(2009) Tags: Warner Bros.
Twentieth Century Fox Film Corporation v. Warner Bros. Entertainment, Inc.
Plaintiff Twentieth Century Fox Film Corp. has sued defendants Warner Brothers Entertainment, Inc., WB Studio Enterprises, Inc., and Warner Brothers Pictures for copyright infringement, interference with contract, and breach of contract. Fox seeks to enjoin the scheduled March 6, 2009 release of Warner Brothers’ big-budget comic-book feature, “Watchmen,” and also seeks an accounting of profits, declaratory relief, actual or statutory damages, and punitive damages.
For many years, Fox was involved in a business relationship with Lawrence Gordon, whom Warner Brothers accurately characterizes as an “A-List” producer of important motion pictures. During the period of this business relationship, Gordon conducted business through a number of entities, including Lawrence Gordon Productions, Golar, Inc., and various Largo entities.
In 1986, Fox purchased an option to acquire the rights to “Watchmen,” and Fox exercised that option in 1990 by paying $320,000 for those rights. In 1991, through a quitclaim agreement, Fox conveyed its rights in “Watchmen” to Largo International, N.V., a Largo entity effectively under the control of Gordon, while retaining a right to distribute the first “Watchmen” motion picture. Although the quitclaim agreement and the accompanying short form quitclaim indicated that Fox had the right to distribute the first “Watchmen” picture, the quitclaim also incorporated the Largo Agreements, though with the caveat that the quitclaim controlled in the event that any of its terms conflicted with the terms of the Largo Agreements.
Some time before 1994, Gordon made the decision to withdraw from Largo Entertainment and to dissociate himself from the Largo entities. He resigned from his post as chairman and chief executive officer of Largo Entertainment in November 1993. When Gordon withdrew, he acquired, through Golar, whatever interest LINV had in “Watchmen” at the time. In correspondence between Gordon and Fox, “Watchmen” was later listed as an “LGP limbo project” and was one of the projects encompassed within a “Settlement and Release Agreement” executed by Gordon and Fox in 1994. Among other things, the Settlement and Release Agreement obligated the parties to execute a “Turnaround Notice,” which placed the “Watchmen” project in perpetual turnaround and granted Gordon the exclusive right to acquire all of Fox’s right, title, and interest in the project by paying a “buy-out price.” Plainly, the Turnaround Notice acknowledged that Fox had rights in the “Watchmen” property, that Gordon either owned no rights or owned less than all of them, and that Gordon could acquire all the rights in the project, but only by paying for them. Moreover, the agreement contained a “changed elements” term that obligated Gordon, at any time prior to the payment of the buy-out price, to present the project to Fox whenever a changed element was introduced into the project. Gordon has never acquired Fox’s rights in the project because he never paid the buyout price, nor has he honored the changed elements term since 2005 even though numerous changes have been made in the project since then.