Whose Rights Are They Anyway? The Upset Price and Other Urban Myths

The Writers Guild Theatrical and Television Basic Agreement ("MBA") provides that writers of MBA-covered original television material own all rights in their material other than certain television rights (see Article 16.B.). These rights are called "reserved rights," and include merchandising rights, publication rights, theatrical motion picture rights (the right to produce a theatrical motion picture based on the material), interactive rights, etc.

UPSET PRICE--NEGOTIATING TO BUY RESERVED RIGHTS

If the writer is paid initial compensation in an amount equal to or in excess of an amount specified in the MBA, and known as the "upset price," the Company may, in a separate negotiation, bargain freely with the writer to acquire the writer's reserved rights. This acquisition, to be effective, must be set forth in a separate document.

BOILERPLATE UPSET PRICE PROVISIONS ARE INEFFECTIVE

Provisions in a writer's contract which state that the writer will sign a separate contract selling his/her reserved rights for a specified amount violate the MBA and are unenforceable. Boilerplate language in a writer's contract, even though requiring execution of a separate contract, does not satisfy the requirement of a "separate negotiation," and the sale is not effective.

If the Company sets as a condition of the employment or purchase that the writer agree to sell his/her reserved rights, if paid at or in excess of the upset price, the Company and the writer still must engage in a full and fair negotiation regarding the value of such rights. Therefore, absent evidence of such a negotiation, the Company has not acquired the reserved rights and they continue to be owned by the writer.

The payment of the upset price allows the parties to negotiate; it does not require the writer to accept a predetermined amount of money in exchange for such rights. Even if the writer has agreed to sell the reserved rights, a fair negotiation is required.

Some Companies attach a boilerplate upset price agreement to the writer's contract in which the writer agrees to sell reserved rights for $1, $10 or $50. If the parties have not negotiated and reached agreement on that amount, the Guild contends that the sale is not effective. Some companies may disagree.

NEGOTIATIONS

Absent payment of the upset price, and/or negotiation for the purchase of the reserved rights (even if the upset price has been paid), the writer may agree to sell the reserved rights at "minimum." In the event the Company exploits any of the reserved rights, the Company has a limited period of time within which to exploit the rights and the writer would receive 2.5% of the budget for exploitation of theatrical motion picture rights, 6% of Company's gross for exploitation of merchandising and publication rights, and 3% of Company's gross for exploitation of interactive rights.

Where the writer has been paid the upset price, and chooses to negotiate to sell the reserved rights, the writer may negotiate for similar payments, that is, a percentage of the Company's gross for licensing those rights as opposed to a lump sum payment for all rights.

COMMISSIONS

Where the writer has been paid the upset price and the Company has satisfied the other requirements for the sale of the reserved rights, all monies negotiated for those rights are commissionable.

CONCLUSION

Please remember the writer continues to own all reserved rights in and to his/her property, unless there is clear evidence that there is an agreement to sell such rights and a full and free negotiation regarding the price for such rights has been concluded and stated in a separate document.

This is a very complicated area of the MBA. Prior to exploitation of any of these rights, please contact the Contracts Department at (323) 782-4501.