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Speaker 1: This is Bloomberg Law with June Grasso from Bloomberg Radio.

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Speaker 1: Good morning, aviators. This is your captain speaking combat medals citations,

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Speaker 1: only man to shoot down three enemy planes in the

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Speaker 1: last forty years. Yet you can't get a promotion. You

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Speaker 1: won't retire despite your best efforts. You've refused to die.

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Speaker 1: Here you are Captain. What is that? It's part of

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Speaker 1: life's mystery, Sirree top Gun Maverick. The long awaited sequel,

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Speaker 1: the Return of Tom Cruise as Captain Peter Maverick Mitchell

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Speaker 1: shattering box office records on Memorial Day weekend, grossing more

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Speaker 1: than six D twelve million dollars worldwide so far and

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Speaker 1: climbing so Critics say the sequel is better than the original.

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Speaker 1: What could stop this high flying film enter a copyright

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Speaker 1: infringement lawsuit by the airs of the writer whose story

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Speaker 1: inspired the original film about four decades ago. Allegend that

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Speaker 1: Paramount released the sequel without securing a license, joining me

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Speaker 1: as intellectual property litigator Terence ross a partner Captain Uten

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Speaker 1: Rosenman Terry. This is a blockbuster movie with an enormous

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Speaker 1: budget that's been highly anticipated for a long time. The

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Speaker 1: return of Tom cruise as Maverick. It seems incredible to

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Speaker 1: me that a studio like Paramount wouldn't be sure they

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Speaker 1: had the right sewn up before the release. Well, I

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Speaker 1: think that's correct, June. And I know for a fact

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Speaker 1: that paramounts well represented on the legal side, and I

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Speaker 1: assumed that they came to the same conclusion that I did,

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Speaker 1: that there was no obligation on their part to purchase

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Speaker 1: a new license from the un A family in order

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Speaker 1: to produce the Top Gun sequel. Wow, so you agree

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Speaker 1: with them. So let's go to the very beginning at

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Speaker 1: the making of Top Gun. Paramount did have the rights

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Speaker 1: at that point. What happened since then? So the rights

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Speaker 1: you refer to, June, are the rights to an article

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Speaker 1: in California Magazine published April twenty one, nighte that describes

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Speaker 1: two participants in the Navy Top Gun program who go

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Speaker 1: by the call signs Yogi Impassa and what their typical

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Speaker 1: day at Top Gun is like. That's what they bought

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Speaker 1: the rights for. The movie has at the end somewhere

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Speaker 1: a credit to the extent story based on this story.

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Speaker 1: We need to come back and discuss what that means

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Speaker 1: in more detail. But the movie came out. As you recall,

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Speaker 1: under the nineteen seventy six Copyright Act, there is a

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Speaker 1: new provision put in section two or three that provides

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Speaker 1: for termination of copyright transfers thirty five years after the

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Speaker 1: copyright is transfer for during a five year window, So essentially,

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Speaker 1: thirty five years after the copyright is assigned, you have

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Speaker 1: five years to claw back the ownership of the copyright

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Speaker 1: from whomember you assigned it to by sending them a

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Speaker 1: termination letter and jumping through some formalities. The heirs to

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Speaker 1: the author of the top Guns article in California Magazine

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Speaker 1: assert that they did that, that they properly lawfully terminated

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Speaker 1: the assignment of the copyright effective January one, and that therefore,

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Speaker 1: when the movie came out a couple of weeks ago,

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Speaker 1: that it was an infringement of the copyright that they

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Speaker 1: now owned once more, and for which Paramount did not

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Speaker 1: take a new license before release of the movie. So

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Speaker 1: we get a hint of Paramounts response in the suit.

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Speaker 1: According to the suit, then sent a cease and assist

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Speaker 1: letter in early May, to which Paramount responded that the

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Speaker 1: film had been sufficiently completed before the effective termination date

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Speaker 1: of its copyright. And was not derivative of yours articles.

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Speaker 1: How is this not derivative if the first movie was derivative.

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Speaker 1: So you've got a presumption built in there that the

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Speaker 1: first movie was derivative of the article. And I think

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Speaker 1: that's the problem with the logic here, and the problem

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Speaker 1: with a lot of the commentary so far on the

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Speaker 1: filing of this lawsuit. Unlike most of the reporting, Unlike

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Speaker 1: most of the media that has gone on so far

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Speaker 1: about this, I actually went back and read the California

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Speaker 1: Magazine article called top Guns Plural that was written by

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Speaker 1: Mr Yo Na. You're too good to three doing such

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Speaker 1: thorough research. It's all in the details, June Um and

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Speaker 1: I read the article and it was nothing more than

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Speaker 1: a factual account of two fighter pilots typical day in

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Speaker 1: the topic training program. What it did not have was

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Speaker 1: that the rear seat for Maverick dies during the training.

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Speaker 1: There's no female trainer that Kelly mcgilli's part. There's no

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Speaker 1: encounter with big fighter jets over the in the ocean.

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Speaker 1: There's no father of Maverick being shot down in Korea

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Speaker 1: as the backstory. There's no iconic volleyball match, there's no

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Speaker 1: competition amongst the Top Gun pilots. For these to be

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Speaker 1: the Maverick Versus Iceman competition, there's simply no story there.

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Speaker 1: What there is is a factual recounting of a typical

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Speaker 1: day for two typical Navy fighter pilots in the Top

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Speaker 1: Gun program. Now, keep in mind there is a big

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Speaker 1: difference how copyright treats fiction and factual works. In order

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Speaker 1: to infringe a copyright in a factual work, which is

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Speaker 1: what this magazine article was, you have to engage in

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Speaker 1: what's known as literal copying. It's like taking it and

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Speaker 1: putting it on the xerox machine and reprinting it that way.

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Speaker 1: With respect to fictional works, there's this concept of substantial similarity.

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Speaker 1: All you have to do is show that somehow substantially

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Speaker 1: similar derived from that work. And we have that very

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Speaker 1: important distinction built into copyright well between factual works of

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Speaker 1: fiction works, because we don't want anyone to have a

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Speaker 1: monopoly on the facts or on history. And this work

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Speaker 1: that was copyrighted is a work of fact, not fiction.

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Speaker 1: The movie Top Gun is a work of fiction that

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Speaker 1: happens to share certain factual elements from the California Magazine

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Speaker 1: article that does not constitute copyright infringement. So are you

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Speaker 1: saying that the studio didn't even need a license for

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Speaker 1: the original film Top Gun? That is correct. They could

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Speaker 1: arguably have made the Top Gun movie the original without

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Speaker 1: obtaining any rights to the California Magazine article. That's not

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Speaker 1: the way most movie studios work. They like to lock

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Speaker 1: up ideas, and that's all. This California Magazine article is

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Speaker 1: just an idea of what might turn into movies. Movies.

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Speaker 1: So he's like to lock up ideas for movies by

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Speaker 1: going out and optioning them for relatively small amounts of money,

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Speaker 1: and they will have a portfolio. And Paramount is probably

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Speaker 1: the most famous of the movie studios for engaging in

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Speaker 1: this practice. If you've watched the new mini series on

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Speaker 1: Paramount Streaming called The Offer, which is about the making

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Speaker 1: of the Godfather movie, there's a discussion in there between

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Speaker 1: the head of the studio and some other executives about

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Speaker 1: how Paramounts practiced. Is the lock up famous books even

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Speaker 1: if there's no current plan to make a movie about

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Speaker 1: the book, which is how they got the Godfather book

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Speaker 1: locked up. To make a movie about Godfather, however, was

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Speaker 1: a fictional work. This article in California magazine was not

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Speaker 1: a fictional work, was just a recounting effects. If that

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Speaker 1: constitutes some sort of intellectual property control over the telling

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Speaker 1: of any story about naval aviation, my goodness, there would

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Speaker 1: be a claim to so many other movies out there.

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Speaker 1: It would make it impossible for the movie industry to

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Speaker 1: do any sort of movie about naval fight pilots or

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Speaker 1: the United States naval aviation units. I mean, that's not

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Speaker 1: how copyright works. For the sake of argument, let's say

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Speaker 1: that Paramount did need to get a license. So Paramount

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Speaker 1: said the movie had been effectively completed before the termination

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Speaker 1: date of the copyright. And this movie was delayed due

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Speaker 1: to COVID, So would it have to have been substantially completed, completed, released?

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Speaker 1: Do we even know the answer to that? There is

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Speaker 1: no existing law on this issue. The position that Paramount

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Speaker 1: has taken is that it was quote substantially completed close

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Speaker 1: quote prior to the termination date. Now, the way Section

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Speaker 1: two oh three the Copyright Act works is that, notwithstanding

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Speaker 1: a termination notice having been issued, if you publish, and

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Speaker 1: I mean published in the sense of copyright publishing, put

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Speaker 1: it out there for the public. If you publish a

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Speaker 1: work prior to the termination date, you have the right

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Speaker 1: to continue to distribute that work, and there is no infringement.

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Speaker 1: And so it becomes a very important secondary line of

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Speaker 1: defense for paramount as to whether or not there was

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Speaker 1: sufficient completion in order to take advantage of this one

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Speaker 1: aspect of Section two or three. It will come down

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Speaker 1: at the end of the day to a factual question

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Speaker 1: that a jury will probably have to decide. It will

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Speaker 1: be what state was the movie in on January? In particular,

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Speaker 1: are the elements that the plaintiffs claim were taken from

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Speaker 1: the California Magazine article? Were they complete? There could be

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Speaker 1: other elements that the sound might not be quite finished yet,

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Speaker 1: The sound effects might not be quite finished yet, the

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Speaker 1: aerial stunts might not be quite finished yet. Those are

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Speaker 1: not elements that are claimed under the copyright, and therefore

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Speaker 1: it doesn't have to be complete ready to be rolled

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Speaker 1: out to the movie theaters. And again keep in mind

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Speaker 1: the delay was apparently caused by the COVID pandemic. They

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Speaker 1: didn't want to release this movie, which was going to

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Speaker 1: be a blockbuster. They knew when there was nobody willing

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Speaker 1: to come back to the movie theaters yet, and so

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Speaker 1: I mean, there is a factual question here, and we'll

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Speaker 1: just have to wait to see what the facts are

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Speaker 1: in the laws of the heirs are asking for some

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Speaker 1: profits from Maverick and to block the studio from distributing

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Speaker 1: the movie. Considering what the movie is made already, they're

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Speaker 1: looking for enormous damages. Here they are, and let's start

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Speaker 1: with this injunct development. There's gonna be no injunction issued.

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Speaker 1: That simply won't happen. That sort of bar of free

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Speaker 1: speech just is an aspa to courts, even in copyright cases.

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Speaker 1: Filmgoers do not need to rush out this afternoon and

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Speaker 1: watch Top Gun Maverick before some theoretical injunctions issued. Not

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Speaker 1: going to happen. On the damages side, I think the

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Speaker 1: plane offf also has a significant problem. The original license,

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Speaker 1: my understanding, was sold for relatively peanuts compared to what

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Speaker 1: is made, with no element of profit being factored in.

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Speaker 1: And the way we do copyright damages is the first

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Speaker 1: thing we look at is what was the market for

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Speaker 1: this copyrighted work. And to determine what the market is,

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Speaker 1: you look what willing buyer and a willing sell are

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Speaker 1: paid prior to the infringement and There's only one example

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Speaker 1: of that, and that's this purchase of the original license,

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Speaker 1: and that was relatively low dollar amount that had no

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Speaker 1: profit participation. So I think there's going to be some

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Speaker 1: problems on its trying to get a big chunk of

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Speaker 1: the profits here. And even if the court allows them

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Speaker 1: to seek some portion of the profits, it will have

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Speaker 1: to be shown to what extent the California Magazine article

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Speaker 1: contributed to those profits. The characters in the California Magazine

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Speaker 1: article by Mr You are not the characters that got

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Speaker 1: put up on the screen, not Maverick. It's a rather

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Speaker 1: bland set of characters who seem more like bus drivers

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Speaker 1: going to their jobs every day and then drinking at night.

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Speaker 1: And so I think you can have a lot of

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Speaker 1: issues surrounding the damages. There's also the Tom Cruise element.

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Speaker 1: I mean, a large portion of the demand for this

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Speaker 1: movie and the profits being generated are because it's the

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Speaker 1: return of Tom Cruise to his iconic movie role, and

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Speaker 1: that has nothing to do whatsoever with the California Magazine article.

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Speaker 1: This brings up this reversion of rights clause, which has

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Speaker 1: become a thorn in the side of studios because they

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Speaker 1: face the prospect of losing franchise rights to iconic works.

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Speaker 1: And yet, you know, we've discussed this before. There's so

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Speaker 1: much that goes into those works beyond the original script

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Speaker 1: or the original plot that part of the Lodges seems

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Speaker 1: to me really unfair. June, you couldn't be more correct,

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Speaker 1: and we have discussed this before. Section two oh three

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Speaker 1: of the Copyright Act was arguably a legislative mistake on

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Speaker 1: the part of Congress during the revision period when we

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Speaker 1: produced the Copyright Act nine that there was this litany

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Speaker 1: of legislative testament, money and submissions to the effect that

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Speaker 1: the actual creators, the writers of iconic works were being

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Speaker 1: cheated by the big company. You know, it was this

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Speaker 1: image of the loan writer in the garret or garage

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Speaker 1: cranking out on a nineteen fifties underwood typewriter, this great

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Speaker 1: masterpiece work and then have it taken for pennies on

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Speaker 1: the dollar because he was starving an antifeita family. And

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Speaker 1: that was a myth. And yet sexually two or three

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Speaker 1: was the product of Congress bodding into that myth. And

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Speaker 1: essentially what they did was transfer or attempt to transfer

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Speaker 1: a very significant portion of wealth not created by the

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Speaker 1: original owners of the copyright to these original owners on

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Speaker 1: the theory that the big bad companies of the United

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Speaker 1: States needed to be somehow brought to heal for taking

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Speaker 1: advantage of people. I suspect that this original California Magazine

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Speaker 1: article would have been worthless to Mr Yone, and I

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Speaker 1: suspect he's now deceased, that he would have been thankful

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Speaker 1: to get the spa amount of money he got from

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Speaker 1: Paramount on the speculation that it might someday get made

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Speaker 1: into a movie and might someday make money. Keep in

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Speaker 1: mind most movies don't make money, and the fact that

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Speaker 1: the reason this one movie, Maverick, that really did so

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Speaker 1: well was because of all the contributions you just listed.

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Speaker 1: The writers or Mr Yona did not write this script,

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Speaker 1: the producers who put this together, the actors, the actress

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Speaker 1: Kelly McGillis, the people doing the stunts, the aerial stunts.

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Speaker 1: But the contribution to the United States Navy for allowing

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Speaker 1: the filming on their ships, all the sets to make up,

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Speaker 1: the marketing, the advertising for it. All of this is

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Speaker 1: what made the movie the profits that it produced for

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Speaker 1: the studio. And that's exactly what's happened when Maverick Top

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Speaker 1: Gun again, the units did not contribute in any way

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Speaker 1: to any of that. Mr yun A simply documented on

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Speaker 1: a factually what was going on at the top Gun

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Speaker 1: fighter training program in Merrimar, and some executive paramount happened

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Speaker 1: to read it that article and say says, a good idea.

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Speaker 1: Let's lock it up, make sure it's our idea, and

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Speaker 1: then we'll try to develop it. And that development process

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Speaker 1: took three years and Mr un was not involved in it.

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Speaker 1: This is different from Mario Puzzo in The Godfather, where

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Speaker 1: not only did they lock up the script, but they

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Speaker 1: locked up Mr Puzzo, and he, along with Francis Ford Coppola,

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Speaker 1: wrote the script for The Godfather, which was brilliant in

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Speaker 1: its own rights. Set aside the book, and then we're

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Speaker 1: able to produce that vision that they had in the

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Speaker 1: script into this great work The Godfather. The same here.

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Speaker 1: I'm not gonna put top Good Maverick on the same

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Speaker 1: plane as The Godfather, but somebody had a vision based

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Speaker 1: on this concept of a fighter school at Miramark and

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Speaker 1: they put in the work in the effort to make

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Speaker 1: that vision, to realize that vision and copy of right

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Speaker 1: laws were not intended, deprived them of the fruits of

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Speaker 1: their labor, and why did that? Do you think that

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Speaker 1: Paramount won't want settle this. I've seen and been involved

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Speaker 1: in a lot of lawsuits in the intellectual property field

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Speaker 1: where one party over the year or the other had

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Speaker 1: clear and obvious advantages. The problem is you can never

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Speaker 1: tell what's going to happen in litigation, especially in a

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Speaker 1: jury case, and so there is a benefit sometimes to

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Speaker 1: achieve certainty by settling a lawsuit rather than taking a

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Speaker 1: chance on litigating it. This is particularly true in the

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Speaker 1: entertainment industry. Now, as you know, June, we've seen a

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Speaker 1: number of songs lately, litigation over songs and copyright songs

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Speaker 1: go all the way to them, through to trial and

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Speaker 1: to jury verdicts on appeal. So there is definitely a

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Speaker 1: trend in the entertainment industry to trying to quash these

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Speaker 1: meritalist claims of copyright infringement. But this is the sort

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Speaker 1: of case where you would expect that at some point

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Speaker 1: a settlement would be reached if the Yonas are willing

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Speaker 1: to be reasonable, and if Paramount is willing to be

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Speaker 1: reasonable because it thanks to Pango and so I would

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Speaker 1: expect at some point there will be a settlement, but

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Speaker 1: who knows. Maybe it will go far enough into discovery

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Speaker 1: that one side or the other will feel that they

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Speaker 1: have a dominant position, and or one side or the

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Speaker 1: other becomes unreasonable during the settlement negotiations, But the odds

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Speaker 1: are it will eventually settle. So, Terry, you think that

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Speaker 1: Paramount has the advantage here and that paramounts in the right,

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Speaker 1: do you think it's enough for Paramount to win a

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Speaker 1: motion to dismiss the complaint? So? I think a motion

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Speaker 1: to dismiss is certainly possible on the theory that there

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Speaker 1: were no copyrighted elements taken in the making of Maverick

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Speaker 1: or Maverick pop Gun alleged derivative work. It is possible.

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Speaker 1: But as we've discussed before, Jude, emotions to dismissing the

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Speaker 1: copyright field are challenging as a matter of law. It's

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Speaker 1: not impossible. So it might happen here with respect to

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Speaker 1: the defense that we had substantially completed the movie hired

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Speaker 1: to the termination date. That's just so factually contingent that

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Speaker 1: I don't think that a motion to dismiss would lie

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Speaker 1: for that. It's such an interesting lawsuit. Thanks so much

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Speaker 1: for your insights, Terry, and for reading the original article.

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Speaker 1: That's intellectual property litigator Terence Ross, A partner at Caton

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Speaker 1: Nuchen Rosenman. And that's it for this edition of the

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Speaker 1: Bloomberg Law Show. Remember you can always get the latest

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Speaker 1: legal news on our Bloomberg Law Podcast. You can find

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Speaker 1: them on Apple Podcasts, Spotify, and at www dot bloomberg

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Speaker 1: dot com, slash podcast, Slash Law. I'm June Grosso and

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Speaker 1: you're listening to Bloomberg