Shearer's $125 million lawsuit against Studio Canal and Vivendi enumerates a parade of horribles that the entertainment companies have visited upon him, from ripping him off with crazy, corrupt accounting practices to allowing the Spinal Tap trademarks to lapse but still charging him royalties to perform as his character from Tap.
The lawsuit says that the principles from This is Spinal Tap were supposed to get 40% of net receipts from the film, but that Vivendi structured the payment flows from its music and film subsidiaries so that the net receipts were effectively zero, partly by "cross-collateralizing unsuccessful films bundled with TIST in their accounting." As a result, Shearer's total take for Tap merch was $81 and his royalties from the music came to $98.
The lawsuit also mentions copyright termination, which allows some creators to assert control over their works 35 years after initial release. Termination has been a big deal in music circles, where some artists have successfully used it to force their labels to give them fair royalties for digital re-releases of back catalog, or to yank the rights to that catalog altogether and go into business for themselves, dealing direct with Itunes, the Amazon MP3 store, and the streaming services.
One interesting claim in the suit is that the studio allowed the Spinal Tap trademarks to lapse, allowing a brewing company to register a trademark for "Spinal Tap beer," while still insisting that Shearer cannot perform as his Spinal Tap character, Derrick Smalls, without paying royalties to the studio.
This lawsuit raises two accounting issues, in particular, that figure to draw attention. For starters, Vivendi is accused of “cross-collateralizing unsuccessful films bundled with TIST in their accounting,” a practice sometimes known as straight-lining. Vivendi is also charged with not doing an honest job managing the flow of payments through its subsidiaries. At a time when vertically-integrated companies in entertainment continue to set off problems, the complaint speaks to how the soundtrack music rights are owned by Vivendi subsidiary Universal Music Group, said to have an obligation to pay Vivendi subsidiary Canal.
“The accounting between the Vivendi subsidiaries is not at arm’s-length, is anti-competitive, and deprives the TIST creators of a fair reward for their services,” states the complaint.
With other accounting improprieties alleged such as undocumented marketing expenses and improper deductions, Shearer’s lawsuit references the Copyright Act’s termination provisions, which allow authors to cancel grants and regain rights after 35 years.
“Particularly given that Vivendi has offset fraudulent accounting for revenues from music copyrights against equally dubious revenue streams for film and merchandising rights also controlled by Vivendi subsidiaries, Shearer is concurrently filing notices of copyright termination for publishing and recording rights in Spinal Tap songs he co-wrote and co-recorded, as well as in the film itself,” states the complaint.
Century of Progress Productions vs Vivendi [US District Court Central District of California]
[Eriq Gardner/The Hollywood Reporter]