The Need for a Motion Picture Co-Production Treaty between India and the United States By Ameet B. Naik

The motion picture industries of India and the United States have had a long and fruitful relationship going back to the middle of the last century.  Notable recent Bollywood movies shot in the U.S. include Kabhi Alvida Na Kehna (“Never Say Goodbye”) (2006), Dhoom 3 (“Blast 3”) (2013), Dostana (“Camaraderie” or “Buddies”) (2008) and New York (2009).  All topped box office charts in India. Similarly, well-known Hollywood movies such as  Life of Pi (2012), Slumdog Millionaire (2008), Bride & Prejudice, (2004) Zero Dark Thirty (2012), the Best Marigold Hotel movies (2012 and 2015) and many others dating back to the 1980s—for example, A Passage to India (1984), Octopussy (1983) and Gandhi (1982)—were all shot entirely or in part in India. Dubbed versions of Hollywood films in regional Indian languages have also gained popularity. Further, there is a significant growth in the number of VFX (computerized visual effects) companies thriving in India due, in part, to Hollywood studios outsourcing VFX work for their films to Indian companies. Indian VFX companies like Prime Focus have been instrumental in the production of several Hollywood films, including Avatar (2009). United States-based companies continue to recognize the benefits of production in India given India’s diverse filming locations, and a skilled yet economical labor force.

Bollywood is the nickname that has come into usage to mean the Hindi language film industry based in Mumbai (Bombay). This article focuses on collaboration between Bollywood and Hollywood and less on the many other centers of motion picture production in India.

In recent years, the pace of this decades old collaboration between Hollywood and Bollywood has picked up significantly. The last few years have witnessed a number of new alliances between Bollywood companies and international film studios, such as Warner Bros, Disney, Fox.  These alliances have gone beyond motion pictures into associated fields such as talent management.  Additionally, Indian films are acquiring enhanced global recognition, by their increasing impact at international film festivals and the growing demand for them abroad. As India-U.S. ties in entertainment continue to develop, both sides have recognized that streamlining investment and production processes, including intellectual property protection, benefits all stakeholders.

Indian Courts Are Now Enforcing Intellectual Property Rights

In the past, lax intellectual property protection, at least from Hollywood’s perspective, allowed Bollywood to produce remakes or adaptations of films from Hollywood. Such remakes or adaptations, even if mirroring the original scene-by-scene, were often made without acquiring rights or licenses from the original producers. Some of these remakes and adaptations, based on source material in the public domain, include Pyaar Ka Saaya (“The Shadow of Love” [1991], which adapted Ghost [1990]), Main Aisa Hi Hoon (“I Am Like This” [2005], which adapted  I Am Sam [2001], and Heyy Babyy (2007) (which adapted Three Men and a Baby [1987]).

Recently, however, India’s jurisprudence in media, investment and finance and intellectual property protection has begun to evolve in ways that will facilitate the growing relationship between Indian and U.S. companies in the entertainment field.  For example, Indian courts have begun to protect the intellectual property rights of Hollywood production companies in light of unauthorized remakes.  In Twentieth Century Fox v. BR Films &Anr., NMS/1561/2009 (Bombay High Court 2010) (unreported consent order), the court issued an injunction staying the release of Banda Ye Bindaas Hai (“This Guy Is Fearless” [2009]) pending its decision on an underlying copyright infringement suit which alleged that the Bollywood version was an unauthorized copy of My Cousin Vinny (1992).  The parties settled before the court’s decision.  A year later, however, in Twentieth Century Fox Film Corp. v. SohailMaklaiEntm’t Pvt. Ltd., NM-2847 (Bombay H.C. 2010), the court found that the defendant Bollywood producer’s film Knock Out (2010) had infringed the earlier Hollywood film Phone Booth (2002). This was the first court decision in India where the Court allowed an alleged Hollywood-plagiarized film to be released subject to the producers depositing a certain sum with the court and maintaining accounts of the box office collections. The matter was eventually settled by the parties.

With the increased willingness of copyright holders to bring suit to protect their works and increasingly stringent application of copyright laws in India, acquiring rights to produce an official remake or adaptation has become a new trend. Today, there are several Bollywood films that are authorized remakes of Hollywood films such as We Are Family (2010) (remake of Stepmom [1998]), Players (2012) (remake of The Italian Job (2003), Bang Bang (2014) (remake of Knight and Day [2010]), and City Lights (2014) (remake of Metro Manila [2013]). Recently, Anil Kapoor Film Company, Pvt. Ltd., acquired the rights to 24, an American counterterrorism, action drama television series from Twentieth Century Fox.  This is the first adaptation of a U.S.-based fictional TV series in India.

The Road To An India-U.S. Co-Production Treaty

India has co-production treaties with several countries, including South Korea, Canada, France, Germany, New Zealand, and others.  Yet, despite the shared historical connection in motion pictures between the U.S. and India spanning over four decades, the two countries and their entertainment industries still have no co-production treaty to promote the production of Indian films in the U.S. and vice versa. Recently, the LA-India Film Council was formed to facilitate and strengthen motion picture production, distribution, technology, content protection, and commercial cooperation between Hollywood and Bollywood. However, this effort has so far not succeeded in motivating either government to pursue a formal agreement addressing film production.

Recently, talks have also taken place in connection with the signing of a treaty that facilitates the protection of Intellectual Property Rights (“IPRs”). A senior American diplomat, Charles Rivkin, voiced his opinion by saying,“[h]olding that transparency, predictability and upholding the rule of law are essential for better ties, the U.S. is keen to restart work on a Bilateral Investment Treaty (BIT) with India for deepening economic relationship.” He then continued, “[t]he US wants the Indian economy to grow and reach its potential. Entrepreneurs should know that ideas are not stolen as there is law in place for IPR protection.”

The treaty has not yet materialized due to several issues, including the lack of data transparency relating to box office collections and producer and distributor’s shares available in public domain. Other factors include an unawareness on the part of U.S. companies of a stronger intellectual property rights (IPR) regime in India.  To be sure, foreign investors are still concerned about the fact that India continues to be plagued with media piracy, corruption, heavy taxation on entertainment industry, no single window clearances, lack of film incentives, and ambiguities in certification and copyright laws.  These factors make foreign film makers reluctant to shoot or produce films in India.

However, these are the very issues a co-production treaty would address.  To begin with, the slow but steady change in the Indian outlook towards protection of IPRs is cause for optimism that India is serious about restarting negotiations to remove impediments to co-productions. Most of the concerns of Hollywood companies investing in co-productions would be addressed in a co-production treaty.  Enumerated below is a list of provisions that any such treaty should include.

  • Cash grants: Non-refundable funds disbursed to the production companies that help production houses or companies to reduce their production costs. This benefit will allow smaller companies to venture into foreign markets and help propagate the production of niche movies, which tend to be smaller budget, content-driven films.
  • Cash rebate: Refunds from the actual expenditure incurred at a particular percentage.
  • Tax credit: A sum deducted from the total amount a taxpayer owes to the treasury. It can be granted for various types such as income tax and VAT.
  • Exemptions from customs duty: Regulations already exist that enable a carnet card holder to travel between the two countries for filming purposes, among many other purposes, without the need to pay import duty or tax on carried equipment. In India and the U.S., this system is called the ATA Carnet System (“Admission Temporaire-Temporary Admission.” The ATA Carnet is an international Customs document that a traveler may use temporarily to import certain goods into a country without having to engage in the Customs formalities usually required for the importation of goods, and without having to pay duty or value-added taxes on the goods, such as commercial samples, professional equipment and certain advertising materials.)  However, currently in India, this system permits only the tax-free admission of of goods designated for international trade fairs and exhibitions. It has been proposed to expand the same protections to commercial samples, professional equipment, private exhibitions, film shootings, musical troupes, and sports and media coverage. The Federation of Indian Chambers of Commerce and Industry (FICCI), which is the National Issuing and Guaranteeing Association for implementing ATA Carnets in India, is lobbying the Ministry of Finance to expand the scope of the system to cover professional equipment and commercial samples.
  • Other benefits: Any agreement should also provide for discounts in travel and lodging costs, easier visa processing ensuring fast approvals of the visa.

Any production treaty containing the above-mentioned points will have a far-reaching effect on both nations and will confer the following benefits:

  • Boost tourism: The tourism sector helps generate around almost 7% of India’s gross domestic product. Hollywood movies like Eat, Pray, Love, which was shot in exotic locations around India, highlight the beauty of rural India while showcasing the spiritual and traditional aspects of the country. Similarly, movies like My Name is Khan left Indian audiences awestruck at New York’s glamorous, fast-paced lifestyle. The Ministry of Information and Broadcasting and Ministry of Tourism have both signed a Memorandum of Understanding to further enhance film tourism. This memorandum aims to endorse India as a filming destination for domestic and foreign filmmakers. Further, the memorandum will facilitate budgetary support for specific film festivals and provide a single window clearance for film shooting permissions. (A single window system enables international (cross-border) traders to submit regulatory documents at a single location and/or single entity.) Eventually, world tourist arrivals in India should rise from 0.06% to 1% by the end of the 12th Five-Year Plan (2012-17) As more Indians are able to travel overseas, Indian movies shot in U.S. locales are bound to generate greater interest in visiting those venues.
  • Create employment opportunities: While shooting in a foreign country, it is vital to engage the services of local line producers who understand the workings of the particular venue, which, in turn, generates significant local employment.
  • Increase inflow of foreign exchange: With producers in one country investing to produce a movie in the other, each side will benefit from the associated localized spending that occurs during the shooting.
  • Aid in the advancement of high-tech production facilities and equipment: With the constant evolution of technology, the collaboration of know-how and resources to create facilities and equipment will help create a smoother and more efficient way of producing movies, in turn, reducing other miscellaneous costs that arise while shooting in a foreign location like cast and crew costs or other accommodation expenses.

Realizing the benefits of co-production treaties, countries like New Zealand, China, Germany, Canada, France, Brazil, Italy and the U.K. have already entered into co-production agreements with India, in an attempt to secure the benefits outlined above and to tap into the Indian film market. Furthermore, the recent success of the Bollywood blockbuster Zindagi Na Milegi Dobara (“ZNMD”) (“You Only Live Once,” or, literally, “You Won’t Get A Second Life”), which was filmed extensively in Spain, resulted in an audio-visual co-production agreement between the two countries in the area of feature films, documentaries and animation films. When ZNMD was shot, the Government of Spain offered a VAT refund of around 18% and streamlined the visa process for those involved in the production. These actions, in turn, led to an increase in the number of Indians visiting Spain after the release of the movie. According to Spain’s tourism board, within six months of the release of the film, the number of Indian tourists to the country jumped by 65% to more than 11,500 in 2011. The India’s Ministry of Information and Broadcasting expressed satisfaction over the signing of the Spain Treaty by proclaiming that “The agreement provides opportunities for both the countries to pool their creative, artistic, technical, financial and marketing resources to co-produce films.

The development of strong bonds between India and the U.S. was more significantly marked by President Barack Obama’s recent visit to India in late January 2015, the ripples of which were reflected in a joint statement with the tag line ”Sanjha Prayaas-Sabhka Vikas” (“Shared Effort; Progress for All’”).  This collaboration included “recognizing the progress made in constructive engagement on IPR and enhancing engagement on IPR in 2015 under the High Level Working Group on IP, to the mutual benefit of both the countries.” The leaders of both countries reaffirmed the importance of providing transparent and predictable policies for fostering innovation. Both countries reiterated their respective interests in sharing information and best practices on IPR issues, and reaffirmed their commitment to stakeholders’ consultations on policy matters concerning IP protection.”

President Obama’s visit has further set the stage for greater and closer collaboration between Hollywood and Bollywood to produce and sell motion pictures in the other’s domestic market.  A co-production treaty between India and the U.S. will address most of Hollywood’s concerns by promoting innovation, providing greater IPR protection, creating transparency, and thereby increasing investment opportunities within the Indian entertainment industry and vice versa. A production treaty, along with the “Make in India” initiative adopted by Prime Minister Narendra Modi, and the reforms his government has undertaken, will build on decades-old cooperation between India and the U.S. to synergize the two biggest film industries in the world.

Ameet B. Naik is the founding and managing partner of Naik Naik& Company, a Mumbai-based law firm specializing in corporate transaction support with a focus on mergers and acquisitions, private equity and capital markets.  Ameet has handled transactions in the Technology Media and Telecommunications space and has advised on a number of film productions and major television shows. He has structured investment and production deals for more than 200 films in India and has also been involved in some of the major format licensing deals in the Indian television sector.He also practices in the area of intellectual property related disputes.  Ameet has represented major film producers and media companies in India and is an authority on the workings of Bollywood.  He can be reached at ameetnaik@nnico.com.

Advertisements

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s