 3(b) (E) (vi) below.
(B) If the Picture is classified as a "medium budget~~" picture, then Licensor shall use its best efforts to manufacture, market, distribute and release the items comprising the Picture Merchandising Product Co:m:rnitment, but 'shal.l in any event be obligated to manufacture, market, distribute and release not less than fifty percent (50%) of such items; provided, however, that the selection of the actual products to pe produced by Licensor shallDeadline.com be at Licensor's discretion, subject to Licensee's rights as set forth in Paragraph 3(b) (E) (vi) below.
(C) If the Picture is classified as a "high budget" picture, then Licensor shall be obligated to manufacture, market, distribute and release substantially all of the items comprising the Picture Merchandising Product Commitment.
(D) For purposes of this Paragraph 3 (b) , the Picture shall be classified a "low budget" picture if its final negative cost falls within the range from $0 to $13,999,999, shall be classified a "medium budget" picture if its final negative cost falls within the range from $14,000,000 to $29,999,999, and shall be classified a "high budget 11 picture if its final negative cost.is $30,000,000 or greater. The foregoing negative cost ranges shall be adjusted (up if ap~licable) by the
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same percentage that the MPAA average negative cost of maj-er -- ---studio -m-otion- pictures for the year the Picture commences principal photography has increased or decreased from the MPAA average for 1992 ($26.1 million).
(E) The items comprising the Picture Merchandising Product Commitment are as follows: (i) Poster Sets:
A. Movie posters done as paintings. B. Movie posters done as camera stills of the actors and actresses. c. Movie posters depicting actions scenes from the Picture.
(ii) Collector Cards: A. Packages of stills from the Picture (Bubble Gum cards). B. Boxed set of entire collection of Bubble Gum cards. c. Special Deluxe Edition of a limited series tin box Bubble Gum cards. (iii) Role Playing Games: A. Boxed accessory set based on the movie (D&D: The Movie Game). B. Short module adventures · based on portions of the movie. c. Villain and Hero accessory product. D. Map Set. E. Extensive 11 DRAGON" and "DUNGEON" magazine articles .
. (iv) Book Productions, Novelizations and Deadline.comPublishing Based on the Movie:
A. Movie story novel adaptation. B. Calendars. c. Novels. D. Spinoff books based on Picture Characters. Licensor shall have the right to arrange for the rnanufacturing.of products, publishing i terns and/or other merchandising as set forth in Paragraphs J(b) (E) (i), (ii), (iii) and (iv), through the use of a third party license. Any such decision to use a third party licensee for the Products as defined and listed in Paragraphs J(b)(E)(i), (ii), (iii) and (iv) shall be at Licensor's discretion, provided·however that any such third party licensee will be governed by the applicable terms of this Paragraph 3.
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(v) Licensor agrees and warrants that the quality, quantity, manufacturing, distribution and exploitation of the Picture Merchandise products listed and defined in Pa:t:agraphs 3 (b) (E) ( i), ( ii) , (iii) and. ( iv) h:ereinabove shall be handled in the same manner as that of a typical ~aj or studio Picture merchandising campaign for a picture that is merchandised. (vi) Licensee, its producer(s), distributors and financiers will have the right to request the manufacture of additional Picture Merchandising items or products (but specifically excluding those products covered in Paragraphs 3 (b) (E) ( i) , ( ii) , (iii) and ( iv)) to be manufactured by Licensor, and Licensor shall use its best efforts to accommodate any such request made by Licensee, its producers, distributors and financiers. In the event Licensor and Licensee cannot· agree on the decision to manufacture or produce any such additional Picture Merchandising product or item to . be manufactured by Licensor, then .Licensor and Licensee shall negotiate in good faith to resolve any such dispute within a forty-eight (48) hour period from the time of disagreement, and if not so resolved then Licensor's decision shall be final and binding upon the parties. (vii) With respect to items to be manufactured by Licensor, or its licensees in connection with the Picture, Licens·ee shall promptly execute and deliver. to Licensor a license in a form to be submitted by Licensee, and if required together with a payment of a license fee (not to exceed $1.00 for any of the products created in connection with this Paragraph J(b) (E) (i) ( ii) (iii) ( iv) -hereinabove) to Licensee set forth therein, for the use of any Picture Creation from the Picture to be used in, on or in connection with any such Picture Merchandising and/or publishing items to be manufactured by Licensor, or its licensees in connection with the Picture in accordance with the terms hereof and/or in, on or in connection with the packaging, marketing, advertising,Deadline.com promotion and/or exploitation of any such items for· the Picture, including the use of such Picture Creations such as but not limited to, artwork, photography, likenesses, logos, dialogue, characters, storylines, plots, special effects, optical effects, computer generated effects, virtual reality elements, trademarks and/or copyrights owned and/or controlled by Licensee and/or its production, distribution andjor financing entities. (viii) Licensor shall not, in any event, have the right to use or further develop any Picture creations including but not limited to, the storylines, plots, characters, themes, titles, artwork, illustrations, likenesses, ·photography, dialogue, graphics, visual effects or any other elements of the Picture or Picture creations except as·depicted in and as Picture Merchandising for Licensee's Picture, and except in accordance
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with a specific written license from Licensee for each use in ·each instance. (c) If the Picture is produced and released theatrically in the United States of America within two (2) years after the earlier of the date of completion of the Final cut of the Picture or the date which is seven (7) months after the date upon which principal photography of the Picture is completed, then Licensor or any qualified licensing agent, as the case may be (Licensor shall have the right to engage any qualified licensing agents to seek licenses on Licensor's behalf), agrees to, and will, subject to and in accordance with the following terms and conditions, obtain licenses for the manufacture, distribution and exploitation of . the Picture Merchandising products based upon the Picture and/or Picture Cre~tions as are set forth in subparagraphs 3 (c) (E) (i) (~) through 3 (c) (E) (i·) (16) below (or items substantially similar to the items listed in said subparagraphs) (the 11 Licensed Picture Merchandising Commitment"). The extent of Licensor's obligation with respect to the Licensed Picture Merchandising Commitment · shall depend upon the final negative cost of the Picture as follows:
(A) If the Picture is classified as a "low budget" picture, then Licensor shall use its best efforts to obtain licenses for the manufacture, marketing, distribution and release of the items comprising the Licensed Picture Merchandising Commitment; provided, however, that the selection of the actual products Licensor shall obtain licenses for shali be at Licensor's discretion·, subject to Licensee 1 s rights as set forth in subparagraph 3(c) (E) (iii) below.
(B) If the ·Picture is classified as a "medium budget 11 picture, then Licensor shall use its best efforts to obtain licenses for the manufacture, marketing, distribution and release of the items comprising the Licensed Picture Merchandising Commitment, but shall in any event be obligated to obtain licenses for the manufacture, marketing, distribution and release of not Deadline.comless than fifty percent (50%) of such items; provided, however 1 that the selection of the actual products Licensor shall obtain licenses for shall be at Licensor's discretion, subject to Licensee's rights as set forth in Paragraph J(c) (E) (iii) below.
(C) If the Picture is classified as a "high 11 budget picture 1 then Licensor shall be obligated to obtain licenses for the manufacture, marketing 1 distribution and release of substantially all of the items comprising the Licensed Picture Merchandising Commitment. (D) For purposes of this Paragraph 3(c),. the Picture shall be classified a "low budget 11 picture if its final negative cost falls within the range from $0 to $13,999,999, s.hall be classified a "medium budget" picture if its final
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negative cost falls within the range from $14, ooo, ooo to 11 $2S7 99-9, 999, and shall be classified a "high budget picture if its final negative cost is $30,000,000 or greater. The foregoing negativ.e cost· ranges shall be adjusted "up", if applicable, by the same percentage that the MPAA average negative cost of major studio motion pictures for the year the Picture coDDnences principal photography has increased or decreased from the MPAA average for 1992 ($26.1 million).
(E) (i) The items comprising the Licensed Picture Merchandising Commitment are as follows:
(l) All types of APPAREL generally associated with a Picture Merchandising campaign such as: T shirts, jackets, shorts, socks, sweatshirts·, caps, gloves, scarfs, sport shirts, etc.) (2) MASTER TOY LICENSE involving plastic action figures, accessories (i.e. vehicles, play sets) typically associated with a motion picture toy license. . ( 3) MINIATURE FIGURES based· on all the characters of the Picture. (4) COMPUTER GAMES and VIDEO GAMES.
(5) SCHOOL .SUPPLIES such as: pens, pencils,· erasers, notebooks, rulers, markers, knapsacks, school bags, etc. (6) PAPER GOODS such as posters, bookmarks, stickers, greeting cards, etc.
(7) BOARD GAMES.
(8) CRAFT AND ACTIVITY SETS.
Deadline.com( 9) COSTUME AND MASKS. (10) PUZZLES. (11) BUTTONS and PINS.
( 12) CHILDREN'S BOOKS (picture storybooks, coloring and activity books).
(13) COLLECTIBLES (ceramic figures 1 limited edition lithographs and portfolios, prints). (14) LUNCH KITS and THERMOS BOTTLES. (15) RACK TOYS (i.e. weapons sets, etc.).
-16- Counterclaim, Exhibit A, p. 055 230/LICENSE-02 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 58 of 102 Page ID #:1406
(16) SHEETS and TOWELS and other domestic household items. (ii) Licensor agrees and warrants that the Picture Merchandising campaign will be conducted to the best advantage of the Picture. To that end, Licensor agrees to so provide in its agreements with any third party licensee (s) involved in the manufacturing of Picture Merchandise that the quality, quantity, distribution, and exploitation · of the Picture Merchandise products as listed and defined in Paragraphs 3(c) (E) (i) (l) J(c) (E) (i) (16) hereinabove shall be handled in the same manner as that of a typical major studio picture . merchandising campaign connected with a picture that is merchandised. (iii) Licensee, its producers, distributors and financiers, shall have the right to request additional Picture Merchandising, publishing items and other agreements that licensee, its producers and/or financiers deem necessary or appropriate for the Picture Merchandising campaign, and Licensor shall use its best efforts to accommodate any such request made by Licensee, its producers, distributors and financier!?. In the event Licensor and Licensee cannot agree on a Picture Merchandising license or item or arrangement (but specifically excluding those products covered in Paragraphs 3(c} (E) (i) (l)- 3 (c) (E) (i) (l6)), Licensor and Licensee shall negotiate in good faith to resolve such dispute within a fo~y-eight ( 4 8) hour period·from the time of disagreement, and if not so resolved then Licensor's decision shall be final and binding upon the parties. (iv) Licensor agrees to send a written deal memo, and all revised deal memos which shall include normal and customary prov~s~ons, and any information pertaining to the financial or business terms for each Picture Merchandising and Picture Publish~ng product and item covered in this Paragraph 3 (c) , either above or below, to Licensee, for their coinlllents· andjor suggested changes. Licensor agrees to use all best efforts to make, or cause to be made, any such c·hanges as are reasonably requestedDeadline.com by Licensee, and/or any producer or distributor of the Picture in connection with Picture Merchandising, products, items and publishing items in any way associated with or derived, in whole or in part, from the Picture. Licensor further agrees to provide a copy, for Licensee's records, of all contracts, agreements, licenses or arrangements for each Picture Merchandising and Picture Publishing product and item covered in this Paragraph 3·(c), either above or below. (v) Licensor and Licensee agree to work together in good faith to coordinate all release dates of the merchandising and publishing items covered in this Paragraph 3, with the release dates of the Picture, and both Licensor and Licensee will use their respective best efforts to coordinate the release dates of the Picture with the release of the Picture
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Merchandising campaign. Licensor acknowledges and agrees that the best efforts of Licensor and Licensee to coordinate the release dates of the Picture are of paramount importance, and that in the event of any conflicts in scheduling, timing, marketing or other con,flict after the release date of the Picture has been confirmed, the control and needs of the Picture shall be met. In the event that the release date of the Picture changes after having been confirmed, Licensor agrees to use best efforts to modify its release dates for merchandise, but is not responsible for any circumstances beyond its control or that cannot be reasonably changed. (vi) Licensor shall, and shall cause any Licensing Agent, or similar individual, that may be used pursuant to Paragraph 3(c), either above or below, to comply with the accounting, payment and audit provisions of Paragraph 3 (h) ( i)
(iii) hereinafter, and provide appropriate accounting 1 payment and audit provisions to protect Licensee and Licensor in all licensing agreeme?ts. (d) Picture Merchandising and publishing rights for the Picture being licensed by Licensor, or a Licensing Agent pursuant to Paragraph 3(c), as the case may be, shall be limited to the license and manufacture of Picture Merchandising and publishing items developed fro~ elements of the Picture, but do not include any right to develop the elements of the Picture or Picture Creations (e.g. ·characters, characterizations, storylines, artwork, likenesses, photographs, visual effects, dialogue, plots, themes, titles, graphics, illustrations or, without limitation, other Picture Creation elements) any further or into the future without Licensee's express written authorization, and do not include soundtrack record rights or free promotional tie in rights, all of w~ich are reserved hereby to Licensee. (e) Licetisee recognizes and acknowledges the value of the publicity and goodwill associated with Licensor's underlying original Property, and that such value is exclusively that of Licensor; and thatDeadline.com the Property has acquired a secondary meaning as the trademark of Licensor and/or a particular identity in the mind of the purchasing public. In consideration thereof, Licensee. has agreed that the copyright to all Picture Merchandising produced hereunder based specifically on and containing a portion of the Property (but specifically excluding the copyright to the Picture, and/or any Picture Creation of Licensee) shall be jointly owned by Licensee and Licensor, subject however 1 to the terms and conditions set forth herein either above or below in Paragraphs 2(d), 3(a)(ii), 3(a)(iii), 3 (d) . Licensee recognizes and acknowledges that its ownership rights in and to Picture Merchandising do not entitle Licensee to any copyright or ownership rights in Licensor's original Property and Property Merchandising derived therefrom, provided, however, Licensee will share in the profits derived from Licensee Shared Property Merchandising and New Licensed Property Merchandising as set forth below for the Property Merchandising Term.
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(f) Except in connection with the production and exploitation 6f the Picture or other version, adaptation of the Property permitted to Licensee hereunder, after the Property Merchandising Term, neither party shall have the right to use, exploit or otherwise deal with or authorize or permit others to use, exploit or otherwise deal with, any· Picture Creation or Picture Merchandising not already designed or created without . negotiation in good faith by both parties and the express written agreement of the other party. (g) Licensor agrees to keep accurate, full and complete records of all merchandising and publishing activities, arrangements and products and all manufacturing, distribution, marketing, transactions and licenses involving such merchandising and publishing. ( i) With respect to all Picture Merchandising and publishing items and arrangements manufactured by Licensor as permitted by Paragraph 3(b), Licensor shall send detailed written statements to Licensee within thirty (30) days after the close of each calendar quarter separately setting forth each item, each media, and each terri tory, and the number of each such product sold in each, the gross monies received, the permitted deductions of actual manufacturing and distribution costs . therefrom, and Licensee's share thereof~ accompanied by all monies due to Licensee hereunder. (ii) With respect to Picture Merchandising and publishing items and arrangements licensed by Licensor, or by a licensing agent or similar individual pursuant to Paragraph 3 (c} hereinabove, Licensor shall promptly send a written copy of all statements, invoices, receipts and accountings received by Licensor from its licensees, licensing agent or others within 30 days af~er the close of each calendar quarter, of each calendar year, accompanied by all monies due to Licensee hereunder. . (iii)Deadline.com All the · aforesaid statements shall commence at such time as merchandise or publishing items based on the Picture are manufactured, or other Picture Merchandising agreements are entered into, or advances or other monies are received, whichever comes first, and shall continue for as long as there is any manufacturing, distribution and/or exploitation of products, items and/or monies due and/or becoming due in connection with the Picture Merchandising and publishing items, agreements, arrangements an~ activities hereunder. (iv) Receipt by Licensee of any statement pursuant to the terms of this Agreement or acceptance by Licensee of any sums paid hereunder shall nat preclude Licensee from questioning the correctness thereof at any time during the eighteen ( 18) months ·following receipt of such statement; provided, however, that Licensee shall have no right to dispute any items "or
-19- Counterclaim, Exhibit A, p. 058 2 3 0/LICENSE-02 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 61 of 102 Page ID #:1409
information in that ~tatement (and shall forever be barred from commencing any action, suit or proceeding) unless Licensor shall receive from Licensee an objection, in writing, specifying in detail the items or transaction which Licensee contests. In the event that any inconsistencies or mistakes are discovered in any such statement or payment, they shall be promptly rectified.
(v) Each statement and the accompanying r~mittance will be made on a collection (as opposed to accrual) basis in the United states in United states currency. Licensor shall not be liable in any way for any losses caused by fluctuation in the rate of exchange or because of any failure to convert or remit any particular funds to the United states at any particular time or at a more favorable cost or rate of exchange than the cost or rate of exchange at which such conversion and remittanc~ was accomplished, it being agreed that Licensee shall be bound by whatever reasonable arrangements Licensor may make, in its best business judgement, for the conversion and remittance of foreign funds and by whatever reasonable cost or rate of exchange· is incurred or used for such conversion and remittance. Licensor agrees that it shall use best effo~s to collect and remit funds hereunder in the same manner as it uses for all its own merchandising accounts for the Property and shall not discriminate against the Picture Merchandising related to the Picture. (vi). Licensee shall have the right to grant credits (in opening or end titles) for services in kind or appearances of branded products in the Picture andjor other versions or adaptations permitted to Licensee hereunder ("Product 11 Placements ). All fees, payments, benefits and other things of value, if any, paid by the sponsors of Product Placements 11 ( Product Placement Sponsors 11 ) for the appearances of products in the Picture ("Product Placement F·ees") shall be credited to and shall reduce the negative cost of the Picture or shall be deemed Gross Receipts of the Picture, at Licensee's election. Licensee shall have the right to give to Product Placement Sponsors the right to use PictureDeadline.com creations or other Picture elements in advertisements for any purpose whatsoever in connection with the Picture or any sequel or remake of the Picture. · Licensee shall also have the right to enter into advertising tie-ins with third party manufacturers, vendors, suppliers, sponsors and/or providers of goods andjor services ("Third Party Advertisers 11 ) which advertising tie-ins are intended to advertise andjor promote both the Picture and the productsjservices of such Third 11 Party Advertisers ( Advertising Tie-Ins") . All fees, payments 1 benefits andjor other things of value, if any, paid by Third Party Advertisers in connection with any such Advertising Tie-Ins (."Advertising Tie-In Revenues 11 ) shall be credited to and shall reduce the negative cost of the Picture or shall be deemed Gross Receipts of the Picture, at Licensee's election. Alternatively, any such Advertising Tie-In Revenues may be made available as a credit toward, offset against or augmentation of the
-20- Counterclaim, Exhibit A, p. 059 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 62 of 102 Page ID #:1410
advertising/promotional budget and/or any advertising/promotional expenditures paid or incurred in connection with the exploitation of the Picture. Notwithstanding anything to the contrary in the foregoing: ( i) in the event any promotional and/or advertising ca~paign for the Picture (including Advertising Tie-Ins) involves the sale of items of merchandise, other than free "premiums" (as that term is commonly understood in the motion picture industry) given away without charge to purchasers of goods and/or services sold by Third Party Advertisers, the sale of such items of merchandise shall be deemed Picture Merchandising and shall be governed by the provisions of this agreement regarding Picture Merchandising provided that in the event a fee or royalty is received in connection with any "free premiwn 11 merchandise, then such fee or royalty shall also be deemed Picture Merchandising and shall be governed by the provisions of this Agreement regarding Picture Merchandising; and (ii) in the event any ·Third Party Advertiser pays a royalty based upon the sales of such Third Party Advertiser's goods andjor services for the right to use any Picture creation or any other element of the Picture_on or in connection with the products andjor services sold, then such royalty shall be deemed Picture Merchandising and shall be governed by the provisions of this agreement regarding Picture Merchandising. Licensee agrees to cause the studio or other distributor releasing the Picture to give Licensor reasonable advance notice (five (5) days being deemed 11 reasonable 11 ) prior to finalizing any Advertising Tie-Ins, which· notice shall identify the Third Party Advertisers involved. · If, as a result of such notice, ( i) Licensor is required to cancel or forego a license agreement with a third party advertiser in connection with a Property Merchandising advertising tie-in, and (ii) the Property Merchandising advertising tie-in cancelled or foregone provided for a guaranteed license fee to Licensor, and (iii) as a result of such cancellation or forbearance such guaranteed license fee is no longer payable to Licensor and (iv) the Advertising Tie-In described in such notice provides for a license fee to Licensee or the distributor of the Picture and Licensee actually receives all or a portion of such license fee (i.e., if the license fee is neither creditedDeadline.com to the negative cost of the Picture, nor dee.med Gross Receipts of the Picture, nor credited to the promotional/advertising budget of or promotional/advertising expenditures for the Picture), then Licensor shall be entitled to receive fifty percent (50%) of any such amounts actually received by Licensee as a license fee in connection with the Advertising Tie-in in question. Notwithstanding anything to the contrary in the foregoing, nothing contained in this Paragraph 3(g) (vi) shall interfere with or derogate from Licensor's right to engage in Property Merchandising or Commercial or Advertising Tie-ins connected with Property Merchandising; provided that Licensor agrees that if the financier(s) or distributor(s) ~f the Picture object to any such Commercial or Advertising Tie-Ins connected with Property Merchandising, then Licensor agrees not to enter into any new such tie-ins throughout the Term of Picture Merchandising and in the event such financiers(s) or
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distributor ( s) desire that Licensor cancel any su.ch Commercial or Advertising Tie·-In · connected with Property Merchandising which Licensor has entered into and which is to be conducted during the Term of Picture Merchandising, as af.oresaid, Licensor agrees to do . so immediately · provided said distributor(s) and/or financier(s) agree to pay all the costs or losses associated with any such cancellation and/or agree to indemnify and hold Licensor harmless from and against all charges, damages, costs, expenses (including reasonable counsel fees and expenses), judgments, penalties 1 liabilities or losse? of any kind or nature whatsoever, which may be sustained or suffered by. or secured against or imposed upon Licensor by reason of the cancellation of _any such Property Merchandising Commercial or Advertising Tie-In.
(vii) Licensee shall have the right to audit Licensor's books and records with respect to Licensee Shared Property Merchandising, New Licensed Property Merchandising and/or Picture Merchandising at reasonable times and upon reasonable notice and to· take extracts therefrom, but no more than once each calendar year. Licensor shall account to Liceniee with respect to Licensee Shared Property Merchandising, New Licensed Property Merchandising andjor Picture Merchandising on a quarterly basis no later than thirty (30) days following the end of each calendar quarter. Each statement and the accompanying remittance will be made on a collection basis in Lake Geneva, Wisconsin in United States currency. If any foreign receipts are fro·zen or unremittable, such receipts shall to the extent allowable by law be transferred to Licensee's account in such foreign country and Licensor shall notify Licensee to such effect. Upon Licensee's written request and upon condition that the same shall be permitted by the authorities of such foreign country, Licensor ~hall transmit to Licensee in such foreign country and in the currency thereof, at Licensee's cost .and expense, such part of such foreign receipts to which Licensee would be entitled hereunder if the funds were transmitted and paid in the United States in accordance with the terms hereof. (viii)Deadline.com Licensee shall h.ave the right, at it own expense, to require that Licensor audit the books and records of any licensee under the terms of the license agreement with such licensee, and to send a written report of all such audit rights to Licensee hereunder. If Licensor requests such audit, it shall be at Licensor's expense 1 and if Licensee and Licensor jointly desire and request the audit, Licensor and Licensee shall share the costs of the audit equally. Licensor and Licensee shall share equally in percentages of ·fifty percent (50%) each any monies derived therefrom, after the party that paid the costs of such audit recoups its costs from any such monies derived therefrom.
-22- 230/LICENSE-02 Counterclaim, Exhibit A, p. 061 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 64 of 102 Page ID #:1412
(h) Merchandising Fee Schedule: (i) Licensor and Licensee shall share in equal portions of fifty percent (50%) ~ac~ in all Net Profits derived fro~ all merchandising and publishing items and agreements derived from or based in whole or in part on the Picture and the Property, as follows: (1) revenue attributable ·to New Licensed Property Merchandising, and (2) revenue which is expressly related to Picture Merchandising, shall be shared by the parties pursuant to subparagraph (iii) , herein below for the period. specified in subparagraph (v) . It is understood and agreed that in the event Licensor arranges to license merchandise and commercial tie-up rights to the characters which do not appear in the Picture or any sequel, rema·ke or other version or adaptation permitted hereunder, as well as arranging to license merchandise and commercial tie-up rights to the characters and/ or ~ther specific elements from the Picture and/or any sequel, or remake, Licensee shall be entitled to receive as its share of revenues from such multiple character license a prorated percentage of the revenue paid to Licensor that is directly and expressly attributable to the exploitation of the characters or other specific elements from the Picture andjor any sequel, remake or other version or adaptation permitted hereunder. Included in the revenues shall be all advances paid to Licensor for any such multiple character license for any exploitation hereunder. (ii) Licensor shall pay to Licensee 5% of the Licensee Shared Property Merchandising Net Profits derived from sales of Licensee Shared Property Merchandising in all English language versions only, regardless of the territory in which sold [(TSR Product.#1070 (the Dungeons and Dragons Game]) in excess of 250,000 units annually for the Property Merchandising Term specified in subparagraph 3(h) (v) below. (iii) Subject to Subparagraphs (v) and (vi) below, Licensor's Gross Receipts throughout the world derived from the exploitation of .New Licensed Property Merchandising and/or from Picture MerchandisingDeadline.com shall be dispersed by Licensor as follows: A. Licensor shall first pay any sums due ·to any third party by Licensor entitled.to receive a participation in gross receipts derived from the exploitation of New Licensed Property Merchandising andjor from the Picture Merchandising (e.g. any actor appearing in the Picture and/or sequel or remake because of Licensor's use of the actor's image, name, or likeness) that Lic~nsee shares in the revenues of hereunder; B. Licensor sha11 then retain for its own account amounts equal to its actual and accountable direct out- . of-pocket costs, actually expended in connection with the exploitation of New Licensed Property Merchandising and/or Picture Merchandising or, if such costs were separately billed to its licensees, then the excess of the amount expended, less the
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amounts paid by said licensees, specifically incurred in connection with the revenues that Licensee shares in hereunder.
C. The balance, if any, of the Gross Receipts derived from New Licensed Property Merchandising and/or Picture ·Merchandising as set forth in this paragraph 3 (h) (iii) shall then be shared equally between Licensor and Licensee ("Net Profits").
For purposes of this paragraph, "Gross Receipts 11 shall mean all revenues derived by Licensor, its. parents, affiliates, subsidiaries, and licensees 1 which are derived from the exploitation of the New Licensed Property Merchandising and/or Picture Merchandising, less to the extent not deducted, any and all taxes paid by Licensor to third parties, sales commissions, currency exchanges, lasses and expenses related specificalJ_y to those grass receipts. Licensor will use best efforts to release blocked funds in accordance with customary provisions. With respect to New Licensed Property Merchandising, Gross Receipts shall include all revenues collected during the Property Merchandising Term as specified in subparagraph (v) below from licenses entered into during said Property Merchandising Term, whenever they may be received but shall not include any revenues due after the Property Merchandising Term has expired. ( iv) Subject to subparagraphs (v) and (vi) below; Licensor's Gross Receipts throughout the world derived from the exploitation of English language versions only (regardless of the territory in which sold) of Licensee Shared Property Merchandising shall be disbursed by Licensor as follows: A. Licensor shall first pay any sums due to any third party by Licensor entitled to receive a participation in Gross Receipts derived from the exploitation of Licensee Shared Property Merchandising that· Licensee shares in.
B. Licensor shall then retain for its own account amounts Deadline.comequal ·to its actual and accountable direct out of-pocket costs; actually expended in connection with the manufacturing, marketing and exploitation of Licensee Shared Property Merchandising that Licensee shares in.
C. The balance, if any, of the Gross Receipts derived from merchandising set forth in this paragraph 3(h) (iv) shall be split 95% thereof to Licensor and 5%. thereof to Licensee ("Licensee Shared Property Merchandising Net Profits").
For purposes of this paragraph, 11 Gross Receipts 11 shall mean all revenues derived by Licensor, its parents, affiliates and subsidiaries 1 which are derived from the exploitation of the Licensee Shared Property Merchandising, less to the extent not deducted, any and all taxes paid by Licensor to
-24- 2 3 0/LICENSE-02 Counterclaim, Exhibit A, p. 063 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 66 of 102 Page ID #:1414
third parties, sales commissions, currency exchanges, losses and expenses related specifically to those gross receipts. Licensor will use best efforts to release blocked funds in accordance with customary provisions with respect to Licensee Shared Property Merchandising. (v) In the event Licensee produces and distributes the Picture, Licensee shall be entitled to share in Gross Receipts derived from Licensee Shared Property Merchandising and New Licensed Property Merchandising for a period commencing six (6) months prior to the actual initial theatrical release of the Picture in the United States of America, and ending twenty-four ( 2 4) months after the date of the actual initial theatrical release of the Picture in the United States ("Property Merchandising Term") . In the event Licensee shall produce and distribute any sequel, or remake, Licensee shall be entitl~d to share in Gross Receipts derived from Licensee Shared Property Merchandising and New Licensed Property Merchandising for each sequel or scheduled remake for a period commencing six (6) months prior to the actual initial theatrical release of each sequel·or remake in the United States of America and ending twenty-four (24) months after the date of the actual initial theatrical release of such sequel or remake in the United States of America ("Subsequent Prodl,!ction Property Merchandising Term"). Except as provided in paragraphs J(j) and 14(a), Licensee shall be entitled to share in Gross Receipts derived from Picture Merchandising in perpetuity".
(vi) A. In the event that a Licensing Agent, if any, is. required to represent the licensing of Licensor Merchandising pursuant to Paragraph 3(c) (iv), a fee not to exceed thirty-five percent (J5%) of gross u.s. licensing payments for U.s. licenses, and an override to the United States Licensing Agent of ten percent {10%) over foreign subagents, such foreign subagent fees not to exceed thirty-five percent (35%) of foreign gross license payments for non-u.s. licensing; and Deadline.comB. Participation in merchandising revenues (whether gross, adjusted gross, net or otherwise), if any, granted to actors and actresses not to exceed 5% for all such persons 1 prorated by the totai nu.nlber of such persons used on such items entitled to a royalty. Licensee shall have the right to grant additional participations to persons other than actors and actresses not to exceed 5% in the aggregate in merchandising to any other persons or entities, such as 1 but not limited to, Investors, Directors, Writers, ~xecutive Producers and Producers provided, however, that if Licensee requests. that said participation be deducted "off the top 11 from both Licensor and Licensee, Licensee shall so notify Licensor. In such event, Licensor agrees to negotiate in good faith with Licensee to reach a mutually acceptable decision regarding such request within two ~eeks of the date of Licensee's request, taking into account such person's stature in the motion picture industry, such person's
-25- 230/LICENSE-02 Counterclaim, Exhibit A, p. 064 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 67 of 102 Page ID #:1415
contribution and importance to the Picture, the necessity of such
person or entity 1 the necessity of such a merchandising participation to the financing and/or production and/or distribution of ·the Picture, and the time requirements of the Picture and of completing an agreement with such person or en"t:ity. (i) Advertising the Picture on Merchandising.
( i) Licensor shall have the right to make incidental references to the Picture on the cover of or in connection with Merchandising manufactured· or licensed by Licensor not based on the Property (i.e., Advanced Dungeons and Dragons, Forgotten Realms, Dragonlance, SpellJam.mer, Greyhawk, Ravenloft, Dark Sun) for the purpose of advertising the Picture to Licensor's existing market. All such advertising ·must be approved in advance in writing by Licensee andjor · its distributors. The Picture's logo and artwork may not be used without the written consent of Licensee and/or Licensee's distributor(s). Approvals to be given by Licensee and/or Licensee's -distributor(s) pursuant to this paragraph 3(i) (i) shall be given or denied within seven (7) business days following receipt of written request therefor from Licensor. If Licensee andjor its distributor(s) fail to deny any such writte~ request for approval within such seven (7) business day period, such request shall be deemed approved. (ii) Licensor agrees to provide advertising support in the following ways aft~r consultation with Licensee and the distributor(s) of the Picture in accordance with the pre-release of the Picture, release dates of the Picture, and release dates of the video version of the Picture:
A. In produ9t advertisements about the Picture (all pr?duct lines). •.
B. Articles and advertisements in DRAGON & DUNGEON Magazines.Deadline.com c. Advertisements in Licensed products of all product lines where Licensor can obtain authorization from its licensees.
D. Advertising support at gaming conventions.
(j) Notwithstanding anything contained herein to the contrary, in the event the Picture to be produced hereunder is not released. theatrically in the United States of America within two (2) years after the earlier of the date of completion of the Final Cut of the Picture or the date which is seven (7) months after the date upon which principal photography of the Picture is completed, then Licensee shall not be entitled to share in any
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reventies of any kind or nature whatsoever derived from the exploitation of Licensee Shared Property Merchandising, New Licensed Property Merchandising and/or Picture Merchandising which Licensor may have arranged pursuant to this Agreement prior to Licensee's failure to releasa the Picture theatrically in the United States of America as aforesaid; and, even if the Picture subsequently is released theatrically in the United states of America at a later date (i.e. , after the time period described hereinabove), Licensee shall not be entitled to share in any such
merchandising revenues. Also 1 should Licensor have paid to Licensee any revenues derived from the exploi tat~on of Licensee
Shared Property Merchandising 1 New Licensed Property Merchq.ndising and/or Picture Merchandising prior to Licensee's failure to release the Picture theatrically in the United States of America on a timely basis as specified in the preceding
sentence 1 then Licensor shall have the right to be repaid any such revenues by Licensee promptly upon demand. 4. Reserved Rights/Hold Backs/Restrictions. (a) Animation and Television Series: Licensor may grant licenses to others to use the Property in connection with live action television series, animated theatrical or television motion pictures, but based solely on underlying copyrights and trademarks owned by Licensor and not on any Picture creations or the Picture or any elements thereof, provided however, that except with respect to historical programs andjo"r documentaries for exhibition on television related to role-playing games in
general and/or to Licensor 1 educational programs and game show programs based upon the Property, the rights to which Licensor may grant to others without any holdback, Licensor shall withhold the exercise of such rights for live action television series until the expiration of five ( 5) years following the first general commercial release in the United states of the first teleyision or theatrical motion picture produced hereunder based on the Property or seven (7) years from the date of this Agreement, whicheverDeadline.com shall first occur, Licensor also and shall withhold the exercise of such rights for animated theatrical motion pictures for twelve months from the date of the commercial release in the United States of the Picture,· but in any event later than December 31, 1996. There shall be no holdback with respect to ·animated television series or animated television motion pictures. In any event, the foregoing productions shall not be based upon or include, in whole or in part, Picture Creations, the Picture or any elements of either, such as but not limited to, the story, plot, dialogue, script, illustrations,
photographs, likenesses, visuals 1 special effects, characters, characterizations, copyrights or trademarks derived from the Picture andjor of any Picture Creations andjo~ merchandising or publishing items based on the picture and/or Picture Creations. (b) Advanced Dungeons & Dragons: Licensor may produce or grant licenses to others to produce a live-action or animated
-27- Counterclaim, Exhibit A, p. 066 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 69 of 102 Page ID #:1417
motion picture andjor television production based on Licensor's "ADVANCED DUNGEONS & DRAGONS" game and trademark, but it shall not have the right, and shall not authorize or permit others to, exhibit, release, promote or exploi.t any live action ADVANCED DUN~EONS & DRAGONS motion picture andjor television production or any merchandising or pub.l,ishing in connection therewith, at anytime earlier than twelve (1.2) months following the initial general commercial release in the United States of the Picture produced hereunder. Notwithstanding the foregoing, if the Picture to be produced hereunder is not released theatrically ~n the United states of America within two (2) years after the earlier of the date of completion of the Final cut of the Picture or the date which is seven (7) months after the date upon which principal photography of the Picture is completed, then the holdbacks and restrictions contained in the preceding sentence shall be null and void automatically without notice to Licensee from Licensor being required. (c) Licensor warrants and agrees that it shall not by the exercise of any of its. reserved rights, except as specifically permitted hereunder, compete or interfere in any way with or derogate from any rights and licenses granted hereunder or the Picture or other version of the Property permitted hereunder, or the release, marketing, promotion, publicity, exploitation and merchandising of the Picture and other permitted versions of the Property hereunder. (d) Licensor's Reserved Rights. All rights. in and to the Property not specifically granted to Licensee herein are reserved to Licensor (subject only to the limited holdbacks expressly described in subparagraphs 4 (a)·, (b) and (c) ·above), and provided that in the event any "new right" in connection with a new means or way of recording, distributing, or exhibiting the Picture to be produced hereunder which would be considered standard with the grant of film rights herein is hereinafter created or discovered in the motion picture industry, (e.g. videocassettes were not a normal part of revenues in 1.950 associated with Deadline.coma picture, but in 1.980 video revenues became a major revenue generating category), then such new right shall be deemed to be included amongst those rights granted to Licensee herein; provided, however, that in no event shall any such new right be included in the rights granted to Licensee hereunder if such right is expressly and specifically contemplated herein and has been reserved to Licensor hereunder. Notwithstanding anything to the contrary elsewhere in this agreement, it is agreed and understood that, at any time during the ter.m of this agreement, Licensor may produce and distribute game related videos which explain the concept of role playing to beginning players and/or which are designed to promote particular products and publications of Licensor; provided, however, that in no event shall such videos include any portion of the Picture or any Picture Creations.
-28- Counterclaim, Exhibit A, p. 067 ?1n /T.Tr.F.N"S"R-n? Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 70 of 102 Page ID #:1418
5. Compensation. As full and complete consideration for all of the rights herein granted to Licensee and for the representations and warranties of Licensor hereunder, Licensee agrees to pay to Lic'ensor, and Licensor agrees to accept the sums set forth below, after deduction of all Option payments made to Licensor pursuant to the option Agreement to which this Agreement is attached as Exhibit 11 B11 : (a) A License Fee in a sum equal to two percent (2%) of the final production budget of the Picture (excluding all financing and legal charges, interest and financing fees, contingency allowances and completion bond fees) , but in no event less than Three Hundred Fifty Thousand Dollars ($350,000,00 U.S.) less all Option payments. Said Three Hundred Fifty Thousand
Dollars ($350 1 000.00 U.S.) less Option payments, shall be payable upon exercise of the option and the remainder, if any, (i.e. the difference between two percent (2%) of the final production budget excluding all financing and legal charges, interest and financing fees, contingency allowances and completion bond fees ·and the sum of $350,000.00 u.s.), shall be payable upon commencement of principal photography of· the Picture produced hereunder. Notwithstanding .anything else in this or any other agreement to the contrary, this Agreement and licenses and rights granted by · it to Licensee shall not be effective unless the minimum License Fee payable hereunder ( $J5·o, 000 less Option payments) is paid to Licensor upon exercise of the Option. 6. Licensor Obligations. Licensor warrants and agrees ·that it shall cooperate in the creative development· of stories, scripts and artwork for the Picture and all related promotion~l efforts, and in the creation of a customized "treatment" (as the term is understood in the film industry) for the Picture, including original new characters not previously embodied or used in the Property. To that end, Licensor shall Deadline.commake its creative personnel available' for consultation with Licensee and its creative personnel on a reasonable basis from time to time, and shall supply Licensee free of charge with such written and/or illustrated materials as may be reasonably required by Licensee in creating the Picture, which among other things shall include sample copies of all appropriate storylines, text books, illustrations, drawings, likenesses, photographs, artwork, visuals, trademarks, characters, games and other materials relating to the Property; provided, however, that Licensor shall provide the first $1,000 (at wholesale) of any such merchandise otherwise sold to the public at its expens~ and, if Licensor so requires, Licensee shall pay Licensor the wholesale price of all such merchandise required by Licensee in excess of $1,000. ·
-29- Counterclaim, Exhibit A, p. 068 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 71 of 102 Page ID #:1419
7. Licensor consultatioa/&pproval/Copias Rights. (a) Provided. Licensor is not in ·material breach or material default hereunder, Licensor · f?hall have the following co~sultation andjor approval rights, as applicable, which consultation/approval rights shall be exercised by one (l) individual designated in writing by Licensor promptly following execution hereof:
(i) The right of cons~ltation and approval (not to be unreasonably withheld) with respect to the engaging of a writer or writers to create a treatment andjor screenplay based on the Property, provided however that if Licensor does not respond or approve in writing any such writer with,in ten (10) business days from receipt of said writer's name and credentials and ·ather materials obtained from said writer by Licensee, if any, said writer shall be deemed approved. ( ii) Licensee shall provide Licensor with a c.opy of each final draft of any treatment and script written for the Picture and Licensor shall have ten (10) business days from its receipt . of each such draft to comment and suggest revisions to it, subject to Paragraph. (b) below and to request writers to make such changes as are reasonable and agreeable to all parties subject to the then-existing time requirements and commitments of Licensee, writer(s), _and of' the project itself; {iii) Right of approval subject to Paragraph (b) below and not to be unreasonably withheld, of Licensee's creative concept for the Picture in the form of a detailed outline of the plot, provided, however, that if Licensor does not respond or approve, in writing, same within ten (lO) business days then it shall be deemed approved; (iv) For Licensor's records only, Licensor shall be furnished photocopies of· the pencilled storyboards and script direction; Deadline.com ' (v) For Licensor's records only, Licensor shall be furnished a copy of each full treatment for the Picture, and each full draft of the script for the Picture created by Licensee's contracted writers;
(vi) Right of approval, subject to Paragraph (b) below and not to be unreasonably withheld, of all graphic designs for posters and other promotional materials, provided, however, that if. Licensor does not respond or approve, in writing, same within forty-eight (48) hours from the initial request for its approval, such designs shall be deemed approved;
(vii) For Licensor's records only, Licensor· shall be provided a photocopy of the final·draft of the actual shooting script and final art on all posters and promotional materials •
. -30- Counterclaim, Exhibit A, p. 069 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 72 of 102 Page ID #:1420 ',
(b) Licensor's approva.l rights will be limited to a review of the creative elements of each script to ensure that it maintains the standards of good taste in keeping with the standards of the Los Angele$ Entertainment Community in order to protect the value of its trademarks and copyrights, that the elements are consistent within the accuracy and terminology of the game rules, and that . they meet the requirements set forth herein as pertains to credits to Licensor and protection of ownership of Licensor's-trademarks and copyrights. Licensor may offer comment an other aspects of · the elements defined hereinabove, but has no approval over their details. (c) If any changes or modifications are required to be made to any such material, Licensor shall give notice to Licensee in writing within the applicable time periods specified in subparagraphs (a) (ii), (iii) and (vi) above, and Licensee agrees to make such changes or modifications · as are permitted or required by the foregoing Paragraph (b) arid as are reasonably possible, practical and do not materially add to the cost of the budget for the Picture, writer's schedule and the Picture's schedule of due dates and delivery dates. If no such notice is received by Licensee within the applicable period, such materials shall be deemed approved by Licensor. (d) Licensor shall promptly upon execution hereof appoint one specific staff... member to act as its authorized contact with Licensee with re-gard ·to all approval procedures 'set forth herein. Approval or comm·ents communicated to Licensee by such authorized contact shall constitute the approval or comments, as applicable, by Licensor. (e) With respect to costume designs, Licensee shall consult with Licensor and Licensee agrees to be faithful to the basic conceptualization of the costumes as contained in the Property.
(f) UponDeadline.com the commencement of principal photqgraphy of the Picture, Licensor hereby agrees that Licensee shall, subject to the standards and restrictions set forth herein, have sole creative control of the script and the production and post production of the Picture, and that Licensor's only remaining approval rights shall be those with respect to uses of Licensor's trademarks, as set forth in Paragraph 9 hereinafter. · (g) All approval rights and consultation rights of Licensor hereinabove shall be a condition to any third party production, distribution andjor financing agreements entered into by Licensee.
(h) All approvals of Licensor pursuant to this Paragraph 7 shall be delivered to Licensee-, in writing, within the time period contained within this Paragraph 7 for Licensor to
-31- Counterclaim, Exhibit A, p. 070 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 73 of 102 Page ID #:1421 '·
provide any such approval, and in the event of disapproval by 1.-icensor I then ·Licensor shall clearly state the material reasons for Licensor's disapproval in each such instance. a. credit. (a) Provided a Picture is produced and released based on the Property, Licensor shall be accorded credit on all positive prints of the Picture on a single card, in the main titles substantially as tallows:
"Based on (or suggested by) the game "DUNGEONS & DRAGONS" owned by TSR, Inc. 11 All other aspects of such credit shall be in the sole discretion of Licensee and any third.party ·producer/distributor andjor financier of the Picture. (b) A trademark statement, in the end titles, identifying Licensor as the owner of the rights in and to the trademark "DUNGEONS & DRAGONS" and displaying either the Licensor's Corporate Logo or the words TSR, Inc. in substantially the following form: "DUNGEONS & DRAGONS 11 is a
trademark owned by TSR 1 Inc. and licensed for use hereunder." (c) Inadvertent failure by Licensee or failure by any other persons or entities to accord credit to Licensor or errors and·omissions in any or all of them, shall not entitle Licensor to injunctive or other equitable relief. Licensee shall endeavor to prospectively correct any such errors or omissions made by
Licensee 1 upon written notice from Licensor, and provided such correction is feasible on a prospective basis and is not an unreasonably excessive cost to Licensee or its production, distribution andjor financing entities. 9. Licensor Trademarks· and Copyrights. (a) Provided a Picture based on ·the Property is produced and released, Licensee shall affix on all positive prints of the Picture,Deadline.com a trademark statement in the end titles, identifying Licensor as the owner of the rights in and to the trademark "DUNGEONS & DRAGONS" and displaying either the Licensor's corporate logo or the words TSR, Inc. in substantially the following form: 111 DUNGEONS & DRAGONS' is a trademark owned by TSR, Inc. and licensed for use hereunder.'' (b) Licensee, its successors and assigns agree to comply with Licensor 1 s reasonable instructions regarding proper trademark and copyright notices and agree to submit for Licensor's prior approval, not to be unreasonably withheld, and to be approved in writing within five (5) business days after Licensor's receipt of same, all proposed trademark and copyright notices/ including their proposed manner of usage.
-32- Counterclaim, Exhibit A, p. 071 230/LICENSE-02 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 74 of 102 Page ID #:1422
(c) Licensee ;recognizes the great value of the publicity and good will associated with the .Property and acknowledges that such good will is exclusively that of Licensor; and that the Property has acquired a secondary meaning as the trademark of Licensor and/or a particular identity in the mind of the purchasing public.
(d) Licensee, its successors and assigns agree to take .whatever action, in Licensor'S sole reasonable opinion, is appropriate or necessary to pro~ect Licensor's rights in or the the trademark and the copyrights therein, including without limitation, affixing or causing to be affixed on each print of the Picture and of any sequel or remake produced by Licensee, and on the materials used in connection therewith or in connection with the soundtrack album and video disc and videocassette versions of the Picture and/or any sequel or remake, and in all advertising, packaging and distribution materials relating thereto, the proper trademark and copyright notices indicating Licensor's interests therein. The form of such notices shall be designated by Licensor to Licensee in writing. Unless Licensee receives written instructions from Licensor for requesting .Licensee to take specitic additional actions, Licensee shall be deemed in compliance with the provisions of the foregoing two sentences so long as Licensee shall take actions consistent with the existing practices at the time of the U.s. motion picture industry for the protection of Licensor's trademarks and copyrights. To the extent·· that Licensor shall request Licensee to take actions not consistent with such indus.try practices which require Licensee to incur extraordinary costs in excess of Ten Thousand Dollars ($10,000) in any one instance or Fifty Thousand Dollars ($50,000) in the aggregate for any motion picture, then Licensee shall inform Licensor, in ·writing, in advance of incurring same and request Licensor's instructions in connection therewith. If Licensor shall s;till request such actions be taken, then Licensor shall reimburse Licensee for such costs promptly following Licensor's receipt of reasonable proof of Licensee's expenditureDeadline.com of same. 10. Reoresentations and Warranties. (a) Licensor warrants and represents (i) that Licensor is the sole owner of all the rights, licenses, privileges and property oerein conveyed including without limitation the unlimited universe-wide motion picture, television rights, videogram, live stage and allied and ancillary rights in the Property conveyed hereunder and has the full and sole right and authority to convey the said rights herein granted; (ii) that no part of the motion picture or television rights or videogram or live stage rights to the Property conveyed hereunder or any other rights, licenses, privileges or property herein conveyed have in any way been encumbered, conveyed, granted or otherwise disposed of and the same are free and clear of any liens or claims whatsoever in favor of any party whatsoever and said rights, and
-33- Counterclaim, Exhibit A, p. 072 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 75 of 102 Page ID #:1423
the full right to exercise the same, have not been in any way prejudiced, limited, diminished or impaired: {iii) that Licensor has not entered into and will not enter into any agreement involving or affecting the rights granted hereunder: ( iv) that ·the title or titles of the Property may be legally used in the exercise of all or any of the rights granted hereunder; (v) that the Property and all characters therein do not infringe upon any copyright, trademark, and any common law right, literary, dramatic, motion picture or any othe·r r~ghts of any party whomever, or constitute a libel or defamation o.f, or invasion of any rights (including without limitation, privacy and publicityy of any third party; (vi) that Licensor has not done and will not do any act or thing that will or may in any way p·revent or interfere in any manner with the full and exclusive enjoyment by Licensee of all the rights I license I privileges and property herein conveyed or which will or may impair or encumber. such rights, licenses, privileges or property; (vii) that there are no claims or litigation pending, outstanding or threatened adversely affecting or that may in any way prejudice Licensor's exclusive rights in the Property or any of the rights, licenses, privileges and property herein conveyed; (viii) that no motilOn picture, television program or videogram or live stage production, has been produced based upon the Property not has any version nor adaptation of the Property at any time been broadcast (other than the existing animated television series based on 11 DUNGEONS AND DRAGONS"); (ix) that the .Property has been validly ·registered for trademark and/or copyright protection, as applicable to each element of the Property, in the United states and all other territories of the universe where registration is permitted or required; (x) that Licensor shall not, itself or through others, use, merchandise, publish or exploit in any manner, in whole or in part, the Picture . Creations or any element(s) thereof including, without limitation, any characters, dialogue, titles, storylines, . photographs, illustrations,
likenesses, plots, themes 1 graphics 1 visuals, special effects, trademarks or other elements created by Licensee, except as may be licensed by written agreement to Licensor by Licensee in each specific instance,Deadline.com and even in such event not in plots, storylines or character development other than as specifically depicted in the Picture produced by Licensee hereunder. The foregoing warranties and representations are made by Licensor to induce Licensee to execute this Agreement and Licensor acknowledges and concedes that Licensee has executed this Agreement in reliance thereon. Licensor's warranties and representations contained in this Paragraph 10 do not apply to new matter (including characters) inserted by Licensee into the Picture.
(b) Each party agrees and guarantees to defend, indemnify and hold the other, and its assignees, licensees, officers, employees, agents, parents, subsidiaries, affiliates, ha~less from and against any charges, damages, costs, expenses
-34- Counterclaim, Exhibit A, p. 073 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 76 of 102 Page ID #:1424
{including reasonable counsel fees and expenses), judgments, penalties, liabilities or losses of any other kind or nature whatsoever, which may be sustained or suffered by or secured against or imposed upon such indemnified party, or to assignees, licensees, officers, employees, agents, parents, sub~idiaries, affiliates or associates of other such parties by reason of the breach of any of the covenants, representations or warranties herein contained by the indemnifying party. 11. Suspension/Extension.
Provided Licensee is engaged in active development of the Picture pursuant to the terms hereof, and if Licensee is unable to meet any time limitations or to exercise any of its rights under this Agreement including, without limitation, to exercise rights of First Negotiation and Last Refusal, to employ a writer for a treatment and/or screenplay or teleplay, and/or the time limits within which to obtain a treatment and/or screenplay,· and/or the time limits within which to obtain financing and/or the time limits to · produce or commence production or photography on a motion picture or television production hereunder as a result of any Force Majeure event which substantially affects and interferes with Licensee's ability to. proceed with the development andjor production of the Picture, including without limitati.on, any act of God, strike, earthquake, fire, civil commotion, epidemic, act of government, its agencies or officers, illness, incapacity, withdrawal or termination or· disability of the writer ( s) , director, producer, principal cast members, (provided that if any such suspension. by reason of illness, incapacity, withdrawal, termination or disability of a writer, director, producer or principal cast member exceeds ninety (90) days, Licensee shall use its best efforts to replace such writer, director, producer or principal cast member as soon as possible thereafter) and/or any other legitimate cause beyond the control of the parties which substantially interferes with the intended production, distribution or exploitation of -the Picture or the exercise of any rights under this Agreement, then this Agreement shallDeadline.com be automatically suspended and the time to exercise the Option, to exclusively hold rights, to exercise rights of First Negotiation and Last Refusal, to employ a writer, to obtain a treatment and/or screenplay, to produce or commence photography of a motion picture or television production hereunder and any other rights granted to Licensee or time limits set for Licensee under this Agreement, shall be extended upon written notice within ten (10) days after the occurrence of the Force Majeure event, giving the particulars thereof and the likely duration of any extension caused thereby for a period equivalent to the period that any such condition shall prevail; ·provided that no Force Majeure extensions shall exceed one ( 1) year in the aggregate. No monies or compensation due under this Agreement shall be payable to Licensor during the existence of any such Force Majeure event but Licensee shall have the right to continue its activities hereunder.
-35- Counterclaim, Exhibit A, p. 074 ,..._,.. I..,.~,.,T"''-Tr"T':' "'"' Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 77 of 102 Page ID #:1425
12. Further Documents. Licensor will duly execute, acknowledge, and deliver to Licensee or cause to be executed, acknowledged and delivered to Licensee, in form approved by Licensee, any and all further assignments or instruments which Licensee may reasonably deem necessary, expedient or proper to carry out and effectuate the purposes and intent of this agreement, including but not limited to {a) a short form assignment of all the rights, licenses, privileges and property contained hereiri granted to Licensee, duly executed and acknowledged in the form of the attached 11 Exhibit "B ; and (b) a release in form acceptable to Licensee from the manufacturer/ distributor of the games entitled in whole or in part 11 DUNGEONS & DRAGONS 11 (excluding "ADVANCED DUNGEONS & 11 DRAGONS ) and from the producer/distributor of the animated television series based on 11 DUNGEONS & DRAGONS"; and (c) at Licensee's request, a release in form acceptable to Licensee from any other parties having rights in the Property. . In the event Licensor fails to execute additional documents within five "(5) business days after the date of written notice from Licensee, Licensor hereby irrevocably appoints Licensee as its attorney-in fact to do so in its name, the foregoing being a power. coupled with an interest and irrevocable.
13. Assicrnment. Licensee may assign, sublet, sublicense or transfer this agreement and all or any part of its rights hereunder to any of the entities or persons listed in Paragraphs 13 (a) ( i) -13 (a) (vii) without limitation, and without the approval of Licensor. Any other potential licensee not classified within the guidelines of Paragraphs 13 (a) (i) -13 (a) (vii), will have to be presented, in advance, to Licensor and will r~quire the written approval of Licensor. This agreement shall inure to the benefit of Licensee 1 S successors, licensees and assigns and shall· be binding upon and inure theDeadline.com benefit of Licensor's successors and assigns. (a) Any purported assignee must have been approved by Licensor, in writing, in advance; provided, however, that Licensee shall not be required to obtain the approval of Licensor in the event of an assignment to any of the following:
( i) Major U.S. Motion Picture Distributors (e.g. Paramount Pictures, MCA/Universal, Columbia Pictures, Tri-star Pictures, warner Eros., Disney/Buena Vista, Twentieth century Fox, etc.) . (ii) Major Foreign/International distributors (e.g. Canal plus, U.I.P., Polygram, etc.). (iii) Major u.s. Film Production companies (e.g.
-36- Counterclaim, Exhibit A, p. 075 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 78 of 102 Page ID #:1426 ' I
Morgan Creek, Amblin Entertainment, Lucasfilm Ltd., Largo Entertainment, Imagine Films Entertainment, Cinergi, etc.). (iv) Major Foreign/International Film Production Companies (e.g. CIBY2000 1 Fuj isankei Entertainment, Shochiku Films, Bertolusconni, etc.) .
(v) Major or well known entertainment persons (e.g. Steven Spielberg, Tim Burton, George Lucas, SimpsonjBruckheimer, Larry Gordon, etc.) .
(vi) An entity, such as a partnership, in which Licensee has a twenty-five percent (25~) or greater ownership interest, and ~hich supplies a substantial portion of the production financing for the Picture. (vii) A subsidiary, parent, affiliate or relc;ited company of Licensee. (b) Due to the generality of Paragraphs l3(a) (i) l3(a) (v) above, and for purposes of cla:J:"ificatlon, the potential assignees listed in Paragraphs 13 (a) (i) -~3 (a) _(v) hereinabove are intended to be representative of bona-fide, well established entities or individuals who are well regarded in the entertainment community and are intended to be illustrative and not limitative. In furtherance of the foregoing, any purported assignment to an entity or person that does not .meet the standards delineated herein, or is not similar to the examples provided in Paragraphs 13(a) (i)-13(a) (v), shall require the written approval of Licensor. (c) Licensor may assign, sublet, or transfer this Agreement to any person, firm, or corporation, without limitation, provided,Deadline.com however, that the purported assignee is able to assume all ,of Licensor's rights and obligations hereunder and that the assignment in no way affects ., any of the rights granted to Licensee hereunder or any of the representations and warranties of Licensor·hereunder (e.g. any purported assignee of Licensor must become the holder of the rights granted to Licensee in this Agreement) .
(d) In the event of an assignment by Licensee, any purported assignee must assume, in writing, for the express benefit of Licensor, all of Licensee's obligations, responsibilities, representations, covenants and warranties under this agreement, and an original copy of such assumption must be delivered to Licensor. In the case of any assignment, Licensee shall be relieved of its obligations hereunder to extent of any such assignment.
-37- Counterclaim, Exhibit A, p. 076 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 79 of 102 Page ID #:1427 • ' I
(e) In the event of an assignment by Licensor, the purported assignee must assume, in writing, for the express benefit of Licensee, all of Licensor's obligations, responsibilities, representations, covenan~s and warranties under this Agreement, and an original copy of such assumption must be delivered to Licensee. In the case of any assignment, Licensor shall be relieved of its obligations hereunder to the extent of any such assignment. · 14. No Obligation to Produce/Rating. (a) Nothing contained herein shall be construed to obligate Licensee to produce, distribute, release, perform or exhibit any motion picture, television program, or other production based upon, adapted from or suggested by the Property, in whole or in part, or otherwise to exercise, exploit or make use of any of the rights, licensees, privileges, or property h.erein granted to Licensee. Notwithstanding anything contai.ned herein to the contrary, and without in any way limiting. or derogating from any of the rights in the Property granted to Licensee, if the Picture is produced but is not released theatrically in .the United States of America within two (2) years after the earlier of the date of completion of the Final Cut of the Picture or the date which is seven (7) months after the date upon which principal photography of the Picture is completed, then Licensor shall have the right to produce, exhibit, release, promote and exploit liv.e-action motion pictures andjor television productions based upon the Property; it being understood and agreed, however, that in the event the Picture is produced as aforesaid, Licensee shall retain in perpetuity the license to distribute and exhibit the Picture in any and all manner, media and methods now known or hereafter devised, provided that Licensee shall not release and exhibit the Picture after Licensor andjor its licensees publicly announce a release date for another motion · picture andjor television production based upon the Property during the period ending one ( 1) year after any such other motion pictureDeadline.com and/or television production is released. In addition, Licensee acknowledges that in the event the Picture is produced but is not released theatrically in the United States of America on a timely basis as specified in the preceding sentence, Licensee shall have no right to share in any revenues derived from the licensing and exploitation of any merchandise products and commercial tie-up rights in connection with the Property, the Picture andjor such oth.er motion picture and/or' television produced based upon the Property. (b) In the event that the Picture is produced and distributed hereunder, Licensee agrees and war~ants that the Picture shall qualify to receive a rating of "R" or less (e.g. "R" or "PG-13" or 11 PG") from the Code and Rating Administration of the Motion Picture Association of America, Inc.
-38- Counterclaim, Exhibit A, p. 077 2 3 0/LICENSE-02 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 80 of 102 Page ID #:1428
15 .. Reversion and Pavment to Licensee. In the event that a motion picture or television production {i.e., principal photography) based on the Property has. not commenced production within three (3) years from the date
after the Option is exercised by Licensee 1 (subject to extensions pursuant to Paragraph 11) 1 then Licensor shall have the right to elect to tenninate this Agreement by written notice to Licensee not less than thirty (30) days after such three (3) year period and such notice shall become effective as of the 60th day after, Licensee's receipt of same, unless Licensee, its successors or assigns commence production (i.e., principal photography) within sixty {60) days after receipt by Licensee of said notice. In the event Licensee becomes insolvent, closes its business or dissolves and fails within ninety (90) days after written demand by Licensor. to actively pursue development of a motion picture or television production based on the Property or to assign its rights to a permitted assignee that will actively pursue development of the Picture, then Licensor shall have the right. to terminate this this Agreement by written notice to Licensee not less than thirty (30) days after such ninety (90) day period. Further, in the even~ the rights in the Property have not reverted pursuant to the two preceding sentences, and in the event that Licensee fails to pay the $350, 000 Limited Recourse Note dated as of September 18, 1992 executed by sweet Pea Entertainment Corporation in favor of Licensor,· within thirty ( 3 0) days after the later of commencement of production {i.e. principal. photography) on a motion picture or television production based on the Property and. written demand for payment of the-Note by Licensor, then Licensor shail have the right to terminate this Agreement by written notice to Licensee not less than thirty (30) days a·fter such written demand. In the event of any such termination, the rights in the Property and the Picture and all materials relative .thereto, including 1 without limitation/ all treatments and scripts based on the Property, shall revert to Licensor; provided, however, that in the event that within ten (10} years from the effective date of the reversion of · Deadline.comrights and termination, a television andjor. theatrical motion picture is produced in any manner or by any method whatsoever, based in whole or in part on the Property and specifically u.sing a substantial part of the materials and any Picture Creation elements thereof which reverted to Licensor hereunder (such as but not limited to the treatment 1 script, characters~· plots, storyline, illustrations 1 graphics or other elements thereof) for any medium whatsoever including, without limitation, television, motion pictures· 1 live stage, video, recordings, andjor merchandising, and subject to the limitations on amounts set forth below, Licensor or its successors and assigns, if any 1 shall account to and pay Licensee a sum equal to five percent (5%) of all monies earned, received andjor derived by Licensor, its affiliated licensees, successors or assigns from any such project 1 from any and all sources and all derivative and ancillary rights therein (including, without limitation, five
-39- Counterclaim, Exhibit A, p. 078 230/LICENSE-02 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 81 of 102 Page ID #:1429
(5%) percent of all advances, option payments, compensation, rights payments, 1 icense fees, rentals, purchase prices, royalties, participations, commercial tie-ins and otherwise). In any event, Licensor shall remain primarily liable to Licensee hereunder for all such accountings and sums. Said payments shall continue to Licensee, its successors and assigns until Licensee (its licensees, successors or assigns, as applicable) sh~ll have received a sum equal to the aggregate of the following: {i) The cash payments made or payable by Licensee and any deferred payments which Licensee remains obligated to pay and of which Licensee has notified Licensor in writing in connection with the development of the Property to the writers of the treatment, script and all redrafts and polishes; and ( ii) All option payments and License Fee payments to Licensor Under this Agreement; Licensor shall provide in writing for all such payments _to Licensee, its successors and assigns, in Licensor's agreements with its successors and assigns. Licensor, its successors, licensees and assigns shall keep complete and accurate books and records regarding the production, distribution, marketing, exhibition and exploitation and all monies and other consideration earned or received therefrom-. Statements and payments to Licensee , shall commence with the exhibition, distribution, merchandising or exploitation of any such production whichever shall first occur, and shall be rendered and paid no less than quarterly on March· 31 1 June 30, September 30 and December 31 of each calendar year for so long as any such project or production is exhibited 1 distributed or otherwise ·exploited in any manner. Licensee and/or its representatives shall have the right, upon reasonable notice, to inspect and make extracts from the books and records of Licensor, its successors, l~censees and assigns regarding any such projects and productions, Licensor shall so provide in its agreements with all such parties. Deadline.com 16. Intentionally deleted. 17. Notices.
All notices which either party may be required or may desire to give to the other party hereunder shall be prepaid and may be delivered personally or sent by registered or certified mail or telegraph or telegram to the applicable address indicated on Page l hereof or such other address as either party may from of such other address as either party may from time to time design~te in writing to the other party. Statements to Licensor may be sent by regular mail. Notices to Licensee should be sent to Sweetpea Entertainment Corporation, 2001 Hillcrest Road, Los Angeles/ CA 90068, Attn: Courtney Solom6njJohn Benitz. Licensor
-40- Counterclaim, Exhibit A, p. 079 230/LICENSE-02 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 82 of 102 Page ID #:1430
sh,a].l send a courtesy copy of each no1:ice to Licensee hereunder to Peter J. Dekom, Esq., Bloom, Dekom and Hergott, 150 South Rodeo Drive, Third Floor, Beverly Hills, CA 90212. Licensee shall send courtesy copy of notices to Licensor hereunder to Lorraine Williams and Arthur M. Martin, Jenner & Block, one IBM Plaza, Chicago, Illinois 60611. Failure to send a courtesy copy shall not be deemed a breach hereof. The date of such personal delivery, mailing or delivery to a telegraph office or the date dispatched by telecopier, as the case may be, of any notice or payment hereunder, shall be deemed the date of service of such notice or making of such payment. 18. Confidentiality/Publicity.
Both Licensor and Licensee and their respective officers, directors and employees, shall use their best efforts to keep the terms of the Option Agreement and this Agreement confidential and shall not, without the prior written consent of the other, reveal any.of its material terms to· any other person or entity, except as required by law and judicial order and except as required for financing, production andjor distribution of the Picture and other versions of the Property authorized hereunder, and e~cept to the lawyers, accountants, officers and directors of Licensor and Licensee. · Notwithstanding the foregoing, the inadvertent failure by Licensor or Licensee to comply with the provisions of this paragraph shall not be deemed a breach hereof. Licensor will not, directly or indirectly, issue, authorize or permit the issuance of any publicity, oral andjor written and; or visual, or grant any interviews or make any statements relating to ··Licensee, the Picture or any allied or incidental rights of Licensee therein, unless same are first approved in writing by Licensee; provided that the foregoing shall not be deemed to apply to incidental non-derogatory references to the Picture in personal publicity issued solely for Licensor's corporation.Deadline.com 19. Breach of Agreement.
(a) Except as provided in Paragraphs 5, 15 and l9(c) of this Agreement with respect to the effectiveness or termination of this Agreement, in the event of any breach of this Agreement by Licensee, Licensor shall be limited to Licensor's remedy at law for damages, if any, and shall not have the right to terminate or rescind this Agreement or any of the rights licensed or granted hereundet, or to enjoin or restrain the production, distribution, advertising, promotion, merchandising or other exploitation of any television or motion picture production hereunder or. any video production thereof, or any live stage production penni tted by the terms hereof, or any allied or subsidiary rights in any of the foregoing granted to Licensee hereunder.
-41- Counterclaim, Exhibit A, p. 080 230/LICENSE-02 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 83 of 102 Page ID #:1431
(b) No act or omission by either party hereunder shall constitute an event of default or breach of this Agreement unless ~he other party shall have first notified such party i~ wri.ting, setting forth in reasonable detail the basis for such alleged breach or default and such allegedly breaching party shall not have commenced reasonable efforts to cure said alleged breach within ten ( 10) business days after receipt of such · notice. Notwithstanding the foregoing, if Licensee fails, without cause, to comply with its payment obligations hereunder, such failure shall not constitute a breach or event of default unless Licensor shall have first notified Licensee in writing, of such failure, and Licensee shall not cured such failure within ten (10) business days afte~ receipt of such notice. (c) Notwithstanding anything to the contrary in subparagraphs (19) (a) or (b) above, in the event a "Termination Default" (as defined below) occurs prior to the occurrence of any one of the events described in · clauses ( i)- ( iv) below, then Licensor shall have the right to terminate this agreement. If any one of the following events occurs prior"to the occurrence of a Termination Default, then Licensor's remedies shall be limited to a claim for damages as set forth in subparagraphs 19 (a) and (b) above: (i) a studio has commmenced active development of the the Picture; (ii) Licensee has firm bona fide written commitments for the financing of not less than· forty percent ( 4 o%) of the final ~pproved budget for the Picture; (iii) active preproducti~n of the Picture has . commenced (active preproduction shall be deemed to have commenced twelve wee·ks prior to the scheduled start date for principal photography of the Picture}; or ( ivL Licensee has entered into or has caused a studio, distributor or other financier to enter into a pay-or-play contract with a director or principal cast member. As used herein, a "Termination Default" shall be de·fined as the occurrence of any of the following: (x) Licensee's failure, without cause, to comply with its payment obligations as set forth in Paragraph 5 (a) ; (y) Licensee's failure to comply with the copyright and trademark notice requirements set forth in Paragraph 9; or (z) an unauthorized exploitationDeadline.com by Licensee of any of the rights expressly reserved to Licensor hereunder. Notwithstanding anything to the contrary in the preceding sentence, the occurrence of any of the events described in clauses (x), (y) and ( z) above shall not be deemed to be a Termination Default if Licensee effects a cure within the following time periods: with respect to clause (x), ten (10) business days; with respect to clause (y), thirty (30) business days; and with respect to clause (z), twenty (20) business days. Licensee shall be deemed to have effected a cure if Licensee has either remedied the applicable violation or breach or, if such violation or breach is not rea7onably capable of being cured within the appropriate cure per:~.od, has demonstrated to Licensor's reasonable satisfaction that Licensee has taken steps to diligently act in good faith to cure s~me within a reasonable period of. time thereafter.
-42- 23 0/LICENSE-02 Counterclaim, Exhibit A, p. 081 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 84 of 102 Page ID #:1432
20. Miscellaneous.
This Agreement, including all of the foregoing provisions and exhibits made a part hereof, express the entire understanding and agreement to the parties hereto and supersedes any and all prior agreements or understandings, whether written or oral, relating in. any way to the subject matter of this Agreement except with respect to a separate Letter Agreement, Limited Recourse Note of Licensee, Assignment Agreement of Licensee, · Copyr.ight Agreement of· Licensee and a Security Agreem,ent, Assignment and Mortgage of Copyright ·of Licensee, all dated January 5, 1993 (hereinafter collectively referred to as 11 the "Screenplay Loan Documents ), which are incorporated hereby and made a part hereof. It is agreed that in the event o.f any inconsistency between the terms and conditions of the Screenplay Loan Documents and this Agreement, the terms and conditions of the Screenplay Loan Documents shall control. The remedies herein provided are cumulative and the exercise of one shall not preclude the exercise of any other. No waiver by any party hereto of any failure by the other party. to keep or perform any covenant or condition of this Agreement shall be deemed a waiver of any preceding, succeeding or continuing breach of the same or any other covenant or condition. This Agreement cannot be modified, amended, supplemented or discharged except by written instrument executed by both part;ies hereto. In the event any part of this Agreement is adjudged invalid, illegal or unenforceable, it shall . not affect the remainder of this Agreement, which shall remain in full force and effect. This Agreement shall be construed in accordance with the laws of the State of Wisconsin,· u.s.A. applicable to agreements entered into and wholly performed therein., exclusive of its conflicts of law. The prevailing party in any suit or proceeding hereunder shall have the right to recover ·its reasonable legal fees and costs from the other party. The paragraph headings are for the convenience of the parties only and shall have ·no legal effect whatsoever. This Agreement does not constitute a joint venture or partnership ofDeadline.com any kind between the parties.
21.' Unique Rights and License/Injunction. Licensor acknowledges and agrees that the exclusive and irrevocable license and the rights granted to Licensee hereunder are of a special, unique, extraor<;:linary and intellectual character which gives them a peculiar value, the loss of which cannot be reasonably or adequately compensated· in damages in an action at law, that a breach by Licensor of this Agreement andjor any attempt to use or permit others to use in whole or in part the rights and/or licenses granted-hereunder will cause Licensee irreparable injury. In furtherance of the foregoing, Licensee shall be entitled to seek injunction, specific performance andjor other equitabl~ relief to prevent a breach or threatened breach of this Agreement by Licensor or to cause Licensor to perform
-43- Counterclaim, Exhibit A, p. 082 230/LICENSE-02 . ... ' Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 85 of 102 Page ID #:1433
hereunder, as applicable, which relief shall be in addition to any other rights or remedies which Licensee may have, whether for damaqas or otherwise. IN WITNESS WHEREOF, the undersigned have executed this agreement the day and year first above written.
By: Its
By: Its
TSR, ( "Li
By: Its resident Executive (Lorraine D. Williams)
By: u#JJh-r~.L Its .Chie~ Operati~g Officer (Willard D. Martens} Deadline.com
-44- 2 3 0/LICENSE-02 Counterclaim, Exhibit A, p. 083 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 86 of 102 Page ID #:1434
Deadline.com
EXHIBIT B Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 87 of 102 Page ID #:1435
'• ~· I • ,.I •
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T:SR anc:l 5W?:etpe! have agreed the following Anlcndment to the Exclusi"i~; I.m:voca.blc Licerue Ag:reemen~ dated u of Scptem~ 2, 1994:
· 1. · Swet:tpea will resume priocipal ph.otopphy ofthc Picture on or before January 1 1999, subject to the cure period stated in Paragraph .15 of the Agres:mcrrt, 'ub~ ttl exten3ions ' for fotce maje'-" as provided in Paragraph 11 thereof. ln the event that principal photography does not beiin. by the end of the c~ period, ell rl&ht~ (as provided in Paragraph 5 hcrcof) shall ·revert to TSR.
2. The "all·ln" bud.g~ for the filn.1 will be at lel!rt S20 million. All third party approva.la of the budget required by contract shall be given befott: ~sumption of principal photography,
3. Swe:tpea .iliall pay TSR 2% of the budget M defl.ned in Paraaraph S(a) of the: Agreement on or before resumption of principal photography le!!s the $350,000 lkc..uc fee already paid.
4. On or before the mwnption of principal photography, Sweetpea. sb.e.ll provide:
a. A completion bond, if requi~ by its financier;
b. Production i.ruurance; and
c. Financing .fcr the flmi.
Sweetpea 5hall provide notice crf (a) throuifl (c) above under penalty of perjury to TSR befon: n:S"U.mption of principal photOgraphy. ·
5. In the e•1ent of a failure by Swet:tpea to comply with Itetn! 2 through 4 above, all rigbu srmted to Sweetpea byDeadline.com TSR in the Agrct'tllcnt and in ~ Amendment (but not ill any case the Picture C~tioru which ~hall be owned sol~ly by Sweet}lea) shall re~rt to TSR with no · op,PQrtunity to cure.
6. !SR graol$ to S~etpea the rights to make one or more sequels (which sh.all be defined to include: prequel~) or rcrn.ake.s bru~ed en the Picture, th~:~ Picture CreatioruJ and the Property. The$C righu !!.hall revert oo a rollioi bl!Sis (but not the Picture Creations) t.o TSR on the earlier of (i) five (S) years from of the initial U.S. release or (ii) seven (7) years from :final director's cut of the immediately prior picrure.
7. Sweetpea shall pay to TSR for each sequel intended fer theatrical rcle~e, a. pa.sslve royalty equal to two pe~ent (2%) of the budget a5 defined in l'aragraph S(a) of the Agreement far such seq,ud, provided Utat such license fee sh.all not be less then S350,000 (iocre9.!ed by 2% for the sec.ond and ~ch subsequent Ficturc) nor greater than $600,000, together ! with. five pcxc...--nt {5%) of one hundred pmt'llt (1 00%) of the net profits derived frcno. such
Counterclaim, Exhibit B, p. 084 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 88 of 102 Page ID #:1436 ...... I .·. . .· ..
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:s!Kfucl. ··.Net proOt:S'" anau be defined on a .. mo!t favored nations•• b~Uis with all other net profit participant! for such sequel. ·
8. Sweetp= ah.a.IJ pay to TSR for e~h remake intended fur theatrical release, a passi-ve royslty eqWli to one percent (1 %) of the budget for such roma.kr: !US dcflned In Paragraph S(a) of the Agrctmcnt, provided that !tU:h license fe~ :Jhall not be 1C3s than $175,000 (inciUSed by 2% for~ s~ond and each !ub:sequcnt picture) nor gn:atcr th.an 5300,000, together with twQ md one~ha.lf pcrc~nt (2~%) cf one hundred percent (1 00%) of the net profits de.rlved from such remake. "Net profit!!Jf shall be defined on a. "mo9t favored nation!, basis with all other net profit pa.rtic.ipwm for such remake.
9. Sweetpea 4ha1l pay to TSR for each non-theatrical sequel or rentake a passive royalty equal to two-third! of one pem=nt (2/3%) of the budget far !uch non·th=trical s.equel or remake as defined in Paragraph S{a) of the Agreement, provided that such license fee shall .act be less than 5116,667 (increased by 2% for the second and each sub~queat pic~) nor greater than $200,000, together with one and t'ivo-third3 perc...'"llt (1-2/3%) of cue hundred percent (1 00%) of the net profi.u derived from such noa-thc:atrical sequel or remake. 14Net profits" shall be defined on. a. "most favored nations•• basi& with all other net profit participants for such non-theairlcal sequel or ~ma.ke.
10. TSR grants to Sweetpea the riaht to make one or mo~ live· action television 5erlcs or televi.9ion motion pic~:~ (indiYiduelly and coll~ctiveiy "Television Program(s)'') based on the Picture, the Pictul."e Creatiom and the Property (including the rlibt to use animation for special, optical and compum generated effects of charactm and other elentenb i.n the Picture, provld.ed such use sb.a.ll be 5upportive! and not domizlan.t as dl3tinguished from an anin1ated · televi3ion program the rights to which ar~: not granmd to Sweetpea by TSR, subj~:ct to Paragrap~ 14 and 15 h~f). provided that Sweetpea. shall have first released the Picture. TSR ~serves for itself all other li"vc-ael:ion television seri~ tigh~, subject to Paragra.p~ 14 and 15 hereof. Deadline.com 11. Sweetpea shall pay to TSR for su(::h live-action tel~ision rights to the following:
a. For each episode not exce:ding 30 minutes, S5,000;
b. For each ~isodc: not exceeding 60 minutes, S7,500;
c. Far e!.ch epbode of mort than 60 minutes, S 10,000;
d. For each movie of the week or mlni.series, $10,000 p~ hoW' and no more than s&o.ooo in the aiil"Cgi!te.
Swe~ !!hall also pay to TSR for any live-action tt!cvision serie:t or televi.~ion motion pictu.te tvto s.nd one-half percent (2~%) of one hundr.:d percent (1 00%) of the r.et profit! of any :~uch tc:levl!ion ~-ries or tclevbion motion picture. ''Net profits" sh.ell be defin~d on a. ''most favored
Counterclaim, Exhibit B, p. 085 lJ'-' $9ll.l.. ". 2 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 89 of 102 Page ID #:1437 ...... \,. ,•
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natlon,·· basiS wtm au otner .r.r:t pront part1C1pants !or such Uve-action. television scri~ or television motion picture. The above sums would be one-half(l/2) of the above ifiDitial broai:ica.!t is other than U.S. prime-time network free television. ·
12. If Sweetpea dce:J not com.mr::nc:: a production based. on the rlghtl referenced in Psragraph 11 hereunder on a rolling basis within five (5} yean afb:r the initial broadca.st of the final original episode of any television serie.s or of any television motion pl~, :such rights shill .revert to TSR (but not the Picture Creatioru) and the restrictions in Paragraph 15 shall be relea!ed with respect to futore productions.
13. It is of tho e:~scmca that Joel Silver or.a "ahowiunner" of comparable stature ma.JJ . be attached to the first television series produccl hertUndcr.
14. The holdbacks provided in Paragraph 4(b) of the Ag:re~ment !hall be te:mina.tcd, except:
(a) · TSR !hall not wse or permit othen to use the words "DungeQns & Dragons" and/or "Advanced DuniWil! & Onion,.. in any live-action motion picture or telev~ion program in any maoner until January 1, 2000; provided TSR may use the words 11Dungeotl! & Dragons'' and/or "Advanced Dungeons & Draions" as a. source material credit only in ;ruch productio.ll!~ provided ruch credit (i) will be in a s~ no areater than 50% of1he siz~ of the primary artWork title and (ii) in no .;ase will ap~ar above or before the title.
(b) After January 11 2000; TSR shall not~ or ~:mit· others to use 1he words ICDungeo.t19 & Dragons" and/or •·Advane!d DuniCOll3 & Dragons" in the prims.ry title of any li~s.C""don motion pic~ or.'tel~vision proi!'am; provided TSR ma.y use the word:s "Dunieo~ & Dragons'' Slld!or 14Advanced Dungeons & Dragoru'' In a secondary title in ~w:h producti<:~n!l, in a. size no greater tha.n S0% of th~ size of the primaryDeadline.com artWork title and in oo caac above· or before tho prim~ artWOrk title in such prod~ons.
(c) Upon ~ecution of the formal amendment, TSR may use tfr permit othm to use the words "Dungeons & Dnsgcru" and/or 11Arlvanced Dun&eons & Drasom" 113 the primary or Stcondary title of any animated 1heatrical motion · picture or animated tdevision proil'a.m;
(d) TSR egrets to cooperate in good faith with Swcetpea on the use of th~ WCJrd.! .. Dungeon! & Drag om" and/or "Advanc-..d Dungeon! & Dragore" so~ to. minhniz~:: the competitive impact of any ofTSR's motion picture::~ or television progrsme with any of Sweetpea'ts motion picture~ or t~!cvisioa prcgra.cl!.
15. 1a the even!: Sweetpea, in lts :sole di~cretioo, elccb not 10 we such words in the title(5) at any ~\nt (ar.cl not due to a b~h by TSR of the Agreement) or in the event the first
Counterclaim, Exhibit B, p. 086 3 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 90 of 102 Page ID #:1438
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_pld~ pt"Oul..locrot ay ~W'e;fltpea 1:s not tl!ic:a.!!!d !.n theatres t.n the United States prior to January 1, 2004, then TSR will have the right to W!e such word~ in the prlmazy title(;,) in productions th~reaftc.t".
16. TSR ~'that the quality IUld qua:atity of the manufacturing, distribution and ei Counterclaim, Exhibit B, p. 087 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 91 of 102 Page ID #:1439 ·~ ' ~. !'i~~-'-lSl-538 ll:36P • • 0 \#WI - -- • •w~ • 111111• _...,. . ' ~ .. . -..... _, -·· ·- :.···.- .. , . ··- ':' .• 04 tot.ar-lD-!il~ 11 :071t II',Q7 ~-·- -·- .. ._ __.I 0 11. lAt.twa.t~nr~~ ... JfDrf ... .tali.Wt ...... pittM1( ... otw ~' 1• '-.. JIWtUiau of til AI!Wl. b PM tbA Jllft'K. I rN tmlolil. 'lt'HIUC1=. tM ~~talCUM~ ... •,. 1tril_., I ~~~- J TSI.,lNC. t I l I I I I I . Deadline.com J s Counterclaim, Exhibit B, p. 088 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 92 of 102 Page ID #:1440 EXHJBJT A TSR Manufactured Picture Merchandising Line Category Publishing Movie, TV, Book Adaptations Toys & Games Board/Activity/ Card Games · Role Playing Sets (to replace Toys & Games Product 1070) Deadline.com Counterclaim, Exhibit B, p. 089 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 93 of 102 Page ID #:1441 eXHIBIT 8 TSR Llcens~d Picture Merchandising Line Category Accessories Hats & Caps Apparel T-shirts Gifts & Novelties Figurines Gifts & Novelties Cards, Playing Gifts & Novelties PVC Figures Gifts & Novelties Stained Glass Limited EdiUon Memorabilia Collectible Figurines Limited EdiUon Memorabilia Signature Pieces . Limited Edition Memorabilia Collectible Coins Limited Edition Memorabilia Collector Chess Sets Limited Edition Memorabilia Commemorative Plates Pinball Games Pinball Games Publishing Posters Publishing Address Books Publishing Movie Souvenir Books bUshing Script Books Jblishlng Book & Audio Cassettes i ublishing Diaries Publishil)g Coffee Table Books Publishing How-To Books Stationery/Paper Goods/Back to School Book Marks Stationery/Paper Goods/Back to School Memo Boards, Pads Stationery/Paper Goods/Back to School Posters Stationery/Paper Goods/Sack to School Trading Cards Stationery/Paper Goods/Back to School Stickers Toys & Games Deadline.comAction Figures Toys & Games Playsets Toys & Games Puzzles Toys & Games Model Kits Video Games & Software CD-ROM Video Games & Software Screensavers Video Games & Software General & Educational PC Software Video Games & Software Video Games & Nintendo Video Games & Software Handheld Electronic Games Video Games & Software Interactive Games Counterclaim, Exhibit B, p. 090 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 94 of 102 Page ID ·.. #:1442 ...:XHIBIT C Other Picture. Merchandising Line Category Accessories Sunglasses Accessories . Wallets Accessories Belts & Beltbuckles Accessories Jewelry/Charms Accessories Embroidered Emblems & Logos Accessories Watches Accessories Ties Apparel Jackets Apparel Sweatshirts & Sweatpants Apparel Shirts Apparel Sportswear Apparel Fleece Apparel Boxer Shorts Apparel Uniforms/Sports Jerseys Apparel Sweaters 'a rei Wann·up suits .1estics & Linens Bedspreads .)mastics & Linens Curtains Domestics & Linens Blankets Domestics & Linens Sleeping Bag~ Domestics & Linens Place mats Domestics & Linens Slumber Bags Domestics & Linens Towels·Bath, Beach, Kitchen Domestics & Linens Comforters Domestics & Linens Pillowcases Domestics & Unens Deadline.comSheets Food & Beverage Candies Food & Beverage Gum Food & Beverage Juice Food & Beverage Soft Drinks Food & Beverage Cereal Food & Beverage· Ice Cream Food & Beverage Microwave Meals Food & Beverage Soda Food & Beverage Cookies Food & Beverage Jams Food & Beverage Milk i & Beverage Frozen Meals & Beverage Jellies ad & Beverage Snack Foods Gifts & Novelties Christmas Ornaments Counterclaim, Exhibit B, p. 091 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 95 of 102 Page ID #:1443 Jitts & Novelties Telephone Cards Gifts & Novelties Lapel Pins Gifts & Novelties Pencil Toppers Gifts & Novelties . Banks Gifts & Novelties Nlghtlights Gifts & Novelties Animated Cells Gifts & Novelties Cloisonne Pins Gifts & Novelties Magnets Gifts & Novelties Buttons Gifts & Novelties Ceramic Mugs Gifts & Novelties Key Chains Home Furnishings Laminated Placemats Home Furnishings Clocks Home Furnishings Bedding Home Furnishings Cups, Plates, Bowls Home Furnishings Cookie Jars Home Furnishings Telephones Publishing. Comic Books Publishing Activity Books Publishing Coloring Books -·,biishing Magazines orting Goods Daypac~s ~orting Goods Skateboards Sporting Goods Sports Equipment, Other Sporting Goods Water Bottles Stationery/Paper Goods/Back to School Backpacks Stationery/Paper Goods/Back to School lunchboxes Stationery/Paper Goods/Back to School Calendars Stationery/Paper Goods/Back to School Greeting Cards Stationery/Paper Goods/Back to School Stationery Stationery/Paper Goods/Back to School Party Goods, Paper Tableware Deadline.comDecorations. Candles Stationery/Paper Goods/Back to School Pencils Stationery/Paper Goods/Back to School Pens Stationery/Paper Goods/Back to School Checks Stationery/Paper Goods/Back to School Postcards Toys & Games Costumes & Masks Toys & Games Puppets Toys & Games Kites, Windsocks & Accessories Toys & Games Rack Toys Toys & Games Battery Operated Toys Toys & Games Electronic Toys Toys & Games Radio Remote Controlled Toys ·. & Games Hobby Kits , & Games Activity Sets "'ys & Game5 Plush Counterclaim, Exhibit B, p. 092 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 96 of 102 Page ID #:1444 .Jys & Games Die-Cast Vehicles Travel Accessories Toothpaste & Toothbrushes Travel Accessories Adhesive Bandages Travel Access'orles Shampoo Travel Accessories Vitamins Travel Accessories Bubble Bath Travel Accessories Soap Acceptable Picture Related Promotions Fast Food (Fees & Premiums) Packaged Foods Deadline.com Counterclaim, Exhibit B, p. 093 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 97 of 102 Page ID #:1445 Deadline.com EXHIBIT C Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 98 of 102 Page ID #:1446 AMENDMENT TO AGREEMENT. Thss amendment, made and entered into as of June 8, 1998, to the Exclusive LrrevocAble License Agreerrtent ("License Agreement") dated as of September 1, 1994 (after the exercise of an option from an agreement and dated May;3, 1991) between TSR, Inc., a Wisconsin corporation {"Licensor" ar `"i'SR"), Sweetpea to Sweetpea B.V.I. Ltd., a British Virgin Islands corporation, as successor-in-interesC Entertainment Corporation, an Ontario co;po~ation ("Licensee" ar "Sweetpea"}, together with the amendment thereto are ("Amendment") dated March 19, 1998. The License Agreement and the Amendment collectively referred [o as the"Ap Bement." in each of the For mutual consideration, the parties have a~eed to amend the Agreement following respects: of the License I. Regazding the definition of "Property" set forth in Paragraph 1(a) Agreement, the paraies acknowledge that Licensor is considering merging its AD&D property with its that D&D propBrty for business reasons unrelated to the Agreement. The parties further acknowledge this 1(a) the License Agreement merger shall not expand the scope of "Property" as set forth in Psiragraph of as follows: and, in order to avoid any misunderstanding, cltuify the scope of this definition (a). The term "Property" shall include the contents of t~..11 DUNGEONS &DRAGONS (110fi). products released from inception through December 31, 1994, including Classic D&D (b). Regarding settings, "Property" shall include all contents from the Mystara producCs. (c). Regarding creahu~es,"Property" shall include and be subject to the following: and (i) All creatures in the Dungeons &Dragons Rules Cyclopedia (1Q71} Volumes"}, with the exception the Dungeons and Dragons Creature Catalog (9438} {collectively, "Source D&D products but were of those listed in tha Creature Catalog indax that aze noted as being from other originally AD&D creatures, (ii) Licensed creatures should die portrayed reasonably consistent with said Source Volumes, Deadline.com to by {iii) Wherever reasonably practicable; licensed crea[uros will be referred their primary names as referenced in tf~►e Source Volumes. (iv) "Property" shat! not include the following creatures: (1} Devil Fish (mendaned in AD&D as Ixitichids) (2) Hulker(mentioned in AD&D as the Umber Hulk) (3) Undead Dragons (mentioned in AD&D as Dracoliches) (v) Licensee may use other creatures with the prior written consent of Licensor, such consent which will not be unreasonably withheld (vi) Permission to use these creatures from the Source Volumes does not negate TSR from licensing similarly named/appearing creatures from other, nan-D&D source volumes, provided that TSR may not license Picture Creations without the prier written consent of Liccnsee, such consent which wiI! not be unreasonably withheld. Counterclaim, Exhibit C, p. 094 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 99 of 102 Page ID #:1447 (d). "Property" shall include cha,c~cter classes, spoils and magical items used as generic terms which are part of both the D&D and AD&D worlds. (e). "Property" shall not include the titles, worlds, character names, characters, visuals, stones, props, places, identifica[ions, and other copyrights and trademarks for AD&D (subject to the reskrictions otherwise contained in the Agreement as amended), Greyhawk, Forgotten Realms, Dragonlance, Ravenloft, Planescape, Dark Sun, Birthright, Spelljammer, Al Qadim, First Quest, Maztica. 2. The parties wish to confirm their mutual agreement regarding certain asgects of the "M~rchandising and Commercial Tie-Up Rights" referenced in Paragraph 3 of the License Agreement as amended by clarifying these rights and obligations as set forth below: (a). ~ictur~ Marketing Materials. It is understood and agreed that "Picture Marketing Ma~erials" will be required in order for the parties to properly solicit and secure product connmitments from potential Iicensees~ subject to the condition that both parties will diligently solicit potential licensees. The following is the Iist of Picture Marketing Materials that will be provided by Licensee to Licensor. Picture Marketing Material Include; 1. Marketing Plan/Budget (John Raczka) 2. Find shooting script 3. Picture style wide* 4. List and likeness provisions of principal cast 5. Picture creations proposed by Licensee for the merchandising campaign 6. Picture Loga , 7. Other graphic designs (posters, etc.) as made available to Z.,icensce 8. Signed production budget 9. Firm release date of thB picture *The parties will work cooperatively in developing the Picture Style Guide, with Licensor having fma! approval right. In order to expedite and minimize ttte costs of this guide, Licensor will provide in-house creative and production resources in assembling the finished Picture Style Guide. Licensor will be entitled to deduct "off the top" all directly related costs expended in connection with the development and production of theDeadline.com Picture Style Guide. The parties asee to keep each other fully .informed of all activities and progress in connection with their merchandising activities, and shall provide to the other party copies of a!1 deaE memos, names of proposed licensees and any other information reasonably requested by the other parCy in connection with said merchandisin; activities. ' Pursuant to paragraph 16 of the Amendment, and far the purpose of further defining the scope of each parry's Picture Merchandising Product Commitment and Licensed Picture Merchandising Commitment, attached hereto as Exhibits A, B and C respectively are schedules setting forth (i) Licensor's core manufactured groducts, (ii) Licensor's care licensed products, and {iii) "Othor Products," the merchandising of which shall be managed by the parties' third-party licensing agent, John Raczka. lbl. Manufacturing 84 Licensing Commitment ~r,Qp Deadlines. Licensor's deadline for obtaining manufacturing and licensing product commitments shall be the later of 5 months after S i.icensor's receipt of the Picture Marketing Materials or 5 months prior to the fum release date of the picture (i.e., May 31, 1999, it release date is October 31, 1499). Counterclaim, Exhibit C, p. 095 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 100 of 102 Page ID #:1448 ~c). Picture Relayed Web Site. Licensee will have the option to develop a Picture related web sire at its own expense for mtuketing purposes of the Picture. Licansar will provide Licensee web site. with a link to its web sate, provided ail Picture related e-commerce takes place via Licensor's (dl. Mutual ~pprov~.l Rights to "Other" Categories. The parties have agreed to mutual 2 3 of approval rights to any "Other" product categories currently not listed in Exhibits and the Amendment. e). Licensee Comm fitment to Cross-promote Picture Bused Licensed Products to cross-promote Licensor agreed that it will cantrnetuAlly commit licensees of Picture-related products with the Picture's release. (fl. Distressed Sales of p&D Products. There shall be no distressed sales of D&D products 9 months prior to the film's release. ~~L Prgduct Bundlins~with Picture Based Produces. Licensor shall not bundle Picture or agents. based products with any other products by Licensor or any of Licensor's licensees to ~~L_Cross-Pro~tian with ~ ctur~B~d Products. Lice or will kiave the option cross-promota Picture bused products with other of Licensor's'products. (from receipt (i~. Approval Turnaroupd Tir~ei The parties agree to a 5 business day phase. of materisals} approval turnaround time during any product development as ~j}. Product #1070: The parties acknowledge that product #1070, defined longer exists and that Licensor "Licensee Shared Property Merchandising" in the License AQBement, no references to product #1070, shall not be producing a new version of product #1070. Therefore, any from the Agreement. including Licensee's (Licensee) 5%share of licensed revenue, should be deleted will .(14~. ~&D Pic ~e Game. The parties understand and agree that Licensor date. The Net Profits of manufacture a D&D Picture Game with a product code to be deternuned at a later this product shall be divided oqually between the parties. upon a form of X11. License Agreement Form. The parCies shall develop and agree license agreement to be used for aII picture related merchandising. Deadline.comin good faith with respect to all toy . Sm). Tov License. The parties shall work together of the Picttue licenses related to the Picture, and shall cooperate and consult with the U.S. Distributors) regarding any such toy licenses. to the other (n~ Product PackaQin~and Marketing Materials. Each party shall provide to thereof for party samples of product packaging and final product marketing materials prier distribution or cause to be made, any thaE party's review~and comment. Each party will exercise best efforts to make, changes in said packaging or materials reasonably requested by the other party. lines, the words 3. In subparagraph 3(g)(vii) of the License Agreement, on the 11`h and 12`~ on." "Lake Geneva, Wisconsin" are deleted and replaced by the words "Renton, Washing "7oe1 Silver" 4. Psuagraph 13 of the License Agreement is hereby amended by inserting Agreement, and by inserting afier "Larry Gordon" and before "etc.)" in Paragraph 13(a)(v) of the Licenses the second line of the first "related [o the first picture" after "all or any pt~rt of its rights hereunder" in assignment to Behavior paragraph of Paraoaph 13. Licensor will execute a consent to Licensee's Counterclaim, Exhibit C, p. 096 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 101 of 102 Page ID ., i'b~'u,.%y~ IIII LL::~r {•:1.1 «Ua~V~ ru~;~ ~rlL:~ltua #:1449 I.L•4:~c. ~ir~'i ~YJVu: Worldwide and its nffiliatcs, subject to ~hG terms and conditions For such an assignment as sec forth in Paragraph I3, upon Licensor's review and approval of the terms and conditions of this assignment. 5. In Para~aph 17 of the License Agreement,[he second, third and fourth sentences thereof are dele~ed and replaced by the following: "Notices to Licensee should be sent to Sweetpea S.V.1., Ltd., c/o Sweetpea Eneertainment, Inc., 147 South Afmon~ Drive, $ungalow, Los Angeles, California 90048-2914, Attention: Courtney Solomon. ~ieensor sha]I send a courtesy copy to Sheri Jeffrey, Esq., at Kaye, Scho[er, Fie~man, Hays &Handler LLF, 1999 Avenua Stars, Suite 1600, Los Angeles, California 90067. •Notices to Licensor shall be sent to TS R, Inc., P.O. Box- 707, Renton, Washington 98057-0707, A«ention: Senior Vice President and General Counsel. Licensee shall send a courtesy copy to Wyman, Isaacs, Blumenthal & Lynnz,?029 Cen~ury Park East, Suite 3250, Los Angeles, California 900b7:' b. Ln Paragraph ?0 of the License Agreement, on the 28th line of the test of [he paza~raph, the word "Wisconsin" is deleted and replaced by the word "California." Pasoaph 1 of the Amendment is deleted and replaced by the following: "Sweetpea, or its assignee, will resume principal photograQhy of the Picture on an ongoing, contenuous basis consis~en~ with industry standards on or before June 1, 1999 (and in no event sha[I she provision for cure periods in Paragraph 15 of the Agreement extend that date), subject only ca extensions for force majeure as provided in Paragraph l I of the Agreement, In the event principal phonography does not begin by June 1, 1999, subjec~ only to extensions for force majeure as provided in Para aph 11 of the Agreement, a!1 rights (as provided in Paragraph 5 hereof} shall revert w TSR." 8. Paragraph 4 of the Amendment is deleted and replaced by the Fotlowino: "4. a. On or before the resumption aF principal photography, Sweetpea shall provide notice, under gena]ty of perjury to TSR, of ~ completion bond, if required by Sweetpea's financier, and of production insurance; and "b. ors or before lvlarch 31, 1999 (with NQ cure period), Sweetpea shall provide Haute, under penalty of perjury to TSR, of financing far the Pic~ure, tivhich shall be defined for this purpose to mean evidence of a comirutment of producrion financing for the Picture from a banl: oc a tinaPcier of theatrical motion pictures in theDeadline.com form of either a letter of creditor an'ex~cuted comznitmenc letter, either of which shall otherwise bz consis~en~ with film industry standards regarding proof of production► financing. .4n executed lever comltxitting to provide production financing for the Picture shall be subject only to Sweetpea obtaining a completion bond and production insurance for the Picture. 9. In Paragraph 5 of the Amendment, on the first Line, insert after the word "above" the words "on or before the resumption of principal photopaphy but in no event later than June 1, 1999, subject only to extensions for force majeure as provided in Paragraph ll of the Ageement, with the excep~ion of the requirement with Item 4.b. above, which must be satisfied on or before Nlarch 31, 1999 (tvirh NO cure period)." I0. Licensor grants to Licensee, as set forth in the Amendment, the rights to make one oc moco sequels (which shall be d~Fned to include prequels) or remakes based on the Picrure, the Picture Creations and the Property. 1 1. At Sweetpea's request, T5R will promptly execute and deliver all aCditional documents, instruments and assi;nmen~s which Sweetpea reasonably deems necessary or dzsirable to effect the purposes of this Amendment and the Agreement (including, wi.Chout limitation, a ShortCounterclaim, Form AssignmenC Exhibit C, p. 097 Case 2:13-cv-03406-DMG-JCG Document 62 Filed 09/03/13 Page 102 of 102 Page ID #:1450 .n the form attached hereto), provided that this provision shall not be interpreted to requirc TSR to agree to :ake any action in contravention of its rights under the Amendment and the Agreement (c,g., TSR may not be deemed to waive its right of approval of an assignment of Sweetpea's right, title and interest under the Agreement}. In accordance with the foregoing, TSR irrevocably appoints Sweetpea as its attorney-in-fact with full power to execute and deliver such documents in the event TSR fails to do so within a~reasonable interest. tiir►e. This appointment shall be a power couple with an 12. All references in the Amendment to a "formal amendment" are deleted. The parties acknowledge that this amendment, when taken together with the Agreement, constitutes a valid, binding, enforceable and fully integrated agreement between the parties. TSR, Il~C, and W17ARDS OF'T'T~ COAST,INC. By: Jeff .Christianson Sen r ice President and General Counsel Date of Execution: Oct ~~ 1 S S F Date of Execution: ~~-'~'~ cL , ~ G~ ~ Deadline.com Counterclaim, Exhibit C, p. 098