Puzzle Cases and Puzzling rulings – Episode 77

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Using Celebrity Guests’ Photos to Promote an Interview Show – Entertainment Law Asked & Answered

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Matt has a question about promoting his podcast episodes with images of his celebrity guests.

I’m entertainment lawyer Gordon Firemark, and this is Asked and Answered, where I provide answers to common legal questions, so you can take your career and business in entertainment to the next level…

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The unreasonable expansion of the Right of First Refusal Clause in entertainment contracts.

The unreasonable expansion of the Right of First Refusal Clause in entertainment contracts.

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The unreasonable expansion of the Right of First Refusal Clause in entertainment contracts.Get Your Head around the movie biz

After practicing entertainment law for nearly 25 years, I’ve noticed a disconcerting trend in deals with major studios and networks. That trend is toward expanding the scope of a Right of First Refusal and First Negotiation clause(s) in such a way as to unreasonably encumber things, even after the studio or network has “passed” on a project.

What is a Right of First Refusal?

A Right of first refusal (ROFR or RFR) is a contractual right that gives its holder the option to enter a business transaction with the owner of something, according to specified terms, before the owner is entitled to enter into that transaction with a third party.

What is Right of First Negotiation?

Sometimes called a “Right of First Offer”,  a Right of First Negotiation  means that the  owner must undergo exclusive good faith negotiations with the network or studio before negotiating with other parties.

So, for example, when selling rights for a screen adaptation of a novel, the author of the book might wish to reserve rights for audiobooks, an author-written sequel, or a stage adaptation. Often, studios will grant such reservations of rights, but insist on a Right of First Refusal or First Negotiation.

Under such a clause, before selling or licensing a reserved right a third party, the author would be required to first offer the right to the studio. Then, if the studio doesn’t accept the proposed terms, the author is free to sell to (or negotiate with, as the case may be) others.

But, over the past few decades, studios and networks have apparently decided that Rights of First Negotiation and First Refusal aren’t sufficient to secure their stranglehold on content. As a result, they have increasingly insisted on also including similar, but more onerous Right of Last Refusal clauses.

What is a Right of Last Refusal?

A right of last refusal gives one party to a contract the right to accept any bona fide offer made by a third party for some right.

So, in the aforementioned example, the book author might decide she’d like to see a stage play of her novel. Because of the Right of First Negotiation, she is obliged first to approach the film studio, and to negotiate for a period of time. Then, if that time, expires and the parties haven’t reached any agreement, she’s free to offer the stage rights to others. But  with the Last Refusal in place, after negotiating a stage rights deal with a Broadway producer, our book author must first go back to the film studio, and allow them to match the terms.

How a Right of Last Refusal unreasonably encumbers a property.

Such Rights of Last Refusal are an unreasonable encumbrance on creators’ property rights. They effectively, deny the holder of reserved rights any meaningful opportunity to exercise those rights,  and that renders the reservation of rights essentially void. As you might imagine, it can be difficult for a rights holder to interest any third party in a property, if that party knows that, after lengthy negotiations, the best deal to be struck can simply be matched by the film studio. As a consequence, the studio (or network) effectively holds a free, perpetual option to acquire the reserved rights. In my view, this is patently unfair, and should be avoided.

Of course, if the financial terms justify such an encumbrance, then so be it, but parties should understand the consequences of the provisions to which they agree.

When negotiating contracts with reservations of rights, it is of utmost importance that rights holders resist the use of clauses granting rights of last refusal.  Unfortunately, the only way to accomplish may involve saying “no” to an otherwise attractive deal.

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Stairway to Heaven, Copyright Small Claims, Tattoo T-Shirt & DOJ Ruling – Episode 76

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  The Latest episode of my Entertainment Law podcast, Entertainment Law Update, is now available for your enjoyment. Listen here, or subscribe and download in your favorite podcast listening app. Show notes are located at http://entertainmentlawupdate.com Here’s what we talked about… Led Zeppelin Ruling – No infringement 2 Is there a Small Claims Copyright Court in… Continue Reading

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Having a Character in a Play Sing a Song (Grand Rights) – Entertainment Law Asked & Answered

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AUDIO: TRANSCRIPT: http://firemark.com Elizabeth wrote in with a question about having a character in her play sing a song… I’m entertainment lawyer Gordon Firemark, and this is Asked and Answered, where I provide answers to common legal questions, so you can take your career and business in entertainment to the next level… Continue Reading

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How do I Know Whether an Offer is a Good One – Entertainment Law Asked & Answered

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AUDIO: TRANSCRIPT: http://firemark.com Amin wrote in with a question about how to evaluate a film option that’s been offered. I’m Entertainment Lawyer Gordon Firemark, and this is Asked and Answered, where I answer your questions about the business, so you can take things to the next level. Amin has been asked to negotiate a deal… Continue Reading

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Taxing Dead Celebs, Fee Shifting in Copyright Cases and Red Flag Knowledge – ELU 75

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  The Latest episode of my Entertainment Law podcast, Entertainment Law Update, is now available for your enjoyment. Listen here, or subscribe and download in your favorite podcast listening app. Show notes are located at http://entertainmentlawupdate.com Here’s what we talked about… Quick Follow up on Dead Celebrities More Songs IN Public Domain Supreme Court Fee Shifting… Continue Reading

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Location Releases – Entertainment Law Asked & Answered

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AUDIO: TRANSCRIPT: http://firemark.com George writes in with a question about location releases and permissions. I’m Gordon Firemark and this is asked and answered where entertainment law questions so you can take your career and business to the next level. Continue Reading

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Using Film Clips in Movie Reviews – Entertainment Law Asked & Answered

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AUDIO: TRANSCRIPT: www.firemark.com Brief Explanation of Fair Use YouTube’s Strike Policy   Tim wrote in with a question about his movie reviews channel on YouTube. I’m Entertainment Lawyer Gordon Firemark, and this is Asked and Answered, where I answer your questions, so you can take your business in entertainment and media to the next level! … Continue Reading

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Drones and Dead Rockers. Special guest: Enrico Schaefer – Episode 74

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  The Latest episode of my Entertainment Law podcast, Entertainment Law Update, is now available for your enjoyment. Listen here, or subscribe and download in your favorite podcast listening app. Show notes are located at http://entertainmentlawupdate.com Here’s what we talked about… DRONE LAW 2 Special Guest: Enrico Schaefer 3 Prince’s death;  Review of his legal influences… Continue Reading

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