Who own economic rights to old animated films?

Authors: Kristina Vilkiene, Assistant Attorney-at-Law in METIDA, Reda Zaboliene, Managing Partner, Attorney-at-Law, Patent Attorney in METIDA

meskis Old animated films continue to live in the memory of the older generation, and many of the animated characters remain popular even today. Such popularity attracts not only film viewers but also marketing specialists, manufacturers of a variety of products, and service providers.

In relation to each old animated film, authors have moral rights not pecuniary in nature. Nevertheless, who are right holders of economic rights including commercial exploitation rights to the animated characters and catch-phrases in the film?

One of the companies has a huge potential for exploiting a copyright to animated films. It is the animation studio set up in the Soviet Union in 1936 under the name ‘Soyuzdetmultfilm’ (in Russian: ‘Союздетмультфильм’). The name was changed to ‘Soyuzmultfilm’ (in Russian: ‘Союзмультфильм’) in 1937.

Since its establishment to 1991, ‘Soyuzmultfilm’ have accumulated in its archive around 1,500 of animated films, which feature around 13,000 characters. According to the animation studio, all rights to the films should be owned by it.

These claims, however, are being challenged by the authors of the films. The maximum, they maintain, what the Animated Film Studio may have is the right to show and rent the animated films, and the rights to use film excerpts for advertising purposes, whereas the right of commercial exploitation of the work or characters pictured there in should be owned by authors because they did not transfer such right to the Animated Film Studio.

According to the Animated Film Studio, it is the holder of all rights to the animated films created during the Soviet era. Its key argument for such determination of the copyright holder is that the authors have created work in question as part of their employment. In other words, the studio argues that the authors have received remuneration for their work and, therefore, now they have no economic rights over it. Furthermore, the Animated Film Studio estimates that exploitation and merchandising of old animated film characters may generate annual income amounting to at least half a million U.S. dollars.

In fact, ‘Soyuzmultfilm’ increasingly often concludes contracts regarding the exploitation of animated characters while bypassing the author’s royalty rights, but the authors increasingly often defend their rights in a court. An ambiguous legal situation as regards the economic rights to the animated characters is disadvantageous for both the right holders and the companies willing to merchandise particular animated film characters for promoting their products or services.

Since 2009, all rights to the Soviet animated films belong to the ‘United Federal Film Collection’. In the sole year of 2011, the company have received 180 million roubles in royalties for animated films of ‘Soyuzmultfilm’, of which only 28 million roubles have been given to the Animated Film Studio. At the end of 2011, the Prime Minister of Russia returned the rights to ‘Soyuzmulfilm’, the former right holder, making it possible to pay royalties to directors, composers, script-writers, and other creators. Licensing the use of images of animated film characters for T-shirts, mugs, books, toys and other articles of merchandise generates the bulk of revenues.

There have been a number of legal battles between the Animated Film Studio, creators and manufacturers over the right to use animated film characters. For example, ‘Soyuzmultfilm’ tried to ban the use of Winnie the Pooh (in Russian: Винни-Пух) for curd snacks. Alleging that a manufacturer have used this character illegally, the studio claimed 415,000 roubles as compensation for damage requiring to pay the royalty of $6,000 and $3,000 for Winnie the Pooh and the Bee from the same film, respectively. The manufacturer declined the claim stating that he did not use characters from animated films. According to the manufacturer, he have concluded contracts with animators of the animated film, who, under a special order, also created the portrait of Winnie the Pooh, which is slightly different from the character appearing in the animated film. As the legal issue regarding the rights to animated characters is being considered by an arbitration court for the first time, its decision may have interesting implications for future legal issues of similar nature.

Companies of other countries also have been engaged in legal battles over exploitation right to animated characters. Recently, the ‘Walt Disney Company’ announced being granted by the heirs all trademark and copyright rights to the Winnie the Pooh, whereas formerly the rights have been split between ‘Disney’ and other American company. The authors of the character have transferred their economic rights to the work to natural persons, to whom the ‘Walt Disney Company’ must pay royalties – more than $200,000 each week – for commercial exploitation of the Winnie the Pooh.

In view of the fact that the bulk of revenues generated by animated film characters is collected from licensed products and services, the holders of economic rights are interested in efficient use of the popularity and notoriety of animated film characters. Exploiting characters in animated productions starring Winnie the Pooh is a highly profitable business for the ‘Walt Disney Company’ generating annual revenues of more than billion U.S. dollars.

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