When An Option Agreement Expires

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Question:

I had an option agreement on a book, did the script. The option expired, but the writer of the book and myself entered into a co-producer agreement on the project.  Will we need to do another option agreement once we get funding for the project?

Answer by Brandon Blake - Entertainment Lawyer:

Figuring out what happens to an option agreement after it expires is always a difficult question for producers. Of course the terms of the actual option agreement that you signed with the writer will govern, but I will give you some ideas about what usually is included in an option agreement.

First, it is important to remember what an “option agreement” really is, because for many producers and writers it becomes a short hand for a “rights acquisition agreement”, but in fact it is only half of an actual rights acquisition agreement.

Originally option agreements were not supposed to transfer any rights at all to the producer. Instead, the producer is buying time, or an “option”, to actually purchase the story rights at a later time.

However, over time I have seen that gradually the producers are acquiring more than just time when they purchase an option on a book or a screenplay. Typically independent producers what to get their money’s worth, so as soon as the work is optioned the producer will either write a script based on the property, or if the property is already a script, will produce development materials such as business plans, websites, posters, storyboards, teaser trailers and for animation, will develop characters and produce whole animated sequences.

The problem is that the option only lasts for 12 to 18 months typically. So what happens to the rights in these materials once the option expires?

That question really depends entirely on how the option was drafted, but typically at the end of the option all of the material produced based on the underlying work will be unusable. Although there is an independent copyright in the work that was produced, it is all characterized as derivative work, work based on another copyrightable work. So without exercising the option, those subsequent development materials and scripts are not usable.

However, I have also seen independent producers begin to try to make claims to these materials in the options, which is a big problem for the writer. The writer is agreeing to a small or sometimes no fee to give the producer a chance to develop the work. But generally a writer would not knowingly allow permanent rights to be granted through the option agreement. However, it can happen depending on how the option is drafted.

In specific answer to this question above, the ownership of the rights should be determined by the co-production agreement. If the co-production agreement did not deal with the underlying rights, then a new acquisition agreement will need to be signed before anything else can be done with the project.

As with any legal matter, please do not make a decision about complex matters without consulting an experienced entertainment attorney first. I have been representing feature film projects and television series for more than 14 years. Please feel free to contact my office about a quote.

- By Brandon Blake, Entertainment Lawyer

About the Editor:

Brandon A. Blake is an entertainment lawyer and producer who works with Academy Award winning actors, directors and filmmakers. A complete biography is available online.

About the Entertainment Lawyer Q&A: The Entertainment Lawyer Q&A does not create an attorney-client relationship, nor is the information treated as confidential. Responses to selected questions will be made public and shared with our subscribers. All entertainment law information is informational in nature and is not intended to be acted on without entertainment lawyer counsel.