• Individuals: There are four individuals identified in the Copyright Reportthe screenplay writers. There is no facility for nationwide searches for individual locations like there is for corporations, so to be sure we have identified all security interests we must search the Secretary of State in all 50 states, plus all the counties in the additional 14 states that require dual filings. Let us assume, conservatively, this means searching 100 jurisdictions, or 4 x 100 = 400 searches. The costs is $34 per state search, and $49 per county search, i.e. ($34 x 200) + ($49 x 200) = $16,600. We will assume no copy or reading problem. Judgment Liens: We still have the judgment liens. Currently, a lien creditor who does not record in the Copyright Office remains junior to a federally recorded copyright mortgage (In Re Peregrine, supra 116 B.R. fn. 16; LeFlore v. Grass Harp Productions, Inc., 67 Cal.Rptr. 340, fn. 1 (Cal.App. 1997), although the case law is admittedly sparse. This means that currently a Copyright Report is sufficient to disclose any prior lien creditors. Under Article 9301(1)(b), however, a party who becomes a lien creditor by levy or attachment before the security interest is perfected has priority. (Barkley Clark, THE LAW OF SECURED TRANSACTIONS UNDER THE UCC, ¶3.03[2][c] (1994 Rev. Cum. Ed.).) Under FIPSA, our production lender would need to search at the state level to find prior lien creditors. Again, there are many state variations as to when lien creditor status arises (filing, levying) notice rules (some states include judgment liens with UCC filings) and procedures. (See Coogan, Hogan, Vagts & McDonnell, SECURED TRANSACTIONS, Chpt. 7E (Matthew Bender, 1998).) Since many copyright owners operate nationally, and copyrights exist everywhere, a judgment lien affecting the copyright might be recorded in any of the 6,400 filing locations nationwide. Searching them all would require examining all 94 parties in all 6,400 locations at $49 per search-for a staggering cost of $29,478,400. Let us assume we only need to search in the counties where the parties are located. Then we still need an additional 94 searches at $49 a search, or $4,606. The following table compares the admittedly hypothetical costs of finding all liens that might apply to a Terminator 3 production loan under current law and under FIPSA. Of course, we could get lucky. We could find the parties after searching only a few locations. But we cannot guarantee it. Terminator is not unusual. There are many U.S. motion pictures with chains of title just as elaborate, if not more so. Copyrights have complex chains of title. A remote transferee often has no way of knowing where prior transferors are located other than by searching the public records. Since copyrights are national assets, a remote transferee must be prepared to search public records on a national scale. The average independent motion picture costs $2 million. They cannot absorb the uncontrollable costs that will be required under FISPA to obtain a production loan. It will mean these pictures cannot be produced at all-or that they must be financed and produced outside the United States. Independent producers are responsible for close to 148,000 American jobs nationwide. FIPSA threatens them all. A BETTER SOLUTION As we mentioned, AFMA and AFIs do not believe that the current system is perfect. To the contrary, we have for several years advocated reform. Two problems need attention from the point of view of lenders: Floating liens: The ability to file a "floating lien" that covers all of the debtor's assets in a single filing. After-Acquired Property: The ability to have the lien attach to after-acquired property. Article 9 does have legal rules to accommodate the creation, attachment and foreclosure of floating liens and after-acquired property. The problem is that Article 9 does not have the facilities for filing and perfection with regard to these types of interests where copyrights are concerned. As the previous discussion indicates, it is incapable of doing so. That does not mean we cannot solve the problem. Copyrights are federal rights; they deserve a federal solution. AFMA has previously proposed a solution that preserves the essential nature of the copyright system and solves these problems. The details are discussed on the attachment. So let must just discuss the concept. The Copyright Office filings are indexed against works. Article 9 filings are indexed against persons (debtors). To solve the problem, we need to create a facility in the Copyright Office for constructive notice filings against persons as well as works. The idea is to allow the Copyright Office to establish a "person index." Persons (companies or individuals) with a copyright interest can file a "person registration statement" just like a copyright work registration statement. Recorded transfers can then be indexed against the parties in the "person register" or against the work in the current "work register." These filings will be linked in a computerized, relational database. Either one will have constructive notice and create priority under federal law, and the necessary perfection under state law. This is essentially the same system the title insurance companies use for land titles. They maintain two indexes: a “lot book" for the properties, and a “general index" describing filings against the persons. They search both to issue a title policy. This is also the system used in all the major database vendors to create "relational databases." It is a well understood problem with well documented solutions. In practice, the system could be simple to use. A secured creditor loaning against a copyright need only insure that either the work or the debtor is registered. The lender can then, in principle, file an additional copy of its UCC-1 financing statement with the Copyright Office to perfect against the copyright assets. One extra filing. No multiple searching. No excessive costs. Again, the exact details are explained in the attachments. CONCLUSION The 140 member companies of AFMA, and the 22 banks and financial institutions in the AFI, support needed federal legislation to update the current system for securing copyright mortgages. We endorse the goal of FISPA, but cannot under any circumstances support its "mixed filing" methodology. Copyrights are national treasures. They deserve a national solution. We look forward to working on a system that will solve current problems while preserving the integrity of the federal copyright system. LIST OF ATTACHMENTS Documents Discussed In Statement • Copy of Copyright Research Report For Terminator 2. Documents Advocating Positive Solutions • Letter dated April 6, 1999 from Allen R. "Mike" Frischkorn, President of AFMA, to House Subcommittee on Courts and Intellectual Property enclosing proposed improvement legislation for copyright financing. • AFMA proposed amendments to Copyright Act to improve copyright financing. • Memo from Lorin Brennan and Prof. Ronald Mann describing benefits of AFMA proposal, with attached Concept Paper Documents Regarding "Mixed Filing System • Memo dated November 30, 1998 to ABA describing objections to "mixed filing" system in FISPA. Acceptance and relarves upon this report by the eflent constitures an ecosystence of its terms, conditone and Imitations. Any liability arising out of the preparation of this report is fedted to a refund at the search fee paid. We have tainen all memorable steps to ensure the completeness and securway of this report however, due to the highty subjective razse of copyright I otherwise guarantee these resurit. This searah la valid only for the property or title noted above. If the property or ve séject of thin anarch is añanged, even slighty, a new cearch should | nducted. Please note that this repart in no way consdistro a Thomson & Thomson COPYRIGHT REASSYCH CHOUP, S30 E Barest, 697, Sato 87%. Washington, DC 200246276 Thomson & Thomson December 21, 1992 Boston A search of the records of the Copyright office and the records and files of this office reveals that the motion picture entitled TERMINATOR 2: JUDGMENT DAY, starring Arnold Schwarzenegger and Linda Hamilton, a Mario Kassar presentation of Fashington, D. Pacific Western production in association with Lightstorm Entertainment, produced and directed by James Cameron, was Los Angeles released in the United States on July 3, 1991 by Tri-Star Pictures. According to the copyright application, it was created Chicago in 1991, published July 3, 1991 and registered for copyright in the name of Carico Pictures, Inc., July 9, 1991, under entry No. Antwerp PA: 527-728. The application author is listed as Carolco International, N.V. and Carolco Pictures, Inc., employers for London hire. Pre-existing material consists of a screenplay and copyright is claimed on the motion picture version. Montreal "Baseline" reported on October 28, 1992 that the motion Toronto picture is being released as follows: Tri-Star Pictures (North America) Carolco (International sales) Guild Film Distribution (Great Britain) Penta Distribuzione/Cine Italia (Italy) Unirecord International (Spain) Columbia Tri-Star Film Distributors (Australia, Norway, Finland, Hong Kong, Philippines, New Zealand, Japan, Taiwan) SF Norge (Norway) Concorde Film (Netherlands) Independent (Belgium) Twentieth Century Fox (Switzerland) Nordisk (Denmark) Guild Entertainment Central Europe (video--Czachoslovakia) Interasa (Czechoslovakia) VCL/Carolco Communications Wideo-German speaking territories) Orbis Communications (tv/syndication--United States) RTL Plus (television--Germany), Request TV (pay-per-view--United States) 500 E Breet. SW Ste 970. Washington, DC 20024-2710 Telephere: 202-488-2900 Fax: 202-546-8069 Telex: 6974942 (CPYRGHT) Copyright Report - TERMINATOR 2 "Baseline” also reports that the motion picture has been widely released abroad. Underlying Work The motion picture is based on a screenplay by James Cameron and William Wisher, which was created in 1991 and registered for copyright as an unpublished work in the name of Carolco Pictures, Inc., under the title TERMINATOR 2; JUDGMENT DAY, June 10, 1991, under entry No. PAU: 1-513-625. The application authors are listed as Carolco International, N.V. and Carolco Pictures, Inc., employers for hire. Reference is made to the following screenplays also entitled TERMINATOR 2, although it is not clear if they relate to the motion picture in question: TERMINATOR II: Screenplay (third draft--91 pages) by John Wall, created in 1987, and registered for copyright as an unpublished work in the name of John Wall, August 26, 1987, under entry No. PAU: 1-046-524. TERMINATOR II: Screenplay by John Wall (96 pages) created in 1989, and registared for copyright in the name of John Wall, April 17, 1989, under entry No. TXU: 367-387. The application states that this work was previously registered under entry No. PAU: 1-046-524, and that copyright is claimed on the additional text. The motion picture TERMINATOR 2: JUDGMENT DAY is a sequel to the motion picture entitled THE TERMINATOR, a work in approximately 107 minutes running time, starring Arnold Schwarzenegger, a Pacific Western production, directed by Janes Cameron, produced by Gale Anne Hurd and released by Orion Pictures. According to the copyright application, it was created in 1984, published October 26, 1984 and registered for copyright in the name of Cinema '84, February 22, 1985, under entry No. PA: 241-495. Copyright is claimed on the entire work except for some previously published music. Variety, issue of October 21, 1984, described THE TERMINATOR as a Hendale production of a Pacific Western picture. THE TERMINATOR was telegast over the HBO cable television natwork on September 15, 1985 and over the Cinemax network on the same date. It was telecast over the NBC television network on September 27, 1987. |