By Sue Zeidler
LOS ANGELES (Reuters) - CBS Corp is in settlement talks with cast members of the popular 1970's TV show "Happy Days" to end a legal dispute over revenues from the sitcom's merchandise, an agreement that could have broad ramifications for how TV actors are compensated.
Representatives for the actors, who include Anson Williams, Marion Ross, Don Most, Erin Moran and the widow of Tom Bosley, began negotiations with CBS after a California judge ruled earlier this month that their case could go forward, according to two people with knowledge of the talks who asked to remain anonymous.
A CBS spokeswoman declined to comment directly on the talks, but did release a statement saying: "We have never refused to pay the members of the 'Happy Days' cast any of the money they are owed under their contracts, and we'll continue to honor those obligations."
Representatives for the actors were either unavailable or had no immediate comment.
CBS had sought a summary judgment to end the lawsuit, arguing the actors were properly paid. But the ruling by California Superior Court Judge Elizabeth Allen White means the case will go to trial as scheduled on July 17, unless a settlement is reached.
The actors' lawsuit, which was not joined by "Happy Days" stars Ron Howard and Henry Winkler, was originally filed in April 2011 and sought $10 million from CBS, alleging the actors were not fully compensated for the sale of a broad array of 'Happy Days' merchandise including: comic books, T-shirts, board games, lunch boxes and drinking glasses.
CBS challenged the suit and Judge White in October 2011 dismissed claims for fraud and punitive damages, significantly reducing the potential damages.
The actors are pressing ahead with merchandising royalty claims saying they are owed for the use of their images on DVD packaging, which legal experts say could fetch about $500,000.
They have already received royalty payments on the DVDs themselves, but are trying to apply a merchandising formulation to the packaging.
While the amount they are seeking is relatively low in terms of Hollywood legal battles, the case could set a costly precedent for actors' compensation because it would allow stars of TV shows to be paid for the use of their images on products in addition to royalties they collect from the products themselves, according to legal experts.
"It would likely be a shocking and costly development if courts started interpreting contract language to require a separate merchandising revenue for the use of actors' likenesses on video packaging," said Jay Dougherty, professor of entertainment law for Loyola Law School in Los Angeles.
He said the actors were taking an unusual tactic.
"I wouldn't be surprised if the two sides reached settlement over this dispute because the studios wouldn't want this precedent out there if it resulted in a ruling against CBS," said Dougherty.
CBS has argued DVDs are covered under their current Screen Actors Guild agreement allowing it to "reuse photography from ‘Happy Days' to exploit the television series without making additional payments to plaintiffs," according to court papers.
White ruled earlier this month that "defendants have not met their initial burden of showing that plaintiffs are not entitled to merchandising royalties for the use of their likeness on DVD sets sold to consumers."
The popular "Happy Days" series aired from 1974 to 1984. The Bosley, who portrayed the character Howard Cunningham in the long-running series, died in 2010.
(Edited By Ronald Grover, Bob Tourtellotte and Leslie Gevirtz)