Fox and Warner Bros. have just released official confirmation that they have settled the Watchmen dispute. The following is the companies’ reported joint statement:

Warner Bros. and Twentieth Century Fox have resolved their dispute regarding the rights to the upcoming motion picture Watchmen in a confidential settlement. Warner Bros acknowledges that Fox acted in good faith in bringing its claims, which were asserted prior to the start of principal photography. Fox acknowledges that Warner Bros. acted in good faith in defending against those claims. Warner Bros. and Fox, like all Watchmen fans, look forward with great anticipation to this film’s March 6 release in theatres.

As Nikki Finke reports, the price that Warner Bros. is said to have agreed to pay is substantial: 8.5% of the gross, a percentage of “everything going forward, including a sequel or spinoff,” as well as a substantial cash payment for Fox’s development costs and attorney fees. Industry watchers may want to keep an eye on TimeWarner’s SEC filings for more information–the loss of a substantial amount of Watchmen‘s anticipated profits arguably qualifies as a material fact that the company must disclose to its shareholders.

That the settlement came so quickly after the judge’s summary judgment ruling for Fox should come as no surprise. As I noted earlier, Fox had nothing to lose going forward, while WB could lose everything–and given the recent track record, Warner Bros.’ executives might not exactly be comfortable relying on their lawyers’ assurances of victory. What’s more, the injunction against the manufacturers of Bratz provided a powerful reminder that federal judges in that district could view (alleged) infringement of IP rights as harm substantive enough to warrant shutting down distribution. You don’t have to be a game theorist to see where the incentives lay.

News reports note that Warner Bros. is going to seek reimbursement from film producer Larry Gordon, from whom the rights to the film had ostensibly been purchased. The basis for such a claim would be the indemnification provision referred to in these court filings–in short, an agreement to indemnify is a contractual promise to compensate someone for loss or other harm.

The extent to which Gordon may be obligated to pay for Warner Bros.’ loss depends on a few key circumstances. Read these documents carefully and you’ll note that in the course of its dispute with Warner Bros., Fox argued that Warner Bros. had “actual knowledge” of Fox’s rights when it entered into the indemnification agreement with Gordon. If that’s indeed the case, a court might rule that Gordon does not have to pay, on the grounds that a party should not be allowed to insure itself against its own reckless or willful misconduct. Even if a court does determine that Gordon must indemnify Warner Bros. for its loss, he himself might have insurance or grounds to sue his own lawyers for malpractice.

However, for most fans of the graphic novel, Gordon’s fate is probably not the immediate concern. What matters most: provided the judge approves the proposed settlement, the Watchmen film will indeed be released on March 6.

This entry was posted on Thursday, January 15th, 2009 at 11:40 pm and is filed under Legal, Movies, News & Views. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.