Even the negotiation of film contracts between German screenwriters or publishers and German production companies can be difficult. Many legal questions are relevant here. I have already addressed some of these questions in an article about screenplay contracts. Particular problems arise when German rights holders want to conclude literary purchase agreements with American production companies, be they independent film producers, mini-majors, majors, or streaming providers (such as Netflix, Amazon Prime Video, or Disney+). Many German-language novels are successful in translation worldwide and also arouse the interest of American producers. The producers usually approach the German book publishers, because the novelists regularly grant all film rights to their books to their book publishers as ancillary rights. While the first key points for the agreements are still made in short emails, German publishers are at some point confronted with the complex contracts of the American producers. These can sometimes be up to 50 pages or more. Here I would like to go into some special features.
The choice of law of these contracts
The contract offers are generally subject to U.S. law. It is rarely possible to subject these contracts to German law. This can only succeed in the case of a very successful novel that has attracted several international film producers who are in a bidding war for the film rights. If the contract is subject to American law, the involvement of a lawyer trained in American law is advisable. Although many American legal terms are familiar to us in the German film business, they can have a very specific legal meaning in the U.S. Many of the design rights and legal consequences that we know in German law have no equivalent at all in U.S. law. Also, American law is not as codified as German law. As a rule, the German legal practitioner can rely on the fact that the statutes, in particular the German Civil Code, regulate many appropriate legal consequences for general contracts, which can be used in the event of contractual gaps or interpretation problems. In American law, the lack of statutes can lead to surprises. In addition, the law can also be different in the different American states. In practice, this then means that American contracts of economic importance can have a length of up to 50 pages or more.
Variety of contracts
Especially when negotiating with major companies, you are confronted with a large number of contracts. In addition to the main contract (Option and Literary Purchase Agreement), there are numerous annexes, such as Short Form Assignments, Short Form Options, Riders, Definitions, Standard Terms and Conditions, Schedules, etc. In these annexes, the provisions of the main contract might be regulated in more detail. When reviewing American film adaptation contracts, these general terms and conditions must also be carefully examined and, if necessary, adjusted. Sometimes, the producer speculates that the contract partner will not read the “small print” carefully and will overlook important provisions.
Multiple options
As a rule, film adaptation contracts are designed as option contracts. After concluding the option agreement, the producer would first like to develop the film material internally and also secure financing. Since this can take a long time, extension options are usually provided. Corresponding option fees are due for this.
What rights are transferred?
As a rule, the production company has an interest in acquiring all rights of use to the work. If the contract partner is a German publisher, the publisher will exclude all book rights, as it wants to continue its main business. It is quite possible to withhold further rights of use (reserved rights). However, the negotiations on this can be long and difficult, as the American production company sees the use of the work in secondary markets (such as the theater sector) as “free-riding” and sees its own economic interests at risk.
Remuneration for the grant of rights
As a rule, lump-sum remuneration is paid first, which can also be based on the budget of the film. Furthermore, certain profit-sharing schemes are common, for example, in follow-up productions (remakes, etc.) or television productions (e.g., TV series). If, on the other hand, you are dealing with streaming services (Netflix, Amazon), you will probably not be able to enforce a separate share of the SVOD revenues.
Breach of contract, disruption of performance, legal consequences
Particular attention is required when regulating breaches of contract, guarantees, terminations, reversion clauses, etc. Here, American law offers some special features that can result in disadvantages for the German party in case of conflict.
The publisher caught in the middle
After all, from the point of view of the German book publisher, it must always be remembered that they are caught in the middle here.
On the one hand, the publisher concludes a publishing contract with the author under German law. The Copyright Act is basically designed to be author-friendly and provides for a large number of mandatory provisions in favor of authors. This applies, for example, to moral rights, claims to appropriate remuneration or appropriate further participation, as well as revocation rights.
On the other hand, the publisher concludes a film adaptation contract with the U.S. producer under American law. In this contract, these copyright-friendly provisions will be waived. The publisher must therefore be careful not to get caught between the two sides in the event of a conflict and not to be obliged to do more for the author than what can be claimed from the American side. This makes careful contract drafting of the chain of rights necessary.
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