Judge denies WB's motion to dismiss

A judge has denied a Warner Bros. motion to dismiss 20th Century Fox’s lawsuit over Warners’ right to make a film based on the graphic novel “Watchmen.”

Ruling is potentially a huge victory for Fox, which could wind up as a profit participant in the film, and could cost Warners millions considering the film’s box office prospects. However, Fox’s legal team says it isn’t looking for monetary compensation and instead wants to prevent the big-budget film from being released altogether.

Project, which has been in development for two decades, finally began lensing in September with Zack Snyder at the helm. Warners was set to release the film, which stars Patrick Wilson and Jackie Earle Haley, on March 6 in the same slot in which “300″ opened.

At the heart of Fox’s suit, filed in February, is the contention that it never ceded rights to the property. And according to the federal Judge Gary Allen Feess, Fox retained distribution rights to the graphic novel penned by Alan Moore and illustrated by Dave Gibbons through a 1991 claim. Furthermore, Feess appears to agree that under a 1994 turnaround deal with producer Larry Gordon, Gordon acquired an option to acquire Fox’s remaining interest in “Watchmen,” which was never exercised, thereby leaving Fox with its rights under the 1994 agreement.

“It is our company’s policy not to comment on pending litigation and thus will not comment on the specifics of this case,” Warners said in statement. “That said, the court’s ruling simply means that the parties will engage in discovery and proceed with the litigation. The judge did not opine at all on the merits other than to conclude that Fox satisfied the pleading requirements. We respectfully disagree with Fox’s position and do not believe they have any rights in and to this project.”

The court has asked the two parties for expedited discovery; generally the discovery process can take up to two years. Because the film has already wrapped and is dated for spring 2009, the judge wants to move forward quickly.

“Warner Bros.’ production and anticipated release of ‘The Watchmen’ motion picture violates 20th Century Fox’s long-standing motion picture rights in ‘The Watchmen’ property,” Fox said in a statement, though the graphic novel’s title is simply “Watchmen.”

“We will be asking the court to enforce Fox’s copyright interests in ‘The Watchmen’ and enjoin the release of the Warner Bros. film and any related ‘Watchmen’ media that violate our copyright interests in that property.”

Surprisingly, Fox said it would rather see the film killed instead of collecting a percentage of the box office.

“When you have copyright infringement, there are some damages you never recover,” said a source close to the litigation.

Fox spent more than $1 million developing “Watchmen” but had not previously taken legal action against the project, which had been in development at Paramount several years ago.

The case resembles to some extent the copyright suit, also involving Warners, over “The Dukes of Hazzard,” in which Feess also presided. The studio agreed in 2005 to pay producer Robert B. Clark at least $17.5 million for infringing on the copyright to his 1974 United Artists film “Moonrunners,” which became the basis of the Warners TV skein “The Dukes of Hazzard.”

Warners settled the “Hazzard” suit while faced with a preliminary injunction, issued by Feess, which would have canceled the release of the feature and seen all copies impounded by federal marshals.

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