​Screenwriters should annotate their scripts to document the source of their work. A careful annotation will help a screenwriter defend against defamation and invasion of privacy lawsuits by showing that the writer acted carefully. Recall that when a public figure or public official sues for defamation they must prove that the defendant acted with "actual malice." Annotation shall specify the source of all script elements except those elements that are completely fictional and arise wholly from the writer’s imagination.  Script elements include characters, events, settings and dialogue.  Annotations are typically written in the margin of the script, or they are in the form of footnotes or endnotes to the text.

A continuity script is a script that conforms to the final cut of a film. Filmmakers will need a continuity script as a delivery item because for foreign sales in countries where English is not the primary language. It is  needed for the foreign buyer to create  a  foreign language version which will either be a sub-titled version or a dubbed version. An  annotated script is just a continuity script with notes on it and it will also help your lawyer clear the film and write a clearance letter which is often needed to obtain Errors and Omissions Insurance.  You can create a continuity script yourself or hire a company to create it for you.  If you just take the last draft of your script and conform it to the final cut, you will have a continuity script. 

Annotations should include the following information:

1. CHARACTERS: For each character note the following information:

      (a) Whether the character is a real person, a fictional or a composite character.

      (b) For real characters, whether the actual person is living or dead.

      (c) For composite characters, the name(s) of actual person(s) on whom the composite character is based, and what traits can be attributed to the real person(s).

2. SCENES: Note whether each script element portrays fact or fiction.

      (a) If fact or an inference from fact, describe the source material for script elements, including the following:

                (i) For books: title, author, publisher and page(s)

                (ii) For newspaper or magazine articles: title, author, publisher, date and page.

                (iii) For materials obtained from the Internet: author, title of article, web site address.  If material has been repurposed from another medium, note the title, author, publication etc. of the underlying work.

                (iv) For materials based on radio or television interviews or programs: date, time of broadcast, broadcast station or source, interviewer, program name.

                (v) For interviews: Name of subject, whether notes or tapes exist, reference to tape or transcript page number.

                (vi) For trial or deposition transcripts: the court or other forum, date, person testifying, and transcript page number.

                (vii) To the extent possible, multiple sources should be identified for each script element.

      (b) If a partly fact and partly fiction, indicate which portions are fact and which are fiction.  For factual parts, describe source material as specified in Paragraph 2(a) above.

3. MISCELLANEOUS:

      (a) Copies of reference materials referred to in annotations should be kept for at least five years after the film or program has been released. Materials should be cross-indexed by script page and scene numbers.

      (b) If margin annotations are coded to avoid repeated lengthy references, a key to such coding should be provided.

      (c) If a Writer's Guild member is asked to annotate a script, this request must be made at the outset of the assignment.

SCREENPLAY CHECKLIST

1) DERIVATIVE WORKS: If the screenplay is based on another work, a copyright report will need to be obtained to make sure all required rights have been obtained.  There must be a written agreement between the creator(s) of all materials, including quotations from copyrighted work, granting permission to use the material in the production.

2) DEPICTION RELEASES: Written releases are required from all persons who are recognizable or whose name, image or likeness is used, and if such a person is a minor, the release should be binding (which may require court approval).  If a subject is deceased, a release usually is not needed but may be required in some circumstances.  Releases are not needed if the recognizable person is part of a crowd or background shot and is not shown for more than a few seconds or given special emphasis.

3) RESEMBLANCE TO LIVING INDIVIDUALS: Where work is fictional, names of all characters must generally be fictional.  Take care to ensure that the names of fictional characters do not resemble the names of identifiable living individuals.

4) IDENTIFIABLE PRODUCTS: Where particular businesses, personal property or identifiable products are depicted, written releases must be obtained.  Releases are not necessary if property is non-distinctive background.

5) RELEASES: All releases must:

      (a)  give right to edit and modify material.

      (b)  right to fictionalize people portrayed.

      (c)  right to market production in all media and markets.

6) TITLE: Title report for title must be obtained setting forth prior uses of title.

7) DEFAMATION/INVASION OF PRIVACY: Material should not contain any material that constitutes defamation or an invasion of privacy.

8) MERCHANDISING: If you are planning on any merchandising spin-offs, make sure your actor agreements grant you the right to depict the actor in merchandising.
 

I was recently asked to write an article on film financing for LexisNexis, a leading publisher of legal information for lawyers. Practical Guidance is a next generation tool for lawyers with enhanced technology that provides legal know-how, practical information, and forms on numerous topics. 
 
 
 For those who subscribe to the service, you can review it at: Film Financing Overview.

Or read a copy here: Published Articles by Mark Litwak

Crowdfunding with Donations: Crowdfunding refers to the process of raising money to fund a project or business through numerous small contributors, often using an online platform or funding portal to solicit their investment. Because investing is film is such a risky endeavor, being able to spread that risk among many people  may substantially increase the amount of financing available for a film. Before the Jobs Act, crowdfunding could only be accomplished by seeking donations. Webportals  like Kickstarter and Indiegogo could help filmmakers raise such donations.  While those  who made a donation could not share in any profits, they  might receive  certain benefits, such a screen credit on the film, a poster, T-shirts or other swag.  
 
 Kickstarter
 
Indiegogo
 
Crowdfunding Investments:  With passage of the Jobs Act promoters are now able to offer a share of the profits in a project. This will likely encourage small investors who want to participate in film or other startup businesses, but can only afford to make a modest investment.
 
Funding portals are platforms that provide investors with information about investments being offered. These portals are designed to allow internet-based platforms or intermediaries to facilitate the offer and sale of securities without having to register with the SEC as brokers. Portals are required to register with the Commission and become a member of a national securities association (currently, FINRA). FINRA is an independent, non-governmental regulator for all securities firms doing business with the public in the United States. It is authorized by Congress to protect America’s investors by making sure the securities industry operates fairly and honestly.
 
The Securities and Exchange Commission (“SEC”), after a long delay, adopted rules to permit companies to offer and sell securities through crowdfunding. The new Regulations for Crowdfunding are to implement the requirements of the Jumpstart Our Business Startups Act (“JOBS Act”), enacted on April 5, 2012.
 
To qualify for equity crowdfunding one must meet specified requirements, including the following:  the amount raised must not exceed $5,000,000   in a 12-month period;  individual investments in all crowdfunding issuers in a 12-month period are limited to the greater of $2,500 or 5 percent of annual income or net worth, if annual income or net worth of the investor is less than $124,000; and 10 percent of annual income or net worth if annual income or net worth of the investor is $124.000  or more; and the funding portal must be registered and follow the rules that govern it. If you are an accredited investor, there are no limits on the amount you can invest.
 
For more information, see,  https://www.sec.gov/oiea/investor-alerts-bulletins/ib-crowdfunding
 
One  can only invest in a Regulation Crowdfunding offering through an online platform, such as a website or a mobile app, of a broker-dealer or a funding portal.  Companies may not offer Regulation Crowdfunding investments to investors directly—they must use a broker-dealer or funding portal. 
 
A list of portals can be found at:  https://www.finra.org/about/firms-we-regulate/funding-portals-we-regulate
 
Companies that offer and sell securities to the public in reliance on an exemption from registration for securities-based crowdfunding must make filings on the Electronic Data Gathering, Analysis, and Retrieval system  (EDGAR) which is  the primary system for companies and others submitting documents under the Securities Act of 1933, the Securities Exchange Act of 1934, and the Investment Company Act of 1940. This database provides free public access to corporate information, allowing you to research a public company’s financial information and operations by reviewing the filings the company makes with the SEC.  https://www.sec.gov/edgar/search-and-access
 
Unfortunately there are a lot of unethical persons attempting  to raise funds. To avoid fraudsters, counsel should conduct some due diligence.  There are ways to check on brokers  and promoters in addition to checking court records.
 
FINRA offers a website called BrokerCheck. BrokerCheck is a free tool to research the background and experience of financial brokers, advisers, and firms. BrokerCheck gives you a snapshot of a broker's employment history, regulatory actions, and investment-related licensing information, arbitration and complaints including a list of brokers that are barred by FINRA. The website is at: https://brokercheck.finra.org/
 

The United States Copyright Office concluded recently that art created exclusively by Artificial Intelligence (AI) is not copyrightable. Artists can attempt to register works made with the assistance of AI, but they must prove significant “human authorship.”

In February 2023, the Copyright Office determined that a graphic novel comprised of human-authored text combined with images generated by the AI service Midjourney constituted a copyrightable work, but that the individual images themselves could not be protected under copyright. The Copyright Office has taken the view that copyright can protect only material that is the product of human creativity.

Applicants for registration have a duty to disclose the inclusion of AI-generated content in a work submitted for registration and to provide an  explanation of the human author’s contributions to the work. The Copyright Office  is in the midst of an initiative to examine the copyright law and policy issues raised by artificial intelligence. The office has published a new bulletin on the issue  and set up a new webpage devoted to this topic: https://www.copyright.gov/ai/
 

In the past few decades, various decisions of the Supreme Court expanded the fair use doctrine which is a defense  to copyright infringement claims. Under the fair use doctrine, creators can borrow from  existing copyrighted works in creating their own transformative works without permission of the owner of the original works. For example, in  Campbell v. Acuff-Rose Music, Inc.[1] the owner of Roy Orbison's 1960's hit "Oh, Pretty Woman" sued the rap group 2 Live Crew over its unauthorized rap version of its song that they called "Big Hairy Woman."   2 Live Crew argued that its song was a parody mocking the banality of the original song and should be a fair use. A unanimous Supreme Court  reversed the lower court’s  decision, which had held that the rap song was a commercial use and not a fair use.

The Campbell  Supreme Court opinion examined the fourth statutory fair use factor, namely, the effect of the subsequent use on the original's potential market and found that this factor was limited to realistic potential markets. The court explained that it was unlikely that the copyright owners of "Oh, Pretty Woman" would have released a parody rap version of their own  song, and therefore the fourth fair use factor favored  the defendants. Thus,  the Court interpreted the fourth factor in a manner that favors  a fair use.

As a reminder, the  four factors to determine fair use are:

(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;
(2) the nature of the copyrighted work;
(3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole;
(4) the effect of the use upon the potential market for or value of the copyrighted work.

However, last week the Supreme Court appeared to go in the opposite  direction by restricting the fair use defense in its decision of  Andy Warhol Foundation v. Goldsmith. In  1984 Vanity Fair magazine wanted to license one of Lynn Goldsmith’s photographs of  the musician Prince to  illustrate a story about him. Goldsmith agreed on the condition that the use of her photo be a “one time use.” Vanity Fair then hired Andy Warhol  to make a silkscreen based on Goldsmith’s photo, and then published this  image with  its  article about Prince.

Without Goldsmith’s knowledge, Warhol  also created 15 additional works based on her photograph,  one of which is  orange and called  “Orange Prince.” After Prince died in 2016,  the Andy Warhol Foundation for the Visual Arts, Inc. (AWF) licensed Orange Prince  to Condé Nast, for the purpose of illustrating a special magazine titled “The Genius of Prince.” AWF was paid  $10,000 while  Goldsmith received nothing. After  Goldsmith informed AWF that she believed its use of her photograph infringed her copyright, AWF sued her for a declaratory judgment asking the court to find that that their use was not a fair use, which would not require a license. Goldsmith counterclaimed for copyright infringement.

The court found that the “purpose and character” of AWF’s use of Goldsmith’s photograph in commercially licensing the work  to Condé Nast did  not favor AWF’s fair use defense. The court stated:

As portraits of Prince used to depict Prince in magazine stories about Prince, the original photograph and AWF’s copying use of it share substantially the same purpose. Moreover, AWF’s use is of a commercial nature. Even though Orange Prince adds new expression to Goldsmith’s photograph, in the context of the challenged use, the first fair use factor still favors Goldsmith…In sum, if an original work and secondary use share the same or highly similar purposes, and the secondary use is commercial, the first fair use factor is likely to weigh against fair use, absent some other justification for copying.

Justice Kagan and the Chief Justice issued a strong dissent stating that the majority opinion was not a continuation of existing copyright law and  failed to acknowledge the importance of transformative copying. Citing the prior Campbell case, she argued that the first factor should concern whether the new work is transformative or not. “The more transformative the new work, the less will be the significance of other factors, like commercialism, that may weigh against a finding of fair use.”

Justice Kagan noted:

All of Warhol’s artistry and social commentary is negated by one thing: Warhol licensed his portrait to a magazine, and Goldsmith sometimes licensed her photos to magazines too. That is the sum and substance of the majority opinion. Over and over, the majority incants that “[b]oth [works] are portraits of Prince used in magazines to illustrate stories about Prince”; they therefore both “share substantially the same purpose”—meaning, a commercial one.

Of course, “Big Hairy Woman”  and "Oh, Pretty Woman" are both songs that share the same purpose. This latest Supreme Court decision muddies the landscape and will make it more difficult to predict which uses are fair and which are not. Read the decision.
 
[1] 114 S. Ct. 1164 (1994)

Writers and filmmakers need to understand their legal rights and how to defend themselves from those who may seek to exploit them or falsely claim their rights have been infringed. This seminar explains how writers and filmmakers can prevent problems from arising by properly securing underlying rights, and by encouraging other parties to live up to agreements with performance incentives, audit rights, default penalties, and arbitration clauses. In the event of a dispute, participants learn what remedies are available to enforce their rights.
Other topics include defamation; invasion of privacy; protecting your stories and avoiding being sued when portraying others; typical compensation and terms of contracts; merchandising deals; and negotiating tactics and strategies.
This seminar includes more than 100 pages of useful contracts, checklists, forms, and materials. This class is for writers, filmmakers, content producers, attorneys, arts professionals and whoever is interested in the topic.
This program will be taught by Mark Litwak, Esq., Law Offices of Mark Litwak and Associates.Dates and Time (Participants should attend both days):
Day 1: Thursday, April 20, 2023, 1 - 4:30 PM EST
Day 2: Friday, April 21, 2023, 1 - 4:30 PM EST

Please note that this is a live webinar. A recording will not be available for those who cannot attend. Participants will receive an email in advance of this workshop with instructions to access the program. Please, therefore, make sure that you have regular access to the email address you use to register.
For more information on this program, please contact VLA at registrations@vlany.org.
For more information and to sign up: VLA 

My son Michael's first feature film MOLLI AND MAX IN THE FUTURE will premiere at SXSW 2023.
 
Molli and Max in The Future is a sci-fi romantic comedy about a man and woman whose orbits repeatedly collide over the course of 12 years, 4 planets, 3 dimensions and one space-cult.

A grounded romantic comedy set in an absurd world, “Molli and Max” takes the character-driven romance of a movie like "When Harry Met Sally" and combines it with a sci-fi universe found in shows like “Futurama or “Rick and Morty." Through a combination of old-school practical visual effects (hand-built models, miniatures, puppets, stop-motion animation, and rear-projection) and cutting-edge technology (Unreal Engine and LED Volumes) the filmmakers have created a universe like no other. Tentacles! Robots! Glorp!

STARRING: Zosia Mamet (Girls, The Flight Attendant), Aristotle Athari (Saturday Night Live), Arturo Castro (Broad City), Okieriete Onaodowan (Broadway’s Hamilton), Erin Darke (Good Girls Revolt), Grace Kuhlenschmidt (Search Party), Michael Chernus (Severance), Aparna Nancherla (Bojack Horseman), Danny Burstein (Broadway’s Moulin Rouge),  Paloma Garcia-Lee (West Side Story) and  Matteo Lane (The Advice Special).
 
The film is the first feature directed by Michael Lukk Litwak whose thesis film won NYU Tisch’s top prizes and Deadline Hollywood voted it the #1 Short Film of 2014. He subsequently directed the entire third season of the series (Snatchers Season 3) for Warner Brothers and has directed numerous commercials and branded content including for Subway, Burger King, Keystone, Macy’s, Verizon, Yahoo, Applebee’s, Squarespace, Spotify and Snapchat.   www.Michaellitwak.com.
 
Produced by Ben J. Murphy (Lucy and Desi), Candice Kuwahara (Milkwater), Mallory Schwartz (Before You Know It), Kate Geller (Casting Director, Shiva Baby), Executive Producers Ted Geogeghan (We Are Still Here) and  Jeanne Elfant Festa (The Bee Gees).  
SCREENING TIMES

Stateside Theatre on Saturday, March 11 at 11:30 AM
Violet Crown Cinema 2 on Tuesday, March 14 at 5:30 PM
Violet Crown Cinema 4 on Tuesday, March 14 at 6:00 PM
Alamo Lamar C on Saturday, March 18 at 11:15 AM

Donald Trump has filed suit against journalist Bob Woodward claiming that Woodward improperly published  audio tapes of their interviews. The interviews were conducted with  the understanding that that Woodward was authoring a book which was published in September 2021 with the title  Rage. Woodward later decided to separately publish the audio tapes of his interviews with Trump.

Trump alleges that the publication of the audio tapes violates his rights because he only consented for the interviews to be used in the book although no written agreement exists to that effect. The lawsuit names Woodward, Simon & Schuster and the publisher’s parent Paramount Global as defendants and seeks damages of $49.98 million dollars. They have denounced the suit as “without merit.”
The case is likely to be thrown out like other Trump lawsuits. Trump’s lawyers do not seem to understand that one of the requirements for copyright is that the work has to be fixed in a tangible medium of expression to be copyrightable. Extemporaneous conversations are not copyrightable because they have not been fixed in a writing, on audio tape, or some other stable medium. Trump did not record these interviews, Woodward did.

Another requirement for copyright is originality. Here Woodward created  his questions, but not Trump’s answers. So, Woodward  may not own the copyright in Trump’s answers  to his questions, but that does not mean that Trump has a copyright interest in them.

In the Estate of Hemingway v. Random House, Inc. (1966), book author A.E. Hotchner authored a book titled  Papa Hemingway. It incorporated long conversations between the author and Ernest Hemingway. They had been close friends for 13 years and went on drinking escapades and travels together. Hotchner took notes and published several articles incorporating their conversations. Hemingway liked the articles. After Hemingway’s death, his estate sues Hotchner, seeking an injunction against the book and damages for infringement of common-law copyright. The court refused to find that Hemingway had any rights in their conversations.

In the case of Falwell v. Penthouse Int'l, Ltd., Jerry Falwell an evangelical fundamentalist minister objected when interviews with  him were published in softcore porn magazine Penthouse. Falwell claimed  that the interview appeared without his consent and contrary to specific conditions given orally to the defendants at the time of the interviews. Reverend Falwell objected to his interview appearing in this publication. However, the court found against Falwell stating:

Plaintiff's claim of copyright is not founded on any existing principle of law, nor is it even analogous  to any of the circumstances which heretofore have been contemplated by the courts. Plaintiff's claim of copyright presupposes that every utterance he makes is a valuable property right. If this were true, the courts would be inundated with claims from celebrities and public figures all of whom may argue that their expressions should also be afforded the extraordinary protection of copyright. Such a result was never contemplated  by the development of the law regarding common law copyright, and such a result would run counter to the firmly established constitutional guarantees of freedom of speech and of the press. Falwell v. Penthouse Int'l, Ltd., 521 F. Supp. 1204, 1207-08 (W.D. Va. 1981).

Recently a Florida judge ordered Trump and his lawyer to pay nearly $1 million in sanctions to cover the legal costs of Hillary Clinton and others sued by Trump alleging a conspiracy to target him for criminal prosecution.
 
Read the Rage lawsuit.
 

Investors have filed a class action lawsuit seeking $11 billion in damages against Crypto platform FTX’s  founder Sam Bankman-Fried and various  celebrity endorsers who   promoted the platform, including Shaquille O’Neal,  Larry David, Tom Brady, and Stephen Curry. FTX filed for bankruptcy on Nov. 11.
​
The lawsuit alleges that the failed  FTX Platform was based upon false representations and   deceptive conduct to take advantage of   unsophisticated investors who made investments. The complaint states  that FTX and its affiliates used  celebrity endorsers to raise funds pouring billions of dollars into the  FTX Platform to keep the company  afloat.

The suit alleges that the endorsers  never disclosed the nature, scope, and amount of compensation they personally received in   exchange for the promotion of the FTX Platform, and  that a  failure to disclose is  a violation of the anti-touting provisions of the federal  securities laws. Furthermore, Plaintiffs alleged that  none of these defendants performed any due diligence prior to marketing   these FTX products to the public.

The lawsuit cites other celebrities similarly accused and prosecuted for failing to disclose their paid   endorsements including  Kim Kardashian and basketball player Paul Pierce. According to the FTC, investors  have lost more than $80 million in crypto scams, due in large part to celebrity endorsements. Kim Kardashian reportedly  settled similar claims this year by the SEC for $1.26 million without admitting any  wrongdoing.

Read the lawsuit

William Sadleir  was sentenced to six years in prison for his participation in two fraudulent schemes relating to investments made by a New York-based investment fund (the “Fund”) in indie film distributor Aviron Pictures, LLC and its affiliated entities. Sadleir pled guilty to two counts of wire fraud, one relating to each of the schemes.
 
Sadleir was the chair and chief executive officer of Aviron and oversaw its operations from in or about 2015 until in or about December 2019.

In the Advertising Scheme, Sadleir  misappropriated millions of dollars that the Fund had invested in Aviron. Sadleir  represented to the Fund that Aviron had invested this money in pre-paid media credits with the advertising placement company MediaCom Worldwide. Sadleir  actually  used a sizable part of those funds for his personal benefit, including to purchase a private residence in Beverly Hills for approximately $14 million dollars.

 In the other scheme, Sadleir  engineered the illicit and fraudulent sale and refinancing of assets worth more than $3 million that secured the Fund’s loans to Aviron. Sadleir  used the forged signature of one of the Fund’s portfolio managers on releases to remove the liens on certain secured assets. He  did so in order to sell or refinance the assets without the Fund’s consent, thus depriving the Fund of its collateral on outstanding loans.

In addition to the prison term, the Judge sentenced Sadleir  to three years of supervised release and ordered Sadleir  to pay $31,597,000 in forfeiture and restitution.
Sadleir was expelled from Aviron in 2020 after he and the company were sued by BlackRock for fraud. He was later charged by federal prosecutors and the Securities and Exchange Commission. The 68-year-old producer has also pleaded guilty to money laundering and fraud charges for pocketing nearly $1 million in Paycheck Protection Program loans meant to help Aviron stay afloat during the COVID-19 pandemic.

Criminal Complaint

SEC Complaint 

U.S. District Judge Raag Singhal in South Florida sentenced Jason Van Eman, a 44-year-old movie producer from Oklahoma to 262 months in prison for his part in a financing scheme that defrauded investors out of more than $60 million. The defendant was also ordered to pay $9 million in restitution.
 
After a six-week jury trial, a  federal jury found Van Eman, doing business as Weathervane Productions, guilty of conspiracy, wire fraud and money laundering.  Van Eman promised the victims that his partner Benjamin McConley  would match any funds that the victims contributed to their projects.
 
Van Eman and his co-conspirators then stole the victims’ money by moving it to their personal and corporate bank accounts. To make the scam more credible,  they recruited Benjamin Rafael, a Wells Fargo bank employee, whose role was to assure victims that their cash contributions had been matched and that their money was secure – neither of which was true.
 
Van Eman, McConley, and Rafael used the stolen money to purchase luxury cars, watercraft, real estate, jewelry, home furnishings, designer clothes, and private and commercial air travel. Van Eman used some of the stolen cash to fund movies in which he was cast.  
 
Co-conspirator McConley was sentenced to 13 years in prison after pleading guilty to one count of conspiracy to commit wire fraud. Bank employee Benjamin Rafael was sentenced to 30 months in prison plus  three years of supervised release.
 
Van Eman’s credits include producing the Sundance hit “The Tale”  with Laura Dern and Jason Ritter. He has 23 producer  credits and 10 acting credits listed on IMDB.
 
To learn how investors can better protect themselves see my article: The Hollywood Shuffle: Protecting Film Investors published in the Vanderbilt Law Journal.

 
An author’s heirs has sued Paramount Pictures Corporation in federal court over the underlying rights to the  hit movie Top Gun: Maverick, which plaintiffs contend is  a  sequel to the original movie. Ehud Yonay wrote the original 1983 article in California magazine titled “Top Guns,” from which the 1986 motion picture “Top Gun” (the “1986 Film”) was based. According to the plaintiffs, the  recently released 2022 motion picture “Top Gun: Maverick” (the “Sequel”) is also  derived from the article. Yonay’s heirs availed themselves of their right to recover the copyright to the story under the Copyright Act (17 U.S.C. § 203(a)), by sending Paramount a statutory notice of termination and filing it with the Copyright Office as of January 24, 2020.

Under U.S. copyright law, authors (or their survivors), can “terminate” copyright assignments they have previously made in certain circumstances and regain rights to their work. Consequently, even if an author, musician, or filmmaker signed an agreement transferring all rights in their work in perpetuity, the Copyright Act provides that the author can end that grant and demand that the rights revert. Essentially, the author is getting a second chance to make money from his work which may have initially been sold at a time when it did not fetch much money.
 
However, works previously created before termination can continue to be distributed. The owner of a film produced based on a novel, for example, can continue to exploit the movie because that grant was prepared under authority of rights before termination. However, no new sequels or remakes could be made after termination.

The 1986 Film was  produced by Jerry Bruckheimer and its screenplay written by Jim Cash and Jack Epps, Jr., and was derived from the story according to the plaintiffs. They mention in the lawsuit that the 1986 Film specifically credits Ehud Yonay for his story.
​
Under copyright law (17 U.S.C. § 203)  a  derivative work prepared under authority of the grant before its termination may continue to be used under the terms of the grant after its termination, but this privilege does not extend to the preparation after the termination of other derivative works based upon the copyrighted work covered by the terminated grant. The plaintiffs contend the movie wasn’t completed until May 8, 2021, more than a year after Paramount’s rights to the story expired. The release of the film was delayed because of theater closures forced by Covid-19.
 
Paramount can be expected to argue that the sequel movie is not derivative of the article and many of the facts are in the public domain. It may also argue that a mere story idea is not copyrightable, and the movie was produced before termination was effective, even if it was released later.

Should the plaintiffs prevail, they could stop distribution of the hit film causing Paramount to lose enormous amount of revenue. Moreover, they can seek damages for copyright infringement. In cases like this, the parties often reach a settlement. 

Read lawsuit