Can We Make Custom Movie Posters?

Dear Rich: I have a question for you. We run a theatre here in Ottawa, Ontario and wanted to start creating our own 'promotional posters' for upcoming movies. Our movies are mainly cult classic and B-movies anywhere from 1940 to 1980. We would like to hire an artist to create a custom promo poster advertising the showing of the film at our theatre. We pay for rights to play the film, but we're unsure if we are allowed to create these custom movie posters. Also, we would like to print a limited supply of these posters, say 100 – 200, to offer souvenirs from our theatre. Do you have any idea if this would be breaking the law? I see this done a lot for music venue's (the resale of music venue posters), but never for theatres. Any advice would be awesome! Wow, will you be showing our favorite B cult movie, Carnival of Souls? We loved that movie when we first saw it and still love it today (and the fabulous soundtrack). And just as the lead character moved in and out of reality, the film moved in and out of copyright. Some claim it is in the public domain while others claim that a chain of title has been reestablished.
Right, you had a question. We love your theater for presenting older films (no subwoofers needed for these movies) and we love your theater for making original posters of the film. (Can we pre-order Carnival of Souls?). We hope our love for you doesn't affect our judgment but the short answer is that we think your creation and sale of movie posters will probably be fine.
The difference between music posters and movie posters? Yes, there is a diff. Movie posters usually include copyrightable elements from films or copyrighted characters from those films -- think Sam Spade, Superman, or the Terminator. That's not the case with music posters where the emphasis is on the artwork and the event. We bring that up because the only way we can see you tripping any alarms is if you use copyrighted stills or imagery from a film (or as in the case of this lawsuit, you copy a non-film copyrighted image into your poster). But if we were a betting blog, we'd bet that the copyright owners of these films (if they are even aware of your use) won't bother chasing after a hip Ottawa movie theater which may after all, be one of the few paying venues showing such films. Takeaway: If you're really paranoid, keep in mind that the more original the poster -- and the less use of stills from the films -- the less chance for hassle.
This just in from our CYA Dept., We're not experts on Canadian copyright law which differs in many ways from U.S. Copyright law (also, note the distinction between "fair dealing" and "fair use").