October 2013 | The Intellectual Property Issue
Comic Books and the Law: Don't Get Trapped in the Negative Zone or Elsewhere
Comic books are not just for kids or nerds. This stereotype has long been proven false, and comic books are now big business. Comic books are for everyone, including attorneys and their entertainment clients who are writers, content creators or owners of archived properties. However, advising a comic book client without the requisite legal knowledge can be complex, and as full of hidden dangers as the Fantastic Four on a mission to find Annihilus in the Negative Zone. An attorney’s intellectual property and contract law experience will ultimately determine whether he or she is sufficiently qualified to advise clients on comic book licensing and legal matters.
Comic books can have significant monetary value, as evidenced by the recent report of a copy of Action Comics #1 (first appearance of Superman) selling for $175,000 at auction. Unfortunately, the exploitation of these comics is limited by the number of physical copies in existence, as well as actually possessing or controlling one of these comics. Less than 100 copies of Action Comics #1 exist, so most clients will never have an opportunity to exploit or purchase one (. Nevertheless, all comic book properties carry some potential value, namely, the underlying value of the property as an asset in a client’s intellectual property portfolio. The following phrase may be overstated, but true: Content is king. A client who is creating original comic books is also creating content, and in many cases, the client is creating an original, underlying property. The more talented the client, and the more original stories and characters the client writes, the more valuable this underlying property becomes.
Clients should own and control as much of the property and content as possible, whether they are creating new comic books or licensing existing properties to comic publishers. Ownership of the content is the key, because ownership will always give the owner a stake or control of the content’s exploitation, specifically in ancillary exploitations. The attorney needs to understand intellectual property law, primarily copyrights and trademarks. Contract law is also important, but an attorney will not really see the contract side of the business if the client’s intellectual property rights are not secured, because the person who actually does secure those rights will be the owner negotiating contracts.
Any type of story can be depicted in a comic book form, but some types of stories (e.g., sci-fi, action, licensed properties, superhero, etc.) are more suited to the comic book genre than other stories. Some of these comic book stories are even more suited to Hollywood exploitation in television and movies (e.g., Walking Dead, The Dark Knight). The client will always have opportunities to sell the finished product to customers and make money, but the comic book property may be also used as a vehicle to generate these ancillary exploitation opportunities in television, film and merchandising. A comic book gives the client a visual representation that can also be pitched to motion picture executives. An executive who does not grasp the concepts in a complex screenplay may immediately see the vision when shown the art and story in comic book form. Many of the comic book images can also be converted to storyboards for later use and reference.
That is why owning the intellectual property rights is very important. The owner gets to exploit these ancillary opportunities and share in the monies that the property will potentially generate, while non-owners who contribute content to the comic book will not. Filing for copyright registration is not prohibitively expensive and many works can be filed online. The Copyright Office says:
A cartoon or comic strip can be registered as a visual arts work or a literary work, depending on the nature of the work and the way it is presented. Generally, cartoons are considered works of the visual arts; however, if textual elements are preponderant in a cartoon or comic strip, it should be registered as a literary work.
If money is no object for the client, then for maximum protection, separately register the comic book artwork (without lettering) as a visual arts work, register the script/text/letters as a literary work and then register the final comic book as a literary work. This approach will give the comic book additional copyright protections.
When the client is engaging the services of third parties (e.g., artists, letterers, colorists, editors, etc.), some attorneys will recommend that “work-made-for-language” be included in each of these service agreements. While that approach is recommended, the attorney should also include an irrevocable assignment provision of the service provider’s intellectual property rights in the materials to the client or the client’s company, because most aspects of comic book creation do not fall within one of the nine enumerated work-made-for-categories as defined in subdivision (2) of Section 101 of the Copyright Act for commissioned works. These categories are: (i) a contribution to a collective work; (ii) a part of a motion picture or other audiovisual work; (iii) a translation; (iv) a supplementary work; (v) a compilation; (vi) an instructional text; (vii) a test; (viii) answer material for a test; and (ix) an atlas. Creating a comic book does not appear to fall under any of these categories, so the original creator of any content will need to be the client’s employee for the content to be considered a work-made-for-hire, and any work-made-for-hire language agreed to by the client and the independent contractor would not be applicable.
The comic book will eventually need to be published if the client wants anyone to ever read it. A client can self-publish or negotiate a publishing agreement with a third party. If the goal is to get a publishing agreement with a third party, then the attorney will need to be ready to negotiate the terms and conditions of the publisher’s standard publishing agreement on behalf of the client.
Self-publishing is fairly self-explanatory. The client publishes the completed comic book through any number of channels of distribution (physical and electronic) by securing one-on-one deals with sub-distributors and/or paying a publishing company to print physical copies of the comic books for sale. Numerous printing companies can print a comic book, so the attorney and client should shop around for the best prices, because the lower the publishing cost, the more monies the client will be able to keep when selling the books.
The third-party publishing deal is where a publisher agrees to publish the client’s comic book and distribute the comic book through the publisher’s network of retailers. Some of the major comic book publishers are Marvel Comics, DC Comics and Dark Horse Comics. While these major publishers have significant reach, they are not likely to license an unknown property, because an unknown comic book is not likely to sell without some known creator attached to the book or a huge marketing campaign. The more famous a property is, the more likely that one of the major publishers will be interested in publishing the book, because of the built-in markets and fans for this property. Nevertheless, if the attorney can secure a publishing deal for the client, the attorney will need to know how to negotiate the terms and conditions of the proposed publishing license to ensure that the client is protected.
A comic book publishing license agreement includes several essential provisions. The property should be specifically defined, and that will essentially be the content or underlying property that will be made into a comic book. The license term and license territory will also be included. The license term says how long a particular publisher can sell the comic book and the license territory defines the countries where the comic book can be sold. No license is complete without consideration, so the license will need to include some type of payment, which is usually paid as an advance or minimum guarantee. This amount will ultimately be based on the popularity of the underlying content that the publisher is licensing. The publisher should also pay a royalty on sales of the comic book after recouping any advances. The royalty rate will range based on the property, negotiation and publisher, but the rate can be anywhere from 8 percent – 12 percent of the book’s physical net sales and 10 percent – 25 percent of the book’s electronic net sales. The attorney will also want to negotiate an audit provision that gives the client the right to examine the books throughout the license term and upon reasonable notice, in case of a dispute over the amount of paid royalties.
Limiting the sales channels where a potential licensee or publisher may sell in a license agreement is not recommended, because the more sales channels, the more opportunities to generate royalties. The channels of distribution should only be limited for a compelling business reason, such as a particular comic shop or retailer negotiating some type of exclusive or premium deal with the client that would be harmed by allowing sales in other channels. For the self-publisher, the attorney will need to understand the various distribution windows for the companies that work with self-distributors, because holdbacks and rights of first refusal may be connected with these services. For example, one electronic comic book distributor and service provider might refuse to sell a particular comic book if the comic book first appears on different service provider or through another distributor.
When Hollywood does comes looking to license the client’s comic property for a movie or television project, the client’s goal should be to have a developed property, where only a few additional elements are needed to make the property a viable movie or television project. If a client truly wants to make movies or television programs, then the attorney should advise the client to use the comic books as a way to get better potential motion picture opportunities. Perhaps, the comic book can even be used as a type of spec script that can be used to generate further interest for the property. It is also much easier for an attorney to sell a property to a movie/television studio and negotiate the applicable license agreement if the client is the rights holder, rather than a newbie trying to sell his/her first screenplay.
Comic books offer opportunities for the creative client to produce viable content that can be exploited across many different, ancillary channels. However, the nature of comic book creation presents potential intellectual property law pitfalls that can catch one by surprise if not prepared. The attorney should be sufficiently qualified in intellectual property and contract law matters in order to properly advise his/her client about comic book licensing and legal matters in order to avoid any potential issues.
Joseph Ford is a sole practitioner who provides legal advice in connection with entertainment licensing, distribution and production, including merchandising, publishing, copyright, trademark and piracy. He can be reached at (310) 990-0124 or email@example.com.
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