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Why every writing team should have a written collaboration agreement. (part 3 of 3)

This is the final installment of  a 3-part series on the importance of collaboration agreements for every writing or other creative team.  In Parts 1 and 2, I analyzed some of the important provisions found in properly negotiated and drafted collaboration agreements.  Here, I'll continue that discussion, and explain the advantages of using entertainment lawyer -drafted agreements.

G.  Division of Royalties and other revenues/expenses

Generally, the authors of a collaborative work  share in the Net Income derived from exploitation of the work.  The definition of Net Income, while  sometimes a hotly contested issue in negotiations with third party purchasers, shouldn’t be a major point of contention among collaborators.  It’s usually a relatively simple formula… Income, less expenses and commission equals Net Income, which is then divided according to the agreed splits among the collaborators.

H.  Small/Grand Rights

Since Musical Theatre projects consist of both musical and literary material, it’s important to distinguish between the sources of revenue for the musical components of the work.

Songs, for example may, in addition to being performed as part of the show, be re-recorded by other artists, played on radio, tv, over the internet, etc.

The rights in such non-dramatic performances of musical works are typically referred to as “small performing rights”, while “Grand Rights” refers to performances within the dramatic context of a staged production.

Since there are different sources of revenue, it’s important that the collaboration agreement address the manner of accounting  for each.     As a general rule, the small performing rights are controlled by the lyricist and composer (or their publisher).  The big question, then, is whether the bookwriter/librettist should participate in such revenues, and if so, to what extent?

Other considerations might include  revenues from merchandise focusing on a particular element, say a song-title on a T-shirt, or a lyric printed on a greeting card.

Similarly,  what about subsidiary uses of only a single element.  (i.e., the publication of the book only, or music only?)

Still further consideration should be given to the inclusion of a buy-sell provision.  This would require that if a collaborator wishes to sell his/her interest in the show, the other parties might  have a right of first refusal, last refusal, or even an absolute right to bar the sale to any third party.  As with many provisions of the collaboration agreement, the better spelled-out the mechanisms, time frames, and procedures are, the less likely that misunderstandings will arise.

J.  Resolving Disputes

Historically, parties have relied on court proceedings to resolve disputes that arise out of collaborations… but the expense of such proceedings  is considerable and is often a deterrent to pursuing  the issue.  Many collaboration agreements now contain provisions for less formal methods of dispute resolution, such as mediation, and failing agreement following a mediation, arbitration of the dispute.  Care should be taken to select mediators and arbitrators familiar with the particular industry involved, so you get an informed and meaningful result.

Special Situations with Company-Created Works

While a typical collaboration agreement  can deal adequately with a 2- or 3-member team of collaborators, it is not well suited to the situation of Company Created Works.

A Company Created Work is a  work that is authored by a collective, such as a theatre company, acting class or improv group.    The questions  (ownership, control, merger, division of revenues, etc.) that arise in such situations are similar to those of collaboration, but the way they’re handled can differ greatly.  I’ll make this the subject of a future article.  Stay tuned.

Why agreements should be drafted by an Entertainment Lawyer, and not simply copied from books or the internet.

While there are plenty of “form” collaboration agreements available on the internet, in books, and elsewhere, entering into a collaboration agreement should be looked at in the same way someone would view starting any other new business.  The advice and counsel  of a knowledgeable, experienced entertainment attorney is invaluable in protecting the interests of all concerned.  The cost of preparing such an agreement is negligible compared to the losses that can be suffered if a project is abandoned, or winds up mired in litigation.

Why every writing team should have a written collaboration agreement. (part 2 of 3)

This is part 2 in a series of 3 posts about the importance of collaboration agreements to writing and other creative teams.  In part 1, I defined the term Collaboration Agreement, explained why such agreements are important to collaborators, and began exploring the usual terms of the collaboration agreements by looking at copyright ownership of the finished work.  In this post, I continue with the discussion of contract terms.

B.  Control over the creative and business decisions relating to the finished work.

Again, typically the parties intend to share control equally.  In many cases, however this requires unanimity for decision making.  This being the case, a party might effectively wield “veto” power, and hamper the exploitation of the work.    For this reason, it’s important to establish some guidelines for voting, and a method to break ties, when the parties don’t agree.

In many cases, the voting mechanism is simple… one person, one vote.  But what if the book of a musical is written by one person, and the music AND lyrics written by another.  The composer/lyricist might be justified in feeling he/she deserves one vote for each of those elements.

The breaking of a tie is sometimes handled by a neutral 3rd party agreed upon by the collaborators.  The collaborators may feel that different neutrals should be appointed for different types of matters.  Creative issues might be decided by a director or writer, while business issues could be determined by an agent, lawyer or producer.

Whatever the mechanism, it’s important that the parties agree upon the specifics at the outset of the relationship, since once a disagreement arises, it may be impossible to agree on anything, including who should be the arbiter of the dispute.

C.  Merger

The merger clause is somewhat unique to the theatre industry, but there’s no real reason it can’t be applied in other cases as well.

“Merger” refers to the parties agreement on the specific point (in time) at which the various creative contributions are deemed to be a unified, single work.

Generally, a merger clause provides that ,   Up until the merger, any collaborator may withdraw or be removed, and may (sometimes) take his/her contribution out of the work.  Once merger occurs, however,  the work is final, frozen, and may not be altered  without the mutual consent of all parties concerned.  (note, however that directors and producers may have other thoughts.. the subject of another article).

The merger clause will set out a specific time or event that will trigger merger.  It is critical that the collaborators select this time carefully.  There is no legal definition for when merger occurs.    (Copyright law considers the work a Joint Work very early-on… at the time of creation… but only if the parties intended the work to be a joint work)

Some examples of events/times chosen for merger are:  The first press preview of the show;  the final technical rehearsal;  the official opening at a particular venue or level of production;  or a specific  date.    Each of these has its benefits and its drawbacks, and your entertainment  lawyer will help you determine the best approach.   Care should be taken to preserve some flexibility for when a show’s reviews indicate a need for revisions.  It’s also wise to provide for circumstances where significant elements are “cut” from a show after the merger date.  Should a song, once cut from the show, remain property of the writing team as a whole, or should ownership revert to the composer/lyricist?

D.  Representatives – who will represent the show?

Most good collaboration agreements contain a provision identifying the representatives for the finished work.  While each collaborator may have her own agent, manager, lawyer, etc., the best practice is to avoid having a gaggle of representatives promoting the project and negotiating the deals. The parties should agree at the outset on who the agent and attorney for the project will be.

N.B.  When a lawyer represents a project, the possibility of a conflict of interest is always present.  If a later dispute between the collaborators arises, the lawyer will probably be required to withdraw from representing anybody.  Still, where all collaborators’ interests are aligned, it’s best to have one lawyer rep`’ing the project.

E.  Removal/Withdrawal of a Collaborator

What happens if someone withdraws, dies or is removed?  In the case of a partnership (absent a collaboration agreement), the business of the partnership must be wound-up by disposing of the assets and dividing up the proceeds.    Obviously, where the asset of a collaboration is a play, musical or other work of authorship, the true value of the work may not be realized for a very long time, so the parties will want to retain their interest(s) in the works.

Generally,  a withdrawing member may remove his or her contribution if the withdrawal occurs before merger occurs… But, the parties may agree that all contributions be retained as part of the work, in exchange for some form of compensation… typically a percentage of revenues determined by some formula agreed upon by the collaborators.

Other issues to consider and address in the collaboration agreement are:  Whether the withdrawn member may create competing works, or be required to wait some time (a “holdback period” before creating such other material; What to do about  non-musical contributions by a composer/lyricist or vice-versa.

The other major issue involves death/disability of a collaborator.  The remaining parties will often want to continue the work, so it is important that the parties initially agree on some approach to compensating the disabled collaborator or heirs by establishing a formula for  the interest in the work, but without giving them voting rights that might impact the future of the work.

In a case of death or disability, it’s also important to address the likely need to add a replacement collaborator.  To that end,  the collaboration agreement should include a  formula for disposition of revenues.  Importantly, in most such cases, the remaining collaborators shouldn't need consent of the deceased member's estate, etc.

Stay tuned for part 3 of this series, in which I'll address a few more common terms in collaboration agreements, and discuss the advantages of lawyer-drafted collaboration agreements over forms found in books and on the ‘net.

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