Napoleon Dynamite

(2004)   Tags: Fox

NAPOLEON PICTURES LIMITED v. Fox Searchlight Pictures, Inc.

Napoleon Pictures Limited premiered its film “Napoleon Dynamite” at the 2004 Sundance Film Festival. The Film was produced by 24-year-old Jeremy Romney Coon, with an initial $404,000 from his family.

Napoleon hired John Sloss to negotiate a distribution agreement for the Film. Sloss, an experienced entertainment lawyer who has sold 400 independent films, wanted Fox Searchlight Pictures, Inc., to distribute the Film. He immediately began to negotiate terms with a friend, Fox vice-president Joseph De Marco, with whom Sloss had arranged at least 10 movie distribution deals. Sloss profits from the Film’s distribution through his “advisory company,” which receives 10 percent of all revenue arising from commercial exploitation of the Film.

Sloss and De Marco made a handshake deal on January 18, 2004, one day after the Film premiered. A “Term Sheet” was signed two days later. Fox paid Napoleon an acquisition price of $4.75 million, with a 50 percent gross profits participation rate.

Central to the parties’ dispute are the terms for home video royalties. During negotiations with Fox at Sundance, Coon was told that the home video royalty for the Film would be approximately 25 percent.  Defendants claim the home video percentage was always 10 percent.

Judgment: In a dispute over film revenue, a referee rejected plaintiff’s claim that defendant’s vice-president orally agreed to pay a high royalty rate of 31.66 percent for video sales. The claimed undocumented oral understanding contradicts the parties’ written agreement, which states that rentals have a high royalty rate while sales royalties are at 10 percent.