Monday, July 29, 2013
Six Stages of Production Legal in Independent Motion Pictures
This is an update to the blog article I wrote several years back called LEGAL RAMIFICATIONS OF LOW-BUDGET MOVIE PRODUCTIONS. An attorney on Avvo asked me to update the article as a legal guide, so I updated the article. However, I did not want to leave it exclusively on Avvo, so I have re-posted it here as well.
This guide is based on my experiences as a production attorney for independent films in Los Angeles, California and is written to assist the independent producer or production attorney better understand some of the basic legal issues at each of the six stages of producing a motion picture project.
1. SUBJECT MATTER/CONCEPT/ACQUISITION STAGE: So you want to produce a movie? Congratulations! Producing can be an exciting & rewarding career, but you have to decide what story you want to produce. The movie will be based on some type of subject matter or story - be it fact, fiction or original. The subject matter determination is both a creative and business decision made by the producer based on various market factors and the vision of the producer. The easiest subject matter to clear (or license) will be the producer's own original story, because there are no underlying rights to be secured. However, if the subject matter or story is not the producer's original creation, then certain motion picture rights will need to be licensed from third parties. A producer will need to secure an attorney at this point to ensure the licenses are sufficient to show a proper copyright chain-of-title when requested by financiers & talent guilds in the project's subsequent stages. The attorney may work for a flat fee or on an hourly rate basis.
2. DEVELOPMENT STAGE: Once the producer has identified the subject matter and secured the necessary rights, the producer can begin developing the movie for screen. Nevertheless, the producer will need money to make the movie and this money can come from many sources. There may be credit checks and financial due diligence requirements from potential financiers, so a producer has to be prepared for these checks. The attorney will also need to consider securities laws & regulations. The film's financing will be dependent on a number of factors such as the budget, the attachments of talent/crew and the available monies. The attorney will need to draft these investor financing agreements and file the necessary chain-of-title documents with the Copyright Office. If there are talent/crew attachments, then the attorney may also need to draft & negotiate letters-of-intent with these individuals. The financiers will likely take a portion of the equity and tax rebates (if any) in the project to secure the investment.
3. PRE-PRODUCTION STAGE: In this stage, the attorney will form the desired corporate entity (corporation, LLC, etc.) in the desired jurisdiction with this decision to be discussed with the CPA. The attorney will draft the operating agreements and manage the entity's tax obligations such as the EIN and entity classification forms. After the legal entity is formed, the producer can open bank accounts. Financing for the project can be transferred to these accounts and the producer is ready to begin formalizing production dates & talent/crew commitments. A CPA should be hired as early in the process as possible. The accountant should be consulted in the early stages to ensure the project is best organized to receive the benefit of favorable tax advantages. In this production stage, the accountant is vital to keeping the project on the projected budget by managing, handling & controlling access to the project monies. There must be a contract or some other written acknowledgement for all expenditures on the project.
4. PRODUCTION/PRINCIPAL PHOTOGRAPHY STAGE: The producer will need to discuss with the attorney whether the film project will be a signatory to any of the unions and guilds like SAG, DGA, WGA. The unions and guilds have specific signatory requirements (including monetary bonds) to employ one of their respective members, so the project may need to be guild-compliant before principal photography can commence. Having working relationships with the guilds can help. The casting agent will typically negotiate the talent's terms with the attorney drafting & providing the contracts, but it will depend on the talent. Contracts for all crew members should be executed before principal photography commences. Location releases, vendor contracts & permits will have to be drafted/finalized. The attorney will review the general liability and E&O insurance policies. If artwork and/or products are used, then the releases for these items will also need to be drafted. Unexpected things will happen, so the attorney should be prepared for anything.
5. POST-PRODUCTION STAGE: The attorney may have to review and negotiate deals for the music, composer, film lab, editor & post-production suites at this stage. The producer may also need to shoot additional photography, so there may be additional talent & service agreements to be drafted and reviewed. Once the photography has been completed and the producer has satisfied all union and guild obligations, then the attorney can close out the agreements and request a return of any security bonds. One of the biggest issues working on an indie project is missing paperwork and agreements especially when the actual production occurs at a remote location where the attorney is not on-site. Therefore, the attorney will need to manage the return of all legal documents from the remote production team. All of the required paperwork for delivery, if known, should be compiled & cross-checked for availability and accuracy. If anything on the legal side is missing or incomplete, then the attorney will need to address the issue.
6. DISTRIBUTION/EXHIBITION/EXPLOITATION STAGE: The final stage will be the time to distribute and exploit the project and hopefully make a lot of money. The producer may use a sales agent to secure distribution and if so, the attorney will need to negotiate the sales agent's agreement along with an applicable commission and term for the agent's services. The attorney's services may also include negotiating and reviewing the distribution agreement such as license term, advance, royalty rate, territory and reserved rights. The attorney’s legal services will typically cover only services up until the delivery of the project to the initial distributor, but the attorney should do one final review of all documentation & delivery obligations to ensure that everything is in compliance and then get the client to sign-off upon attorney's completion of the services. If the attorney is needed by the producer for additional services, then the attorney and the producer can negotiate these services at the attorney's hourly or a new flat fee rate.