Nobody emerges as the hero as 'Watchmen' litigation winds down


When the "Watchmen" litigation finally is settled — and all indications point toward that happening as soon as this morning — Warner Bros. and Fox will issue flowery statements noting the respect the studios have for each other and how they have already put this dispute behind them.

Don't believe a word of it.

Business is business, of course, and studios — however often they position themselves as fiercely independent — always will have interlocking interests and agendas. But the "Watchmen" case has opened an unusually deep and festering wound, and, at least for Warners and the film's producers, it hurts bad.

How else to explain the rare public blame-gaming that has erupted since Judge Gary Feess' Christmas Eve ruling giving Fox a distribution right to the $130 million comic book adaptation.

First, producer Lloyd Levin unloaded on Fox for showing little interest in the property until it realized it might be able to win the lottery through legal maneuvering. He argues in a widely circulated open letter that as recently as 2005, Fox production execs passed on the project and called the script a "piece of shit" in an internal e-mail.

"If Fox had any say in the matter, 'Watchmen' simply wouldn't exist today, and there would be no film for Fox to lay claim on," Levin writes, echoing the fanboy blogosphere, which largely has painted Fox as the villain in this case. "It seems beyond cynical for the studio to claim ownership at this point."

Then Larry Gordon, the film's other producer and, ironically, former head of Fox, took aim at his own attorneys. Gordon's litigation lawyers wrote to Feess that the fiasco might be traced to a "unilateral mistake made by his counsel" at Jake Bloom's law firm, home to some of the town's top dealmakers. The existence of a 1991 quitclaim agreement, which gave Fox a right of first refusal if Gordon or anyone else decided to make "Watchmen," apparently was not known to lawyer Tom Hunter when he was negotiating Gordon's 1994 turnaround deal with the studio. In his deposition, Hunter blamed Fox business- affairs execs for sending him a chain-of-title report that failed to include the 1991 agreement. Still, producers pay their lawyers 5% of their earnings to, you know, keep track of these kinds of things.

Gordon and the Bloom firm understandably are defensive because they are staring at a fat indemnity claim from Warners, whose own finger has become increasingly outstretched. The studio argues in court papers that it could go after Gordon "for all damages Warner Bros. suffers as a result of Fox's claims," not exactly chump change considering a settlement could total tens of millions of dollars depending on how well the film's March 6 release goes. The Bloom firm's insurance carrier likely is becoming as familiar with "Watchmen" as the most hardened comic book geek.

Yet for all the blaming going around, a more productive question is whether there are lessons to take away from one of the nastiest studio showdowns in years.

First, if there was any doubt, the era of common courtesy among the studios is long gone. Fox and Warners might share MPAA memberships, but the minute Fox saw an opportunity, its lawyers jumped on it unabashedly. This isn't uncommon: Just last month, Warner Bros. TV sued CBS for millions in profits from "Two and a Half Men." But studio-vs.-studio litigation typically settles quickly or is moved to private arbitration. Now, thanks to its bold litigation strategy, Fox stands to pocket millions from a movie Warners spent $150 million to make and market and Fox never wanted much to do with in the first place.

Second, as much as studios devote hours of lawyer time to vetting chains of title, a simple misunderstanding can sabotage the whole endeavor. Boiled to its essence, the "Watchmen" case reads like an episode of "Three's Company." But instead of Jack Tripper inadvertently inviting two buxom dates to the same booth at the Regal Beagle, two studios have spent hundreds of thousands of dollars arguing over what likely was a simple misunderstanding between Gordon's attorneys and Fox business affairs. No wonder lawyers tend to drink heavily.

And third, never underestimate the value of a quick and tidy settlement. From the beginning, Warners vowed to defend the case vigorously, even after it was assigned to Feess, the same judge who issued an injunction against its 2005 release of "The Dukes of Hazzard." The Christmas Eve ruling surprised many in entertainment law circles, not only because it reversed Feess' earlier holding that a jury should hear the case but also because it was only five pages long and devoid of major legal analysis. Feess still hasn't followed up his "short order" with something more substantive, yet Warners is forced to settle or face another possible injunction.

And Fox? Fox is just about the only one not complaining.

Matthew Belloni can be reached at