Friday, Mar. 27, 2009

Hard Rock Park founders say they're due a cut of the profits

Some original founders of Hard Rock Park said Thursday they still have intellectual property rights over the park's overall concept and want an annual $500,000 licensing fee and royalties from the park's new owners, who bought the park out of bankruptcy last month, according to court documents.

FPI MB Entertainment, the group that purchased the park for $25 million, said the compensation request not only threatens the reopening of the park, planned to be by Memorial Day, but the attraction's entire existence.

At issue is whether the rights to the layout, design and theme of some of the park's attractions and the park itself were transferred with the park's assets to the new owners by the federal bankruptcy court in Delaware.

Ultimately, that will be up to a judge to decide. A hearing is scheduled for 11 a.m. today.

``It certainly is possible to separate intellectual property from the physical assets . . . that were sold,'' said Richard Stolker, a bankruptcy lawyer at Uptown Law in Rockville, Md. ``Now whether that was done or not, you'd have to look at the documents that were filed.''

The new owners say the sale of the park was approved by the bankruptcy court ``free and clear of all encumbrances,'' indicating the intellectual property rights were transferred to them. They say the founders also have no more rights over the park because they failed to object to the original sale order.

The founders say the park's intellectual property did not belong to HRP Myrtle Beach Operations, one of the corporations that filed for bankruptcy, and thus could not have been transferred. Instead, they say the rights belong to HRP Creative Services Co., a separate corporation set up by the founders and one that never filed for bankruptcy.

HRP Creative Services was incorporated in Florida. According to the Web site of that state's Division of Corporations, the park's founders _ Jon Binkowski, Felix Mussenden and Steven Goodwin _ are partners in the corporation. Goodwin served as CEO of the park.

In an e-mail to the park's new owners that was included in the court documents, Goodwin asks for the licensing fee and for 1.5 percent of gross revenues over $50 million. Goodwin says that is a ``fair offer'' for such a ``magnificent park.''

``I find it inconceivable that you can consider opening the park in 2009 without securing an agreement with us to utilize our intellectual property, as the cost and time to strip out our creative content from the park would seem to rule out such a course of action,'' Goodwin wrote on March 1 to FPI MBE.

HRP Myrtle Beach Operations gave HRP Creative Services similar compensation for the intellectual property rights, according to court documents, though Goodwin headed both corporations and signed for both of them in the agreement between the two, which was finalized in 2006.

In their court filing, the founders say even changing the names of the rides would violate their rights if no licensing fee were paid.

Dennis Drebsky, an attorney representing HRP Creative Services, said Goodwin was not trying to hinder the opening of the park.

``From the point of view of Steve, he'd like the park to go on and be a success,'' Drebsky said. ``That's not what we're trying to do. He's just trying to get fair compensation for what his corporation owns.''

The motion filed by FPI MBE says that Goodwin is ``trying to shamefully unravel all that has been accomplished after laying behind the log'' when the court originally approved the sale of the park.

``Erstwhile silent, Goodwin now belatedly claims that he and his ill-conceived company . . . actually still own the park's basic DNA or alleged underlying intellectual property,'' the new owners' motion says. ``Not just on some discrete level, but in a most integral, wide-ranging and all-inclusive manner.''

FPI MBE is asking the bankruptcy court to affirm that the founders waived their intellectual property rights by not objecting to the sale order, that FPI MBE purchased all of HRP Creative Services' rights with the sale and for protection against future litigation.

Representatives for the park's buyers could not be reached Thursday.

Stevan Lieberman, a principal at Greenberg & Lieberman, an intellectual property law firm in Washington, D.C., said it is not uncommon for businesses to set up a separate corporation to hold their intellectual property rights. In some circumstances, though, doing so could be illegal.

``There are rules that say you can't transfer something knowing that there are debts that have to be dealt with,'' he said. ``That would be called a fraudulent transfer.''

The $400 million park opened in April and closed in bankruptcy in September after a lackluster first season. Two of the original investors in the park have also given financial backing to FPI MBE, including Tim Duncan, who also served on the park's board of directors.

According to court documents, Duncan will testify today that Goodwin did not seek board approval before transferring the intellectual rights to HRP Creative Services and that the bankrupt corporations, not HRP Creative Services, paid for the filing fees for the park's trademark registrations.

The original owners of the park licensed the Hard Rock brand from Hard Rock International for $2.5 million a year and are not claiming any rights over the Hard Rock Park name. The new owners are still negotiating with Hard Rock International over whether the name can be kept this year.

Contact MIKE CHERNEY at 444-1765.