Warner Bros. settles lawsuit over ‘Rings’ licensing deal

Clearing the way to move forward with its two planned films of “The Hobbit,” Warner Bros. resolved a nasty legal battle with the heirs of J.R.R. Tolkien over profit from the “Lord of the Rings” films.

Last year, two of Tolkien’s children, Christopher, 84, and Priscilla, 80, sued New Line, now a unit of Warner Bros., for an estimated $150 million that they claimed was owed from the three “Lord of the Rings” movies, which amassed $2.96 billion at the worldwide box office and at least $3 billion in DVD and other ancillary sales, according to the lawsuit.

The lawsuit, which alleged breach of contract and fraud, claimed that the heirs had not received any money under a preexisting licensing agreement that guaranteed them 7.5% of the films’ gross receipts (money that movie distributors receive after theaters keep their share of ticket sales). The rights to Tolkien’s work, originally sold to United Artists in 1969, ultimately ended up with New Line.

However, just days after the lawsuit was filed in February 2008 in Los Angeles County Superior Court by the Tolkien heirs and co-plaintiff HarperCollins Publishers, New Line became a division of Warner Bros., ceasing to operate as a separate studio under corporate parent Time Warner Inc.

On Tuesday, the parties announced that they had settled the lawsuit but declined to disclose terms. The trustees’ attorney, Bonnie Eskenazi, said her clients “feel vindicated and are entirely satisfied with the terms of the settlement.”

Warner Bros. President Alan Horn said his studio was “pleased to put this litigation behind us” and “we all look forward to a mutually productive and beneficial relationship in the future.”

The lawsuit, which sought to terminate New Line’s rights to all of Tolkien’s works including “The Hobbit” until the claims were resolved, was settled in the nick of time. Not only were the plaintiffs scheduled to go to trial Oct. 19, but the two “Hobbit” movies are slated to go into production next year with director Guillermo del Toro and producer Peter Jackson.

In late July, Jackson was served with a deposition subpoena as he was announcing the imminent completion of the “Hobbit” script at pop-culture festival Comic-Con. It was not the first time the filmmaker had been involved in litigation surrounding the Tolkien properties.

In 2005, Jackson himself sued New Line, claiming he had been underpaid as much as $100 million. Producer Saul Zaentz also sued New Line twice. Those lawsuits were ultimately settled.

Each of the litigants criticized New Line’s refusal to let them independently audit all the movies. During the course of the Tolkien trustee litigation, the family was allowed to audit the second and third films, which it had been barred previously from doing.

“We really were able to detail all the accounting improprieties that we saw,” Eskenazi said. “We were set, ready, and very excited to go to trial.”

She said a “significant portion” of the settlement will go to the London-based Tolkien Trust, which distributes money to charities such as Save the Children and UNICEF.

“The beneficiaries of this settlement will be needy people literally all over the world,” Eskenazi said.

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claudia.eller@latimes.com

rachel.abramowitz@latimes.com