Warner Bros. Claims Tolkien Estate Breached 'Hobbit' Contract (Exclusive)

Warner Bros. Pictures

"The Hobbit"

Warner Bros. is going after the estate of author J.R.R. Tolkien hard in litigation over online slot machines and games tied to the lucrative Lord of the Rings and Hobbit properties.

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In November, the Tolkien estate and its book publisher, HarperCollins, filed an $80 million lawsuit that claimed that Rings/Hobbit producers, including Warner Bros., had infringed the copyright in the books and breached a contract by overstepping their rights.

Rings/Hobbit rightsholder Saul Zaentz Co. already made its own counterclaim that the Tolkien estate has breached an implied covenant of good faith and fair dealing by going down this road.

Now, it's Warner Bros' turn.

The studio, represented by pitbull attorney Daniel Petrocelli, is striking back at the estate of the revered fantasy writer, who died in 1973, with amended counterclaims that allege the Tolkien estate's repudiation has cost Warner Bros to miss out on millions of dollars of licensing opportunities. The studio demands damages for the alleged breach of contract.

Read the court filing here.

Warner says it and Zaentz are the successors-in-interest to merchandising and other rights to The Hobbit and The Lord of the Rings from a United Artist agreement from 1969. The studio says it has been exploiting the rights for some time, and that 16 years ago, the parties confirmed that Zaentz had rights to online video games.

But by 2010, soon after a "regrant agreement" was executed, controversy over the nature of those rights erupted, and now Warner says that it has been damaged.

According to Warner Bros' filing, "Because of the repudiation, Warner has not entered into license agreements for online games and casino slot machines in connection with The Hobbit -- a form of customary exploitation it previously had utilized in connection with the Lord of the Rings trilogy -- which has harmed Warner both in the form of lost license revenue and also in decreased exposure for the Hobbit films."

The filing also states that it had plans for a Hobbit-themed casino slot machine with a company called WMS Gaming but "was unable to proceed" and that "this alone cost Warner millions of dollars in license fees."

Bonnie Eskenazi, the attorney for Tolkien estate, responds:

"The defendants’ amended counterclaims are nothing more than an effort to sue the Tolkiens and HarperCollins for suing them. They are entirely without merit and are a classic example of studio “bullying tactics.”  The Tolkiens and HarperCollins filed this lawsuit in order to force WB and Zaentz to live within the boundaries of the contract to which they agreed. WB’s and Zaentz’s amended counterclaims are simply an attempt to punish the Tolkiens and HarperCollins for having the nerve to stand up to the studios and tell them that they can’t take more rights than were granted to them by contract. Luckily, the law protects people like the Tolkiens and HarperCollins from these kinds of intimidation tactics."

E-mail: eriq.gardner@thr.com; Twitter: @eriqgardner