MONDAY, 29 January 2001
Breakout: Policy
Intellectual Property in a Digital Age – An Oxymoron?
Peter Hamilton, moderator
Mark Litwak, attorney
I think there are a number of ways we can help consumers find the right program. One way may be through smart agents that will help them navigate the Internet and find programs of interest to them. Another way may be for suppliers of motion pictures to start developing their own email lists of people who are interested in certain types of movies. It seems terribly inefficient, for instance, if you are about to open a Chinese-language picture in Manhattan, to take out full-page newspaper ads. Wouldn't it make much more sense to develop a mailing list of several hundred thousand people in the greater New York area who have asked to be alerted about programs or feature films of interest to them? If a film comes to the theaters, then you could email them, you could email them a trailer, they could find out about it over the Internet, they could order a ticket over the Internet and they could show up. That would be far superior to the shotgun approach of taking out ads in the mass media.
At the moment, the Internet is really just about the last window to exploit, and you need to be sure that it won't preclude you from more lucrative deals with the traditional windows of theatrical, home video, and cable television. The companies that are putting product up on the Internet often want an exclusive. They don't want you to give it to any other potential Internet supplier. The problem with this is that, as you know, a lot of these Internet companies have gone out of business. If you sign a deal and grant an exclusive right for two or three years, you tie up your product with one company. You can't make a deal with another competing company, and it's very hard to predict who's even going to be around in three years. So if you make give an exclusive deal on your film, you may find that the company goes bankrupt and the distribution rights, the Internet distribution rights to your film, are now tied up in bankruptcy court. So one of the ways you might want to protect yourself is to look for either a non-exclusive deal or perhaps a very short-term deal, or a short-term deal with milestones. For example, you might predicate a one-year extension on X number of dollars returning to you in the first year of a contract.
We confront a hodgepodge of laws throughout the world, and you shouldn't assume that, when product is distributed throughout the world, American law will apply to whatever rights and obligations you have as a filmmaker. This is true even if you make a film in America and you're an American and you employ Americans. With regard to royalties from distribution, there is simply no standard as yet.
Many of the companies that are buying Internet rights to films are warehousing these rights in the hope that in the future they'll be valuable. This is because no one is making much money on them. So my advice is always to obtain some sort of reversion clause in any contract whereby you license rights to your film. This means that a definite point those rights come back to you, and especially if the licensee fails to actively exploit your film.
David Liu, ITVS
The title of this panel is interesting, because to my mind the phrase "intellectual property" is quite simply an oxymoron. The problem arises from the fact that the intellectual and the material are different planes. When a product of the intellect is transferred in whatever medium, be it paper, book, film, tape, or whatever it is, to a material realit
y that you can feel and touch and see, that's where the difficulty begins, that's where it becomes property that can be bought and sold.
| "To my mind the phrase 'intellectual property' is quite simply an oxymoron." DAVID LIU |
We ran into this sort of trouble in a few cases when we were trying to work with cable. I've been in conversation with HBO for maybe the last five years through various people, among them John Moss and Nancy Abraham. And a couple of times we really came close to a show that they really, really wanted for their broadcast, but things never worked out because of issues of exclusivity and premiere. So until some brilliant minds can find a language or a solution to that, at least with HBO, it will be very difficult. A dual premiere could work if exclusivity was a lower priority for HBO and they wanted the show badly enough. But I it's not going to happen with HBO until their legal department can see their way beyond this kind of "favored nation" treatment. If they do it for ITVS, they have to do it for everybody else that comes knocking on the door. And that's unlikely to happen for a while unless there's a show that they absolutely can't pass up. It would have to be a very, very special case.
Larry Sapadin, WinStar
The question is, has "intellectual property" become an oxymoron in the digital age? I take this to mean, does the advent of the digital age make it impossible to protect intellectual property? I think the answer is no - for the simple, non-technical reason that the economic stakes in the protection of intellectual property are simply too great for the legal protections to simply crumble away. I mean, we're talking about Disney, we're talking about AOL/Time Warner. These people won't just sit around and watch copyright be destroyed. The copyright law will, of course, have to evolve as it has many, many times before now. But it certainly will not be destroyed.
I think the owners of intellectual property will ultimately find it preferable and more profitable to spend their time thinking of new business models that take advantage of the new distribution technologies, rather than putting all their resources into litigation, which will not always be definitive.
I recall a previous presentation like this, hearing from somebody who had just started a video store that was emphasizing independent work. Independents flocked to this conference, thinking they'd finally found the pot of gold at the end of the rainbow. The gentleman began his presentation by saying, "Read my lips. You're not going to make any money." At this point, all these ancillary uses of streaming and whatnot are not yet real markets. It's really almost like beta-testing of a future technology, and it'll be very interesting to see how both the law and the commerce evolve to address all these issues relating to digital rights.
Richard White, Initial Cut
The British government spends three hundred million pounds a year supporting the national film industry. That film industry is currently running at a loss. The British government spends no money supporting the national interactive entertainment industry, and that industry turns an annual profit of three hundred million pounds. Last year it grossed about two billion pounds more than the American film industry. I think of the interactive entertainment industry as a kind of baby Godzilla still wearing diapers and wandering through the city of the media industries; at any moment this baby is going to find a spot, settle down, and grow up.
| "I think we have to start thinking about how we actually go about franchising our intellectual property rights." RICHARD WHITE |
From our point of view, as storytellers who currently use film as a medium, I think we therefore have to start thinking about how we actually go about franchising our intellectual property rights.
When it comes to interactive media, or multimedia as the French say, it is felt that traditional methods of remunerating creators don't work. The approach within traditional media is something like this: you give somebody $5,000 or $10,000 or $15,000 and they can go back to their garret and create something. With this goes a well-defined terminology: when you give somebody $5,000 and they go back to their garret and write you a script, they write you a first draft; when you get that first draft you can read it and you know whether you've got something or not. Things just don't work like that with interactive media. For one thing, authors don't tend to be individuals, they tend to be groups; and in general the rules have simply not yet been defined. So what is needed is another model or mechanism governing the way authors create, deliver and get remunerated for interactive-media creations.
Let me describe three possible models for interactive product. One is the Disney model. The Disney people make movies. They basically produce a film and then they put it through a process and it gets to a point in sales and distribution where a kind of factory decision is made, something like this: okay, we have a kind of template here for the ancillary rights, and what we'll do is we'll produce a CD and we'll produce some music albums and some books and we'll do stickers etc., etc. As a result what you end up with is immensely stereotypical product. This is really quite boring, granted, but it's a big franchise and people kind of get it.
A second model is the Lucasarts-type franchise. Lucasarts creates special effects and they try to utilize those special effects in the best way they can. They make more money out of all the games they create than they do out of the movies it creates. And to a very large extent, the Lucasarts vision of things sees their films as a big commercial for the interactive products and other merchandizing that they spin off.
And third is the franchise model, which I think is the most interesting. This is the Pokemon model and it's the one I think that we need to follow. Pokemon has been very successful, and it's been successful as a franchise across all media, the reason being that the people who created it just had a story they wanted to tell and could write down on one page - and this not in terms of plot points but literally the story itself. They wanted kids to engage in a particular way, to interact with something, and they simply just kept going back to it, to that thing that they wanted to occur and they looked at how they could best transpose that, franchise it, if you like, into different media.
It's very important to remember the Betamax case, when Sony was sued by Universal Pictures to stop the dissemination of the VCR and the studios said the sky was falling and no one was going to go to movie theaters any more. The Supreme Court ruled against Universal, and now in retrospect it's almost laughable because most of the major studios are making five times as much money from home video as they are from theatrical, in fact video is what saved them -
any major studios that didn't have home video revenue today would be out of business. Attendance at theaters didn't drop at all. It went up.