Fox Wraps Up Legal Dispute Over 'Chipmunks' Movie (Exclusive)

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Courtesy of Twentieth Century Fox

While Mexico has been eclipsed by Brazil as the biggest moviegoing market in Latin America, it remains a vibrant and key territory. And if there's a premier 3D family market anywhere, it's Mexico, where Fox's "Alvin and the Chipmunks: Chipwrecked" has earned north of $6 million.

It took a few years and was very expensive to defend, but 20th Century Fox has largely come out on top in a lengthy battle over the Alvin and the Chipmunks property.

When Bagdasarian Prods., the family company that licensed the Chipmunk characters, sued Fox in 2010, an incredible amount of money was on the line. A year earlier, Alvin and the Chipmunks: The Squeakquel came out and grossed more than $443 million in worldwide box office. The Bagdasarians demanded half of the profits.

The lawsuit would feature several claims.

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Janice Karman, wife of the late creator's son Ross Bagdasarian Jr., alleged that Fox had taken her screenplay contributions without authorization. Thus, Bagdasarian asserted copyright infringement.

But the lawsuit would also cover such issues as whether Fox breached an agreement over promotional tie-ins to the Chipmunk characters, whether a $3 million producer payment was an advance on royalties or separate from royalties, and whether Fox got enough when it licensed Chipmunks movies to HBO and FX.

The dispute would go several rounds, with the first going all the way up to the 9th Circuit Court of Appeals to vindicate Fox's position that contract provisions meant the dispute would be tried before a referee rather than a jury.

Once that happened, the referee in 2012 ruled that Fox's purchase of Chipmunks literary materials encompassed any contributions that Karman had made under the contract's definition of "property."

Then, this past February, the referee ruled that the language of the parties' agreement supported Fox's position that the $3 million was an advance, that deductions taken by Fox with regard to soundtracks was proper, and that cable licensing wasn't done on a discriminatory basis. The referee left open a breach of implied contract claim alleging that Karman had contributed writing services with the expectation of compensation.

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On June 6, Fox filed a motion to recover nearly $2 million in legal fees. The company stated that was just a fraction of what it had spent in the case. It was argued that Bagdasarian had brought the lawsuit in a bad faith attempt to renegotiate the Chipmunks deal, and that around the time Squeakquel was released, the Bagdasarian family was both using its approval rights to insist that Karman's materials would be used and plotting copyright claims that would threaten Fox's ability to release Squeakquel and make more Chipmunks films. Allegedly, the lawsuit was born after Fox refused to accede to Bagdasarian's demand to hand back merchandising rights or pay an increase in back-end compensation, from 2.5 percent to 10 percent.

On June 14, the referee issued a decision that resolved all remaining issues. Soon thereafter, Fox withdrew its motion for attorneys' fees, and the parties agreed to abide by the referee's ruling.

On Tuesday, attorney Steven Marenberg, representing Bagdasarian, and attorney Louis Karasik, representing Fox, told a district judge to enter judgment. We're told that money isn't exchanging hands. The case started out at a high pitch, but it's effectively over.

Twitter: @eriqgardner