【Column by Lawyer Lan】Deconstructing the Rights of VR Animations

Presenting and realizing virtual reality (VR) has become a popular trend in the new technology landscape of Taiwan’s animation industry in current years, and the artworks participating in international competitions have reached new heights of success. These Taiwanese artworks including “The Sick Rose”, “Madame Pirate: Becoming A Legend”, “Red Tail Ep.1”, and “The Reflected City”, are selected for XR Competition of Newimages Festival , which was announced on April 6, 2022. Among of all, “Red Tail Ep.1” is named as the winner of Special Mention Award, and also nominated for Venice Immersive Competition at the 79th Venice Film Festival, where another Taiwanese VR movie named “The Man Who Couldn’t Leave” also enters the award race [1]. Meanwhile, VR is also booming within the industry of performing arts. One of the dance performances hosted in National Kaohsiung Center for the Arts in 2020, “Afterimage for Tomorrow”, is a perfect example that presents art from a non-traditional angle.

While Taiwan’s VR animations are picking international attention, we must ask if any corresponding measurements in legal aspects are in place to keep up with the intellectual properties issues relating to the market mechanism in IP licensing. These concern people like directors participating the creation, production team, VR technicians, investors or government agency giving the grants.

For example, it is reported that “Red Tail” was first backed by a grant from Kaohsiung Film Archive, then later received investment funding from Taiwan Public Television Service Foundation. Do the parties have clear stipulations regarding their rights and obligations? Do they agree on the rights and interests vested and held by creators and investors? While Taiwan’s VR animations are shining on the global stage and granted awards recognizing their excellence, it is crucial for us to zero in on the industry’s practice.  With the onset of the production team’s cross-industry collaboration and the effort of developing new markets, laws can be implemented in time to support the rules in the world of art creation in order to lower the risk of unnecessary disputes.

What kind of copyright works do VR animations belong to?

In the field of technology innovation, creators have been striving to present the latest art forms by constantly integrating advanced technologies. The issue that has come into joint focus of people in technology, art and the legal industries has emerged: Are there applicable and corresponding legal protection and mechanism conferred at this stage? All governments worldwide are in a row of working on developing adaptable systems of legal regulation to keep up with these accelerated trends. Prior to lawmakers’ passage of new laws, courts are tasked with novel issues of applying the existing legal schemes to ever-changing technology.

Let’s take one famous example, in 2019, teamLab brought a lawsuit to the US district court that MODS (Museum of Dream Space) violated its copyright [2]. This case has come to the focus of all countries. According to teamLab’s allegation, MODS’s artwork is similar to its own “protectable expression,” including “the use of multicolored flowers flowing across the ground, the streams of light/water cascading down the wall and onto the ground, and the interactivity of the work responding to the user’s proximity to the exhibition, “constituting copyright infringement.

MODS has refuted the copyright allegations, claiming teamLab’s work is not original nor protectable as the plaintiff’s Boundaries has “a significant interactive aspect that changes the work every time a viewer walks through it,” which is “ever-transforming.” How could it be determined if there is substantial similarity between the two artworks? Moreover, plenty of artists use mirrors and LED lights to create installations, which shows such concept is not unique, and even if the defendant’s artwork were similar to the plaintiff’s, it is not an infringement. The legal battle has been tangled for three years, pending the court’s decision and further investigation, as the judge is exercising more caution when facing the fast-growing art technology’s impact.

What kind of copyright works do VR animations and films belong to? Some people incorporate VR publications into the category of the computer program, some find VR works similar to cinematographic creation, and others suggest VR publications be taken apart and analyzed which element falls into each category [3]. Opinions vary.

Let’s take the example of Taiwan’s VR work “Red Tail”, which was just called for animation in Venice Film Festival. According to the media [4], “Red Tail” is the adaptation of Fish Wang’s comics. It is an adventure story about a youth chasing a floating red tail in the sky to a fantasy city, experiencing numberless breathtaking moments util disclosing the secret of the red tail.

The animator, Fish Wang, and Zero One Film’s production team cooperated in realizing hundreds of handmade sites and characters in physical models with composite materials, and before proceeding to make the animation, they had the models scanned with photogrammetry techniques; then the final stage of VR content was completed by another Taiwanese tech team, “Funique VR.” After its world premiere at Venice Film Festival, “Red Tail” has its first official release in Asia at Kaohsiung Film Festival, which runs from October 14 to 30, 2022.

As comics are considered to fall into the category of artistic works as well as oral and literary works, authorization should be obtained from the comic author or the publisher upon adapting them into scripts for amination. If the script is based on an original story created by the screenwriter without adaptations of previously published material, then the screenwriter enjoys the copyright in literary works. The production company or performance groups will need to obtain the screenwriter’s authorization or assignment when the script is intended to be developed as one animation, dance, or musical. When the script is adapted from the comics, such authorization from the copyright holders (the comic book writers or publishers) has to be ensured because the animation production requires not only the story’s plot, but also the reproduction of characters’ images.

In VR context, HMD (Head Mounted Display) devices users wear display images that allow users to view their environments and characters in 360/720 degrees, beating the limits of the movie screen. Before producing the animations or VR content, the production team usually creates models based on essential elements like story characters, objects, and surroundings to advance the viewing effects. Such models become the new copyrighted artistic works as they are 3D-presentation of the comics or original images. That is why figuring out the models’ titles and copyrights in the artistic works becomes one of the centerpieces of examining the rights inherent in VR animation. Especially nowadays, IP development is riding a boom that models’ display is accounted for film merchandise or promotion event, or even one of the commercial activities, causing the production company and creators or investors to regard the ownership of copyrights in comics models as a necessary negotiation parameter.

Animation production will begin after the creation of the comic drawing and models, and the completed animation should be classified as audiovisual work. With the addition of synchronous voiceover and narration by production company, the outcome now constitutes an independent work of authorship. Then usually VR company takes over from here, as VR technicians will need to build the game engines, implement the animation For the VR film – a new audiovisual work is born.

Ownership of copyright in VR animation and clause templates

There are still many technical problems to overcome in VR animation’s production process, not to mention the nonstop tests by the creative team. Considering those team members – the creative team and the traditional movie staff – have different backgrounds and are unfamiliar with contract stipulations as well as legal requirements, it is fairly common that a VR film project is short of a binding agreement in Taiwan. In some extreme cases, the members did not start the discussion over the copyright ownership until they had been granted some international award, which led to a bunch of controversies amongst parties taking place and delaying the release or deteriorated execution of the rights.

What needs to be set out clearly in the mutual agreement regarding the ownership of copyrights in VR films include the comics, screenplays, tools and models, animations and VR films. We know that these copyrights owned by the same creator or company are not likely to be disputed. However, VR film’s technical complexity takes both inspiration and skills, and when finishing the creative comics and touching storyline, the author might lack professional skills thus a specialized technician team to enable the creation of VR film comes into the play.

During the production process, technical skills, facility, and workforce rely heavily on sufficient financial support, which needs to be backed up by the investors; thus the production team has to tackle the giant challenge regarding the entitlement of rights or allocation of the profit. In the contract, what needs to be addressed includes commission, investment, voiceover and background music, and model assignment; furthermore, there might be different ways to split the rights in compliance with different types of collaboration, such as hire of services, mandate or hire of work.

While the work is completed under the hire of services, the employer company acquires the copyright in the work made for hire, however, when it comes to a work completed by a person under commission, the company and the creator could set out clearly who owns the copyright. Because the investors might want to enjoy VR film’s full entitlement, they often ask the production company to acquire the copyright besides the screenplay and music, so the investors own a joint copyright in the VR film.

1. Comics’ Licensing

If VR film is adapted from the comics, the production company should obtain its author’s authorization for adaptation to ensure the comics are licensed for the production of animations and VR films while copyright in the artistic and literary comic works are still retained with the author. In practice, many issues arise out of the way comic authors exploit their IP – tabletop games, video games, non-animated movies, TV shows, exhibitions – and sometimes the exploitation expands to one single character for merchandise offerings -backpacks, postcards, comic tees – not to mention the idea to create a sequel.

Due to comics’ copyrights being kept with the author, the scope of authorization is limited to the production of animations and VR films; in this way, the comic author can freely work on IP development outside of the licensed items. To clarify their respective rights and obligations for both parties, we list some key clauses in the agreement concerning comics adaptation as follows.

(Party A: the Comic Author, Party B: the Production Company)

1. Subject matter

Party A hereby grants an exclusive license for Party B to adapt Party A’s creation of comics, XXX (“the Comics”), into screenplays, animations, and VR works, while the moral and economic rights in the artistic works of Comics are fully retained with Party A.

2. Licensing Scope

Such licensing shall entitle party B to use the Comics in script development, production of models (physical, digital, or 3D scanned), animations, VR works, and other use for promotion purposes (including the movie trailer) for the entire world and for an unlimited period of time, and irrespective of the media forms.

3.  Exclusivity of License

Once the Agreement comes into force, Party A shall not engage in, or shall grant any other license for anyone, any identical or similar use or adaptation of the Subject Matter wholly or partially; meanwhile, Party A shall not conduct any behavior which harms Party B’s interests.

4. Ownership of copyrights in Derivative works

Party A agrees that all intellectual property rights, titles and ownerships in the models, VR works and promotion contents based on the Comics belong to Party B, who enjoys the moral and economic rights hereunder. Party B shall be free to assign or license anyone the economic rights to the models, VR works and promotion contents containing the comics’ contents without seeking Party A’s permission to do so.

5. IP development

Party A shall own all the copyrights in the works of art existing in the Comics (including but not limited to the characters, backgrounds and tools), and Party A may fully exploit IP except animation and VR works.

2. Script Adaptation

Before adapting comics into animation, the production company has to engage a screenwriter to write the script. In the case where the screenwriter is an employee within the production company, we shall refer to Article 11 of Copyright Act as follows: “Where a work is completed by an employee within the scope of employment, such employee is the author of the work; provided, where an agreement stipulates that the employer is the author, such agreement shall govern. Where the employee is the author of a work pursuant to the provisions of the preceding paragraph, the economic rights to such work shall be enjoyed by the employer.”

With the application of this provision, it means that the copyright in the literary works of the completed animation script belongs to the production company, unless the employer and employee have an agreement to appoint the employee to be the script’s copyright holder. But such stipulation is rare in practice.

Because the employment contract that the company requests the employees to sign upon onboarding generally contains the terms securing the ownership of rights in the works made for hire, there is no need for the additional stipulation. In contrast, more attention should be paid to outsourcing screenwriting, which belongs to the situation where the work is completed by a person under commission, and here we can refer to Article 12 of Copyright Act: “Where a work is completed by a person under commission, except in the circumstances set out in the preceding article, such commissioned person is the author of the work; provided, where an agreement stipulates that the commissioning party is the author, such agreement shall govern. Where the commissioned person is the author pursuant to the provisions of the preceding paragraph, enjoyment of the economic rights to such work shall be assigned through contractual stipulation to either the commissioning party or the commissioned person.”

In the recent practice in Taiwan’s movie and TV industry, screenwriters intend to keep their copyrights and only grant the production company to use their scripts in a limited time and scope for specific purposes. Some of the fundamental clauses are provided here for example.

(Party A: the Screenwriter, Party B: the Production Company)

1. Party A hereby grants Party B the exclusive right to produce animation and VR works, XXX, based on Party A’s animation script (“Subject-Matter Work”), which is the adaptation of the comic work, 000.

2. Authorization period: The exclusive authorization period where Subject-Matter Work is granted by Party A to be adapted by Party B into animation and VR film (the “Films”) pursuant to the provisions of the preceding paragraph shall remain in effect for a period of three years as of the date the Agreement comes into effect, which means all the authorization shall be terminated on December 31th, 2025. Notwithstanding the expiration set out herein, all and any of Party A’s legal rights within or related to the Films, information, materials and works produced and generated during the authorization period shall not be affected after such termination.

3. Party A agrees to grant Party B the exclusive and worldwide license over economic rights in Party A’s literary works of Subject Matter during the authorization period, and the licensed rights include but are not limited to the right to make cinematographic work, the right to adapt and edit Subject Matter. Party A further agrees that party B may publicly present, broadcast, transmit or publish the Films in any form or media, including but not limited to any technology now known or later developed.

4. Party A warrants to maintain in strict confidence and not disclose any and all elements including characters, plots and storyline (“Authorization Elements”) to any third party. During the authorization period, without the prior consent of Party B, Party A shall not create other screenplay based on Authorization Elements or a sequel script to Subject-Matter Work (a sequel means a work that has the similar or identical script name, main characters’ names, and characters’ relationships with Subject-Matter Work, and continues the story of Subject-Matter Work or is highly associated with Subject-Matter Work.) PROVIDED, Party A shall own all the rights to adapt Subject-Matter Work into TV scripts, web series or theatrical performances and novels, the rights in all types of characters based on the adaptation of Subject-Matter Work, and the right to continue the creation of characters.

5. Party B shall be the author of copyrighted works and derivative works based on the authorized Subject-Matter Work in accordance with this Agreement, and Party B shall own complete moral and economic rights in the works of the Films and derivative materials. PROVIDED, both parties agree that Party A shall be listed as the screenwriter and the author of the original story for the final script of the Film; Party B warrants that Party A shall enjoy the right of attribution for the final script of the Films. Party B owns the worldwide and perpetual rights in the Films upon completion of the adaptation, including but not limited to the trademark interests, patent interests, moral and economic rights, copyright in all merchandises, copyright in work of the Films upon completion of the adaptation in any language anywhere in the world, other derivative intellectual property rights and performers’ interests as well as copyright in the related plot structure in any language anywhere in the world.

3. Model Production

What makes VR animation production so special is VR’s requirement of viewing in 360/720 degrees, and this explains why flat photos are not suitable, and it is necessary to make physical models for main characters, backgrounds, and tools and scan their digital pictures before proceeding with VR production; in this way, viewers can freely watch each object or character in the film from all aspects while using VR headsets.

When the production company contracts out model production to professional technicians, such contract should include the terms assigning the enjoyment of copyright in the artistic work of physical models to the production company in favor of copyright exploitation hereafter; meanwhile, the parties should agree that the production company shall obtain the ownership over the models, so the production company can secure how to use the physical works. Some of the fundamental clauses are provided here for example.

(Party A: Creator, Party B: the Production Company)

1. Party B hereby engages Party A to create physical models for VR production entitled XXX (“Subject Matter,” as set forth in the exhibit pictures), and Party A shall make the physical models of Subject Matter in accordance with Party B’s instructions and requirements.

2. Party B shall be the author of the works of Subject Matter and enjoy the moral and economic right in the work and has the ownership of Subject Matter.

3. Party B shall pay Party A an amount of NTD$__________(tax included) as full compensation. Party B shall have no obligation to pay Party A any additional remuneration or royalty payments when Party B receives profit from the display of Subject Matter models and sales of merchandise or co-branding products.

4. Party B shall warrant that the images provided for Party A or instructing Party A to create the models shall be free of any third-party infringements and violations of any laws. Party B shall be fully responsible in the event of any infringements or violations, and shall indemnify Party A against all losses and damages to rights or goodwill resulting therefrom. Party B shall provide the said warranty and indemnity protection to the models produced by Party A as well.

5. Party B agrees to identify Party A as the Creator when Subject Matter is in use.

4. VR Film Production

Despite the same storyline used in VR film and animation, they belong to different types of works, and independent copyrights subsist in each of them; therefore, before engaging the tech team to create the VR film, the production company has to decide who owns the rights in the VR film: Is the production the exclusive copyright holder? Or can the two parties be the joint copyright holders (though they can own different percentages of the work)? Or should the tech team enjoy all the audiovisual copyrights?

In addition, how does the revenue from the VR film get split? When the production company solely owns the audiovisual copyright, can the tech team assert their right to split such profit? Or is the tech team only entitled to their remuneration? Let’s make an example of a business deal where the production company has full audiovisual copyright, and the tech team shall receive royalty payments based on 5% profit of the VR film. Here are some of the fundamental clauses provided for example.

(Party A: VR Tech Team, Party B: the Production Company)

1. Party B hereby engages Party A to create XXX VR film (the “Film”), the details of which are listed as follows:

(1) Name:《XXX》VR  (the “Film”).

(2) Director: 000; Producer: 000.

(3) Type: Interactive VR.

(4) Length: 15 minutes.

(5) Required technology format: 6 Dof Animation, Spatial Audio sound effects.

2. The film is adapted from OOO’s original comics, XXX, as Party B is licensed with the exclusive right to create the script and animations, XXX. Party B owns the copyright in the artistic and audiovisual works of the animation and hereby engages Party A to adapt the said animation and produce a VR film.

3. Party B shall provide VR materials, including original comic images, script, digit files of physical models (characters, backgrounds and tools) and the animation film.

4. Party B is the author of the Film completed by Party A, and Party B shall enjoy the moral and economic rights in the Film and the ownership of Subject Matter; PROVIDED, Party A shall be identified as the Creator in the ending credits of the Film or promotional posters.

5. Party B shall pay Party A an amount of NTD$_________(tax included). Party A shall have the right to receive royalty payments based 5% net profit from the Film’s release throughout the period of five years as of the first release date.

6. Party B agrees, at no charge, to license Party A in perpetuity to use the Film’s photos, work photos, images, and promotional videos on social media (such as youtube, Vimeo, Facebook, Instagram and Twitter) as introduction and explanation of the works for non-commercial purpose.

5. Investment Cooperation

The production of VR films takes a lengthy process and incurs high costs, which cannot be without solid funding; otherwise, the gap in financial support during the production process could easily cause discontinuity and disruptions, failing the entire VR project. Thus, the production company needs to secure VR film funding from government grants or private investment, inevitably, which often triggers stakeholders’ grappling over their rights and interests.

That is why reaching a well-planned investment contract is crucial for the production team, as they must set out clear terms for the deal conditions which the investors pay close attention to, including the timeframe for funding, completion timeline, premiere arrangement (when and where), allocation of prize money granted from the competition, joint enjoyment of audiovisual copyright, profit split on the movie release. Some of the fundamental clauses are provided here for example.

(Party A: the Investor Company, Party B: the Production Company)

1. Party A agrees to invest in XXX VR film (the “Film,” details are set forth in Exhibit 1) produced by Party B. The investment amount for this contract is NTD $_________, which shall be invested in three installments (the payment schedule and method are set forth in Exhibit 2).

2. Party B shall undertake to execute and complete all the production works for the Film, and such works shall include but are not limited to obtaining the author’s permission, writing the screenplay, developing the production team, making the animations and VR films, editing and post-processing for voiceover and background music and signing the work contract. Party B warrants its competency to carry out the works with qualified technologies, workforce and relevant sources and shall be responsible for the above-mentioned production works.

3. According to the schedule agreed upon by Party A and Party B, Party B shall regularly report the Film’s production progress to Party A. Production meetings shall be scheduled on an as-needed basis for Party A’s understanding of the Film’s production status.

4. The length of the completed VR film should total no more than 20 minutes, and the Film’s opening credits should contain the identifiable word fonts, logo or animation provided by Party A. The closing credits shall list “Presented by: _______(name of the company).”

5. It is agreed that the world premiere of the completed film by Party B shall be held at 2023 Taipei Film Festival.

6. Party B shall enjoy the moral right in the Film, and Party A and Party B shall be the joint economic rights holders, with 30% owned by Party A and 70% owned by Party B, that both parties have the right to publicly broadcast, present, transmit the Film via worldwide cinemas, TV (including but not limited to broadcast, cable or satellite TV), internet, reproduce products in relation to the Film (including but not limited to movies, TV shows, videotape, videocassettes, videodiscs, tapes, digital recording and images, interactive movies, interactive TV, internet, webpage, IP address, pictures and texts, and all media forms invented in the past, currently available or later developed to broadcast, transfer and transmit), publish the pictures and texts (including but not limited to TV series novel or album books), and merchandise the promotional products (including but not limited to T-shirts, mugs) and other derivative merchandising items.

7. Party A has the exclusive right to release the Film in physical screening establishments within the scope of Taiwan’s territory.

8. Both parties hereby agree on respective profit-sharing percentages of any net profit of the Film; namely, the profit-sharing percentage of Party A shall be 30%, and the profit-sharing percentage of Party B shall be 70%.

9. During the production process, Party B shall warrant that any intellectual property right, right of publicity, right of attribution and privacy right in the relevant creation materials (such as music, dances, background music, etc) shall not infringe any legitimate interests of a third party or subcontractor. In the event of any dispute arising out of Party B’s execution of the above-mentioned production works or intellectual property infringement, Party B shall be solely responsible for such dispute and legal liabilities, and the Investors shall have no obligation with respect thereto. Party A has the right to rescind the Agreement if such dispute leads to impossibility of normal performance of Subject Matter.

Conclusion

VR animation films have brought groundbreaking development in human technology and upgraded the visual experience to the next level. While the tech team and filming production team have overcome all the difficulties and realized the art form’s miracle, we notice the terms stipulating rights and obligations amongst the production team, investors, creators, and sponsors are missing, bringing about partners’ disputes, suspicion and separation, eroding the leading creative team’s motivation, and even jeopardizing the success in VR works.

At this moment, no existing rules in practice may clearly apply to the entitlement amongst comics, screenplay, animations and VR films, and when we ask what the reason is, rather than legal gaps, it is when cutting-edge technologies embrace the arts, we face difficulties in identifying the rights bestowed onto the parties and confirming their ownership at the different completion stage of works.

In this article, the author tries to summarize the practical experiences, analyze the legal relationships among the parties and list the key regulations, with an effort to examine the rights existing in VR animation films. The author’s attempt here is to look forward to clarifying the boundary of the rights to VR animation films, pushing these art tech works to evolve smoothly within a legitimate market with governing rules, stand at the beautiful stage shining their potential, and create new milestones for the world.

Footnotes

1. Ying-Ju Tu, “Groundbreaking Records! Up to Ten Taiwanese Entries Nominated in XR Competition of French New Images Festival“, Liberty Times, 7 April 2022. Jing-Yu Zhao, ” VR Film ‘The Man Who Couldn’t Leave’ Enters the Venice Film Awards Race“, Central News Agency, 28 July 2022, . I-Wen Zhang, “ ‘Afterimage for Tomorrow’, Crossroad of Virtuality and Reality“, Reviewing Performing Art Taiwan, 23 December 2020.

2. Mark Laudi, “TeamLab Sues a Museum for Copying Its Immersive Art, But Can It Really Be Protected When the Artwork Itself Is Ever-changing?“, PitchMark, 23 May 2022. Shanti Escalante-De Mattei, “Japanese Immersive Art Collective Sues California Company for Copyright Infringement“, ARTnews, 28 April 2022.

3. Jing Wang, Wei Song, “Copyright Protection for Virtual Publication“, Science- Technology & Publication, 2 Sep 2021.

4. “Taiwan’s VR Red Tail Wowed Venice Film Festival, ‘Deeply Touched.’ Said Voiceover Actor- Kuan-Ting Liu“, China Times, 28 July 2022, . “Congrets! Taiwan is Taking the Lead in VR Competition, Bringing “Red Tail” to Shine in Venice Film Festival“, Kaohsiung Film Archive.

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