The Fight Over Art the Clown: A Look at the Terrifier Lawsuit

A $5,000 contract signed in 2013 is now at the center of a federal lawsuit over one of the most profitable horror franchises ever made. Every business owner and creator who has ever signed away rights should pay attention.

By Peter J. Lamont, Esq.

Art the Clown has become one of the most recognizable horror villains of the last decade. The Terrifier films built around him have grossed more than one hundred million dollars worldwide, spawned a merchandising empire, and even earned the character his own haunted house at Universal Studios. Now a federal lawsuit claims that the filmmaker behind the franchise does not actually own the rights to his own creation. As a New Jersey intellectual property attorney, I see the same underlying problem in businesses across Bergen County and throughout the state: paperwork signed early, for very little money, that quietly controls everything that comes after.

A $5,000 Deal at the Center of a $100 Million Franchise

Damien Leone created Art the Clown in a pair of low-budget short films, Terrifier and The 9th Circle. According to a complaint recently filed in federal court in California by Ruthless Studios, Leone signed a series of agreements in 2013 with Ruthless Pictures, the company's predecessor, transferring ownership of those two shorts for $5,000. The complaint alleges that the transfer was not limited to the films themselves. It claims the agreements also conveyed the related copyrights, trademarks, sequel rights, and the right to create derivative works of all kinds based on the material.

Ruthless says it financed and produced the 2013 anthology film All Hallows' Eve, which incorporated both shorts and introduced Art the Clown to a wider audience, and that it spent years distributing and promoting the character. The franchise then exploded. The first Terrifier feature, released in 2016, was made for roughly $35,000. Terrifier 2 earned over ten million dollars against a $250,000 budget, and Terrifier 3 became the highest grossing unrated film in history, earning more than ninety million dollars worldwide. A fourth film is in the works, and the character now appears on toys, apparel, video games, and live events.

That success is exactly why a $5,000 contract from 2013 is now the most important document in the franchise's history.

What a New Jersey Intellectual Property Attorney Sees in the Ruthless Complaint

Ruthless Studios sued two of Leone's production companies, Dark Age Cinema and Art the Clown LLC, alleging copyright infringement, trademark infringement, unfair competition, and improper profiting from the franchise without authorization. According to the complaint, Ruthless permitted Leone to make the first low-budget Terrifier feature as a one-time exception, after he allegedly acknowledged the company's ownership rights and asked for permission. Ruthless claims it was then cut out entirely as Leone and his companies produced Terrifier 2 and Terrifier 3, signed merchandising deals, and expanded the brand without notice or consent.

The relief Ruthless seeks tells you how high the stakes are. The company is asking for damages, an accounting of profits, injunctive relief, and a court declaration that it owns the copyrights to Terrifier 2, Terrifier 3, and all related sequels, merchandise, video games, events, and other derivative projects. In plain terms, Ruthless is asking a federal court to hand it the franchise.

Two points deserve emphasis. First, these are allegations. Leone and his companies have not yet answered the complaint publicly, and the agreements will be tested in litigation, where questions about scope, interpretation, performance, and conduct over the intervening decade will all matter. Second, even if the defense ultimately prevails, the cost of fighting over ownership of your own core asset is enormous. The dispute casts a cloud over the fourth film, the licensing program, and every deal the franchise wants to make while the case is pending. That is the real lesson for business owners: the fight itself is the damage, and it was set in motion by a contract signed when the property seemed almost worthless.

Assignments, Licenses, and Derivative Works: Where Ownership Really Lives

The legal concepts driving this case show up constantly in ordinary business deals throughout New Jersey. An assignment is a transfer of ownership. A license is permission to use something the other party still owns. The difference between those two words in a contract can be worth the entire value of your company, yet many owners sign agreements without ever asking which one they are agreeing to.

Derivative works are the other concept at the heart of the Terrifier dispute.

Under the federal Copyright Act, the owner of a copyrighted work controls the right to prepare works based on it, including sequels, adaptations, and remakes. Ruthless argues that Terrifier 2 and Terrifier 3 are clearly derivative of the original short film because they share the same central character, themes, story elements, visual style, and even the logo and title design. When you assign a work along with its derivative rights, you are not just selling what exists today. You are selling the future of that property, in whatever form it takes and however valuable it becomes.

In our Bergen County practice, we regularly see this pattern outside the entertainment world. A founder assigns software to an early investor and later wants to build a new product on the same code. A design firm sells a logo and the client assumes it owns every future variation. A small business owner signs a broad assignment as part of a financing or vendor deal without realizing the language reaches products that do not exist yet. None of these people thought they were selling their future. The paperwork said otherwise.

The Second Lawsuit: A One Percent Deal and No Records

The Ruthless case is actually the second major lawsuit facing the franchise. In late 2025, actress Catherine Corcoran, who appeared in the original Terrifier film's most infamous scene, sued Leone and producer Phil Falcone in California federal court for breach of contract. According to her complaint, she worked for the SAG minimum day rate in exchange for a deal entitling her to one percent of the profits generated by Terrifier, including box office, streaming, live events, and merchandise. She alleges that despite the franchise's nine-figure success, she has been paid roughly $8,300, and that when she pressed for answers she was told the production did not keep records. The defendants deny the claims and have moved to dismiss.

Whatever the outcome, the allegations describe a familiar failure. Profit participation deals are only as good as their definitions and their paper trail. A well-drafted agreement spells out what counts as profit, what expenses come off the top, when payments are due, and what audit rights the participant has. A business that grants backend interests without an accounting system is building a lawsuit into its own success. In New Jersey, contract claims generally carry a six-year statute of limitations under N.J.S.A. 2A:14-1, which means a poorly documented profit arrangement can surface as litigation years after everyone thought the deal was ancient history.

How a New Jersey Intellectual Property Attorney Protects You Before You Sign

The time to win an ownership dispute is before it exists. If you are creating, buying, selling, or licensing intellectual property in New Jersey, a few disciplines will save you from the Terrifier problem.

Read the assignment and derivative works language before anything else. Know exactly what you are transferring, whether the transfer covers sequels and future versions, and whether any rights revert to you if the other party fails to exploit the work. If you are the buyer, insist on clear chain of title so nobody can later claim the rights you paid for. If you are the creator, negotiate scope limits, reversion rights, and approval rights over future uses of your work, and be very careful about signing broad transfers early, when the property seems to have little value. Damien Leone allegedly signed away a franchise for $5,000 because in 2013 nobody imagined what Art the Clown would become.

Document everything, and keep the records current. Register your copyrights and trademarks, keep signed copies of every agreement, and maintain accounting that can support any royalty or profit-sharing obligation you take on. This matters just as much for content creators and influencers as it does for traditional businesses, because creative properties can go from worthless to extremely valuable overnight, and the contracts you signed at the beginning travel with the property forever.

Finally, have counsel review the deal before you sign it, not after the dispute starts. A New Jersey intellectual property attorney can spot a one-sided assignment, an undefined profit term, or a missing reversion clause in an afternoon. Untangling those same problems in federal court takes years and can cost more than the rights were ever worth. The Terrifier lawsuits will eventually be resolved, but the fight over Art the Clown was avoidable, and the version of that fight brewing inside your own business probably is too.

Interested in More Legal Insights?

Explore our range of resources on business and legal matters. Subscribe to our podcast and YouTube channel for a wealth of information covering various business and legal topics. For specific inquiries or to discuss your legal matter with an attorney from our team, please email me directly at pl@pjlesq.com or call at (201) 904-2211. Your questions are important to us, and we look forward to providing the answers you need.

Contact us today to discuss your business or legal matter. Put our 20+ years of legal experience to work for you.

---

For detailed insights and legal assistance on topics discussed in this post, including litigation, contact the Law Offices of Peter J. Lamont at our Bergen County Office. We're here to answer your questions and provide legal advice. Contact us at (201) 904-2211 or email us at  info@pjlesq.com.

About Peter J. Lamont, Esq.

Peter J. Lamont is a nationally recognized attorney with significant experience in business, contract, litigation, and real estate law. With over two decades of legal practice, he has represented a wide array of businesses, including large international corporations. Peter is known for his practical legal and business advice, prioritizing efficient and cost-effective solutions for his clients.

Peter has an Avvo 10.0 Rating and has been acknowledged as one of America's Most Honored Lawyers since 2011. 201 Magazine and Lawyers of Distinction have also recognized him for being one of the top business and litigation attorneys in New Jersey. His commitment to his clients and the legal community is further evidenced by his active role as a speaker, lecturer, and published author in various legal and business publications.

As the founder of the Law Offices of Peter J. Lamont, Peter brings his Wall Street experience and client-focused approach to New Jersey, offering personalized legal services that align with each client's unique needs and goals​.

---

DISCLAIMERS: The contents of this website and post are intended to convey general information only and not to provide legal advice or opinions. The contents of this website and the posting and viewing of the information on this website should not be construed as, and should not be relied upon for, legal or tax advice in any particular circumstance or fact situation. Nothing on this website is an offer to represent you, and nothing on this website is intended to create an attorney‑client relationship. An attorney-client relationship may only be established through direct attorney‑to‑client communication that is confirmed by the execution of an engagement agreement.

Disclaimer: Recognition by Legal Awards

The legal awards and recognitions mentioned above do not constitute an endorsement or guarantee of future performance. These honors reflect an attorney's past achievements and should not be considered as predictors of future results. They are not intended to compare one lawyer's services with those of other lawyers. The process for selecting an attorney for these awards can vary and may not include a review of the lawyer's competence in specific areas of practice. Potential clients should perform their own evaluation when seeking legal representation. No aspect of this advertisement has been approved by the Supreme Court of New Jersey.