Behind the Scenes w/ David Brown - What is a CoT (Chain of Title)?
Decoding Hollywood: What is a Chain of Title (CoT)?
Ever wonder how a film's rights are transferred and secured? It's a process often misunderstood, even by those working in the industry. In this article, we'll break down the concept of "chain of title" in filmmaking with insights from David Brown of FM Lending LLC d/b/a FilmMoney (www.filmmoney.com). This is the first in a series of short videos (and blog posts) explaining film career terms. Let's dive in!
What is Chain of Title (CoT)?
Think of the chain of title as the pink slip to your car or the deed to your home. It's the document that proves ownership. In filmmaking, it establishes who owns and controls the rights to the film.
The Pink Slip Analogy
Just like you need a title to prove you own your car, a film needs a chain of title to establish ownership of the film rights. Without it, you can't sell, distribute, or even properly finance your movie.
Contractualizing the Script
The chain of title turns your script into a tangible asset. It's more than just a creative idea; it's something you can secure funding against. When you sell or license your film to a distributor, you're handing over that chain of title.
Imagine a film gets delayed because of chain of title issues. The delay could hurt the film's distribution. For example, film festivals might have passed, or the media attention might have dried up.
The Chain of Title Process: From Writer to Distributor
So, how does this chain get created? It starts with the writer and ends with the distributor. Here's how it works.
Option Agreements: The Starting Point
The chain of title begins with the writer agreement or option agreement between the producer and the writer. This agreement gives the producer the right to shop the script around and try to get the film made.
Here are the key elements of an option agreement:
The producer gets the rights to shop the script.
The writer receives a fixed option fee.
The option period usually lasts 12-18 months.
Perfecting the Chain: Payments and Paperwork
To have a clean chain of title, the producer needs to pay the writer. Writers are typically paid the purchase price on day one of filming. This solidifies the deal and ensures the producer has clear rights to the script.
The producer needs to have:
The option agreement.
Proof they paid the option fee.
Proof they paid the purchase price.
The Role of LLCs
The producer's production company, often an LLC, usually options the script first. But a separate LLC, often called a "generic movie LLC," typically holds the rights for financing and distribution. The producer then assigns their contractual rights to this LLC.
The Generic Movie LLC: A Hub of Activity
This "generic movie LLC" becomes the central hub for all things related to the film's rights and legal obligations.
Contract Central
The LLC enters into contracts with:
Lenders.
Financiers.
Distributors.
Copyright and Insurance
The LLC also obtains:
Copyright mortgage.
Copyright filing with the Library of Congress (Form PA).
Liability insurance.
Errors and Omissions (E&O) insurance.
E&O Insurance: Protecting Against Claims
E&O insurance protects the producers and investors if someone claims the film stole their idea or infringed on their copyright. If someone sues the production claiming the idea was stolen, the E&O insurance would cover the costs.
Conclusion
Understanding chain of title is key to navigating the film industry. It protects everyone involved, from the writer to the distributor. Stay tuned for more behind-the-scenes insights into the world of filmmaking! Next up, we'll explore completion bonds.