3. Rights Optioned/Rights Granted: If you exercise the option and pay the purchase price (see Paragraph 4 below), the author will grant you a package of rights. This is a very important deal point but has fairly standard parameters. Generally, upon payment of the purchase price, the author shall grant and assign exclusively to you in perpetuity and throughout the universe all motion picture, television (free, pay, cable, etc.), video/DVD, internet production, and allied and ancillary rights to the book including, but not limited to, remake, sequel, and television series rights, and merchandising and commercial tie-in rights (in respect to the productions that you produce). He must also grant you the right to exploit and distribute any productions that you produce based on the book in any and all media, now known or hereafter devised, throughout the universe in perpetuity. Most of these rights are self-explanatory. You need this broad range of rights because you may choose to produce a production other than your contemplated motion picture (hereafter "Picture") in other media, either initially or as a remake, sequel, or series, and you (and your distributors) also need to be able to exploit your productions in any media now known or hereafter devised.
In respect to ancillary rights, sequel rights are especially important if the Picture has a cool character (like Jason Bourne or maybe Luigi) whom you will want to feature in subsequent original sequel productions based on your Picture. This will be especially important if your Picture is a hit! You don't want to have to go back to the author to buy sequel rights at that point . Merchandising rights will likely not be a big problem or cash-cow with "Looking for Luigi". But with science fiction/fantasy novels, where the author may already be doing some merchandising, they are a big issue and the author may resist granting them. Two common compromises, which are fair, are that you can only make merchandise based on either scenes from the Picture or the likenesses of the actors in your Picture. The author still gets to make his board games and key chains using made-up likenesses.
The author usually reserves all (a) book publishing (print and electronic publishing), (b) radio, (c) live stage, and (d) author-written sequel rights. With live stage and author-written sequel rights, you can generally get Larry to agree to a hold-back: The author will promise not to exploit the live stage rights or "author-written sequel" rights before the earlier of (for example) 5 years after the initial general release date of your Picture or 7 years after the date of exercise of the option. Live stage rights are frankly not a big deal to me, and I rarely ask for the right to purchase them. But "Author-written sequels" can be a very big deal! It is very important to understand what this term means. Author-written sequels are other books which the author will write or has written featuring some of the same characters as are in the first book participating in new or different events which take place either before (prequel)or after (sequel) the events portrayed in the first book (again think the "Harry Potter" or "Twilight" book series). In your grant of rights, you will acquire the right to use the characters from the first book in subsequent original motion picture or television sequel productions based on your Picture, but you can't use the stories or new characters of the author-written sequels without buying them. This right can be critical. Imagine how lousy you and your investors would feel if your Picture becomes a hit, then the author writes a new best-selling sequel to the book and you can't touch it! [continued on page 3].