When Worlds Collide: The Intellectual Property Basis of a Labor Dispute and Why It Matters to the Future of Hollywood - Fordham Intellectual Property, Media & Entertainment Law Journal
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When Worlds Collide: The Intellectual Property Basis of a Labor Dispute and Why It Matters to the Future of Hollywood

When Worlds Collide: The Intellectual Property Basis of a Labor Dispute and Why It Matters to the Future of Hollywood

By: Kellie Kroyer

On November 5, 2007, over 12,000 television and film writers went on strike, crippling productions and, as of the date of this writing, costing the industry upwards of $1 billion. The strike was the result of three key points of contention which arose during contract negotiations between the Writers Guild of America (“WGA”) and the Alliance of Motion Picture and Television Producers (“AMPTP”).i The first issue involved the WGA’s desire to negotiate a better deal for its writers than the 0.3% residual payments for home video (at the time VHS and Beta, now DVD) sales they agreed to in 1988. The second issue centered around the WGA’s demand for a similar structure to pay writers residuals on “new media”, a medium for which writers currently receive no extra compensation. In the final issue, the WGA sought jurisdiction over writers working on reality shows and animated works.

Of the three issues, the debate over new media is perhaps the most contentious. It is certainly the issue most watched by the other entertainment industry unions, including the Screen Actors Guild (“SAG”), whose own contract with the AMPTP expires on June 30, 2008. New media specifically refers to such recent phenomena as Internet downloads from sites such as iTunes, streaming video that allows users to watch television shows in real time on their computers, straight-to-Internet content like webisodes, and other video on-demand distribution methods such as HBO On Demand. The AMPTP argues that it isn’t clear yet how much money such new media will actually produce, and therefore that the WGA should table their residual demands until at least the 2010 contract talks, when revenue may be more predictable. The WGA feels, however, that they were duped in 1988 into accepting a home video residual percentage that ended up being too low. As the AMPTP now seems unwilling to remedy that discrepancy, the WGA argues that accepting little or no residuals for new media now will leave the union in the same position in future negotiations about that issue. Though each side may have a valid point, it does seem that the policy reasoning behind commonly accepted intellectual property protections justify the WGA demands.

Though it should be noted that there is some debate over the real purpose of residual payments, many do agree that they are paid to writers as compensation for the intellectual property rights they give up when they sell a work to, or write a work for, a film or television studio.ii In the United States, copyright protections vest in the author of a work, the person who conceives of the copyrightable expression, when that person fixes the expression in tangible form. Copyright is very powerful in that it gives the owner the exclusive right to reproduce the work, to prepare derivative works based on the original, to distribute copies of the work, to publically perform the work, and to publically display the work. The main policy justification for giving the author of a work such broad rights is that doing so promotes creativity to the benefit of the public as a whole. In other words, an author’s industriousness is rewarded by allowing that author ample opportunity to profit from his or her work, while the public is rewarded with a better cultural landscape.

However, an exception to the copyright rule occurs with “works made for hire,” – works that are prepared by an employee within the scope of his employment and/or works that a commissioning party pays for the creation of. In such cases, the entity paying for the work, rather than the writer, is deemed the “author”, and receives the copyright protections. It is then arguable that the residual payments a writer receives for subsequent uses of the work are a form of compensation for the copyright protections the writer gave up to the studio. The real world result of residual payments is that they also serve to further the policy goals of intellectual property rights as a whole, by allowing writers to make a living in their chosen craft, even when that work is not necessarily stable or steady by nature. If writers are not given these residual payments, it is foreseeable that less people will be able to make writing a career, and that those who write will only be those that can afford to—in essence leaving the field as something open only those who are wealthy or those who have some reliable, independent source of income. This could affect the quality of television and movies as a whole, by reducing the size of the talent pool, and thus competition within the industry.

It is important to realize that while many may accept arguments as to why the policy behind intellectual property rights supports residuals for writers, it may be harder to convince people that actors deserve to earn residuals as well. This issue will be of particular importance in the coming months as SAG begins its own contract negotiations and will likely seek the same structure of residual payments for new media that the WGA has been lobbying for. Once again, however, the intellectual property rights that actors have may explain why their work is worthy of residual payments as well. Namely, there is a lesser known branch of intellectual property protection known as the right of publicity. Though generally thought of as a right that protects individuals from the unauthorized commercial use of their names, images, likeness, etc., it has been argued that when an actor’s appearance on television or in film amounts to giving up a certain portion of that right which should be compensated.iii After all, when an actor is contracted to do a film, she almost always signs some form of contract giving up her right to control the further copying, distribution, etc. of her image. In addition, just as with writers, residuals provide a means for ensuring that talented actors are able to make a living in their chosen field, rather than leaving the profession open only to those with a wealthy benefactor.

If the intellectual property policy argument is to be believed, then the writers and actors are clearly entitled to residuals for the work that they do. The question of whether or not the percentages proposed by the AMPTP are fair should be weighed in light of the rights these people are giving up. And, quite frankly, if one takes that view, it does seem that 0 – 0.3% of anything is a fairly paltry amount. It might behoove the AMPTP, as they sit down at the bargaining table, to keep in mind the policy goals of intellectual property protections, and to do what needs to be done to protect the quality of the product that they are spending so much time and money to produce.


i Normally in collective bargaining when two sides reach an impasse, as was the case here, the law provides that the employer may institute their final offer. However the AMPTP is not an employer, but rather an alliance between the major television and film producers.
ii Many consider residuals to be analogous to royalty payments.
iii Looking at actor residuals as compensation for their release of intellectual property rights helps to answer the question of why actors and writers are paid residuals for a given work, but others, such as stagehands, are not. Clearly everyone working on a production is putting in an immense amount of effort, but residuals are not meant to reward labor, specifically. Instead, residuals exist for the same reason that royalties do—as a payment in recognition of the vested intellectual property rights that one has given up by selling their work or image.

Chris Reid