Image of "Star Team," Star Wars knockoff toys, from Star Wars blog.

In a statement released to Entertainment Weekly about the matter, Fox said

Of course we are concerned about the fans; however, any disappointment from the core fans should not be directed toward Fox. What we are doing is seeking to enforce our distribution rights to Watchmen. Legal copyright ownership should not just be swept under the rug and ignored.

Warners, for their part, are saying very little in response:

We respectfully disagree with Fox's position and do not believe they have any rights in and to this project.

While Fox may have good reasons to try and delay or destroy the release of Watchmen (Not least of which would be to protect their own summer movies, including X-Men Origins: Wolverine, due out the week before Watchmen's projected date), they deny that they are trying to do any such thing; they're just trying to protect their interests and have been trying to do so since the movie started pre-production:

[A]ccording to a Fox source, studio lawyers contacted Warner Bros. about the distribution rights issue several times prior to the start of production but were rebuffed.

Uncivil Society's Jeff Trexler found more damning evidence in Fox's favor when examining the court documents:

Arguably the most explosive sentence in the order: "It is particularly noteworthy that nothing on the face of the complaint or the documents supplied to the Court establishes that Gordon, the claimed source of Warner Brothers' interest in 'Watchmen,' ever acquired any rights in 'Watchmen.'"

Deadline Hollywood has a timeline of events, as laid out in the court documents; again, it's not looking too good for Warners:

1994: Fox negotiated a “Settlement and Release” agreement with Gordon which contemplated that the Watchmen project would be put in “perpetual turnaround” to Lawrence Gordon Productions, Inc. The “turnaround notice” gave Lawrence Gordon Productions “the perpetual right . . . to acquire all of the right, title and interest of Fox [Watchmen] pursuant to the terms and conditions herein provided.” The turnaround notice then described the formula for determining the buy-out price in the event that Gordon elected to acquire Fox’s interest. Thus, the document suggests that Gordon acquired an option to acquire Fox’s interest in Watchmen for a price... May 2006: Warner Brothers, allegedly with knowledge of the 1991 Quitclaim, entered into a quitclaim agreement with Gordon under which it claims to have acquired the rights to the Watchmen project. Fox alleges that these facts demonstrate that, at the very least, it retained distribution rights in Watchmen, that it performed all of its obligations under the relevant agreements, and that while it granted Gordon what amounted to an option to acquire its rights, neither Gordon nor his successors ever fulfilled their contractual obligations to Fox. Indeed, Fox contends that Warner Bros either knew or turned a blind eye to the fact that Fox had retained distribution rights in the project, and that Gordon had not perfected his interest in the Watchmen project before quitclaiming it to Warner Brothers.

It now falls to Warners and/or Lawrence Gordon to prove that the Fox option was exercised, or perhaps pay the kind of settlement to Fox that Charlie has previously hinted at; one thing is for sure: Warners need Watchmen's buzz and potential box office next year, and they're probably willing to pay any price to keep it.

The Watchmen War [Entertainment Weekly]
Watchmen lawsuit original documents [Uncivil Society]
SAVE US! Warner's 'Watchmen' In Legal Peril After Judge Won't Dismiss Fox Suit [Deadline Hollywood]

Fox is seeking an injunction to stop the March release of Warners' Watchmen movie, and they've managed to find the most sympathetic judge in L.A., Lawrence Feess. In a nutshell, Fox argues that Warners obtained movie rights from producer Lawrence Gordon, but Fox already owned the rights to distribute any movie made by Gordon. In a similar case involving the Dukes movie, Judge Feess granted a preliminary injunction preventing Warners from releasing the film.

But in the Hazzard case, Warner Bros. agreed to pay the plaintiffs at least $17.5 million to settle their claims, and the movie came out as planned. (In retrospect, Warners may regret that settlement, considering how badly Dukes did.) It seems likely that Fox is simply lining up for a payout, and Watchmen will come out on time — but it'll simply be even more expensive than Warner Bros. already bargained on. Watchmen Babies image from Time.com. [New York Times]

In a series of three excellent posts, Trexler explains just what last week's ruling in favor of the Siegel family actually means... and doesn't mean:

Even in regard to the Siegels' interest in Action Comics #1 and works derived from it, the Siegel heirs are at best co-owners with DC (the Shuster situation is explained in brief here). Each holder of copyright interest must account to any others for any profits gained from exploiting the copyright, and no partial copyright holder can transfer exclusive rights without consent of the others holding a copyright interest. In addition, as the court rules (pp. 63-66), under the law the Siegel heirs regain an interest only in domestic—not foreign—profits.

But wait, there's more! A number of elements in the Superman "universe" (see pp. 13-14) did not appear in the first issue of Action Comics. Kryptonite, Lex Luthor, Metropolis, Beppo the Super-Monkey—none of these appear in the issue. Superman could not fly, nor does he have super-breath, heat vision or a Fortress of Solitude with an interplanetary zoo and the Bottle City of Kandor. The extent to which the Siegels' profit distribution will be affected by subsequent additions to the original material is yet unresolved.

The situation gets far more complex when deciding what constitutes a derivative work from Action #1. Given how much of the current character is distinct from the material in that story, the amount that the Siegels should receive from new material (i.e., from April 16, 1999 onward) is open to debate.

Making this more difficult is the relation of the Action Comics #1 material to Superman trademarks. Superman trademarks include elements from the relevant copyrighted material, from aspects of Superman's uniform to certain characters to the logo, which reflects the classic Ira Schnapp design "based on Joe Shuster's concept." This is cutting-edge unresolved intellectual property law, with ramifications far beyond the comic book community. Anyone looking for an easy and immediate answer will, alas, be disappointed... Even if the cases didn't settle and the Shusters prevailed, the termination only applies to domestic U.S. copyright. The retention of trademark and foreign copyright by DC & co., as you can imagine, creates a far more complex situation, as does the fact that so much of the current character does not appear in the Action Comics #1 material. I'm not saying it would be easy, but there are things that Time Warner could do without a license, just as there are opportunities the creators' families couldn't exploit without dealing with Time Warner.

Instead of worrying about DC folding up, expect a settlement with both the Siegel and Shuster families, albeit perhaps one that is more favorable to them in terms of finances and the creators' recognition than might have otherwise been obtained.

The Siegel-Superman decision, A Siegel Superman copyright decision FAQ Copyright, trademark and the death of Superman [Uncivil Society]

Part of the challenge, says Eick, was "we only had the rights to the show's title and the character's name, but, legally, we couldn't depict mechanistic technology that involved parts being placed on the body."

I'm guessing this is the same legal circle jerk (involving the novel which the 1970s show was based on) which prevents a DVD release of the Lindsay Wagner series. In other words, Bionic Woman is reflecting our real-life universe: intellectual property keeps us from reaping the benefits of assistive technologies. Private ownership won't even let us imagine some possible futures. As a result, we don't have a cyborg with sturdy machine limbs, we have a much flimsier superhero. Image by Win McNamee for Getty Images.

Not Your Father's 'Bionic Woman' [Associated Press]