Payton & Associates, LLC
Commercial Litigation Attorneys
Miami, Florida

Lawsuit ends royalty disputes over Napoleon Dynamite

Florida readers may be big fans of the cult hit movie 'Napoleon Dynamite.' The movie was released to little acclaim in 2004, but grew into a cult classic once released to home video. The movie has been the subject of intense litigation since 2011, when the production company behind the film sued FOX Searchlight over royalty disputes.

At issue is more than $10 million in royalties that the production company claims were underreported. The company claims that a deal was struck at the Sundance Film Festival that would give the production company $4.75 million in upfront payment for the film, plus royalties in the amount of 31 percent for home video release profits. Fox claims that the agreed upon royalty amount was just 10 percent.

The parties enlisted a private judge to hear the case. At the heart of the matter is the extremely complicated contract signed by the parties, and the validity of certain definitions within that outlined how royalty payments would be calculated. The production company claims that the terms of the contract was not sufficiently spelled out, and that the terms within did not reflect the verbal agreement made at Sundance.

The judge, acting as a binding referee in the matter, ruled that Fox did abide by the terms of the contract, and that the profits were properly reported. The decision means a loss of as much as $20 million to the production company, when interest is taken into consideration. This case gives movie buffs in Florida and elsewhere a glimpse into the high stakes associated with royalty disputes, and demonstrates why royalty litigation is often the best recourse to protect one's interests in matters of royalty income.

Source: Hollywood Reporter, "Fox Wins Major Ruling in 'Napoleon Dynamite' Profits Case (Exclusive)," Matthew Belloni, Dec. 5, 2012

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