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Speaker 1: This Is Spinal Tap is a mockumentary about a fictional

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Speaker 1: British heavy metal band on a North American tour. The

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Speaker 1: film helped usher in a genre satirizing serious films. It

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Speaker 1: was added to the U S Library of Congress as

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Speaker 1: an important work. It also popularized lines such as give

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Speaker 1: me some money and this goes to eleven. You see,

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Speaker 1: most most blokes are gonna be playing its ten. You're

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Speaker 1: on ten here, all the way up, all the way up,

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Speaker 1: all the way up. You're on ten on your guitar.

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Speaker 1: Where can you go from there? Where? I don't know where. Exactly.

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Speaker 1: What we do is, if we need that extra push

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Speaker 1: over the cliff, you know we do, put it up

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Speaker 1: to exactly one. Why don't you just make ten louder

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Speaker 1: and make ten b the top number, and make that

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Speaker 1: a little louder. These cards were eleven. Spinal Tap is regrouping,

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Speaker 1: but not for the reason you may think or hope.

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Speaker 1: The band is reuniting in a Los Angeles court. Two

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Speaker 1: sue a Vendi, thestry batter of cult Film for four

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Speaker 1: hundred million dollars. Christopher Guest, Michael McKeen, and Rob Reiner

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Speaker 1: joined Harry Shearer's lawsuit demanding damages for anti competitive and

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Speaker 1: unfair business practices as well as fraudulent accounting of the vendee.

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Speaker 1: Spokesman declined to discuss the lawsuit, saying the company doesn't

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Speaker 1: comment on ongoing litigation. Our guest is prominent intellectual property

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Speaker 1: litigator Terence Ross, a partner at Captain Utun Rosenman Terry

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Speaker 1: tell us about the lawsuit well June. Unfortunately, this is

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Speaker 1: a very common lawsuit in Hollywood, the film and the

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Speaker 1: music industry, and it all starts with the mistake that

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Speaker 1: the guys in Spinal Tap made many years ago, when

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Speaker 1: the field they made was based on getting a share

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Speaker 1: of the net revenues, in other words, the profits from

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Speaker 1: their work. Nowadays, the better represented talent go for a

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Speaker 1: percentage of the growth, which is a relatively easy thing

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Speaker 1: to determine, to calculate and to keep straight, whereas these

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Speaker 1: net deals from the old days are very hard to

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Speaker 1: get a fair shake out of. And fundamentally what they're

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Speaker 1: saying is, Yep, we didn't get a fair shake from Vivendi.

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Speaker 1: They are doing different things they're calling fraud that are

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Speaker 1: loading up on the clost side so as to reduce

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Speaker 1: the net that gets distributed terry. Some of the numbers,

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Speaker 1: at least as alleged, are pretty remarkable. The the lawsuit

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Speaker 1: says that the companies say the Vivendi says that the

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Speaker 1: total share the creators total share of worldwide merchasing income

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Speaker 1: from was eighty one dollars. I saw that. I thought

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Speaker 1: there must be a type of there. There was something

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Speaker 1: supposed to be after Can that possibly be be the case?

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Speaker 1: I don't think so. And you know that wasn't the

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Speaker 1: only allegation to grab my attention. There's another allegation in

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Speaker 1: there that the spinal tap guys have not received an

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Speaker 1: accounting in three years. Normally these statements come out quarterly

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Speaker 1: with the check. So something clearly is going wrong here.

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Speaker 1: But let me lay out how it could actually get

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Speaker 1: to eighty nine dollars. And it's very simple. If you

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Speaker 1: take every expense that your business incurs and you book

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Speaker 1: it as an expense for the spinal tap marketing costs,

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Speaker 1: then the net revenues coming out, even if they are

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Speaker 1: four hundred million dollars or going to come down to

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Speaker 1: a very small amount. And it is a very common

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Speaker 1: gimmick that's done when you have net deals of this

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Speaker 1: sort all types of expenses, whether they're marketing or other things,

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Speaker 1: get booked to that account, bringing down the net and

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Speaker 1: eliminating any need to distribute profits to the creators. Terry.

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Speaker 1: We've seen a lot of these lawsuits going way back.

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Speaker 1: But what about the punitive damages. One of the closet

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Speaker 1: of action being alleged is outright fraud that folks that

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Speaker 1: have the vent simply are engaged in a fraudulent scheme.

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Speaker 1: It's more than just an accounting action where we want

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Speaker 1: to true up the books and figure out what the

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Speaker 1: right number is saying that they took. They willfully took

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Speaker 1: steps to defraud them. And under California law, if proven

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Speaker 1: to be true, and if that fraud is intentional, they

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Speaker 1: would be entitled to punitive damages in order both to

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Speaker 1: punish the defendant here and to deter future people from

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Speaker 1: engaging in sword content. And it could be very substantial,

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Speaker 1: three to four times the amount of the actual damages. Terry.

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Speaker 1: I guess these four are suing as the creators of

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Speaker 1: the film. If I'm understanding it correctly, is that is

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Speaker 1: it sort of typical that it's the creators of the

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Speaker 1: film who are involved in these disputes to do. Other

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Speaker 1: people like the actors, for example, also have agreements where

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Speaker 1: they get a portion either of the net or the

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Speaker 1: gross revenues. Absolutely, in this case the four suing as

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Speaker 1: the original copyright owners for having developed the script of

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Speaker 1: the music, and then they license that copyright off for

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Speaker 1: a mistake on their part of the net. But talent,

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Speaker 1: pure talent actors and actresses also will do deals. They

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Speaker 1: more commonly do a percentage of the gross um And

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Speaker 1: you see this with the major talent in all the

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Speaker 1: leading movies in the United States. They'll get a set

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Speaker 1: see of a few million dollars and then one point

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Speaker 1: against the growth terry. They're also asking for certain rights

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Speaker 1: to the film, including trademarks on the band's name and

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Speaker 1: the name of Shearer's character. Is that unusual hard to get?

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Speaker 1: It's not unusual. What is unusual is that, as the

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Speaker 1: law suit makes clear, the Vendi and the predecessor companies

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Speaker 1: failed to take certain actions with the United States Trademark

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Speaker 1: Office and overseas trademark offices to protect these names and

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Speaker 1: to obtain the rights in them. And so essentially the

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Speaker 1: guys are are suing to obtain back the right to

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Speaker 1: go to the trademark office and register the names themselves.

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Speaker 1: It again is one more element of a story that

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Speaker 1: describes a completely inept management of the film and and

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Speaker 1: the possibilities to earn money off of the film. And Terry,

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Speaker 1: you said that these kinds of disputes are very common.

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Speaker 1: Do they usually go to trial or do we have

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Speaker 1: Can we hope that we'll have a really interesting trial

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Speaker 1: over spinal tapper or a settlement more likely? That would

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Speaker 1: be fun to watch, um, But unfortunately, almost all of

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Speaker 1: these settling. Once the forensic accountants get into the books

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Speaker 1: and start sorting out what the defendant did, how they

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Speaker 1: move the moneys around, it becomes clear real quick that

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Speaker 1: the case would settle, and then it becomes mostly a negotiation.

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Speaker 1: Very few of these will ever go to trial, which

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Speaker 1: would be a great thing to watch, would be very

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Speaker 1: fun to see the inside accounting maneuvers that these film

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Speaker 1: companies in music companies, UM and get thanks for being

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Speaker 1: on Bloomberg Law Terry. That's Terence Ross, a partner at

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Speaker 1: Captain Yuchen Rosenman