The Legal Issues Behind the Art of Filmmaking

Making and monetizing a film have several moving parts and while you, the filmmaker, are focusing on the art form, you should not lose sight of the legal underpinnings that can make or break a film project. There is nothing worse than creating a wonderful film only to have it caught up in legal problems that a little foresight could have prevented.

There are many legal considerations when making, funding and distributing a film but here are some of the issues that deserve your careful consideration. These are but a few examples of the legal issues involved in making a film and you should understand there are many more issues that must be addressed when making a film. This is not an exhaustive list of all pertinent legal issues.

Business Structure — preferably before you start filming or fundraising for your project, you should create an appropriate legal entity to separate the project’s income and expenses from your personal assets. A sole proprietorship or partnership is not recommended because they blur the lines between your personal assets and those of the film project. Those business forms also expose you personally to legal liabilities that ought to be limited to the corporate entity that is making the film. Most filmmakers form a “production company” for each film in the form of a limited liability company or a corporation (“S” or “C” corporation — note that an “S” corporation can only have a limited number of shareholders whereas a “C” corporation can have an unlimited number of shareholders).

Film Financing — financing your film project is one of the most critical aspects of the entire process. Without sufficient funds, your project and its success will be limited, regardless of how creative the concept is. One of the most common funding sources is “equity” funding which requires a “private placement memorandum” or “PPM” to raise outside money from friends, family, and business associates. Regardless of the amount of money you plan to raise from third parties, you must prepare a PPM which is regulated by state and federal securities laws. Your business plan alone will not suffice as the necessary disclosure for your securities offering memorandum which is a full disclosure document and must comply with strict legal requirements: it cannot be used to solicit investment money from the general public, it requires investors to be “accredited investors” with high net worth and investment sophistication, and certain documents must be filed with the appropriate governmental agencies. Most importantly, you should consult with qualified legal counsel to assist you with your film project but particularly when it comes to fundraising.

Intellectual Property Issues — film financing and distribution depend on the filmmaker’s ability to ensure investors and distribution companies that he/she owns or has a license to all of the intellectual property attached to the film. That typically means you must have copyright ownership or licensee rights to move forward including the script or screenplay, music rights, and trademarks. Writers Guild of America registration of a screenplay can help define authorship but it is not a replacement for copyright and trademark rights and protection. Keep an eye on using consumer products and identifiable brand names in your film because they will require third-party consent if depicted in your film. Clearing intellectual and proprietary rights is a “must do” for all films, large and small. Documentary films have more leeway when it comes to the fair use privilege of content that appears in a documentary but they are still subject to the same basic principles. There have been many sad stories of a great film project getting stopped in its tracks or delayed only because no one took the time to clear the rights to scripts, products, music, etc. that happen to be part of the film.

One twist on this issue is making sure you do not cast a name brand product in an unfavorable light in a scene in your film. If a recognizable brand name appears in a way that sheds a negative light on that product, you should edit out the brand name to avoid legal challenges by the product manufacturer who believes the scene will adversely affect sales and revenue and goodwill of its brand.

The unauthorized use of names of real-life characters can present legal challenges by the person portrayed (or his/her estate) on the grounds of defamation or failure to obtain a waiver or consent for the use of the name or image. This applies to the use of a person’s image without consent which advertisers have paid dearly for after the fact. Misappropriation of a person’s “likeness” is a devastating legal pitfall that can drain away any profits derived from even the most successful film. Beware!

Miscellaneous Contracts — given the many moving parts of making a film, you can imagine the myriad of contracts that are necessary, ranging from employment agreements, work-for-hire agreements, intellectual property licenses or waivers, location and still photo release agreements, composer agreements, screenplay and option agreements, talent agreements, director and producer contracts, writers’ agreements, location releases and on and on….the best word of advice is to consult with an experienced attorney to help guide you through the process while you focus on making the best film possible.