Lions Gate Films challenges Blockbuster sale, seeks objection ruling

By Caroline Salls

Pittsburgh, April 28 - Lions Gate Films, Inc. is asking a federal court to reconsider its order approving Blockbuster Inc.'s sale of its assets to DISH Network Corp., arguing that an objection tied to its ownership interests in Videograms acquired by DISH was never heard by the court, according to a Thursday filing with the U.S. Bankruptcy Court for the Southern District of New York.

Lions Gate said the court should confirm that its revenue sharing rights are covered by the terms of the asset purchase agreement.

According to the motion, Lions Gate objected to the sale based on its ownership interests under revenue sharing agreements with Blockbuster "and the lack of any ownership interest" by Blockbuster at the time of the sale.

Lions Gate said its objection was overlooked by Blockbuster and the court, meaning it could not have been overruled or waived.

As a result, Lions Gate said DISH Network could have at most only acquired a leasehold interest in some physical and digital units of copyrighted motion pictures in the form of DVDs or digital copies.

Lions Gate said it leased those Videograms to Blockbuster under the revenue sharing agreements for a period of 26 weeks following a film's public release date, with title to the Videogram for each film passing to the lessee only at the end of the revenue sharing lease period.

Lions Gate said the sale order seems to be based on an assumption that it did not object to the sale of the company's interests in the Videograms to the extent that Blockbuster did not have clear title to the interests and instead held only leasehold interests where the revenue share period had not expired.

However, Lions Gate said its objection triggered provisions of the purchase agreement that call for revenue-sharing adjustments.

Lions Gate said DISH claims the sale transferred the Videograms without any revenue sharing obligations.

Blockbuster, a Dallas-based provider of in-home movies and game entertainment, filed for bankruptcy on Sept. 23, 2010. Its Chapter 11 case number is 10-14997.

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