Conan/Leno madness: the 5 big unanswered legal questions

By Eriq Gardner

NBC may be on the verge of more "Law & Order"...and we're not talking about what's replacing Jay Leno at 10 pm.

NBC brass and Conan O'Brien reportedly have reached a detente, with Conan said to be receiving a payout and the ability to appear on another network before his contract expires, according to news reports.

Let's assume a deal is made. We don't think this ends the legal fallout from this saga. Here are five big unanswered questions:

1. Besides the $$$ changing hands, what else is in the settlement between Conan & NBC? For instance, are there stipulations about what one party can say about the other? Given how ruthless Conan has been toward NBC and Leno, can NBC negotiate a deal that will muzzle CoCo and vice versa?
2. Will Triumph the Insult Comic Dog and the Masturbating Bear follow Conan wherever he goes? NBC and O'Brien are likely negotiating whether the intellectual property created on "Late Night" and "The Tonight Show" stays with NBC or goes with Conan. If you'll recall, this became an issue when David Letterman left NBC for CBS.
3. NBC has been telling folks that it had to make a move to quell its unhappy affiliate stations. If Fox is indeed courting Conan, what about the network's affiliates who are tied into their own contracts with syndicators and may not want a late night host whose ratings weren't fantastic?  
4. We know what NBC thinks about O'Brien's job performance (thanks, Dick Ebersol). Could Conan sue NBC for defamation for damaging his effort to get a job elsewhere? What about a possible suit by NBC against Conan for things he said on the air?
   
5. How will this debacle influence future negotiations in Hollywood between A-list talent with leverage and studio/producers? Will the ordeal push one side to try to get more specific with contract language and the other side to pull back from long-term contractual commitments?

Why did Microsoft settle a Perfect case?

By Eriq Gardner

Adult entertainment publisher Perfect 10 has for years been fighting to stop search engines from displaying thumbnails of its copyrighted photos of nude women.

This week, Perfect 10 filed a motion against Google for allegedly abusing the discovery process in their long-running litigation. What we found interesting is that Perfect 10 has apparently settled a similar beef with Microsoft. Why would Microsoft settle a case that most believed it would win?

Conspiracy theorists might think that Rupert Murdoch had something to do with this. 

Last month, the media world was buzzing about a possible deal between Murdoch and Microsoft wherein Microsoft's Bing would have exclusive access to News Corp. content and would pay to block Google from indexing the media company's news websites.

One possible hiccup in these plans is that Google has the capability of modifying its technology to direct its spiders to crawl News Corp. properties like the Wall Street Journal and Fox.com anyway. As attorney Jonathan Steinsapir pointed out on the Huffington Post, if Google ignored a request by News Corp. to stop indexing its content, the result might be an epic copyright battle. Steinsapir says there would be a "race to the courthouse" as Google would try to file first in the Ninth Circuit.

Why there? Let's jump back to the Perfect 10 case.

In 2007, the Ninth Circuit Court of Appeal reversed a lower court opinion and found that Perfect 10 was "unlikely to succeed in overcoming Google's fair use defense" for directly infringing the plaintiff's copyrights. This decision would probably give Google a leg-up in claiming it has "fair use" to index content from News Corp. too.

When Perfect 10 first sued Microsoft in 2007, the defendant resisted entreaties to settle. Now Microsoft has changed its mind. We don't know details of the settlement, but a District Court was asked to review the Microsoft settlement to see if the deal had any bearing on Perfect 10's outstanding copyright claims. Hmm.

Comcast-NBCU deal a bright idea for lawyers

By Eriq Gardner

Q: How many lawyers does it take to screw out a GE lightbulb?

A: 79 lawyers—and that's not counting some new names who will now help Comcast from getting screwed by the nation's antitrust luminaries.

No joke, it took the involvement of 79 attorneys to wrangle NBC Universal from General Electric's hands. The WSJ has the full rundown on the list of lawyers who worked on the deal, including legal assistants and lawyers who haven't yet even been admitted to the bar. 

Jack Donaghy from "30 Rock" wasn't included in the lawyering, but David Caplan of Davis Polk & Wardwell was certainly at the negotiating table. Caplan gets profiled as AmLaw Daily's "Dealmaker of the Week" for helping ink the complex transaction for longtime firm client Comcast.

Let's hope that all of the lawyers and investment bankers who participated in dealmaking put compensation and bonuses for their work in writing. The New York Court of Appeals recently ruled that the broker who helped facilitate Edgar Bronfman Jr. $2.6 billion purchase of Warner Music wasn't entitled to a reward because he never got a written agreement.

On a brighter note (sorry, last GE reference), some say the Comcast deal should spur more M&A activity.

Disney settles Pixar 'Luxo, Jr.' lamp case

By Eriq Gardner

Anybody who's ever seen an animated film by Disney's Pixar should be familiar with the iconic squeaky desk lamp character featured in the opening credits. 

The character was created by Pixar chief creative officer John Lasseter more than two decades ago for Pixar's first film — an animated short entitled "Luxo, Jr." The short earned an Academy Award nomination, and the character has become an iconic mascot for the studio ever since.

But two months ago, trouble broke out after Disney began selling limited-edition "Luxo Jr." lamps packaged with a Blu-ray version of "Up." There also is a six-foot animatronic version of the lamp at Walt Disney World.

Norwegian lamp-producing giant Luxo AS wasn't exactly turned on by Disney's growing commercialization of the lamp. On September 3, Luxo sued Disney for trademark infringement. saying the sale of Pixar lamps would "cause devastating damage to Luxo and dilute the goodwill which Luxo has built up."

Fortunately, Pixar won't have to turn off the lights on its famous character. 

We've learned that the parties have reach an amicable settlement and the lawsuit has been withdrawn. Disney will stay out of the lighting business, and for now we hear that Luxo doesn't have any problem with "artistic renditions" of the lamp.

Pixar may be off the hook — but what about Luxo, Jr.?

Check out this short film produced two weeks ago by CollegeHumor.com where Jr. gets into criminal trouble and ends up being sentenced by a judge to electrocution. Get it?

Eric Schmidt deposition reveals why it was OK to overpay for YouTube

By Eriq Gardner

Google CEO Eric Schmidt gets a lot of credit for being a financial genius. But he doesn't seem like the shrewdest negotiator.

CNET got ahold of a deposition transcript from last May in Viacom's litigation against YouTube for copyright infringement. In it, Schmidt reveals he told Google's board that YouTube was worth $600-700 million, but that he asked the board to approve an acquisition price of $1.65 billion anyway.

Why the billion-dollar premium? Here's part of Schmidt's answer:

"In the deal dynamics, the price, remember is not set by my judgment or by financial model or discounted cash flow. It's set by what people are willing to pay. And we ultimately concluded that $1.65 billion included a premium for moving quickly and making sure that we could participate in the user success in YouTube."

That seems like an awfully high price to pay for the premium of moving quickly.

Just for fun, let's compare it to Disney's $4 billion acquisition of Marvel. 

In an S-4 statement, Marvel says it never convinced Disney to up its original offer significantly. Instead, the companies went back and forth about what actions Marvel's board would be permitted to take if it were to receive a superior offer from a third party.

Two different acquisitions and two different strategies for dealing with competitive offers. Disney haggles over deal protection terms whereas Google just prefers to overpay.

Case Tracker: Letterman's YouTube problem; Apple's Eminem problem; Jack Thompson's Facebook problem

Here's a roundup of some stories we've been following:

• We covered the legal ramifications of David Letterman's admission to having an affair with "Late Show" female staffers last week. This appears to be a sensitive topic for CBS as the network is doing everything in its power to keep clips of Letterman's admission off YouTube and other media websites.
• Apple has wisely settled its beef with Eminem. The rapper's publisher claimed it was due more money from digital sales, but the trial won't reach any conclusion after the parties reached an undisclosed settlement.  
• Remember Jack Thompson, the zealous Florida attorney who went after video games for violent content and eventually lost his law license for obstruction of justice? Thompson has now filed a lawsuit against Facebook for hosting hate groups on the social networking website. He believes the groups have threatened him.
• According to an story by ABC News, peephole victim Erin Andrews' "own detective work was integral in helping investigators track and arrest her suspected stalker." And what did that detective work consist of? Identifying the exact room, date, and location where she wore a pair of blue jeans that appeared in the video.

Buzz Media claims Superficial website price was superficially inflated

By Eriq Gardner

A Hollywood-style feud has broken out in the world of celebrity websites.

Buzz Media, an L.A.-based startup, has gone on a buying spree of late, purchasing big pop culture sites like Stereogum, Idolator and Celebuzz.It also runs official celebrity websites for the likes of Britney Spears, Mischa Barton and Tila Tequila. The company's got big ambitions and just hired former executives at MTV to come aboard. 

In a new lawsuit, Buzz claims that Karl Wang, founder of celebrity gossip site The Superficial, "made false, fraudulent, and misleading statements to deceive Buzz Media and induce it to purchase the Website for an inflated and fraudulently induced price."

So Wang created too much buzz?

He allegedly told Buzz that a third party, Gorilla Nation Media, had a made an offer for The Superficial.

Buzz allegedly had a right of first refusal on the website, and to keep its rights it began to negotiate a purchase. Later, Buzz says it found out that there was no real offer from a third party. The company is now suing for fraud, negligent misrepresentation, breach of contract, and breach of good faith and fair dealing. Here's the complaint.

We're sure this kind of negotiating tactic, if true, might not cause any agents and lawyers in this town to blink. Pretending to have an offer from another party is probably the oldest play in the Hollywood dealmaking book, but will it fly in the new media world? 

Annie Leibovitz settles loan lawsuit...for now

By Eriq Gardner

Annie Leibovitz has struck an agreement with the company that lent her $24 million and as a result, The Art Capital Group has withdrawn its lawsuit against the famous photographer.

Last we checked in on this story, Leibovitz was facing a deadline to pay back the loans and a court hearing that could have resulted in her losing the copyright to many of her greatest works. The story offered a cautionary tale for others using IP as collateral to raise money.

According to a joint statement, Art Capital Group agreed on an extension for the loan, with Leibovitz purchasing "from Art Capital its rights to act as exclusive agent in the sale of her real property and copyrights."

Legal experts caution that her troubles aren't over. Her property and copyrights remain as collateral, and Leibovitz will have to come up with a way to come up with the money during the loan extension. That might result in some big sales of the artist's works, but at least she's been given some more time for an out for this sticky situation. Leibovitz's high profile probably didn't hurt her cause: Goldman Sachs, which helped finance the loan, pushed hard to resolve the situation.

Don't hold your breath for The Beatles on iTunes

By Eriq Gardner

Today is a big day for fans of John, Paul, George and Ringo.

Fans will be snapping up the video game Beatles: Rock Band, as well as re-mastered versions of the band's albums. But 09/09/09 might not be quite as eventful as many had hoped.

On this same day, Apple Inc. held a big event to introduce new developments to the iPod and the iTunes media player. The spectacular timing led many frothing in anticipation that the catalog of The Beatles would finally be available for digital purchase on iTunes. After all, the marketing opportunity was ripe. And Yoko Ono had been sending strong hints.

Alas, like similar rumors of a deal from prior years, it's not meant to be.

Paul LiCalsi at Mitchell Silberberg & Knupp represents Apple Corps Lld. — the company founded by The Beatles in 1968 to manage the band's financial interests — and says he hasn't been a part of any negotiations with the other Apple. If the band had struck a deal with Steve Jobs, LiCalsi would probably know.

And it doesn't sound like we should expect songs by The Beatles to appear on iTunes anytime soon either.

Most people assume that the difficulty arises from bad blood between Apple Inc and Apple Corps. over the use of a fruity trademark. After Apple Inc got into the music business with its iPod, Apple Corps sued, contending the computer company had violated an agreement. But that dispute was resolved a couple years ago, and in recent interviews, Paul McCartney has expressed some hope that the band's songs would eventually be sold through iTunes.

No, the hang-up to a deal seems to be ongoing animosity between Apple Corps and EMI, the company that owns the master recordings. At issue is what percentage of royalties EMI should pay to the band, a problem we've seen come up in ongoing legal disputes between musicians and labels. "If one (EMI) employee decides to take it home and wap it on to the Internet, we would have the right to say, 'Now you recompense us for that,'" says McCartney. "And they're scared of that."

Tolkien settlement: More than $100 million

By Matthew Belloni and Eriq Gardner

Today's resolution of the litigation between New Line Cinema and the estate of author J.R.R. Tolkien (right) over “The Lord of the Rings” trilogy is shaping up as one of the biggest profit participation settlements in Hollywood history.

Two independent sources with knowledge of the deal pegged the value to the Tolkiens and co-plaintiff Harper Collins at well over $100 million.

Reps for the Tolkien estate and New Line parent Warner Bros. would not comment on the terms, citing a confidentiality agreement.

“We deeply value the contributions of the Tolkien novels to the success of our films and are pleased to have put this litigation behind us,” said Alan Horn, president and chief operating officer of Warner Bros. Entertainment.

The settlement heads off a scheduled October trial between heirs of the “Rings” author and New Line, which released film adaptations in 2001-2003. The trilogy grossed $3 billion in worldwide theatrical boxoffice, plus an estimated $3 billion from DVD, TV licensing and merchandise sales.

The deal also paves the way for Warner Bros. and MGM to move forward with two planned films based on Tolkien’s “The Hobbit,” which will be executive produced by “Rings” director Peter Jackson and directed by Guillermo del Toro.

The Tolkiens sued New Line in February 2008 claiming the family trust was paid only $62,500 for the right to make the three films and was owed 7.5 percent of gross receipts. The family initially sought $150 million but that figure was revised upward to $220 million during the litigation.  

The suit echoed similar cases brought against New Line by Jackson and “Rings” producer Saul Zaentz. Those cases settled for more than $20 million apiece after both Jackson and Zaentz publicly feuded with former New Line co-topper Bob Shaye. Warners inherited the Tolkien litigation when New Line was absorbed in March 2008.

A major beneficiary of Tuesday’s settlement is the Tolkien Trust, the U.K.-based charity controlled by the family. “The Trustees regret that legal action was necessary, but are glad that this dispute has been settled on satisfactory terms that will allow the Tolkien Trust properly to pursue its charitable objectives,” trustee Christopher Tolkien said in a statement.

Tolkien lead attorney Bonnie Eskenazi said the family felt “vindicated and satisfied” with the settlement. 

The nine-figure deal resolves a potentially disastrous situation for Warners and MGM on “Hobbit.” The Tolkiens argued in the litigation that New Line’s failure to pay profits was a material breach of contract, which, if proven, would allow the family to terminate a grant of rights. A hearing on that key issue was scheduled for next week.

“The Trustees acknowledge that New Line may now proceed with its proposed films of ‘The Hobbit,’ ” Christopher Tolkien said.  

Jackson was also eager to move forward with the project. At Comic-Con in July, he told fans that he was close to delivering a script for the project, with budgeting and casting soon to follow.