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DeepFocus Law’s Getting to Greenlight series presents entertainment attorney explanations of key business and legal affairs aspects of film and television development. This post turns the lens on the literary option/purchase agreement.
Demand for new source material in Hollywood leads frequently to creative executives approaching authors of written works from literary fiction to existing screenplays to graphic novels. The underlying rights to such works are often the first link in the chain of title of a motion picture or television series. The first step in forging that chain is one of the most important in motion picture and television law–creating a deal for intellectual property rights. A deal for adapting literary material for the screen is most often documented in a literary option/purchase agreement. Here’s an example of a screenplay option/purchase agreement.
Copyright law and the literary option/purchase agreement
For authors and screenwriters, this means understanding how both the “option” and the “purchase” parts of this essential film industry contract relate to copyright law. The option part of the option/purchase contract is the right (but not the obligation) to acquire the rights needed to make a film or television project from the written work’s creator. Its purpose is to secure for the production company the necessary copyright “sticks” in the “bundle of rights” that the creator generally obtains at the moment his or her work is “fixed in a tangible medium of expression” under the Copyright Act. A work is fixed in a tangible medium of expression “when its embodiment in a copy . . . by or under the authority of the author, is sufficiently permanent or stable to permit it to be perceived, reproduced, or otherwise communicated for a period of more than transitory duration.” 17 U.S.C. §101. “Fixation” is a requirement for obtaining a copyright. Once a work is fixed, all of the rights that make up copyright come into legal existence. They include the right to adapt the work, make and distribute copies of the adapted work, and exhibit the adapted work, all of which are needed for a successful movie or series.
So why don’t the producer and author just agree on a price and buy the rights right then? Why do they need an option? The reason is that before the film or show based on the author’s work can be made, it must be “set up” (such as with a studio or production company) or otherwise financed (such as with investors, tax credits, loans, savings, and usually a combination of many funding sources). This development process takes time.
During that time, an option on the work prevents the author from selling the motion picture rights to another buyer (who might be able to put his or her production together faster than the first buyer). It operates kind of like a reservation that holds a table in a restaurant (say, one where a Hollywood talent agent and a studio executive are meeting for a power lunch). But the option takes the literary property OFF the table for a certain period of time, usually about 18 months, in exchange for a fee.
What happens when a producer exercises an option?
A producer is never required to exercise an option, which is why the option fee is less than the total price of the film rights. It’s a reservation, not an obligation. Development may not work out as planned, desired talent may be unavailable, funding may fall through. Many reasons could cause the project not to move forward. If that happens, the producer does not owe the full price of the right to use the work. But the author keeps the option fee, which is why he or she might choose to grant an option (otherwise the work might just sit without earning anything for the author). If the project moves out of development and actually goes into production, the “purchase” part of the option/purchase agreement comes into play. The option price and the full price are negotiated at the same time so that IF the option is exercised, both sides know how much to pay. The producer needs to know this cost to go out and find funding that covers it. The author needs to know so that he or she can decide whether to agree to sell the rights or hold them (perhaps for a more lucrative deal in the future).
You now have a basic overview of literary option and purchase agreements. If you also have more questions about them, or other questions for an entertainment attorney, DeepFocus Law welcome your contact.