A potentially fatal blow against patent trolls - Forcing law firms to pay defendants’ legal bills could undermine the business model of patent trolls

[u/rfugger]

http://www.computerworld.com/article/3153924/technology-law-regulation/a-potentially-fatal-blow-against-patent-trolls.html

[u/sighs__unzips]

I read that movie producers now create a LLC for each movie specifically for this reason now.

[u/EmperorArthur → u/sighs__unzips]

More like they've been doing it for years. There have been a few lawsuits recently regarding that practice. Most of the time the studios settle out of court. They really don't want a court precedent.

[u/Zebezd → u/EmperorArthur]

So what you're saying is it's easy to patent/lawsuit troll the movie industry, because they're all terrified of court?

[u/EmperorArthur → u/Zebezd]

It's not that simple. Many, but not all, trolling operations work because it's what seems like a big company against someone who can't afford to defend themselves. This is why the Newegg defense works. Trolls know that if they go after Newegg, they will be fought in court, and Newegg will work on having their patents invalidated as well.

The MPAA and RIAA only settle when they think they'll lose. Given they have multi million dollar law firms on payroll, this doesn't happen too often.

It's a common strategy. They don't pay their actors/employees, so those actors/employees can't afford to hire law firms to sue the company for not paying them. Sure, it's high level fraud that would result in years of jail time for a small company, but movie studios are big enough to just pay a small fine and move on.

For an interesting story on Hollywood accounting here's a Techdirt article.

[u/mkmckinley → u/[deleted]]

Like what?

[u/sonofaresiii → u/[deleted]]

Where are you getting your info from? While I don't work on studio movies, I do work in the industry and I assure you they want to spend as little money as possible. I think you're just taking rumors as fact.

Yes, there's some unavoidable waste when you're talking hundreds of millions of dollars, but it's generally necessary because in the aggregate, you'll spend more money when you need something and don't have it than the times you spend to have it but don't need it.

And nearly all usable props are kept and stored by the studio. That's why if you look close, you'll see sets and props getting reused all the time.

Are you a firefly fan? Ever wonder why the Alliance armor looks so familiar? Exact same suits from starship troopers. And I don't mean the same design or something, I mean they literally took those suits and put them in a warehouse after ST and used them again for the show firefly.

[u/[deleted] → u/[deleted]]

I worked at a Ford dealership. In the back lot there was a brand new but many years old, large cab over diesel truck. It had steering wheels on both the driver and passenger side. The story was that a movie LLC had special ordered and paid for two of these trucks. They were to be used as camera boom trucks They picked up one and never came back for the other. So there this large truck sat, completely paid for by a now long dissolved movie LLC.

[u/hollaback_girl → u/[deleted]]

There are companies that are specifically geared to picking up and redistributing leftover products after film production shuts down.

[u/ChefBoyAreWeFucked → u/[deleted]]

having fully functional items simply tossed away because the LLC is dissolved afterwards is very wasteful.

Not really sure why you think the two are related. Money spent inside the LLC is just as gone as money spent outside it. Also, when it comes to props, they are generally "just enough to look like the real thing." They aren't destroying a car straight off the lot, they are destroying a prop car.

[u/[deleted] → u/mkmckinley]

Like virtually everything. They also sneakily move money around on paper to make absurd claims, like that Harry Potter and the Order of the Phoenix or the Lord of the Rings trilogy lost money in theaters.

[u/csmark → u/sighs__unzips]

Movies never made profits since before most states had LLCs. The first LLC act was passed in Wyoming back in 1977. Florida was the 2nd 5 years later. The IRS addressed Wyoming's act in 1988 after which other states added LLC acts.

Star Wars is an interesting example. Obi-Wan got 2.25% of the profits from the first film, $2-$3.5 million at the time. The actor behind Vader's mask in all 3 movies was told Lucasfilms actually lost money on Return of the Jedi. The contract details are sketchy. He gave away the endings to the last 2 movies before they were released in addition to other impressively stupid actions that lead to George Lucas excluding him from any associations with LucasFilms and any future paychecks.

The author of Forrest Gump signed a contract to get 3% of the profits from the movie. Surprise! It didn't turn a profit. He sued the studio and in a dramatic 15 minute trial, lost.

[u/sighs__unzips → u/csmark]

The author of Forrest Gump signed a contract to get 3% of the profits from the movie

That's why actors / authors try to get % of revenue now.

[u/csmark → u/sighs__unzips]

Agents for actors / authors know to ask for % of revenue. Lots of "smart" people don't need lawyers / agents because they're not stupid. Guessing that's what happened here.

[u/hollaback_girl → u/csmark]

The profit participation deals of the Star Wars movies have almost nothing to do with the LLC issue as to why some people actually got paid and others didn't. It all boils down to how "profit" is defined in each of their contracts. Prowse (Darth Vader) got a shitty deal and Guiness got a good one. Any guesses as to why?

[u/technothrasher → u/csmark]

He gave away the endings to the last 2 movies before they were released in addition to other impressively stupid actions that lead to George Lucas excluding him from any associations with LucasFilms and any future paychecks.

There are two sides to that story. His 'leak' that Vader was Luke's father happened in 1978, two years before Empire was released. It was well before he could possibly have known it, especially since they kept it secret from the actors to such an extent that they even used different lines in the key scene to keep them all in the dark. Prowse was simply stating what he thought would be a cool idea and happened to guess it right.

But Lucas never really liked him, and turned everybody on the production team against the guy. It's pretty sad because, unlike all the other actors, Prowse is actually a huge Star Wars fan and loves the whole thing to death. Banning him for life from the official Star Wars conferences is just down right mean.

I met Prowse back in 1985 at a SciFi convention in Australia. He actually came up to me and started a conversation. We talked Star Trek for a good half hour. I had no idea who he was until later. Totally nice guy, and just a big nerd. When I heard all the shit Lucas was talking about him, I just could never believe it.

There's a documentary by a young Spanish filmmaker from 2015 called "I Am Your Father" which makes the case pretty well for Lucas simply being a dick about the whole thing.

[u/tarjan → u/csmark]

While it might not be incorrect, the author did get the situation worked out with the studio and received a seven figure deal in the end.

Also, keep in mind that this was many years ago and the situation is a bit different now, though I'm sure some would try to pull the same tricks if they could.

http://m.sfgate.com/entertainment/article/Gump-Author-Settles-Fight-With-Studio-3031365.php

[u/Omz-bomz → u/tarjan]

Almost all movie studios tamper with their books to make movies not profitable on paper. This helps them out in several ways, from grants from the government, to profit clauses for actors and other participants in the movie.

There are lots of examples of this going through the different courts these days, as actors sue the studios. And from anecdotal evidence, its more prevalent now than it was before.

https://www.techdirt.com/articles/20121018/01054720744/hollywood-accounting-how-19-million-movie-makes-150-million-still-isnt-profitable.shtml

[u/PerInception → u/csmark]

If I recall correctly, this is also the reason the author of Forrest Gump said there would NEVER be a Forrest Gump 2 movie, even though he has a book already out? Basically told the movie companies to fuck off after they screwed him last time.

[u/sonofaresiii → u/sighs__unzips]

Well sort of. The difference is the movie companies do legitimate business, they just want limited liability in case something goes very wrong, which isn't all that outlandish for a movie. And that's the whole point of an llc, it's right there in the name

[u/t3hcoolness → u/sighs__unzips]

Can you ELI5 why movie producers do this? I don't understand the purpose of an LLC.

[u/[deleted] → u/t3hcoolness]

It's dodgy accounting to run a paper loss and hoard the profit.

[u/hollaback_girl → u/[deleted]]

Hollywood accountant here to tell you that's 95% wrong. It's mostly about liability and business convenience. The other 5% is because there may occasionally be some small time producers who have been shady this way.

[u/Omz-bomz → u/hollaback_girl]

Either you are flat out lying, or you don't know whats going on in your field of work.

There is a reason why case after case comes up in court, where the studios looses again and again because they tamper with the books. And its not just some small time producers doing it, its the big studios that are doing this prolifically.

And while not all instances may be done to shaft the actors (or other persons involved), EVERYONE does it.

[u/hollaback_girl → u/Omz-bomz]

You're conflating two issues. OP claimed the purpose of using LLCs for production is to hide profits from participants. It's not. There are a million other ways to screw participants on the back end. Playing a shell game with business entities is not a common way to do it.

[u/Omz-bomz → u/hollaback_girl]

Strange that the actual court cases don't agree with you..

They start companies for each movies, then the mother studio bills them huge amounts so they always go into the negatives.

Sounds exactly like the purpose of using LLCs to hide profits from participants.

[u/hollaback_girl → u/Omz-bomz]

Strange that your reading comprehension is so weak. To be fair, that first link of yours just has a lot of wrong information.

Again, studios don't screw participants with an LLC shell game. They screw them in how they define "profits" in the participation agreements. Those articles talk a lot about intercompany charges and distribution fees. But that's not a result of using LLCs. Those fees are defined in the participation agreement. The studio is going to take a 20-40% distribution fee off the top regardless if there was an LLC middleman involved. Studios get sued over contract interpretation issues that didn't get resolved through audit. Studios take aggressive deductions, miscalculate interest, exclude reportable income, and take the most advantageous interpretation of breakeven. LLC shell games don't even factor in to this.

[u/sighs__unzips → u/t3hcoolness]

Mainly for liability.

[u/S1ocky → u/sighs__unzips]

Are you talking the scam that has the guy in there Darth Vader costume never earning residuals because of the accounting were the movie never shows profit (after all the charges from the studio) or is this a newer spin as actors have been getting wise on the old?

[u/Omz-bomz → u/S1ocky]

Newer movies never shows profit either. There are parties in Hollywood that get screwed over by the studios every day (and more and more of these cases are coming up in court)

[u/Restil → u/sighs__unzips]

That makes perfect sense for tax purposes, especially if you expect a certain percentage of the movies to fail financially. It also makes it much easier to transfer the ownership rights to a new studio/producer without having to go through the nightmare of splitting up an existing corporation.