In the News Law360

Kirkland, NYC Charities Secure 'Sesame Street' Royalties

Kirkland & Ellis LLP’s pro bono legal services helped 10 New York City charities secure almost $600,000 in lump sum payments for royalties from the works of the late Tony Geiss, a screenwriter for “Sesame Street” and “The Land Before Time,” among other children’s classics.

Kirkland’s Anna Salek and Kristen Curatolo worked with a royalty exchange startup to auction the royalty bundles, which notably included “Elmo’s Song,” songs from “The Land Before Time” and the theme music for “Abby’s Flying Fairy School,” the firm announced Aug. 8. The payors, which include Sesame Workshop and Google, had been hesitant to pay out the royalties to the charities, which ranged from the New York Public Library to the American Cancer Society Inc., incrementally over the next 64 years, which they regarded as an administrative strain, Salek said.

“The royalty payors didn’t want to cut checks to the 10 charities for a period of 70 years,” Curatolo said. “So our goal was to figure out the simplest solution in order to give them finality so their financial lives wouldn’t be intertwined for that long of a period of time.”

Geiss, who died at age 86, invented several Muppets characters, adapted "Sesame Street" for the big screen, and not only created the five-minute segment “Elmo’s World,” which debuted in 1998 to draw a younger audience to the show, but also composed its famous theme song. Over the course of his involvement with the show, "Sesame Street" won 22 daytime Emmy awards for screenwriting and songwriting.

Beyond his "Sesame Street" career, Geiss wrote the screenplay for “An American Tail,” a cartoon about a Russian mouse who immigrates to the U.S., and “The Land Before Time,” another cartoon film about orphaned dinosaurs that has spawned numerous sequels and even a TV show — both works produced by Steven Spielberg.

Much beloved by audiences nationwide, Geiss’ works, and in particular their copyrights, continue to generate substantial royalties. The Estate of Tony Geiss named 10 New York City charities beneficiaries of such royalties: the New York Public Library, Doctors Without Borders, City Harvest Inc., the Central Park Conservancy, the American Cancer Society Inc., the National Foundation for Cancer Research, the Wildlife Conservation Society, the Nature Conservancy, the National Audubon Society Inc. and the National Parks Conservation Association.

After Geiss died in 2011, however, the payors were reluctant to comply with the terms of the royalty streams, viewing the system of sending payments to each charity in differing, incremental amounts over 64 years as prohibitively burdensome on an administrative level, Salek said.

The payors include Sesame Workshop, Google, Warner Brothers Pictures, and the American Society of Composers, Authors and Publishers, as well as the Writers Guild of America East, the Writers Guild of America West, Rights Flow, KIDdesigns Inc. and Entertainment Partners.

Meanwhile, the charities faced the challenge of coordinating to find a way to administer the royalty payments that would satisfy each one’s interests.

Their dilemma came to the attention of Kirkland when the National Parks Conservation Association’s general counsel, Elizabeth Fayad, reached out to Jacqueline Haberfeld, who runs the firm’s robust pro bono practice, requesting assistance. About a year and a half ago, Haberfeld asked Salek and Curatolo to take on the case, knowing they had expertise in estate administration as members of Kirkland’s trusts and estates department.

"It was difficult to herd all of the charities together and organize at the top with every general counsel to ensure everyone was on the same page,” Salek said. “I think they were in need of someone to act as their quarterback."

Seeking the advice of the firm’s intellectual property group, Salek and Curatolo brainstormed a number of strategies to simplify the royalty payments, toying with the ideas of dividing checks for larger sums or creating a limited liability company. But it was Curatolo’s “outside the box” thinking that led them to an online exchange for royalties, Salek said.

Denver-based Royalty Exchange, which was founded in 2011, had never before sold royalties from an estate, Salek said. Similarly, Curatolo and Salek’s colleagues at peer firms had never worked with, let alone heard of, a company that could bundle, market and promote royalties as the Royalty Exchange advertised.

“We really trailblazed with this approach,” Curatolo said.

After the charities got on board, Kirkland received approval to proceed with the auction from the Office of New York Attorney General Eric Schneiderman, which “sympathized with the charities,” recognizing that they would otherwise be forced to wait decades to fully realize the payments, Curatolo said.

"Our clients would rather see that money now as opposed to later,” Salek said.

The Royalty Exchange helped the charities value their royalty payment streams, deriving a price for auction from the previous 12 months of royalties that the copyrights had generated. Once the value of the payment stream was vetted, the company worked with the payors to promote the bundled streams.

The bids started with $430,000 and, a week later, the copyright royalty payments sold for a total of $580,000 — more than five times the $108,500 the collection earned in 2016.

Kirkland staffs and supports pro bono in the same way and with the same resources as it supports billable work, a representative for the firm said. In 2016 alone, 92 percent of Kirkland lawyers contributed more than 100,000 hours to pro bono legal services, an average of 66.6 hours per attorney.