<b><i>Commentary: </b></i>Inequity Is Seen In Film-Rights Reversion Process

I have a lot of trouble accepting something that makes no sense simply because an attorney trying to make a point in a deal says: 'It's always done that way,' or 'Everyone does it like this.' Attorneys preparing a film contract often use this 'irrational' rationale. I am referring to the reversion clause in a contract to acquire rights in a basic work, such as a novel for a film.

The attorney for the film company acquiring the rights may try to convince you that the percentage of the net profits that will go along with the fee payment for the rights in the work are indeed valuable, while both of you know that, in most instances, net profits on a film are really 'pie in the sky.' Turn the argument about the value of net profits around, and the film attorney may try to convince you that the likelihood of net profits is so remote that it shouldn't even be considered part of the consideration so that if the seller of the rights in the book never has the chance to receive net profits, he or she has lost nothing.

Give 'Em an Inch '

Be that as it may, if no film is made during a specified time after the rights are purchased (eg, 7 years), the seller of the rights in the novel hasn't received full consideration for the sale. Furthermore, if the specified years go by without a film, the author-seller wants the rights back to sell them to someone who has a chance to make a film based on the novel. Few authors sell the film rights in a book for the option money. The author of the book wants the purchase money and to see a film made.

The attorney for the film company will likely demand that if no film is made and the author wants the rights back after the specified time, the author should pay the film company if the author later sells the reverted rights to someone else. The film-company attorney won't only ask to receive all the money back that the company has paid the author, but some attorneys even have requested that the money be repaid to the film company with interest. In fact, the film attorney in some instances will request that the author pay back an amount equal to all funds that the film company has spent trying to make the movie, including, for example, fees paid to the writer of the screenplay.

No Free Rides

I have great difficulty understanding the reasoning, when considering:

• The film company acquired the rights to make a film based on a novel;
• After 7 years, the film company utterly failed in getting a film made;
• The author of the novel has had his or her valuable property off the market for 7 years; and
• During the 7 years, the film company muddied the market and probably shopped the prospective film to most of the studios that could finance it.

I can't think of a single good reason why an author should be asked to give back money paid for the rights to make the film. Why should the film company get a free ride, especially when the author gets back rights that are diminished in value? Why should the film company own the rights for 7 years for what might turn out to be no money at all? And then to ask the author perhaps to return with interest the rights payment received from the film company requires colossal nerve.

Business deals are supposed to make some sense, but search as I may, I can't find any reasonable way to justify this kind of a deal, except that 'It's always done that way.' And that really makes no sense at all.

I have a lot of trouble accepting something that makes no sense simply because an attorney trying to make a point in a deal says: 'It's always done that way,' or 'Everyone does it like this.' Attorneys preparing a film contract often use this 'irrational' rationale. I am referring to the reversion clause in a contract to acquire rights in a basic work, such as a novel for a film.

The attorney for the film company acquiring the rights may try to convince you that the percentage of the net profits that will go along with the fee payment for the rights in the work are indeed valuable, while both of you know that, in most instances, net profits on a film are really 'pie in the sky.' Turn the argument about the value of net profits around, and the film attorney may try to convince you that the likelihood of net profits is so remote that it shouldn't even be considered part of the consideration so that if the seller of the rights in the book never has the chance to receive net profits, he or she has lost nothing.

Give 'Em an Inch '

Be that as it may, if no film is made during a specified time after the rights are purchased (eg, 7 years), the seller of the rights in the novel hasn't received full consideration for the sale. Furthermore, if the specified years go by without a film, the author-seller wants the rights back to sell them to someone who has a chance to make a film based on the novel. Few authors sell the film rights in a book for the option money. The author of the book wants the purchase money and to see a film made.

The attorney for the film company will likely demand that if no film is made and the author wants the rights back after the specified time, the author should pay the film company if the author later sells the reverted rights to someone else. The film-company attorney won't only ask to receive all the money back that the company has paid the author, but some attorneys even have requested that the money be repaid to the film company with interest. In fact, the film attorney in some instances will request that the author pay back an amount equal to all funds that the film company has spent trying to make the movie, including, for example, fees paid to the writer of the screenplay.

No Free Rides

I have great difficulty understanding the reasoning, when considering:

• The film company acquired the rights to make a film based on a novel;
• After 7 years, the film company utterly failed in getting a film made;
• The author of the novel has had his or her valuable property off the market for 7 years; and
• During the 7 years, the film company muddied the market and probably shopped the prospective film to most of the studios that could finance it.

I can't think of a single good reason why an author should be asked to give back money paid for the rights to make the film. Why should the film company get a free ride, especially when the author gets back rights that are diminished in value? Why should the film company own the rights for 7 years for what might turn out to be no money at all? And then to ask the author perhaps to return with interest the rights payment received from the film company requires colossal nerve.

Business deals are supposed to make some sense, but search as I may, I can't find any reasonable way to justify this kind of a deal, except that 'It's always done that way.' And that really makes no sense at all.