Q&A: How Do I Protect Myself From a Producer Flipping My Script?

by Greenberg Glusker Fields Claman & Machtinger LLP

Q: A producer has offered to option my script.  I’m just starting out so the numbers are pretty low (it’s a 12 month option for $1,000 with a purchase price of the WGA scale).  I’m cool with that but have one problem with it:  what happens if she turns around and sells the option to a studio for a lot of money?  I think that’s what she plans to do.

A:  Pat yourself on the back, my friend.  You just spotted an issue that is often overlooked in standard option agreements.  To answer this, let’s talk a little background.

Here is a potential scenario:  the producer’s first step might be to start shopping your script to studios.  If a studio has interest, the studio likely will have her assign the option agreement to the studio in exchange for hiring her to produce the project.  After this assignment, the studio would be the party with the right to exercise the option at the WGA scale in order to acquire your script.

Let’s say hypothetically, however, that you recently also sold another one of your scripts (for a similarly cheap price).  It’s a cutting edge tale filled with wit, sarcasm and pop culture references about a hipster high school student who gets pregnant.  We’ll call it “Palin.”  Suddenly “Palin” is the hottest thing in town and anything you’ve written, whether it be a script or an angry e-mail to Time Warner cancelling your service, suddenly has studios trying to gobble it up like piranhas to a ham hock.

Your producer friend is happy to discover that she now has an extremely hot and extremely cheap property on her hands.  When she goes to studios with your new script in this scenario, she may be able to get more out of the studio than the standard arrangement described above.  The studio may want the script enough to not only agree to make a standard producer deal with her, they may also pay her $1M in exchange for her assignment of her rights in the option agreement.  Unfortunately, if your agreement doesn’t address this situation, when the studio exercises the option, the WGA scale purchase price is all you’re going to get.  Because of everyone’s sudden realization of your greatness, the producer gets $1M plus her producer fees, while you only get the scale?!  Sad but true.

This is an extreme example but similar events happen all the time.  Speculating producers may option scripts on the cheap then try to “flip” them to pocket any money received for the transfer that is over and above the purchase price.  It’s not nefarious in any way, it’s one of the reasons option agreements have had such staying power.  Now that you know about it, the solution is simple:  make sure that in your agreement you get your nimble little hands on some of the money that comes out of that “flip.”

This can be accomplished by including a provision that states that in addition to the purchase price, you will be entitled to 50% (or any other percent) of any money paid to the optioning party (in this case, the producer) for any transfer of rights in the option agreement or script.  You can clarify that this is not meant to entitle you to any portion of the producer’s standard producer fees.  This way, if a studio pays the producer $1M in exchange for the assignment of the option agreement (or the script, if the producer exercised the option herself), you will be entitled to half of it, which is fair since it’s your genius that caused all the fuss in the first place.

One quick note:  if you REALLY want to be safe, you can state that you will be entitled to 50% of any monies received by the producer over and above the producer’s standard producing quote plus 10% (or some other percent).  This will protect you in the event that the $1M is all classified as a producing fee.  Under the aforementioned provision, you’re ensuring that regardless of how it’s classified, the money not subject to the 50/50 split can only be an amount that is 110% of her standard producing fee.  That way, for example, if her standard producing fee is $500k, she’ll get her $550k, and you and her will split the remaining $450k.

Money may be the root of all evil.  We can all feel good about ourselves in agreeing with that statement.  But if it’s being handed out, especially for something you did, don’t feel bad trying to grab as much of that root as you can.

This blog was originally published as part of Legal Ease, Film Independent’s weekly column on legal matters pertaining to the entertainment industry. To see other LEGAL EASE columns please click here.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Greenberg Glusker Fields Claman & Machtinger LLP | Attorney Advertising

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