A super battle over ‘Watchmen’

The iconic image from “ Watchmen,” Alan Moore and Dave Gibbons’ ground-breaking graphic novel, is a yellow button sporting the familiar happy-face design. Next to the cheerful smile, though, you’ll find a foreboding splatter of blood. ¶ That good-news-bad-news contradiction also fits the high-stakes legal tussle surrounding the movie version of the novel -- a film that holds great creative and financial promise but is now being overshadowed by a bitter copyright- infringement lawsuit that threatens “Watchmen’s” distribution. ¶ Directed by Zack Snyder and starring Billy Crudup, Patrick Wilson and Jackie Earle Haley, “Watchmen” is one of the spring’s most anticipated releases, and fan interest exploded after Snyder showed his film’s trailer at July’s Comic-Con in San Diego. The sprawling Cold War-era drama about a band of masked crime fighters is scheduled to arrive in theaters March 6, almost two years to the day after Snyder’s global blockbuster “300” premiered. ¶ It’s taken more than 20 years and any number of false starts to bring “Watchmen” this far along: Forsaken film adaptations include versions from directors Terry Gilliam (“Brazil”), Paul Greengrass (“The Bourne Ultimatum”) and screenwriter David Hayter (“X-Men”), with countless script revisions along the way. Joaquin Phoenix was once considered for Crudup’s starring part as Dr. Manhattan, the all-powerful but tortured soul at the center of the “Watchmen” story. Early screenplay costs and abandoned preproduction fees total close to $10 million, and no fewer than four studios have worked on the movie over the decades, including 20th Century Fox, Warner Bros., Paramount and Universal.

The film’s long path to the screen factors prominently in the litigation and is at the center of another, far less public, “Watchmen” dispute between Paramount and Warners.

In the main case, 20th Century Fox believes that no matter how many hands “Watchmen” has passed through, Fox controls the right to make or, at the very least, distribute “Watchmen,” even though Warners is currently producing and distributing the film.

As Fox sees it, Warners infringed on Fox’s rights, and “Watchmen” producer Lawrence Gordon gave Warners rights he didn’t possess. Warners says Fox’s claim is baseless and, as one of its court filing says, “opportunistic” -- a last-minute, backdoor attempt to cash in on another studio’s potential hit.

In Warners’ view, Fox repeatedly declined to exercise any purported rights to become involved in the film during its various incarnations over the years, and in an e-mail even bad-mouthed the script that Warners greenlighted. The “Watchmen” case dramatizes the complex deal making that surrounds many high-profile projects and underscores how movie studios have grown addicted to comic-book franchises. In an era where “The Dark Knight” can generate $1 billion in global theatrical revenue, the well-executed superhero story has turned into Hollywood’s Holy Grail. It’s not just the box-office returns that are so meaningful to these kind of properties. A hit film can also sell truckloads of DVDs, help launch a theme-park ride, or generate millions in television sales. Fox, which has suffered through a demoralizing string of box-office flops this year, could desperately use such a movie. It felt its case against Warners was so strong it had no choice but to take the matter to court.

“They are not just fighting over ‘Watchmen,’ ” entertainment attorney Mel Avanzado, who is not involved in the litigation, said of the duel between Fox and Warners. “They are also fighting over sequel rights. Whoever controls the franchise probably controls quite a bit.”

As part of its legal strategy against Warners, Fox is trying to block “Watchmen’s” theatrical release, claiming that it would cause the studio irreparable harm. The case has been scheduled for trial in U.S. District Court in Los Angeles in early January, but Fox and Warners are set to enter a non-binding mediation toward the end of November.

So far, though, the parties have not participated in any settlement talks, evidence that the legal skirmish -- just like the mysterious murders of key characters in “Watchmen” -- could grow more brutal before it gets better.

Living up to its ‘unfilmable’ tag

When DC Comics began publishing Moore (the writer) and Gibbons’ (the illustrator) 12-part series in 1986, “Watchmen” took the comic book from the domain of pop entertainment into the realm of literary fiction. The comics were combined into a graphic novel that won the prestigious science-fiction Hugo Award and was listed by Time magazine among the top 100 modern English-language novels.

But everything that made “Watchmen” a landmark moment in the comic-book world also made it a daunting property for Hollywood. A story that unfolds over four decades with nearly a dozen major characters, “Watchmen” also takes place in an alternative reality where Richard M. Nixon was president well into the 1980s. The graphic novel told its story not just with illustrated panels and dialogue, but with faux primary documents, such as medical reports and excerpts from one character’s autobiography. “Watchmen’s” darkness was another issue: Was America ready to watch one superhero rape another?

While the visual style and interconnecting story lines of the “Watchmen” comics made it among the most cinematic comics of its era, the conventional wisdom was that its story was “unfilmable,” as Snyder himself has often pointed out.

Nevertheless, not long after its publication, Fox acquired “Watchmen’s” motion picture rights, and brought Joel Silver (who would later make “The Matrix”) in as a producer. The studio hired several screenwriters to adapt the story, including Sam Hamm (“ Batman”) and Gilliam’s “Brazil” collaborator, Charles McKeown, but the movie stalled in development.

The lawsuit hinges on what happened next, and the following is a summary of what Fox and Warner Bros. are alleging.

In 1991, Fox entered into an agreement with Gordon, a former Fox studio chief, under which Fox transferred some of its “Watchmen” rights to Gordon. The studio believes the 1991 deal gave Fox distribution rights to the film and a share of “Watchmen” and any sequel’s profits if Gordon made the film elsewhere. Three years later, Fox entered into another agreement with Gordon, this time saying that Fox was putting the film in turnaround (meaning the studio would not be making it at the time and Gordon could try to sell the project to someone else), according to court documents and people close to the dispute. As Fox interprets that 1994 deal, Gordon wouldn’t fully control “Watchmen’s” production rights until he reimbursed Fox its development costs (with interest, now in excess of $1 million, Fox says), a payment Fox says Gordon never made. Furthermore, if Gordon changed any of the key creative elements behind “Watchmen” (such as director, screenwriter or principal cast), he was obligated to resubmit the movie to Fox, which would have a few days to rejoin the production if it wanted, the studio maintains. (Fox says Gordon never informed Fox of the change when Snyder came aboard.)

This “changed elements” clause is crucial to many turnaround deals, because it protects the studio that is walking away from a movie from being burned if the film is reincarnated as a more appealing production elsewhere. If a studio, for example, puts into turnaround some spy thriller starring Gary Coleman only to see a competitor recast the film with Will Smith, it’s natural it would immediately want back in.

Changed elements clauses “have been around as long as I can remember,” said entertainment attorney Daniel H. Black of Greenberg Traurig, a firm that is not involved in the “Watchmen” litigation. “The studio is saying, ‘Look, as this project is currently configured, we are not going to pursue it.’ But the changed elements clause is going to obligate me to come back to you and offer you a chance to come back in.”

After “Watchmen” left Fox, it went through a number of changes.

Gordon brought the movie to Universal in 2001 with Hayter set to write and direct the film. Universal knew the film would be an expensive, visual-effects-heavy production, and never felt fully confident in its merits, according to a person familiar with “Watchmen’s” time at Universal.

In 2004, the project migrated from Universal to Paramount, which (as is industry custom) paid Universal 10% of its “Watchmen” development costs for the chance to put the movie together, according to two people familiar with the deal; had Paramount made the movie, it would have been obligated to reimburse Universal the remaining 90% of the studio’s expenses on the film’s screenplay drafts.

At Paramount, “Watchmen” finally came to life. The studio was searching desperately for a way to cash in on the comic-book craze, having missed out on the boom that was generating profitable franchises at Sony (“ Spider-Man”), Warners (“Batman Begins,” “ Superman Returns”) and Fox (“X-Men”).

Greengrass, who wanted Phoenix in the starring role, personally reworked Hayter’s script, budgets were assembled and millions spent on scouting locations and building sets. But then Brad Grey took over as studio chief, and, concerned about “Watchmen’s” script and $100-million-plus budget, shut the production down in June 2005, firing studio executive Donald DeLine while he was in London to meet with Greengrass to discuss the film’s budget and script, according to people involved in the Paramount production.

The movie was homeless yet again.

In December 2005, around the time Fox allegedly passed on Hayter’s script, Warners picked the movie up, and six months later named Snyder as its director. The fighting was set to begin. But it wasn’t Fox and Warners that were clashing.

Paramount had allowed Warners to develop “Watchmen” without paying any of Paramount’s development and preproduction costs (totaling close to $7 million) for a chance to co-finance the movie, several people close to the deal say.

But then Warners claimed that because Paramount had never fully reimbursed Universal for Universal’s “Watchmen” costs, Paramount wasn’t entitled to co-finance the movie with Warners, as it didn’t control any rights to transfer, two people familiar with the matter say. After a skirmish of conversations between Paramount and Warners, the two studios agreed that Paramount would own 25% of the film and distribute it overseas.

Warners had no interest in making any such deal with Fox, both studios say. Fox sued Warners for copyright infringement in February of this year.

Fox’s lawyers say they contacted Warners before production on the film began, with Fox telling Warners that its “Watchmen” deal violated Fox’s 1991 and 1994 agreements with Gordon. But that was about as far as the discussion went, and there were no negotiations: whatever Fox was selling, Warners wasn’t buying.

Warners says that it was unaware of the 1994 deal when it chose to produce the movie in 2006, and that Gordon may have forgotten to tell them earlier about the 1991 deal. Gordon’s lawyer, Tom Hunter, who is among those being deposed in the case, did not respond to interview requests. While he is a key witness in the case, Gordon is not a party in the lawsuit.

Warners says Fox passed on the Hayter screenplay that Snyder filmed (with a rewrite by “Sucker Free City” TV writer Alex Tse), dismissing the script in an internal e-mail as “unintelligible” and with an even less flattering expletive. Warners also says that the 1994 agreement does not confer Fox any distribution rights and that Gordon ended up with all the “Watchmen” rights he needed.

U.S. District Court Judge Gary Feess isn’t so sure. In denying a Warners motion to dismiss the case last August, Feess said a key Warners argument “ignored a number of facts” and that “nothing on the face of the complaint or the documents . . . establishes that Gordon . . . ever acquired any rights in ‘Watchmen.’ ”

Fox executives and lawyers point to another chain-of-title case they say proves Warners plays fast and loose with its movie rights. In a dispute before Feess over 2005’s “The Dukes of Hazzard,” Warners failed to get the underlying rights to the obscure movie (1975’s “Moonrunners”) upon which the TV show was based. Warners settled the case for $17.5 million after Feess said he would block the movie’s release.

Where it goes from here

“They haven’t stopped us,” Snyder said in early October, after he had shown dozens of journalists some footage from his film and was asked about the lawsuit. “We are just acting like we’re making a movie.”

Even now that the movie is in postproduction and is stirring intense anticipation, “Watchmen” presents other challenges for its distributor. Its R rating will keep out some younger moviegoers who made multiple trips to the PG-13-rated “The Dark Knight.”

And it very well may be hard to build a franchise like “X-Men”; the “Watchmen” movie has an ending that, like a comic-book version of “Titanic,” hardly encourages a sequel no matter how good the grosses. A prequel certainly could be made but Snyder, a devoted fan of the graphic novel, has called it a terrible idea and vowed to oppose it.

As Snyder hurries to finish the film and “Watchmen’s” release date approaches, the Fox and Warners lawyers continue battling over documents, depositions and the film’s script, which Fox says Warners won’t share.

It’s unclear if Fox can really prevent Warners from releasing the film. Warners will likely ask Feess to dismiss the case once all the evidence is collected, a motion Fox is certain to oppose. The more likely outcome is Fox studio chief Tom Rothman or Warners’ head Alan Horn striking some sort of compromise deal in which the studios share the movie’s costs and proceeds. But because Warners already is sharing the portion of the film it didn’t sell to Paramount with financing partner Legendary Pictures, the studio doesn’t have that much to divvy up.

The Roman poet Juvenal centuries ago asked, “Who watches the watchmen?,” his way of asking who controls those in authority. It’s a central idea in Moore and Gibbons’ graphic novel, but it has taken on a different meaning with the “Watchmen” lawsuit. Now lawyers and studio executives all over town are watching the “Watchmen,” curious to see if Fox can somehow get back into what looks like Hollywood’s next superhero blockbuster.

Horn is a Times staff writer.

john.horn@latimes.com

Times staff writer Geoff Boucher contributed to this article.