A Licensing Agreement Dispute – Starz Entertainment (“Starz”) files suit against MGM Domestic Television Distribution (“MGM”).

Michael Lehr headshot

By: Michael Lehr

Lehr is an Associate with Dunlap Bennett & Ludwig in our Richmond Office.

 

[6.8.2020] Starz Entertainment (“Starz”) filed suit against MGM Domestic Television Distribution (“MGM”) in California federal court this past week alleging breach of contract, copyright infringement, and violation of the covenant of good faith and fair dealing. The suit arose over a dispute regarding certain movies and television episodes that MGM owns and had exclusively licensed to Starz in a 2013 agreement worth $70 million. Under that licensing agreement, MGM gave Starz the sole and exclusive right to show nearly 600 MGM owned movies, along with 175 television episodes. Some of the notable titles included in the deal were Mad Max, The Terminator, several James Bond films, and Bill & Ted’s Excellent Adventure.

According to the Complaint, Starz realized that MGM failed to abide by the terms of the licensing agreement when an employee saw Bill & Ted’s Excellent Adventure available for viewing via Amazon’s Prime Video. After learning of this potential breach, Starz conducted further research and found dozens of its exclusive titles available on other platforms, some of which went as far back as 2015. Most notably, a direct rival subscription service provider, Epix – wholly-owned by MGM itself – had some of the works available during the period when Starz held its exclusive license. When Starz brought these glaring faults to the attention of MGM executives last August, the response it received was that MGM was “dig[ing] into” the situation. Since that time, the parties had been in discussions over how to remedy the situation; however, negotiations soured in recent weeks.

Starz then brought the recent suit seeking an unspecified amount of lost profit damages, an injunction stopping MGM from wrongfully licensing additional works, attorney fees, and other costs. At the heart of its claims, Starz alleges that MGM’s conduct, including allowing its very own subscription service provider to show the licensed works, severely hindered its ability to retain its subscription customers. Starz representatives stated that when its customers find content, supposedly exclusive Starz, on Amazon, Epix, and other third-party platforms, they are less likely to retain their subscription. Furthermore, Starz’s potential new customers will refrain from subscribing if they know they can find the desired movie or show on another platform.

Adding another wrinkle to the case is that Starz, in its complaint, alleges that MGM reportedly admitted to granting licenses to over 32% of the works described in the parties’ licensing agreement. Starz claims that this admission does little to remedy the situation; however, it discovered 100 additional works covered in the licensing agreement on other services during its due diligence. MGM’s failure to include these in its apparent admission to Starz likely hastened the devolvement of the relations between the companies. But Starz openly concedes in its complaint, that it remains unsure of exactly how many of the additional works covered by the licensing agreement were released, and it presumes more will come to light.

In response to Starz’s filing the licensing agreement dispute, MGM’s outside counsel, Orin Snyder of Gibson Dunn & Crutcher LLP, released a harsh statement on Monday. Snyder stated that MGM’s conduct has had no financial impact on Starz and that the lawsuit was a “transparent effort by Starz to use litigation to deflect attention away from its competitive shortcomings.”

Contact the team at Dunlap Bennett & Ludwig by emailing clientservices@dbllawyers.com or by calling 800-747-9354.

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