The Disclaimer (What lawyer doesn't have one?)
The information below is for general purposes only and is NOT legal advice. No attorney-client relationship is formed by reading this information. If you need legal advice, please consult with a competent attorney licensed to practice in your jurisdiction.
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As an entertainment lawyer in New York and Austin, I have had the privilege of working with many talented and dedicated industry veterans, as well as those in the nascent stages of their careers. Interestingly, I have seen that experience does not necessarily keep people from making some very common mistakes. Below are the ones that I encounter on an almost weekly basis, and that I hope you can avoid in your projects. But first, an annoying legal caveat: the information below is not legal advice, so if you have a question you should consult an attorney. OK, back to the mistakes:
1. Writing, shooting, or engaging in any creative or business activity with other people - or their works - without first documenting the nature of the relationship.
I have several clients who after being smitten by novels, have felt compelled to write screenplays based on them (considered "derivative works" under the Copyright Act), without first getting permission from the novels' authors. This mistake can be very costly, either because you have to shell out thousands of dollars to buy the rights, or risk wasting hours and hours of your time on a script you can't later produce or sell to someone else.
Direct collaboration also can be risky. United States copyright law provides that even a small contribution of original material by a person to another person's work may be enough to render it a joint work. Therefore, if you have written a script, but give it to a writer you trust to polish, you may have a co-authorship situation. Absent an agreement stating otherwise, co-authors may be entitled to undivided equal interests in the whole work. Which leads us to the next mistake. . . .
2. Running to the alter.
By its very nature, filmmaking is a collaborative process. Consequently, filmmakers are often tempted to jump blindly into partnerships or other legal entities without really thinking about the consequences of their actions. Forming an LLC for a production company with your best pal from film school is akin to a marriage. Like a marriage, there are legal obligations, rights, and assets that must be considered in the event of a dissolution. And you know what the divorce rate in this country is. . . .
You do not need to be part of the same corporate entity to collaborate on a project together. Your production company can execute a co-production agreement with your colleague's company, or one company can hire an individual producer for one project. In other words, before you get married, wouldn’t you want to date the person first? And as we established above, make sure there is a contract that describes the working relationship before collaboration commences.
3. Undercapitalization of the project or company.
While well-known exceptions exist, filmmaking is almost always an expensive and time-consuming venture. A detailed, accurate, and realistic budget is crucial. Even if you don’t have Movie Magic or another budgeting program, you can create just as detailed a budget with Excel or a similar spreadsheet program. Your budget needs to be more than just a rough estimate of equipment rental, craft services, and cast/crew salaries that fits neatly onto one page. A good budget is a complex document that is your roadmap for your entire production process (including pre- and post-production elements).
If budgets scare you, bore you, or you don't know what a honeywagon is (or how much to budget for it), join the Yahoo FilmBudgeting group (hotlink: http://movies.groups.yahoo.com/group/FilmBudgeting/); it is replete with sample budgets, astute advice, and answers to common questions. And unlike many groups out there, it is well moderated to ensure posts stay on topic.
Once you have your complete budget, memorize its final total and sear it into your brain. Starting production on your feature without your total budget (or a very significant portion of it) raised is like building a new house and assuming that shingles and door knobs are unnecessary elements you can jettison last minute.
Similarly, a production company needs some initial seed money. Copies and overnight mail deliveries of scripts for your first project to potential cast and financiers is not cheap. Consider putting a little money away each month automatically with an online high-interest savings account that automatically drafts from your checking account. A savvy financial planner, who works with many self-employed artists (hot link: www.downtoearthfinance.com), recommends www.ingdirect.com and www.emigrantdirect.com as a couple examples to start saving automatically.
4. Using the "I"word.
As in investor. Filmmakers often come to my office and talk about their investors. When I ask about the nature of the offering or to see their private placement memoranda I get a blank stare. No documents have been drafted. I know how desperately you need the development funds, but before you accept a single dollar from anyone, be clear about the nature of that money. Is it a gift? Is it a loan? If so, what is the interest rate and payback schedule? If you are talking about a transaction that means Joe Investor will give you X dollars in exchange for a share of the future (fingers crossed) profits, then you are entering into a securities transaction. Securities are heavily regulated by federal and state laws, and breaking these laws can result in civil AND criminal penalties. Many contracts are available online or are circulated amongst filmmakers, but investment documents should always be drafted by a knowledgeable entertainment lawyer who understands film finance.
5. Failing to protect your intellectual property.
Often, when I ask a writer or a filmmaker if he/she has registered the copyright for his/her work, I hear "yes, it's registered with the WGA." Let's get something clear: copyright registration with the US Copyright Office is the surest way to avoid a disaster in the future. It costs $45 and is therefore the cheapest peace of mind you can buy. And starting July 1, 2007, the Copyright Office intends to offer a beta version of an online registration system for $35, making the process even easier.
Though WGA registration can protect you in a writing credit dispute (e.g. if you sell something that gets rewritten), it does very little in a potential infringement suit. A successful infringement suit for a copyrighted work entitles you to significantly higher damages in addition to attorney fees, which can be crucial for individual artists without that litigation slush fund.
Deena Kalai is an entertainment lawyer with offices in Austin and New York.
Copyright 2008 Deena Kalai, PLLC.
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