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“Indies
and the Law ”
SAGIndie Spotlight, June, 2005
Screen Actors Guild
An Interview
with Entertainment
Lawyer and Film
Rep Mark Litwak.
Filmmaking with
its numerous employees
and production
responsibilities
is more of a business
than art. And every business, no matter how small, needs
some form of legal counsel. In the world of indie
law, there are
few names as prominent as Attorney Mark Litwak. He has represented
filmmakers for almost twenty years as well as publishing
several books on the subject.
SI:
How did you get
started in entertainment law?
I
changed career
directions several times before I became interested in entertainment
law. I attended Queens College of the City University of
New York where I earned a B.A. in Psychology, and was elected
student body president in my senior year. As a student in
the 60’s and early 70’s
I was politically
active, and I was one of the founders of the New York Public
Interest Research Group (NYPIRG).
After graduation
I earned an
M.A. degree in Urban
Studies at night while
during the day I supervised
a study of the New York State Legislature for NYPIRG. After
working with young idealistic lawyers, I saw the value
of earning a law degree. I enrolled in Law School at the
University of San Diego in 1974, and clerked for a law
firm. During my third year of law school I attended classes
at night and worked full time for the San Diego District
Attorney’s
office. I graduated
in 1977, moved to Albany,
New York, where I worked as a public interest lawyer for
NYPIRG. One of the issues I was concerned about was the
danger arising from nuclear fuel in power plants. After
the movie “The
China Syndrome” was released, I recognized that a
movie could influence
public opinion
very quickly.
I decided I wanted
to make social issue
movies, even though
I had no background
in film and no contacts in the industry. I moved to Los
Angeles, and became a television producer with Marble Arch,
and later a writer/producer for a syndicated news show.
I also began writing my first book, Reel Power, The Struggle
for Influence and Success in the New Hollywood, which was
published by William Morrow in 1986. Since then I have
worked as an entertainment lawyer building my own practice,
and taught as a law professor for seven years. I continue
to teach two courses a year at U.C.L.A. Over the years,
I have written five more books, most of which concern entertainment
law or independent filmmaking.
What is the
purpose of an LLC and how does a filmmaker start one?
Filmmakers frequently
establish a company
that is a separate
legal entity
from themselves
to produce and own their movie. While there is no legal requirement
to do so, there may be some benefit to operating under the
auspices of a company. The most common business entities
used by filmmakers are corporations, limited liability companies
(LLC), and limited partnerships. These are usually created
under state
law by filing the appropriate documents with the
Secretary
of State.
One reason
to form a company is the
desire to protect
personal assets from
potential liability. If a movie is produced by a
company that is considered a separate legal entity
from the individual filmmaker, then the filmmaker
may not be liable for its debts and obligations.
However, for the filmmaker to avoid personal liability,
the filmmaker must
sign contracts in the name of the company without
giving any personal guarantees.
Likewise by establishing
a separate business
entity, investors
can own the company
that owns the film,
without being liable for the actions of the company.
Investors may be willing to accept the complete loss
of their film investment, but will not want to risk
losing their homes and other assets. Another reason
to set up a company is to reduce one’s
taxes. Before forming a company, one should consider
other ways to minimize liability, such as insurance.
If a filmmaker
is not knowledgeable
about the formalities
of setting up a company, they should retain a lawyer
to do this for them. If you don’t set up the company correctly, and run it
in accordance with legal requirements, courts may disregard
it and not treat
it as a separate legal entity. In this happens, you
have wasted your time and money in setting up a company,
and may be personally liable.
Where can a
filmmaker get contracts,
releases and other
standard paperwork
to protect
his film?
A form
contract is only
useful if the person using
it is knowledgeable
enough to select
the right form for
the circumstances.
Blindly using forms from another production without understanding
the content of the form is risky, and can create serious
legal problems for the filmmaker. There are many different
variations of
customary production forms. An employment contract for a
director, for example, could be structured as a loan out
or for direct employment. It could be subject to the DGA
agreement or not subject to it. There are many variables
that need to be considered.
Furthermore,
union or guild rules may override what is agreed upon by
the parties in the contract. So
it is best to
have a lawyer counsel you and select the contracts you need,
and customize them to suit your needs. It is rare that an
experienced lawyer will draft a contract from scratch. We
have thousands of
templates to use, and often have to revise less than 10%
of a form. But knowing which form to start with, and what
needs to be changed, is important.
A competent lawyer
will know what questions to ask to elicit the information
needed to draft the right agreement.
Of course, if
you produce the film and it turns out poorly, it will not
matter that your documents are not in
order. But if
it is a hit, and distributors want it, they will only acquire
rights if the documents are adequate. Distributors want to
distribute your movie, not
buy into a lawsuit.
Now with my cautionary
words firmly in
mind, should you
decide you don’t
need a lawyer,
there are number of sources for form contracts,
including
my book “Contracts for the Film and Television
Industry,
(2nd Ed, Silman James Press), and my software program “Automated
Contracts for the Film and Television Industry” which
is also sold under the “Movie
Magic Contracts” brand. While lawyers cost
money, you should always consider what it will
cost you if you don’t properly secure the
rights to your film.
Where do most
low budget film
lawsuits originate?
I have not done
an empirical study on this topic,
but in my experience
many disputes
arise from collaborators
falling out over
some creative or business
issue. If the
parties have not entered into a written collaboration agreement
spelling out their respective roles, credits and obligations,
they may find themselves in a messy dispute,
and the work
product created by their joint efforts
may be unusable
by either party.
Another big area
of dispute arises
from filmmakers
not being paid
their share of revenues
from distributors.
It is best to carefully check the track record and experience
of potential distributors. Newcomers are most likely to
be taken advantage
of. Ask a prospective distributor to send you their press
kit. It will likely contain one-sheets from the films they
have distributed. Examine the credits. Track down the filmmakers.
If you cannot
find them, simply ask the distributor for a list of all
the filmmakers they have done business with over the past
two years. Call the filmmakers. Ask them specific questions:
Did they receive
timely producer reports? Have they been paid what they
are due? Did the distributor
spend the advertising
dollars promised?
What is worker’s
comp and how does it protect the filmmaker?
If an employee
is injured on the job,
workers compensation
insurance pays
for medical expenses
and compensation
for any disability.
Employers are required
to have workers
comp insurance
with few exceptions. The employer does not have to be at
fault for the injury in order for the employee to collect
benefits. However,
the injury or illness
has to be incurred in the course of employment for benefits
to be paid. Worker’s
Comp insurance
is normally obtained through an insurance agent or broker.
In California, go to the Division of Workers’ Compensation
website
at http://www.dir.ca.gov
for additional information.
What is E&O
insurance?
Errors and omissions
insurance (E&O) is essentially malpractice
coverage for filmmakers. It protects the
insured from liability arising from negligence
in not securing the rights, permissions and
clearances needed to exploit the film. Coverage
includes liability arising from invasion
of a third party's rights, which might arise
if the film defamed an individual, invaded
their privacy or infringed on their copyrighted
work. E & O
insurance does not insure against damages
from a filmmaker’s
intentional misconduct.
The
insurance policy
also covers legal
fees to mount a defense.
There is often a
deductible, which
may be ten thousand
dollars or more.
Before issuing a
policy, insurers will require applicants
to secure all necessary
licenses and permissions. A copyright
report and title report will be requested,
and employment agreements must be in writing.
Insurers typically
ask that the producer's attorney to review
the insurance company's clearance procedures,
clear the script, and review chain of
title documents.
Low budget
filmmakers
may find it
difficult to afford
E & O insurance, which
runs $7,000 to $12,000. While UnitedStates
distributors usually insist on it, many
foreign buyers don’t
require it. Foreign buyers operate in
countries that are less litigious.
How
does a copyright
protect a film?
A copyright
is a form
of intellectual
property. It is a bundle
of rights the
owner has in certain
products of
the mind. Copyright law protects works
of authorship such as literary works and movies.
A copyright owner can prevent others
from copying, distributing
or preparing derivative works.
A copyright does
not protect story
ideas, concepts
or themes. Such
elements are not
protected whether
they are in a
writer’s
head, written down on paper, or published. Ideas are as
free as the air. Ten authors can write a story about a
doomed romance between lovers from different backgrounds.
This could be Romeo and Juliet, or West Side Story, or
a variation on the theme. Likewise, multiple authors can
write biographies about George Washington. Each is free
to tell the story of George Washington’s life in
the writer’s own words. Each can borrow facts
and historical incidents written by prior authors.
What
copyright law protects
is the “expression of the author.” This
is the particular
manner in which the writer tells the story, his approach
to the material, his voice. In other words, what is
protected is the embellishment on the idea, not the
idea itself.
Consequently,
others are
free to borrow those
elements in your
work that are not
copyrightable, such
as ideas, themes
and historical facts.If
your film is finished,
you should register
it with the Copyright
Office by sending
in Form PA with a
copy of the film and
an attached synopsis describing the
film. If you are still at the script
stage, you can register
the script now and register the film
when completed. Additional instructions
on how to register
your copyright can
be found at the copyright office website:
http://www.copyright.gov/
and on my website, Entertainment Law
Resources at: www.marklitwak.com
What
is a chain of title?
Chain
of title refers
to all the documents
needed to demonstrate
that the filmmaker
owns all rights
to his or her film
and any component
parts, such as music
or stock footage,
so that the film
can be freely distributed
without fear of
being sued for
infringing another’s rights. The documents
that comprise the chain of title vary depending on whether
the film was produced as a work for hire for a production
company, or made by one or more individuals who then transferred
their rights
to a producer or production company. The documents typically
include a script acquisition agreement or writer employment
agreement, depiction releases for all those who appear in
the movie, licenses to use music, photographs, artwork and
stock footage, and employment agreements for cast and crew.
What does work-for-hire
mean?
This is when
a
copyrighted work is
created for another.
Under Copyright law,
this means either a work prepared by an employee
within the scope of employment; or a specially
ordered or commissioned work in one of nine
categories of works, one which is movies, if
the parties expressly agree in a written agreement
signed
by both before work begins. In other words,
sometimes the artist who creates a copyrighted
work is not the author for copyright purposes.
This occurs when the artist is employed by
a company, and the work is created as part
of the employee’s job. The second situation
where
the copyright vests in another party is when
the artist is hired as an independent contractor
and it is one of nine types of work, and the
parties have a written agreement saying it
is a work for hire.
What
is the AFMA?
AFMA was the
name for the trade
group
representing independent
producers and international distributors. The
organization runs the American
Film Market, provides
arbitration to
resolve industry disputes, and offers educational programs.
The organization
recently changed it name to the Independent Film and Television
Alliance (IFTA) to reflect the fact that a significant number
of its members are now not based in the United States.
What
is script clearance
and how does a filmmaker
get it?
Script
clearance is the
process of reviewing
the script and
making sure there
are no legal
problems that the
filmmaker will encounter
in making a movie
based on the script.
An experienced
attorney will read
the script to determine
if anything in it
infringes the rights
of third parties.
If the script defames another,
invades their
privacy, infringes
a copyright or trademark, or otherwise violates
someone’s rights, the attorney
will advise the filmmaker to revise the script.
Often minor changes, such as modifying the name of
a character, adding a disclaimer, or changing the
brand name of a product can resolve the concern.
Such changes are easy and inexpensive to make in
pre-production
but can be very costly if you make changes after production
and to go back and re-shoot scenes. Insurance carriers
often require that the script be cleared before
they
will issue an Errors and Omissions insurance policy.
What is a Producer’s
Rep?
A producer
representative,
or rep, is a
marketing and distribution
consultant
to a producer.
The producer rep
is also a salesperson who takes on
the responsibility
of finding a distributor for a film. This function may entail
a variety
of different
tasks, depending
on the nature of
the film. For a film with the potential of garnering
good reviews
and critical acclaim,
that might mean orchestrating a strategy to exhibit the film
in festivals. The rep may also advise the filmmaker on preparing
collateral materials such press kits and key art for a poster.
For a more commercial film, the rep might solicit distribution
executives to attend
an industry screening.
The goal is always to create competition among buyers
for the film that
will ultimately lead to a bidding contest, and better terms
for the producer. The producer rep can also advise the filmmaker
as to the comparative strengths and weaknesses of distributors
and which ones to avoid.
Why does a
filmmaker need a Rep?
Filmmakers
often
focus their energies on mastering
their craft.
To be an accomplished
filmmaker
one has to know a lot about
cinematography,
writing
and acting, as well as developing good
interpersonal
and
organization skills.
That may not leave much time to
learn the business
aspects of
marketing and distribution,
including the fine
points of complex distribution agreements and the time
needed to build relationships
with festival directors and distribution
executives.
So a good rep can bring expertise to the
team
that the filmmaker lacks or does not want to invest
the
time to learn.
How is a Producer’s
rep different from an Agent
or Manager?
Agents
are licensed by the
labor department,
and they focus on
selling their clients
services or scripts
to producers and
studios. They essentially
are in sales. You
could say they are
a form of employment
agency. A good agency
will know what kinds
of scripts Warner
Brothers is looking
for and what kinds
of projects their
clients are seeking.
Most agents work
within the mainstream
studio system and
major networks, not
in the independent
film world. There
are some agents that
specialize in independent
film, and a few that
serve as both agents
and producer reps.
Where should
a
filmmaker go to seek
out representation?
Filmmakers
should
seek the advice
and recommendations
of other filmmakers.
IFP West has a list
of producer
reps they give out
to their members. There
are only
about a dozen experienced
reps, and they are
concentrated in
New York or Los Angeles.
How can the
filmmaker check
the rep’s credentials and reputation?
If the
rep is a lawyer,
you can check with
the state bar to
see if any disciplinary
actions have
been taken against
the lawyer. If
the rep is an agent,
you can check
the labor department
to see
if the agent is
licensed, and check
with the guilds to
see if they are franchised.
A franchised agent
signs a contract
with the
union assuring certain
protections to union
members. But perhaps
the best way to check
on a rep is to speak
to other clients
of the rep.
What is
the standard
fee for
a lawyer to represent
a film?
Depends on what
tasks
the lawyer is being
asked to handle.
Many lawyers
work on an hourly
fee for general
legal work, and for
experienced lawyers
this may be three
to four hundred
dollars per hour
or more. Of course,
a novice lawyer
who charges one
hundred dollars an hour
and takes ten hours
to draft a contract
that a more experienced
lawyer can draft
in one hour
is no bargain. For production
legal work,
which is drafting the
contracts to
produce a film, a rough rule
of thumb is one
to one and one half
percent of
the budget. But that rule does
not apply to
very low budget or high
budget films.
Producer reps
have traditionally
received most of their compensation
as
a percentage of the
revenue that comes
back
to the producer.
This fee is usually
in the range of
five to fifteen
percent of the
producer’s gross revenue,
which is the sum, if there is
any, after the distributors take
their fees and expense reimbursement.
This is why reps
are very selective
in which films they
agree to rep if they
are working on a
contingency basis.
There are thousands
of independent films
produced each year,
and my guess is that
less than one-third
obtain distribution,
and only a minority
of those films generate
significant revenue.
Does
a producer’s rep help in finding funds?
Some producer
reps will help
develop a project,
including raising
financing. This
is most likely
to occur in the
case of a filmmaker
with a track record
of having made
at least one solid
feature film. Producer
reps will be more
inclined to help
with raising financing
if there are other
impressive elements
attached, such
as stars committed
to the project,
some financing
in place, or a
script by an acclaimed
screenwriter. For
first-time filmmakers,
it is very difficult
to get a rep or
a studio interested
in a project. Most
first-time filmmakers
finance their films
out of their own
pockets or with
finds from family,
friends and MasterCard.
Does
the filmmaker
get to hekp make
the decision
of what distribution
companies their
film will be
submitted to?
The filmmaker
should always have
the final word
on which distribution
agreements are
concluded, whether
represented by
an agent, producer
rep or attorney.
If the filmmaker
wants to be involved
in deciding which
companies will
be approached,
that is fine, but
the more important
decision is which
comany to conclude
a deal with.
Once a distribution
agreement is made,
the distributor
may have the authority
to enter into sub-license
agreements without
the filmaker's
review or approval.
So if filmmaker
strikes a deal
with Miramax for
all North American
rights in all media,
Miramax will usually
insist that they
be able to market
and distribute
the film as they
see fit, without
having to seek
permission of the
filmmaker.
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