Our Alchemy stipulation resolves Netflix license agreement dispute

By Caroline Salls

Pittsburgh, July 27 – Our Alchemy, LLC’s Chapter 7 trustee requested court approval of a stipulation reached with Netflix, Inc. in connection with license agreements for internet transmission, according to a motion filed with the U.S. Bankruptcy Court for the District of Delaware.

Chapter 7 trustee George R. Miller said through the parties’ distribution agreement, Alchemy licensed to Netflix subscription video on demand (SVOD) rights to various film and television titles controlled by Alchemy.

Miller said Netflix filed a motion in November 2016 for relief from the automatic stay imposed by Our Alchemy’s bankruptcy filing to allow termination of its agreements with the company and provide for payment of accrued license fees.

Following an initial hearing, an order was entered by agreement of the parties granting Netflix relief from the stay and preserving all other issues raised by the Netflix motion for a subsequent ruling.

According to the motion, with the exception of fees paid under a separate stipulation, Netflix has not paid any license fees to the trustee or to Our Alchemy, arguing that any license fees that came due since the Our Alchemy’s bankruptcy filing were pending a resolution regarding the rights of Netflix and the company’s estates.

Meanwhile, Miller claims that the agreement termination notices were not valid under the terms of the distribution agreements and that substantial license fees are due to the Our Alchemy estates.

Netflix believes that it is entitled to various set offs against any license fees that would otherwise be owed, that it has various ongoing rights in licensed titles and that it is entitled to assert claims in the bankruptcy cases, including claims for its attorneys’ fees and costs.

Under the proposed stipulation, Netflix will pay to the trustee accrued unpaid license fees for the period from June 2016 through December 2016 for specified titles.

The total accrued fee payment, provided that the trustee obtains all payee acknowledgements and there are no unresolved licensor objections, would be $2.19 million.

The trustee agrees and acknowledges that no further license fees are due from Netflix in connection with specified titles, and Netflix will continue to have a fully valid and enforceable license to those titles.

Netflix will pay license fees for “direction-to-pay” titles to the applicable payee. Miller said the portion of the accrued fee payment attributable to these titles is $625,283.

In exchange for continued license rights to exploit ongoing titles for the remainder of the title’s term, Netflix will pay to the trustee a total of $1.47 million in two installments.

A hearing is scheduled for Aug. 29.

Our Alchemy is an independent film distribution company. The company filed bankruptcy on July 1, 2016 under Chapter 7 case number 16-11596.

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