Using Character Integrity Guidelines to Protect Franchise Characters

Approval Rights

If you have enough leverage in the negotiation, the preferable route would be to obtain approval rights. Such rights should be as extensive as possible and could include approval over the writer of the script, the final script, the director of the movie, the character playing the “franchise character,” the movie budget and anything else that might be apposite with respect to the particular property being licensed. Approval rights come in many flavors, from absolute (i.e., the movie can't be made without your approval), to less than absolute (e.g., you and the studio have mutual approval but in the event of a stalemate the studio or a mutually agreed third party gets to break the tie), to more diluted (e.g., your approval is “not to be unreasonably withheld or delayed”). Needless to say, the movie studio licensing the rights will strenuously object to granting approvals. The studio will argue that it will be expending considerable amounts developing its film and does not want to be held up by reason of the licensor failing to approve something.

If you are able in your license to get approval over one or more elements, or at least to the shooting script, it is important that there be an effective remedy to enforce the approval right(s). It might not be much solace if all you have is the right to pursue a claim for damages, as these can be difficult to prove. What you as a licensor really want is the right to injunctive relief, that is, the ability to get a court to order the studio not to proceed further in the event of a breach of the approval right.

Here again, however, studio agree- ments almost invariably include a “no rescission, no injunctive relief” provision barring such remedies, and the studios are loathe to change these provisions. They argue that once they have started developing a property at great cost to themselves, the licensor should be limited to seeking money damages for any breach by the studio. As a fallback, the licensor can try and include a so-called “liquidated damages” provision, meaning there is a set amount of damages the studio must pay in the event of breach. Such provisions are not foolproof, but if the dollar amount of the liquidated damages is high enough and the studio believes there is at least a significant risk that the provision will be enforced, this can be incentive enough for the studio to pay attention to the licensor's rights.

Character Integrity 'Rules of the Road'

In the vast majority of situations, a movie studio will simply refuse to grant approval rights to the licensor. What avenues are then left to the licensor? One approach that has had some success is to include as part of the contract what are sometimes called “character integrity guidelines.” These are sort of a “rules of the road” that list, sometimes in quite a bit of detail, what can and cannot be done in connection with the adaptation of the franchise character. The guidelines might, for example, list parameters as to how the character might be depicted, such as:

• Appearance. Perhaps there are physical characteristics of the character that can be specified, such as hair color, eye color, height, fitness level or age.
• Apparel. Is there a particular style of wardrobe associated with the character or a uniform that cannot be altered?
• Back story. Are there things about the character's background that have to be absolute ( e.g., never married, never a cop, never a drug addict, never killed an innocent person, etc.)?
• Behavior. There may be certain things the character may not be depicted doing on a going forward basis, such as engaging in drug use, certain forms of undesirable behavior ( e.g., cruelty to children, animals or members of the opposite sex, the handicapped and/or elderly), criminal behavior and so on. Can the character be depicted as getting married and having a family, or must he/she remain a loner?
• Philosophical beliefs. Maybe the character may not espouse anti-religious or unpatriotic views. Or only anti-authoritarian views.
• Affirmative criteria. If a character has particular beliefs ( e.g., if they are a nihilist who believes all forms of government are oppressive, then maybe they should never be portrayed as going “soft” on this position) or behavior patterns ( e.g., if they never smoke or always smoke) that can be articulated, these can be listed and made part of the guidelines.

The franchise-license agreement can specify that such criteria may not be altered, or at least materially altered. There are things which may be contractually legislated, such as that the franchise character may not be killed or maimed. This might seem obvious, but there is no reason not to make it clear.

Spin-Offs

Another issue to consider is whether your established franchise character will be used to establish a platform from which other franchises are launched. Let's say your franchise character is given a sidekick in the movie and then that sidekick is spun off into a series of movies. Arguably your property has been used to create additional value. Is that permitted?

You might try to freeze such rights so that you have the ability to negotiate some mutually agreed compensation for that at the time. If that isn't acceptable, perhaps a passive royalty can be negotiated for such spin-offs. If desirable, you might consider getting cross-licensing rights to allow such a character to be utilized in your existing graphic novel series, video game or the like.

Tie-Ins

Another thing to consider is whether you can restrict the use of the franchise character in connection with commercial tie-ins. Such arrangements are where an item from a movie is used in conjunction with the marketing of a product unrelated to the movie (e.g., an image of the character is put on a fast food franchise's drinking cup). You might try to get an approval over such commercial tie-ins on the theory that they may “cheapen” the franchise. Generally a studio will insist of having the right to enter into commercial tie-ins, as these are an effective way to stretch the marketing budget for the movie. This is a place where “approval not to be unreasonably withheld” might be appropriate.

As a fallback, you could insist that no commercial tie-ins be entered into that conflict with any existing tie-ins you may have. If all else fails, you can insist that before any particular commercial tie-in is entered into, you will be consulted in advance and meaningful good-faith consideration given to your views. Be aware, however, that from a legal point of view, consultation rights are very difficult to enforce in any meaningful way. The argument goes that because the studio has no obligation to accede to your views, even if they do consult with you, there really is no damage that flows from their failure to consult.

Dispute Resolution

If you do get the studio to agree to approval rights or to abide by character integrity guidelines, there remains the issue of how to enforce such provisions. With respect to character integrity guidelines, there are two critical junctures at which the process might come into play. First is the shooting script. It should be submitted to the licensor, who should be given the opportunity to ascertain whether the script conforms to the contractually mandated guidelines. Second, because the script may not be strictly followed in the shooting and editing of the movie, the movie itself should be submitted to the licensor to verify that the movie conforms, or at least does not materially depart from, the character integrity guidelines.

What if the studio and the licensor disagree about whether the guidelines have been adhered to or not? Generally a studio will resist leaving the matter to the courts. Not only is this potentially slow, but it is also public. Airing one's dirty laundry by having it known that there is a dispute between the licensor and the studio is not a great way to create positive “buzz” about the project. So the normal compromise is to have a form of expedited arbitration before one or more arbitrators who have extensive experience in the entertainment industry. You can even pre-approve one or more arbitrators in advance in the contract if both parties agree on individuals who they respect for their integrity and expertise.

It is crucial that the arbitrator have the right to grant effective relief. The right to grant money damages is not enough. The licensor should fight very hard to have the arbitrator be given the right to prevent the script from being shot or the movie released unless and until alterations are made that comply with the guidelines. Although, as noted above in connection with approval rights, the studio will resist this. If the guidelines are specific, clear and reasonable, they provide a known objective roadmap arguably minimizing the possibility of unpredictable and crazy results. If both parties pre-approve the arbitrator, who is then a known commodity, this may all serve to give adequate comfort so that such circumscribed relief will be acceptable to the studio and the licensor's goals can be achieved.

In recent years, Hollywood has become more and more a business of creating and exploiting franchises rather than simply making and distributing movies. This is partly because the costs of promoting a movie are so great that the studio wants to be able to reap the benefits of this initial expenditure by producing and releasing sequels. The studio also wants to be able to “extend the brand” by being able to exploit the franchise in multiple ways (through merchandise, publications, interactive games, theme park rides, stage plays, etc.).

Although occasionally a franchise is still created from scratch (e.g., Toy Story, Avatar), often the studio licenses rights to an existing character or other property that already has at least some built-in audience. (It's “pre-sold” in current parlance.) The licensed property can range from a novel (the Bourne movies), to a comic book or graphic novel (Spiderman), a toy (Transformers), a theme park ride (Pirates of the Caribbean), an interactive game (Resident Evil), an older movie or television property (The A Team); there is practically no limit to the human imagination's ability to find ways to build upon and expand existing sources.

If you are the owner of a property that is being licensed into a potential motion picture franchise, how do you contractually protect the rights to your existing character or property so that the movies and related items being created do not damage your preexisting property? This article examines the approaches customarily utilized. Although I will primarily discuss motion pictures below, the analysis is much the same for television productions.

Approval Rights

If you have enough leverage in the negotiation, the preferable route would be to obtain approval rights. Such rights should be as extensive as possible and could include approval over the writer of the script, the final script, the director of the movie, the character playing the “franchise character,” the movie budget and anything else that might be apposite with respect to the particular property being licensed. Approval rights come in many flavors, from absolute (i.e., the movie can't be made without your approval), to less than absolute (e.g., you and the studio have mutual approval but in the event of a stalemate the studio or a mutually agreed third party gets to break the tie), to more diluted (e.g., your approval is “not to be unreasonably withheld or delayed”). Needless to say, the movie studio licensing the rights will strenuously object to granting approvals. The studio will argue that it will be expending considerable amounts developing its film and does not want to be held up by reason of the licensor failing to approve something.

If you are able in your license to get approval over one or more elements, or at least to the shooting script, it is important that there be an effective remedy to enforce the approval right(s). It might not be much solace if all you have is the right to pursue a claim for damages, as these can be difficult to prove. What you as a licensor really want is the right to injunctive relief, that is, the ability to get a court to order the studio not to proceed further in the event of a breach of the approval right.

Here again, however, studio agree- ments almost invariably include a “no rescission, no injunctive relief” provision barring such remedies, and the studios are loathe to change these provisions. They argue that once they have started developing a property at great cost to themselves, the licensor should be limited to seeking money damages for any breach by the studio. As a fallback, the licensor can try and include a so-called “liquidated damages” provision, meaning there is a set amount of damages the studio must pay in the event of breach. Such provisions are not foolproof, but if the dollar amount of the liquidated damages is high enough and the studio believes there is at least a significant risk that the provision will be enforced, this can be incentive enough for the studio to pay attention to the licensor's rights.

Character Integrity 'Rules of the Road'

In the vast majority of situations, a movie studio will simply refuse to grant approval rights to the licensor. What avenues are then left to the licensor? One approach that has had some success is to include as part of the contract what are sometimes called “character integrity guidelines.” These are sort of a “rules of the road” that list, sometimes in quite a bit of detail, what can and cannot be done in connection with the adaptation of the franchise character. The guidelines might, for example, list parameters as to how the character might be depicted, such as:

• Appearance. Perhaps there are physical characteristics of the character that can be specified, such as hair color, eye color, height, fitness level or age.
• Apparel. Is there a particular style of wardrobe associated with the character or a uniform that cannot be altered?
• Back story. Are there things about the character's background that have to be absolute ( e.g., never married, never a cop, never a drug addict, never killed an innocent person, etc.)?
• Behavior. There may be certain things the character may not be depicted doing on a going forward basis, such as engaging in drug use, certain forms of undesirable behavior ( e.g., cruelty to children, animals or members of the opposite sex, the handicapped and/or elderly), criminal behavior and so on. Can the character be depicted as getting married and having a family, or must he/she remain a loner?
• Philosophical beliefs. Maybe the character may not espouse anti-religious or unpatriotic views. Or only anti-authoritarian views.
• Affirmative criteria. If a character has particular beliefs ( e.g., if they are a nihilist who believes all forms of government are oppressive, then maybe they should never be portrayed as going “soft” on this position) or behavior patterns ( e.g., if they never smoke or always smoke) that can be articulated, these can be listed and made part of the guidelines.

The franchise-license agreement can specify that such criteria may not be altered, or at least materially altered. There are things which may be contractually legislated, such as that the franchise character may not be killed or maimed. This might seem obvious, but there is no reason not to make it clear.

Spin-Offs

Another issue to consider is whether your established franchise character will be used to establish a platform from which other franchises are launched. Let's say your franchise character is given a sidekick in the movie and then that sidekick is spun off into a series of movies. Arguably your property has been used to create additional value. Is that permitted?

You might try to freeze such rights so that you have the ability to negotiate some mutually agreed compensation for that at the time. If that isn't acceptable, perhaps a passive royalty can be negotiated for such spin-offs. If desirable, you might consider getting cross-licensing rights to allow such a character to be utilized in your existing graphic novel series, video game or the like.

Tie-Ins

Another thing to consider is whether you can restrict the use of the franchise character in connection with commercial tie-ins. Such arrangements are where an item from a movie is used in conjunction with the marketing of a product unrelated to the movie (e.g., an image of the character is put on a fast food franchise's drinking cup). You might try to get an approval over such commercial tie-ins on the theory that they may “cheapen” the franchise. Generally a studio will insist of having the right to enter into commercial tie-ins, as these are an effective way to stretch the marketing budget for the movie. This is a place where “approval not to be unreasonably withheld” might be appropriate.

As a fallback, you could insist that no commercial tie-ins be entered into that conflict with any existing tie-ins you may have. If all else fails, you can insist that before any particular commercial tie-in is entered into, you will be consulted in advance and meaningful good-faith consideration given to your views. Be aware, however, that from a legal point of view, consultation rights are very difficult to enforce in any meaningful way. The argument goes that because the studio has no obligation to accede to your views, even if they do consult with you, there really is no damage that flows from their failure to consult.

Dispute Resolution

If you do get the studio to agree to approval rights or to abide by character integrity guidelines, there remains the issue of how to enforce such provisions. With respect to character integrity guidelines, there are two critical junctures at which the process might come into play. First is the shooting script. It should be submitted to the licensor, who should be given the opportunity to ascertain whether the script conforms to the contractually mandated guidelines. Second, because the script may not be strictly followed in the shooting and editing of the movie, the movie itself should be submitted to the licensor to verify that the movie conforms, or at least does not materially depart from, the character integrity guidelines.

What if the studio and the licensor disagree about whether the guidelines have been adhered to or not? Generally a studio will resist leaving the matter to the courts. Not only is this potentially slow, but it is also public. Airing one's dirty laundry by having it known that there is a dispute between the licensor and the studio is not a great way to create positive “buzz” about the project. So the normal compromise is to have a form of expedited arbitration before one or more arbitrators who have extensive experience in the entertainment industry. You can even pre-approve one or more arbitrators in advance in the contract if both parties agree on individuals who they respect for their integrity and expertise.

It is crucial that the arbitrator have the right to grant effective relief. The right to grant money damages is not enough. The licensor should fight very hard to have the arbitrator be given the right to prevent the script from being shot or the movie released unless and until alterations are made that comply with the guidelines. Although, as noted above in connection with approval rights, the studio will resist this. If the guidelines are specific, clear and reasonable, they provide a known objective roadmap arguably minimizing the possibility of unpredictable and crazy results. If both parties pre-approve the arbitrator, who is then a known commodity, this may all serve to give adequate comfort so that such circumscribed relief will be acceptable to the studio and the licensor's goals can be achieved.