Santa Monica Pictures, LLC, Perry Lerner, Tax Matters Partner - Page 126

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          the chain-of-title for most, if not all, of the EBD film titles.            
          Even a cursory review of available information as of December 11,           
          1996, would have demonstrated these gaps.  Moreover, CLIS’s                 
          contribution of the film rights to SMHC and the transfers leading           
          up to that contribution do not establish specifically what rights           
          SMHC obtained in the EBD film titles.  In the Court’s view, a               
          hypothetical willing buyer either would have demanded some                  
          reasonable assurance of SMHC’s rights in the EBD film titles or             
          would have required a substantial discount to account for the               
          gaps in the chain-of-title and possible liabilities for illegal             
          distribution.150                                                            
               At trial, John Peters of Epic Productions testified                    
          regarding the nature and the condition of the EBD film titles               
          that CLIS contributed to SMHC.  Mr. Peters was charged with                 
          selecting the EBD film titles for CLIS’s contribution to SMHC; he           
          was instructed to select film titles that would not affect the              
          overall value of the CDR library.  He selected films that had               
          very little value, films with distribution rights that were set             

               150 Bahman Naraghi, who has considerable experience in the             
          filmed entertainment business, testified that a company’s rights            
          in its motion pictures play a critical part in the filmed                   
          entertainment business, because “That’s what is valued.”  He                
          testified that chain-of-title confirms the validity of those                
          rights and provides the basis for proper copyright filing and               
          protection of copyrights.  He testified that copyrights secure              
          the fundamental rights on any given film title in the form of               
          intellectual property in all jurisdictions of the world that                
          observe copyright laws and, therefore, guarantee the right to               
          receive income derived from the exploitation of film rights.                





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