Comic Book Creator Clients

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10/5/2016

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FROM PANEL TO PUBLISHER: AN IN-DEPTH LOOK AT TRANSACTIONAL LAW FOR COMIC BOOK CREATOR CLIENTS

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Thomas A. Crowell, Esq. www.lanesash.com www.thomascrowell.com @Law_crow

Matthew Tynan, Esq. www.pwes.com @matthewptynan Presenters Jeff Trexler, Esq. [email protected]

David Gallaher www.davidgallaher.com @davidgallaher

Overview of Presentation

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THE COMIC BOOK CREATOR AS CLIENT

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COMIC OWNERSHIP

Creator Publisher- Creator- Owned & Owned Driven Distributed

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IP is the beating heart of the client’s property.

INTELLECTUAL PROPERTY FOUNDATIONS T

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IP rights in a comic property can be parsed and licensed according to…

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Keep track of how the IP is created

Protect the IP “Engine” with registrations

License the IP “streams”

Revenue flows back

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INTELLECTUAL PROPERTY

Copyrights are the KEY Rights

WWW.COPYRIGHT.GOV

Author

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Copyrights are KEY Rights

Copy

Distribute

Public Performance

Public Display

Derivative Works

The Right to Make Derivative Works The EXCLUSIVE right to create other copyrighted works based upon the original work. Comic Book Movie & TV Video Game Toy

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A Few Copyright Danger Zones

The copyright in a Work For Hire is owned by the hiring party.

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A Notable Comic Book Case

Termination of Transfer

One seemingly odd wrinkle in copyright law is the termination of transfer provision, which allows a valid and otherwise irrevocable copyright assignment or license to be revoked after 35 years by the copyrighted work’s author or her heirs.

Superman, Captain America, Fantastic Four, X-Men, Iron Man, Spider-Man, The Incredible Hulk, Thor, The Avengers, Nick Fury, and Ant-Man have all seen the inside of a courtroom as their creators and owners battled over copyright’s termination of transfer provisions.

17 USC §203 - licenses and transfers of copyright which happened after January 1, 1978 17 USC §304(c) - licenses and transfers of copyright that occurred prior to January 1, 1978

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Termination of Transfer Example

Xander assigns the copyright to his patriotic comic book property “Captain Constitution and Bill O’Rights” to Mumble Publishing, which over a 35-year period makes a movie and a television series based on Xander’s work.

Even though the comic book acquisition agreement between Xander and Mumble Pub. explicitly states that the copyright transfer is irrevocable and lasts for the duration of the copyright, Xander can still revoke the copyright starting at the end of 35 years from when it was transferred!

Mumble can still exploit any comic book, movie, or television series it had made prior to the termination, in accordance with the terms of the comic book acquisition agreement. However, once Xander revokes the copyright, Mumble Pub. can’t make any more derivative works from the comic book (additional comics, spin-offs, video games, books, merchandise, etc.) without relicensing the copyright from Xander.

However, unlike assigned copyrights, the copyright created as a work for hire is not subject to the termination-of-transfer provisions.

A Notable Comic Book Case

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Creating Together: Joint Author

Copyright Without a When two law DOES written NOT favor or more contract the author authors between the who did the work creators, most work; together to copyright nor does it law will create a favor the control how comic book author who the they may came up copyright is with the be joint owned. idea. authors

When two or more authors work together to create a screenplay or film, copyright law may consider them to be joint authors.

Cf. Gaiman v Expressive contribution McFarlane (7th Cir.)

Without a contract between the creators, copyright law will Inseparably or control how the copyright is interdependently merged owned.

Copyright law does not favor the No contract to the contrary author who did the most work; nor does it favor the author who came up with the idea.

Each author has some control over creation of work

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Writing Together: Joint Authors

EQUAL RIGHT TO GRANT BUT EQUAL NON- EQUAL PAY- YOU OWNERSHIP- EXCLUSIVE NO RIGHT not more for CAN not more for LICENSE; ALL to sue other JA the person the person JA’S MUST for MODIFY with the who did the AGREE TO infringement idea(s) most work GRANT WITH EXCLUSIVE A LICENSES WRITTEN, SIGNED CONTRACT

Default Joint Authorship Rights !

A Notable Comic Book Case

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Trademark

The title of a single work, such as a book, is not considered a trademark, and therefore is unregistrable. Herbko Int’l Inc. v. Kappa Books, Inc.

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Patent

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Tax Issues

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COLLABORATION AGREEMENTS

M D

Undiscovered General Partnerships

Two or more people working together on a project without a General Partners contract or company with expectancy of profit

Must share profits equally

General Partners are liable for each other's partnership debts

Liable for torts committed to further the partnership

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Identify the Relationship

Independent Contractor?

CHECKLIST: Collaboration Agreement

Partnership? LLC?  IP Ownership? Approvals?  Expenses? Profits? Credits Who can license?  Work schedule? Carve outs for unilateral exploitation? Can collaborators create derivative works? What happens if it doesn’t work out?

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Founded in 2007, Bottled Lightning has worked with DC, Image, Marvel & more. We’ve been collaborating for ten years.

Here are some of our tips for a successful collaborator:

Talk frequently and often; don’t be afraid to talk about the tough stuff, especially things like money.

DAVID GALLAHER: Founder of Bottled Lightning Write down the important stuff! bottled-lightning.com After meetings, recap the major points in an e-mail.

Have a collaboration agreement in place: Ownership. Royalties. Deadlines. What is the plan if things go south? (death, leaving the project, illness)

ENGAGING THE SERVICES OF OTHER ARTISTS

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* IF YOU’RE ENGAGING AN ARTIST, YOU WILL NEED A WRITTEN CONTRACT WHICH ESTABLISHES:

 THE SCOPE OF WORK SHE WILL BE PERFORMING

 EMPLOYEE OR INDEPENDENT CONTRACTOR?

 THE FORMAT/SCHEDULE FOR WORK DELIVERY

 THE COPYRIGHT OWNERSHIP OF THAT WORK/DISCLAIM JOINT AUTHORSHIP!

 HOW MUCH AND WHEN YOU WILL BE PAYING HER––PAGE RATE AND A ROYALITY

 WHETHER OR NOT THAT ARTIST IS EXCLUSIVE TO YOU DURING THE ENGAGEMENT

 SUSPENSION AND TERMINATION: HOW AND WHEN

 ARTIST’S LIKNESS AND BIO APPROVALS MUST BE IN WRITING AND SIGNED BY THE ARTIST!  CONFIDENTIALITY AND PUBLICITY RESTRICTIONS

 REPS & WARRANTIES

 RESTRICTIONS ON THE ARTIST’S ABILITY TO HIRE OTHERS

THE SCOPE OF WORK ARTIST WILL BE PERFORMING

Both Parties should fully understand WORK FOR HIRE: Ideas, what will be required before any work Storylines, Dialogue, Character begins. Don’t assume that an Artist who Designs, Gags and Concepts. pencils can also color, ink or letter as well. DELIVERABLES

DELIVERY, REVIEW, WHO OWNS FORMAT AND REVISION PHYSICAL RESOLUTION SCHEDULE ARTWORK?

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Compensation: Page Rate

• Rates vary on experience, pub co., & Page Rate: market Writing: • $25-$220 Penciling: • $100-$250 Inking: • $75-$200 Coloring: • $35-$150 Lettering: • $10-$50 Covers: • $200-$750 Flatting: • $8- $20

Compensation: Royalty Pool

Royalty payments to the artist kick in only when the comic book has sold a certain number of copies, often referred to as the “minimum threshold.” In a publisher-owned This is the minimum comic book services number that needs to be agreement an artist sold before the might receive 3-5% of illustrator starts cover price from shared receiving any royalties at royalty pool all.

Royalty

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Royalty Pool = A Comic’s Royalties Shared

JOB % LAYOUT/PENCILLER 35% SCRIPT 35% COLORIST 15% INKER 15%

Letterers: Unfortunately, Letterers often don't share in royalties, despite MT the tremendous work they do in comic books.

Other Royalty Models

Not always a royalty pool (not always a royalty at all…) • Illustrator may get a higher rate but based on “net revenue” not “cover price”. • For pencils, inks, and colors each artist might receive 5%-10% of net revenue or higher with smaller publishers. • Larger publishers often stick with the “royalty pool” model. Net revenue definitions vary: • E.g. cover price, less distributor fees, trade discounts and retailer incentives multiplied by net sales. Could be as low as 10% of cover price. • For digital works, net revenues may be net sales less digital conversion costs, third party platform, hosting or distributor fees. • Minimum thresholds still apply. • Issue: how to incorporate digital sales into the royalty model

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“Boilerplate” Keeps the Boiler for Exploding

No Partnership

Notice and Cure

Indemnification

No Obligation to Use

Option for Future Services

Entire Agreement

Waiver of injunctive relief

Forum

PRE-PUBLICATION CLEARANCE

VET, LICENSE, OPTION, PURCHASE

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Chain of Title

“Unbroken Record of Ownership”

Collaboration Cert. of WFH Contracts Agreements Authorship

Registration & Assignments/ Options Recordation Licenses

Publishers need to know that the creator can grant EXCLUSIVE rights!

Clearance Steps

ISSUE SPOT POTENTIAL CLAIMS

ANALYZE (Strength of Claim + Defense + Likelihood of Litigation)

DISCUSS WITH CLIENT & OBLIGEES

LICENSE NECESSARY RIGHTS & OBTAIN WAIVERS

REVIEW !!!

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GETTING THE WORD OUT AND LANDING

DTC A PUBLISHER

Landing a Publisher

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T M D J

If you’re licensing a work to a publisher, you will need an agreement that, at a minimum, clearly establishes: The IP ownership of underlying work and its derivatives

What rights are being licensed?

How long are the rights being licensed for?

When can your client recapture transferred rights?

What rights your client retains?

Delivery date to the publisher and your client’s expected deliverables

Royalty rates and payment in each media form and any advances

Publishing Agreement --- 10,000 FOOT VIEW

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Grant of Rights

MODIFIERS

SCOPE MEDIA EXCLUSIVITY TERM

CARVE-OUTS AND PROTECTIONS Creator’s Reserved rights Reversions Holdbacks permitted uses

Hold Back: Example In his MAGGOT-MAN comic book publishing agreement, Waldo Writer has reserved merchandising rights for himself. Now that the comic book is a huge success, Terrific Toys, Inc. wants to release Maggot Man action figures, with Pus-Shootin’ Action(tm)! Because Waldo’s reserved merchandising rights were subject to a two- year hold back, he must wait for that period to run before he can begin negotiations with Terrific Toys. If Waldo had granted the publishing company a right of first negotiation for the merchandising rights, he would have to deal with them first before starting discussions with Terrific Toys. In any merchandising deal, Waldo should include a provision stating that he will own the rights to any improvements and additions to the character created by the merchandisers. This way he can introduce Maggot Man’s new pus-shootin’ action, initially created for the action figure, into the comic story line, and maintain control over the goodwill of any trademark rights he may have in the character.

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Watch Your Defined Terms “Comic Book”

TIP: If the contract conveys the exclusive rights to exploit the Comic Book to the Pub. Co. and defines “Comic Book” to mean “any literary and/or graphic property, and derivative work thereof.”

The Pub. Co. will gain the exclusive rights to exploit the comic book, AND anything based upon the comic book, including movies, novels, posters, merchandise, etc. !

Reversion and Termination Sets time limits within which the publishing company must publish your book or rights revert to creator Often subject to return of any advances and other monies incurred by the original publishing company

TIP: Be careful of a reversion clause which says something like: “If publishing company fails to utilize any of its rights under this contract within one year of the date hereof, the property shall automatically revert to the writer.”

It may be overly-broad because you will likely be granting the publishing company the rights to “market, promote, distribute, and exploit” the comic book.

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Creator’s Typical Permitted Uses

Sell autographed copies of the comic book in limited numbers from creator’s website

Create a fan site based upon the Licensed Property

Make a series of webisodes featuring creator’s licensed character, taken from artwork that is a part of the Licensed Property.

Kickstarter

Approvals

Especially Creator must important in Pub co: script, approve use of dialogue, choice Creator should try merchandising owned of cover artist, to negotiate for deals, where trademarks, subject to approval over merchandizing – creator must creator’s merchandising not to be maintain meaningful character design unreasonably quality control consultation withheld and protect goodwill

OFTEN A MAJOR POINT OF CONTENTION. TIP: Carve Outs

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Creator-Driven Royalty (50/50 Deal)

The publishing company receives money from the sale of the creator’s comic books, and then deducts recoupable expenses.

The remainder, if any, is split 50/50 with the comic creator as the ROYALTY

Make sure to include audit clause

Some other Creator-owned Royalty Models “Cover Price” Model

After any Advance is repaid

Percentage of suggested retail list “Cover” price

Royalties “step-up” after a certain no. of sales

Digital: percentage of net amount actually received (for example: gross income from sales minus shipping, handling, insurance and sales tax)

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Some other Creator-owned Royalty Models (cont.) “Gross Receipts” Model

Some other Creator-owned Royalty Models (cont.) -The Services / Publishing Hybrid-

Fixed Compensation: page rate for writing, penciling, inking, or coloring; and

Royalties for writing, penciling, inking and coloring

• Based on “net revenue” (cover price, less distributor fees, trade discounts, retailer incentives OR for digital revenue, monies received less conversion costs, or third-party platform, hosting or distributor fees) multiplied by “net sales” (number of copies sold less copies that are returned, damaged, lost subject to reserve for return, free or discounted) • Minimum threshold applies PLUS: Separate Royalties for publishing rights (same as above)

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Deliverables

Artistic deliverables: • Deadline(s) • Format • Compliance with pre-approved script/treatment

Legal deliverables: • Contracts with all writers and artists • Proof of copyright registrations • Option/purchase agreements, if applicable

Representation and Warranties

Creator promises: • No other contracts to license this work with anyone else; Pub. Co. promises: • Owns the work or has the right to license this work • Good faith effort to • No infringement of 3rd publish/exploit party rights • Can pay debts in ordinary course of business

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• Watch for breaks in the chain of title – Joint authorship – Work for hire – No permissions • Giving away too many rights – Or not getting enough money for those rights • Not establishing a clear payment system and safeguards over the royalty stream. – TIP: Include an audit clause. • Not being able to terminate the publishing agreement if the publisher fails to publish the work – Termination right for “going out of print.” Query: does “digital only” publishing constitute going out of print? • Defined Terms TIPS

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QUESTIONS & ANSWERS

Portions of this lecture were taken from The Pocket Lawyer for Comic Book Creators, the first dedicated legal guide for the comic community!

Available in stores and online.

20% DISCOUNT AT WWW.ROUTLEDGE.COM WWW.THOMASCROWELL.COM Enter the code FLR40 at checkout @LAW_CROW Also available, The Pocket Lawyer for Filmmakers!