The practice in the Film and Television Industries whereby sales agents contract with distributors and licensees as principals is not one with which producers and rights owners should collude. This is especially so where the profit participants in a production do not appoint an independent collection agents pursuant to the terms of a properly drafted and negotiated Collection Account Management Agreement (“CAMA”).
Experience suggests that as good as a sales agent may be at sales, not all of them have an equivalent level of expertise in either contract law or how to act in a fiduciary capacity.
Once again we have a production company client whose sales agent entered into contracts with overseas licensees in its own name as principal. The agent collected income from overseas licensees, did not pass it on and has now gone into administration. Our rights owning client has not been paid and is offered little protection under the terms of the sales agency agreement, that we were not asked to review before it was signed. Equally egregious is the fact that our client has no privity of contract with the licensees of its rights and, worse still, not even a copy of the agreements signed between sales agent and licensee.
In accordance with the terms of the sales agency agreement, the agent was given extensive and unfettered rights to deal with the programming in question. Additionally, and like many similar agreements that have come across my desk over the years, the record-keeping and reporting obligations in the agreement are sparse, the audit and accounting provisions inadequate. Unlike solicitors, accountants, banks and even estate agents there is no regulatory frame-work within the UK that obliges film sales agents to keep their principal’s money separate in the equivalent of a client’s account. Albeit that a fiduciary obligation is arguably implied from the nature of a principal-agent relationship, the agreement under scrutiny in the present case fails to mention anything of the sort. Better to have a specific obligation spelled out in an agreement than to relay on what the law should or might imply.
On more than one occasion I have suggested to lawyers acting for others on television deals that involve co-production and or multi-party interests in back end shares that it would be worth putting a CAMA in place and had the suggestion poo-pooed with comments like ‘nobody uses CAMAs in television’. Well, actually some do and more should although there will be cases where the scale of a project and its likely income may make a CAMA disproportionately expensive.
In any event, rights owners and producers should be very careful about enabling their agents to collect money directly unless a satisfactory, bullet-proof arrangement can be guaranteed for safe-guarding that money. The agent’s interest is to ensure that its commission is paid. In the absence of a CAMA, there is no reason why a licensee or distributor may not be required by contract to account for each of the rights owner’s share and the agent’s commission directly.
In the white heat of MIPCOM or AFM, it is a easy for an agent scenting a kill that might otherwise escape into the ether of cyberspace, to have conveniently short forms of agreement that licensees in a hurry may quickly agree. That is no reason for the agent not to be obliged to have the form of that agreement approved in principle by its client and the extent of authority clearly agreed in the sales agency agreement. Additionally, a signature copy of all agreements signed by an agent should be sent to the client as a matter of course. Better still, if the agent is making a deal at a market – or indeed anywhere else – then it should be signed by the agent as an agent with actual authority on behalf of the principal so that there is clear privity of contract between rights owner and rights user. Experience tends to suggest that once a deal has been done and income flowing, an agent is less perspicacious in dealing with the policing and monitoring of a licensee’s performance that meets the commercial and legal needs of a rights owner. Provisions that limit the loss of control over rights will be revisited in a future article.
Producers and rights owners need to be consistently more vigilant about the extent of authority their agents seek and to ensure that appropriate safeguards are written into the suite of agreements pursuant to which valuable copyrights and profit shares may be handled – and mishandled – by those who seek trust but who are not deserving of it. Producers whose expertise is in making programmes should always be wary of signing an agreements that are held out as standard forms that cannot be changed – particularly when they are materially and obviously deficient.
Tony Morris is Head of Media at Marriott Harrison LLP and represents a wide range of film and television producers, broadcasters and other working in the film and television industries. Tony lectures on legal issues for producers at Raindance http://www.raindance.org/ and is an accredited mediator, a qualified arbitrator (MCIArb) and is on the list of recommended arbitrators of the Independent Film & Television Alliance http://www.ifta-online.org/ifta-arbitration