Sinking under legal bills, the Shaw Family Archives [SFA] has tentatively agreed to a 5-year, $3 million licensing deal with its arch-enemy–the estate of Marilyn Monroe–to pull itself out of bankruptcy. The deal would give the Monroe estate control over commercial licensing of hundreds of Monroe images shot by the late photographer Sam Shaw, and finally end protracted litigation between the two companies.

Under the terms of the proposal, the SFA would grant the Estate of Marilyn Monroe LLC “the sole and exclusive right and license” to exploit photographer Sam Shaw’s many images of Marilyn Monroe for commercial uses. The SFA would continue to license the Monroe photographs–including Shaw’s iconic “blowing skirt image of Monroe–for editorial, fine art and exhibition purposes.

Because the SFA filed for Chapter 11 bankruptcy protection last summer, the agreement with the Monroe estate is subject to approval by a federal bankruptcy judge. A ruling is expected later this month.

In court papers seeking that approval, the SFA says, “the Agreement is critical to the [SFA’s] effective reorganization as it ensures the longevity of the [SFA]  as a business by providing the [SFA] with tangible benefits, including: a minimum income that is more than the [SFA] has made in the last three (3) years…and ending most, if not all, of the litigation” between SFA and Monroe’s estate.

Melissa Stevens, operations manager for SFA, characterizes the deal as “a business arrangement that both parties feel will be mutually beneficial to the continued preservation and promotion of both Marilyn Monroe and Sam Shaw’s legacy.”

SFA was forced into bankruptcy largely by unpaid legal bills, which now total more than $1 million. Shaw’s heirs have been embroiled in lawsuits for more than 15 years, fighting not only the Monroe estate but also each other for control of the photographs.

Most costly was the bitter $100 million claim that Shaw filed against his son Larry in 1996. The photographer accused his son of stealing his images and exploiting them for his own gain, without Sam Shaw’s permission. After his death, Shaw’s daughters Meta Shaw Stevens and Edith Shaw Marcus continued to press their father’s claims against their brother.

The siblings finally reached a settlement in 2002, agreeing to combine all the Monroe images in their possession and market them jointly under the Shaw Family Archives name. Larry Shaw, who has since died, was entitled to 50 percent of all revenues under the settlement, while his sisters and other family members shared the remaining 50 percent.

But that wasn’t the end of their legal troubles. The lawyers who had represented them won judgments for unpaid legal fees. According to SFA’s bankruptcy filing, those legal fees alone total more than $1 million.

Then in 2005, Monroe’s estate and its licensing agency, CMG Worldwide, sued SFA for unauthorized use of Monroe’s likeness on some t-shirts sold at a store in Indiana.

The lawsuit brought to a head a disagreement simmering for years between Monroe’s estate and various photographers who own copyrights to images of Monroe. Monroe’s estate had long argued that any commercial uses of those images without the estate’s permission violated Monroe’s right of publicity. It hurt the photographers’ businesses by threatening to sue anyone who used Monroe images on commercial products without the estate’s permission.

The Shaw Family Archives finally challenged the validity the estate’s right of publicity in court to defend itself against the 2005 lawsuit. In 2007, the judge ruled in favor of SFA, on the grounds that Monroe never had any publicity rights to pass on to her heirs or beneficiaries, because those rights didn’t exist in either New York or California at the time of her death in 1962. (Her residence at the time of her death was subject to some dispute in the case.)

Meta Shaw Stevens said at the time that the victory was “a big boost…in the past, [our clients] had to pay a tremendous amount of money to CMG, which left very little money for photos.  Now companies can come to us, and they don’t have to pay CMG.”

But legal fees from that battle added more than $250,000 in additional legal fees to SFA’s debt. The Monroe estate has also continued to sue the Shaw Family Archives over other issues, such as whether some of Shaw’s images are now public domain because he didn’t renew copyright registration in a timely manner.

And in the end, SFA’s 2007 court victory didn’t improve its licensing business enough to meet its debt obligations, so it was forced to file for bankruptcy last June.

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