Back in November 2012, J.R.R Tolkien’s daughter, Priscilla Anne Reuel Tolkein, filed an $80 million lawsuit against the producers of (by then upcoming) film series ‘The Hobbit’. In her capacity as a trustee of the Tolkien Trust, Mrs. Priscilla A.R. Tolkein and her father’s publishers, Harper Collins, brought a joint claim against Warner Bros, New Line (WB’s subsidiary) and Saul Zaentz Co. (a marketing rightsholder) as joint defendants, claiming that ‘The Hobbit’ series promoted online and casino gambling by creating online slot machines and housing developments seen as exploitative.

Interestingly, the estate was prompted to revise the scope of the original agreement after the estate’s attorney received a spam e-mail promoting ‘The Fellowship of the Ring: Online Slot Game’, in which Warner Bros intended to use Tolkien’s characters.

The copyright lawsuit which followed was filed in California. It alleged that Warner Bros overstepped their contractual entitlements under a 1969 contract. The original parties contemplated a limited grant of the right to sell consumer products such as figurines, tableware, stationary items and clothing in the initial 1969 agreement. The rights did not grant any exploitation rights of electronic or digital content or other intangibles. The estate argued that the defendants looked to convert a limited right to profit from Tolkien’s intellectual property into an unlimited right to use the books and the storyline as they please.

The estate claimed that online gambling and the intensified use of video games using Tolkien’s characters created “confusion and consternation” among the fan base of the series, affecting Tolkien’s legacy and reputation, with some stating it was “prostituting art. This naturally affected the goodwill of all other Tolkien’s creations, since the fan base perceived any future marketing attempts as a further commercialisation of the Tolkien works. The remedies sought included an injunction against the infringing video games and other offensive products as well as by damages of more than $80 million.

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Warner Bros, argued that the parties reached a concession allowing it and Saul Zaentz to use ‘The Hobbit’ and ‘The Lord of the Rings’ trilogy online and that these rights were even confirmed in a re-grant agreement back in 2010.

The Claim Commended by Tolkien Trust and Harper Collins

  1. Copyright infringement

The claimants accused that the defendants of engaging in two main activities infringing copyright:

– Making available ‘Lord of the Rings’ themed slot machines; and

– Online and downloadable video games.

The original contract granted Warner Bros the rights of merchandising only personal property that can be physically purchased. The above-mentioned activities fell outside the scope of any such agreement.

  1. Trade Mark infringement

Warner Bros and the other joint co-defendants also registered trademarks and filed intent-to-use applications in categories exceeding the tangible personal property spectrum, including hotels, restaurants, travel agencies, online/downloadable games and housing developments. 

The Counter Claim by Warner Bros, New Line and Saul Zaentz

The defendants denied the charges and brought counterclaims for declaratory relief and damages for breach of implied covenant of good faith and fair dealing (inherent in all US contracts).

  1. Declaratory relief

By filing this lawsuit, the Tolkien Trust breached the implied covenant of good faith by repudiating the agreement granting the right to the defendants. Correspondence dating back to 1996 indicates a concession between the publishers, Harper Collins, and the estate’s attorney, saying that Zaentz has been granted the right to online video games for both ‘The Hobbit’ and ‘The Lord of the Rings’ series. There is also a re-grant agreement dating back to 2010 in which the estate confirms the rights held by Zaentz (and licensed to Warner Bros).

  1. Damages

Warner Bros alleges that shortly after they entered into the re-grant agreement, the estate started complaining about actions allegedly granted under the renewed agreement. This prevented Warner Bros from entering into license agreements with online and casino slot machine providers, which has caused it to lose license revenue.

Settlement

Recent months have seen the parties settle the lawsuit over the licensing of online gambling-related merchandise. The settlement has been disclosed in an LA court on 30 June 2017. Both parties declared to remain open to future collaborations.