Warner Bros., Tolkien Estate Settle $80 Million 'Hobbit' Lawsuit

The Hobbit: The Battle of Five Armies Still 3 - H 2014
Courtesy of Warner Bros. Pictures

The Hobbit: The Battle of Five Armies Still 3 - H 2014

After five years of litigation, Warner Bros. and the estate of author J.R.R. Tolkien have announced in court that they have amicably resolved a fight over the digital exploitation of The Hobbit and The Lord of the Rings.

The Tolkien Estate and book publisher HarperCollins filed a $80 million lawsuit in 2012 alleging that Warners, its New Line subsidiary and Rings/Hobbit rightsholder Saul Zaentz Co. infringed copyright and breached contract by overstepping their authority. The plaintiffs claimed that a decades-old rights agreement entitled the studio to create only "tangible" merchandise based on the books, not other digital exploitations that the estate called highly offensive.

The lawsuit brought the two sides into a new battle. Previously, New Line and the Tolkien Estate had fought over profit participation, coming to a deal in 2009 pegged as being worth more than $100 million. As Warner Bros. readied a Peter Jackson big-screen adaptation of The Hobbit, the Tolkien Estate began investigating digital exploitations when its attorney received a spam e-mail about the Lord of the Rings: The Fellowship of the Ring: Online Slot Game. The subsequent complaint filed in court talked about irreparable harm to Tolkien's legacy and reputation from the prospect of everything from online games to housing developments.

In reaction, Warners filed counterclaims, alleging that repudiation of a 1969 contract and 2010 regrant caused the studio to miss out on millions in Hobbit licensing and decreased exposure to the Jackson films. The studio contended that digital exploitations was both customary and within its scope of rights.

Those counterclaims became the subject of a side fight over whether Warners could sue for being sued. The 9th Circuit Court of Appeals agreed that the studio had properly asserted contract claims.

Meanwhile, the two sides engaged in brutally detailed discovery, with Tolkien heirs and others giving depositions about how the Rings/Hobbit business operates. There were witnesses also appearing about the intent of the 1969 agreement.

For the last couple of years, not much has publicly happened in the dispute. Both sides were due to file summary judgment motions in anticipation of a potential trial. That's been avoided with the sorcery of dealmaking. Terms haven't been publicly disclosed, though the forthcoming release of games like Middle-earth: Shadow of War are likely indication of a mutually agreeable working relationship.

In a statement delivered after publication of this story, a Warner Bros. spokesperson says, "The parties are pleased that they have amicably resolved this matter and look forward to working together in the future."