TV show’s rights licence fails
Here, a licence for a TV show’s rights failed to protect the creator. The licensee licenced the production process to another entity, who could then create a spin-off.
Television production documents should cater for all scenarios. This may sound obvious, but a recent High Court case re-iterated this point. All parties want production to run smoothly. However, issues may arise. If the documentation covers these issues, the parties save time and money.
In this case, the show’s licensee appeared to breach the agreement’s terms. However, since the agreement was poorly written, the TV show’s rights owner could not terminate the production licence agreement.
The television production agreement
A Ltd owned the rights for a popular and successful UK TV show. A Ltd wished to exploit these rights and signed a production licence agreement with B Ltd.
So, B Ltd acquired a licence to the TV show’s rights. B Ltd used those rights in its country of incorporation. B Ltd was not competing with A Ltd. For this right, B Ltd paid A Ltd a fixed licence fee on the agreement’s annual anniversary.
Production licence agreement terms
The agreement contained a loosely drafted “non assignment clause”. That clause stated:
- “B Ltd shall not be entitled to assign in whole or in part its rights and/or delegate its obligations hereunder and shall not sub-license the right to produce the series”.
The clause was classified as a condition. If broken, this entitles an innocent party to rescind the contract and claim damages.
A Ltd’s claim
B Ltd instructed another entity to assist with the production process only. A Ltd attempted to enforce the licence agreement’s terms, arguing:
- The non-assignment clause prevented the delegation and sub-licencing of the right to produce the series;
- B Ltd had instructed another entity to assist with production, which fell foul of the non-assignment clause.
In spite of A Ltd’s claim, B Ltd proceeded to delegate and sub-licence the production process.
The High Court’s decision
The High Court rejected A Ltd’s claim. The High Court found in favour of B Ltd. The court said that B Ltd had not breached the “non-assignment” clause.
The High Court confirmed the definition of “production”. Production encompasses three stages. B Ltd had instructed an entity to assist with just the production process, i.e. not pre/post-production.
Therefore, B Ltd had not parted with the whole production process, just the central component. So, B Ltd retained the rights to the production process, and had not breached the non-assignment provision.
The High Court also provided a useful definition of “production”, as follows:
Pre-production encompasses all that is necessary and desirable to bring about the next stage. This includes:
- Negotiations with broadcasters;
- Studio hiring;
- Set building;
- Budget planning.
Production is the central component of the process. This includes the:
- Direction of staff,
- Control of lighting, sound, and recording equipment to facilitate broadcast.
Post-production is editing material obtained during the production process, and broadcasting arrangements.
Avoiding production process issues
A Ltd could not prevent B Ltd licencing the production process to another entity. A Ltd’s problem was the new entity would obtain information about A Ltd’s TV show. So the new entity could more easily create a “spin-off” show.
A “spin-off” show would damage A Ltd’s expansion opportunities. Unfortunately, A Ltd lacked control over B Ltd’s agreement with the new entity. A Ltd was not a party to that agreement so was not “privy”.
How to cater for this scenario
The production licence agreement did not define the term “production”. This is where industry understanding makes a difference. We would have defined the term to encompass the whole production process. Then A Ltd’s claim might succeed. Note, the High Court said B Ltd still retained practical matters of control, suggesting the High Court thought that B Ltd had not sub-licensed the TV show.
Other ways we might have managed this scenario for A Ltd:
- Ensure B Ltd offers any production licence to A Ltd, or A Ltd’s nominated company.
- Thus A Ltd then gains a right similar to a “right of first refusal”.
- Require B Ltd to notify A Ltd when the issue of sub-licencing or delegating work emerges.
- A Ltd then gains the right to veto B Ltd’s nominated company.
- If A and B still disagree, an independent expert, e.g. the president of Ofcom, adjudicates.
John Deane is a partner in the creative industries sector at Gannons. John advises production companies on commercial arrangements and necessary agreements to complete projects. Legal issues do overlap with commercialism. Our service draws on both aspects.