Disney: "Royalties for creators? That's optional, right?"

[The Larch]

Long story short, after acquiring Lucasfilm and Fox, Disney stopped paying royalties to an author who had published books for them, claiming that when Disney acquired Lucasfilm and Fox it only bought their rights, but did not actually inherit their obligations.

Star Wars Writer Alan Dean Foster and SFWA Call Out Disney for Not Paying Royalties
Alan Dean Foster is a veteran Star Wars and Aliens author who stopped receiving his royalty payments when Disney acquired Lucasfilm and Fox.

Alan Dean Foster and the Science Fiction Writer's Association of America are calling out Disney for failing to pay royalties to Foster for his novelizations of Star Wars: A New Hope (1977), Star Wars: Splinter of the Mind's Eye (1994), Alien (1979) and Aliens (1991) and Alien 3 (1978).

The royalty payments which had been coming from the publishing houses stopped after Disney acquired Lucasfilm (owner of Star Wars) and Fox (owner of the Alien franchise), according to Foster's letter published on the SFWA's website. When Foster's agent Vaughne Hansen tried to get in contact with the publishing branch of Disney to solve the issue, she met with a legal wall that refused to talk about the missing payments unless Foster agreed to sign a non-disclosure agreement.

While NDAs are standard before discussing creative projects to discourage leaks, they are not standard for issues such as paying royalties as they put the claimant in a very weak position: Should they disclose that the conversations were even taking place, or what the content of those conversations was, they would be liable to Disney.

The process to even obtain the royalty statements reportedly became so frustrating that Foster and Hansen contacted the SFWA to help. The SFWA's lawyers contacted Disney, who came back stating that Disney "had acquired the rights but not the obligations." However, US contract law is structured to ensure that any party who buys a contract or property from any other party is acquiring both the rights (in this case, the right to continue publishing and selling Alan Dean Foster's books, which have never been out of print) and the obligations (the royalties owed to the creator as agreed in the original contract).

"There's multiple reasons why their language is absurd and extremely concerning for the larger implications," said Mary Robinette Kowal, president of the SFWA. "We are very concerned about the way that this will affect all writers and all creators. We do have a form that will be on the website along with the text of the statements. If you are having a similar problem, please let us now."

Bill Nye also sued Disney for 37 million dollars of back royalties for his show Bill Nye the Science Guy, encountering the same kind of stalling legal strategy. Winnie the Pooh also came under fire after Disney allegedly failed to pay the family of comic book artist Stephen Slesinger the royalties owed, although that case was thrown out after an 18 year battle.

"Every creative person is at risk if a company that owns the rights to your work and is supposed to pay you royalties on whatever your work is, prints of your art for example, sells it to another company in France or someplace else and then they don't pay you," said Foster. "You have to have some recourse. It's not right. It's not complicated, morally or ethically, and I don't think it's complicated legally. It just needs to be addressed."

[The Brain]

Jesus Christ. Couldn't he have warned the moviemakers that Alien 3 was gonna suck? He had plenty of time.

[Syt]

Eh, a few phone calls from the Mouse to Capitol Hill and the matter will be fixed quickly, with bipartisan support.

[celedhring]

Even for evil megacorp standards, that "legal" reasoning sounds way too absurd. 

[The Brain]

Even for evil megacorp standards, that "legal" reasoning sounds way too absurd. 

Still a better law story than GOP.

[The Minsky Moment]

However, US contract law is structured to ensure that any party who buys a contract or property from any other party is acquiring both the rights (in this case, the right to continue publishing and selling Alan Dean Foster's books, which have never been out of print) and the obligations (the royalties owed to the creator as agreed in the original contract).

That is a very sweeping statement and as phrased, not strictly accurate.

[crazy canuck]

However, US contract law is structured to ensure that any party who buys a contract or property from any other party is acquiring both the rights (in this case, the right to continue publishing and selling Alan Dean Foster's books, which have never been out of print) and the obligations (the royalties owed to the creator as agreed in the original contract).

That is a very sweeping statement and as phrased, not strictly accurate.

I presume the terms of the contract might also need to be read in conjunction with governing legislative provisions.  The law stuff.

[HVC]

However, US contract law is structured to ensure that any party who buys a contract or property from any other party is acquiring both the rights (in this case, the right to continue publishing and selling Alan Dean Foster's books, which have never been out of print) and the obligations (the royalties owed to the creator as agreed in the original contract).

That is a very sweeping statement and as phrased, not strictly accurate.

Where it's not accurate do the obligations just disappear, or do they stay with the seller?

[Valmy]

Disney brutally fucking over creative people is a very old tradition by this point. They are a pretty gross company totally devoid of ethics.

I used to just think of them as overly greedy and unethical. Of course with how the production of the live action Mulan Film they even crossed the line into being morally depraved.

Are there any lows low enough that this company will not stoop to? I once thought so, now I am not so sure.

[The Minsky Moment]

Where it's not accurate do the obligations just disappear, or do they stay with the seller?

First point, somewhat of a quibble, is that there is no such thing as US (national) contract law; contract law is state law and there is some variation.  Copyright law, which presumably is implicated here, is national.

Bigger point is that deals are structured all the time so that the buyer acquires assets without liabilities.  That's the whole point of doing an "APA" (Asset purchase agreement) as opposed to a stock acquisition or full merger.  Now there are limits to this and some liabilities stick to the related assets.  That could be true here - you probably can't acquire IP rights without taking on obligations associated with those rights but it's hard to know for sure without more detail.

[crazy canuck]

However, US contract law is structured to ensure that any party who buys a contract or property from any other party is acquiring both the rights (in this case, the right to continue publishing and selling Alan Dean Foster's books, which have never been out of print) and the obligations (the royalties owed to the creator as agreed in the original contract).

That is a very sweeping statement and as phrased, not strictly accurate.

Where it's not accurate do the obligations just disappear, or do they stay with the seller?

One of the points of negotiation is to allocate risk around who has what obligation after the sale of property or the assignment of a right under a contract.

So it all depends on the terms of the contract, the nature of what is being sold, what statutory obligations apply (think for example of environmental protection enforcement legislation that tags all former owners with liability).  If there were simple answers and general rules of thumb as suggested by the quoted post, hundreds of thousands of commercial lawyers would be out of a job.

And then where would that leave those of us who litigate their mistakes. 

[celedhring]

The US is not the EU, where you can't separate IP from royalties*. Unless the royalties are part of your contract, you won't get them. Now, I have no idea how could Disney separate assets and obligations set in that particular agreement with the author, unless there was some language about it in the contract.

*I'm kinda simplifying here, some royalties (there are different kinds) have to be in your contract in the EU, too.

[HVC]

 Thanks CC and Minsky

[DGuller]

Where it's not accurate do the obligations just disappear, or do they stay with the seller?

First point, somewhat of a quibble, is that there is no such thing as US (national) contract law; contract law is state law and there is some variation.  Copyright law, which presumably is implicated here, is national.

Bigger point is that deals are structured all the time so that the buyer acquires assets without liabilities.  That's the whole point of doing an "APA" (Asset purchase agreement) as opposed to a stock acquisition or full merger.  Now there are limits to this and some liabilities stick to the related assets.  That could be true here - you probably can't acquire IP rights without taking on obligations associated with those rights but it's hard to know for sure without more detail.

Surely there have to be some protections against a transaction that transfers your house without transferring your mortgage?  You can't finance the acquisition with someone's else's receivables, can you?

[crazy canuck]

Where it's not accurate do the obligations just disappear, or do they stay with the seller?

First point, somewhat of a quibble, is that there is no such thing as US (national) contract law; contract law is state law and there is some variation.  Copyright law, which presumably is implicated here, is national.

Bigger point is that deals are structured all the time so that the buyer acquires assets without liabilities.  That's the whole point of doing an "APA" (Asset purchase agreement) as opposed to a stock acquisition or full merger.  Now there are limits to this and some liabilities stick to the related assets.  That could be true here - you probably can't acquire IP rights without taking on obligations associated with those rights but it's hard to know for sure without more detail.

Surely there have to be some protections against a transaction that transfers your house without transferring your mortgage?  You can't finance the acquisition with someone's else's receivables, can you?

One of the reasons to get a lawyer involved in a real estate transaction is to ensure your property only has the encumbrances (or lack of them) that you bargained for, including a having all mortgages removed from title before you take it.   It is routine but important work.  Not something that happens automatically.

And don't call JR Shirley