Litigation may threaten Hobbit films

New Zealand film-maker Peter Jackson may have more in common with JRR Tolkien's heirs than he thought - they are also complaining about big studio accounting methods.

Tolkien's family and a British charity they head, the Tolkien Trust, are seeking more than £134 million in compensation for the Lord of the Rings trilogy Jackson made in New Zealand.

The Tolkien heirs sold movie rights to the LOTR books 40 years ago for 7.5 per cent of future receipts, but say that three films and £3.6 billion later, they have not seen a cent of the proceeds.

Jackson himself threatened to sue the New Line studio in a separate row over royalties from the Lord of the Rings, leading then studio chief Bob Shaye to declare that the New Zealander would "never" make The Hobbit.

That dispute was settled in late 2007 and Jackson and his partner Fran Walsh were named as executive producers for the two Hobbit films now in pre-production.

But the Bloomberg news agency today reported that the Tolkien heirs' case against New Line Cinema, a unit of Time Warner, will start in the Los Angeles Superior Court in October, and is expected to probe the studio's accounting practices.

"The litigation also threatens to derail two The Hobbit films that, if their predecessors are a guide, could generate £2.4 billion in sales,"' the newsagency reported.

The Tolkiens also want the option to terminate further rights to the author's work, according to the complaint.

"Should this case go all the way through trial, we are confident that New Line will lose its right to release The Hobbit," said Bonnie Eskenazi, an attorney with Greenberg Glusker, the Los Angeles firm representing the heirs. Time Warner declined to comment, a spokesman for Warner Bros said.

The company is asking Judge Ann Jones to reject the heirs' claim they can revoke rights to The Hobbit.

Tolkien, a writer and professor at Oxford University who died in 1973, received £153,000 from United Artists when he signed over the film rights in 1969.

New Line was to pay a percentage of all gross receipts, after deducting 2.6 times the production costs, plus advertising expenses in excess of a certain amount, according to Eskenazi.

But the heirs, including Tolkien's son, Christopher, 84, and his daughter, Priscilla, 80, alleged New Line inflated expenses and excluded revenue from its calculation to deny the family payment.