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January 14, 2013

Week in Review

By Martha Nimmer

Itʼs a Bird, Itʼs a Plane, Itʼs...the Ninth Circuit Court of Appeals?

Warner Brothers is breathing a huge sigh of relief. Last week week, the Ninth Circuit Court of Appeals decided that a lower court incorrectly ruled that DC Comics -- a Warner Brothersʼ company -- brokered a deal in 2001 with the estate of Superman creator, Jerome Siegel. Absent the deal, the Siegel estate would not be able to recapture its rights in the highly successful comic book hero. This decision comes just months after a federal judge ruled in October of last year that the estate of Superman co-creator Joseph Snyder would not be able to recapture its own copyrights in the brawny superhero. This is all good news for Warner Brothers: now, the company is permitted to "exploit the Superman franchise without fear of substantial legal hassles" from the Shuster and Siegel estates.

Given the widespread success of the Superman character, the estates of his co-creators have devoted many years attempting to "exploit" the termination provision of the 1976 Copyright Act, with the ultimate goal being the recapture of valuable copyrights in the character. That provision of the Copyright Act, according to the its drafters, was to give artists who gave up their copyrights before the true value of the works became known another "bite at the bargaining apple." Facing financial hardship many years ago, Siegel and Shuster gave up their rights to Superman, but for very little money, not knowing how successful their flying superhero would become. Once Supermanʼs fame and notoriety "took off," the Siegel and Shuster estates have been
determined to recapture their rights.

http://www.hollywoodreporter.com/thr-esq/warner-bros-wins-blockbuster-victory-410871

Read the decision here: http://www.hollywoodreporter.com/sites/default/files/custom/
Documents/ESQ/Superman.pdf

Aloha from Hawaii Five-O

Bad news for George Litto, the talent agent who represented the creator of the original Hawaii Five-O series: a judge has granted CBSʼ demurrer to a lawsuit brought against it by Litto, meaning that "barring any reconsideration or appeal, the network has escaped any liability."

Now, why would George Litto sue CBS over the remake of a television show that ended over 30 years ago? It turns out, at least according to Litto, that he was prevented from participating in the creation and production of the new, highly successful Hawaii Five-O series that debuted in 2010. This exclusion, Litto says, prevented him from making "big money" on the remake. The original series aired from 1968 to 1980.

Back in the 1960s, Littoʼs talent agency represented the original Hawaii Five-O creator, Leonard Freeman. Freeman died in 1974. That year, according to the Hollywood Reporter, "an amendment to the contract [between CBS and Freeman] gave CBS the right to produce the show in the future and shifted responsibility of production from Freeman's company to CBS. The Freeman estate got a huge backend profit participation, and CBS wasn't allowed to recoup production overages." Freemanʼs widow and Litto also allegedly reached an agreement in 1996 to work together on future production of the series. Later, in 2010, CBS made a deal with the Freeman heirs, intent on going forward with a remake of the popular show. This deal, at least according to Litto, cut him out of the picture--and the profits. Fast forward to May 2012: Littoʼs agency sues Freemanʼs heirs for cutting the former agent out of dealmaking. Litto has stated that this "backstabbing" has cost him tens of millions of dollars.

The case history gets even more detailed and complex, but ultimately, the presiding judge on the suit decided to dismiss CBS from the case, for a (thankfully) simple reason: "Litto had waited too long to bring the claims," the judge wrote. Specifically, Los Angeles Superior Court Judge Gregory Alarcon stated that the "[p]laintiff instituted this current action over two years after the 2010 amendment was signed. CBS has already produced the television series and to restore the consideration would essentially require CBS to 'un-make' or, in the alternative, pull what has become a very popular television series." Not wanting to disappoint the showʼs fans, and finding it impossible to "unmake" the show, Judge Alarcon decided to dismiss CBS from the suit.

http://www.hollywoodreporter.com/thr-esq/cbs-wins-lawsuit-hawaii-five-409829

The(Mis)Adventures of Bristol Palin

If you thought you heard the last of the Palins, you were wrong.

Last week, A&E Networks settled a lawsuit with Disney Channel actor Kyle Massey over the idea for a reality show featuring Bristol Palin and her son, Tripp. In the suit, brought by Massey and his mother, the plaintiffs alleged that the Masseys created a written, halfhour series featuring the Massey and Palin families. The show, entitled Bristol-ogy 101, followed the families through their normal routines, including watching Bristol attend college while raising her child. Ms. Palin, it is alleged, agreed to work with the Masseys on the show. Two years later, however, found Ms. Palin working with A&E producers on a different show, this one called Bristol Palin: Lifeʼs a Tripp. The show aired on Lifetime, a subsidiary of A&E.

The Masseys alleged that the Lifetime show, which was subsequently removed from Lifetimeʼs prime time lineup, is substantially similar to their original show concept. The plaintiffs also raised claims of copyright infringement, fraud, breach of contract, misappropriation of name and likeness, tortious interference and unfair competition,
among other claims. Before a judge could decide whether the case could go to arbitration, however, the parties came to resolution. Details of the settlement have not been made public.

We still await news, however, about whether Sarah Palin can actually see Russia from her house...

http://www.hollywoodreporter.com/thr-esq/bristol-palin-lawsuit-ae-reality-series-409160

Vimeo or Vime-Uh Oh?

And now, to the wonderful world of the Web! Capitol Records and other major players in the music business asked a federal judge in New York last Friday to grant their summary judgment motion against the user-generated video website Vimeo. The suit, filed in New York federal court, commenced three years ago. Among the claims the
plaintiffs raise are those of copyright infringement, based on Vimeoʼs alleged copying, performing and distributing well known sound recordings by artists such as The Beatles, Coldplay, the Beach Boys and Nat King Cole. The initial dispute has taken three years to resolve because, as the Hollywood Reporter writes, "there was a pertinent piece of litigation about to go before appeals judges that considered the copyright liability of user-generated-content sites, Viacom v. YouTube." The Second Circuit has now decided what is required before ISPs, like YouTube and Vimeo, may gain safe harbor from copyright liability; essentially, the court ruled that that an ISP has to possess "actual knowledge of specific infringements through takedown notices or something else before being required to remove copyright material expeditiously."

Now that the Second Circuit has decided the Viacom v. YouTube case, record label attorneys have gone full force into filing for summary judgment. According to the motion, Vimeoʼs business model intentionally varies significantly from the business approaches followed by YouTube and Veoh. Vimeo, the plaintiffs write, regularly uploads its own infringing videos and expressly tells its users it is lawful to have infringing music in their videos, even instructing users to do so. In essence, plaintiffs complain, Vimeoʼs business model is to infringe copyrighted music as much as possible.

In its motion for summary judgment, Vimeo denied taking such an active role in copyright infringement, stating that in light of "the sheer volume of video content uploaded every day, Vimeo does not -- and cannot -- view every video uploaded by its users to attempt to determine whether it infringes a copyright or otherwise violates
Vimeo's terms of service. Instead, Vimeo relies upon copyright holders to inform it if a user has uploaded an infringing video." Vimeo has yet to tackle, however, a video it provided to CBS for possible inclusion in a 60 Minutes piece about Vimeo owner Barry Diller. According to the Hollywood Reporter, in the video, Vimeo is said to have "questioned whether it should use the video because the music wasn't licensed, with an employee suggesting, ʻ[i]f you want me to make a version that does not have copyrighted music in it, I will do that for you.ʼ"

Scroll down for the text of the suit: http://www.hollywoodreporter.com/thr-esq/bigrecord-labels-push-copyright-408708

January 16, 2013

Pro Bono Clinic February 24th

On Sunday, February 24th, the EASL and IP Sections will be co-sponsoring a Pro Bono Clinic at Dance/NYC's 2013 Symposium. The Clinic will take place between 10:00 a.m. and 1:00 p.m. at Gibney Dance Center (890 Broadway, 5th Floor, New York, NY).

If you are a member of either the EASL Section and/or IP Section of the NYSBA and a licensed attorney and would like to volunteer for one or more of the 30 minute time slots, please email me at eheckeresq@eheckeresq.com and specify your contact information (name, firm/company, phone number and email address), which time slot(s), area(s) of expertise, and whether you are an EASL and/or IP Section member. We are looking for volunteers with experience in the following general areas: Entertainment, Intellectual Property (copyright and trademarks), Licensing, Corporation/Incorporation (please specify if you have not-for-profit incorporation experience), and Collaboration Agreements.

If you do not have pro bono liability insurance, you may be covered under EASL and IP's policy for this Clinic. Please notify me if you need such coverage.

For your information, Dance/NYC's 2013 Symposium will explore the role and reach of New York City dance, and dig deep into the current circumstances of funding, touring, marketing, and education. Envisioned as a meeting of stakeholders--advocates, funders, policymakers, artists, managers, scholars and audiences--the event's primary goals are to: stimulate awareness, interest, and ongoing engagement in NYC dance; share innovation and develop collaborative advocacy, marketing, management, and creative models and information for use by the dance community; generate dialogue and forge dynamic partnerships among individuals and across nonprofit, government, and private sectors.

The 2013 event will make use of Gibney Dance Center's seven dance studios for main sessions, open level master classes, a networking lunch and reception, and more.
Thank you,

Elissa D. Hecker
EASL Pro Bono Steering Committee
eheckeresq@eheckeresq.com

January 17, 2013

Condé Nast's New Boilerplate Freelancer Agreement Contains Company's Exclusive Right to Option Film and TV Rights in its Magazine Articles

By Joan Faier

A January 14th New York Times article reports that Condé Nast's new boilerplate contract for its freelance magazine writers gives the company the exclusive right for a limited time period to option film and television rights to its writers' articles. On the same day, a posting on the Authors Guild (AG) website entitled Condé Nast Moves to Seize, Lowball Freelancers' Film/TV Rights describes this provision of the new contract, which was introduced last year, as "breaking longstanding industry practice." The AG's posting says the new contract provides the company with a "free, exclusive 12-month right to option dramatic and multimedia rights" to articles as well as the right to extend the period, at Condé Nast's sole choice, for up to 24 months for a "modest sum." According to the AG posting, if Condé Nast exercises its option for film or television rights to an article, then the writer, in accordance with the new standard terms, would be paid below-the-industry norm for such rights -- only 1% of the film or television production budget as opposed to the typical industry- negotiated compensation of 2.5% or more of the production budget.

The New York Times article points out that the plans to secure these rights which previously belonged to the writers began in late 2011, when Condé Nast formed an entertainment group because it wanted a share of potential profits from film and television projects based on its writers' works. The Times quotes a Condé Nast spokesperson as saying, "As we expand into digital, film and television entertainment, we are excited to bring the extraordinary work of our writers and photographers to these platforms, showcase their content in new ways, and create expanded opportunities for their work to be enjoyed by new audiences."

The article also states that some writers and agents are still "skeptical" about how many such entertainment projects Condé Nast will be able to bring to fruition. The AG's posting notes that some authors, those "with significant negotiating clout," have reportedly been able to "substantially alter or eliminate the option terms of the new boilerplate agreement." Condé Nast publishes 18 consumer magazines in the U.S., including The New Yorker, Vanity Fair, GQ, Vogue, Glamour and Self.

http://www.nytimes.com/2013/01/14/business/media/conde-nast-contracts-cut-authors-share-in-film-deals.html?_r=0

http://www.authorsguild.org/advocacy/conde-nast-moves-to-seize-lowball-freelancers-filmtv-rights/

January 18, 2013

Economic Espionage Act

By Gergana Miteva, Miteva Law, P.C (www.mitevalaw.com)

President Obama is about to sign an amendment (//www.gpo.gov/fdsys/pkg/BILLS-112s3642cps/pdf/BILLS-112s3642cps.pdf) to the Economic Espionage Act (EEA) which extends trade secret protection for proprietary information which is intangible and it is not directly used by the owner in commerce. Congress drafted this amendment as a response to a recent Second Circuit decision which ruffled some legislative feathers.

In United States v. Aleynikov, 676 F.3d 71 (2d Cir. 2012), the defendant was a former Goldman Sachs employee who allegedly took off with the company's high frequency trading system algorithms and implemented them on his new employer's system. The court pointed out in its opinion that Mr. Aleynikov had been the highest paid programmer in his group, earning a yearly salary of $400,000 (not counting the generous bonuses Goldman Sachs is known to hand out). Aleynikov joined his new employer at a yearly salary of $1 million and was expected to develop a trading system, with functionality similar to that of Goldman's, within six months of his employment - a task that normally would take years to complete. During his last day at Goldman and minutes before his going away party, Aleynikov apparently uploaded 500,000 lines of code to his new employer's servers. He was later arrested in fitting style by the FBI at the Newark Liberty International Airport, carrying a potion of the incriminating code with him.

Mr. Aleynikov was prosecuted under the National Stolen Property Act, 18 U.S.C. § 2314 (http://www.law.cornell.edu/uscode/text/18/2314) and the Economic Espionage Act, 18 U.S.C. §1832 (www.law.cornell.edu/uscode/text/18/1832) in the United States District Court for the Southern District of New York. The case was tried before a jury, which found for the prosecution. Aleynikov was sentenced to eight years of imprisonment, one of the toughest sentences ever imposed under the EEA.

On appeal, the Second Circuit concluded that the defendant's actions did not violate either statute and vacated the conviction. The issue under the NSPA was whether the defendant stole "tangible goods" as defined in the statute; under the EEA, the issue was whether the code was a product "produced for or placed in the interstate or foreign commerce."

On the first issue, the court held that the statute does not apply to intangible goods, which effectively meant that it may not be used for prosecuting stolen source code offenses. According to the court, if Aleynikov had seized the code as it was embodied in a Goldman-owned CD or flash drive, that act would be covered by the statute. The court spun an even thinner web when it reasoned that the interstate transportation of the code on a memory drive was again not transportation of stolen goods, because the affixing of the intangible property to Aleynikov's drive did not transform it from an intangible stolen property into a tangible one. Ironically, Aleynikov's arbitrary decision to upload the code electronically to a remote server, rather than copy it to a memory drive, saved him from serving half a dozen years in prison.

In discussing Aleynikov's actions under the EEA, the court concluded that this statute also did not apply, because Goldman had not placed this particular code in "interstate or foreign commerce," but rather was using it for its internal operations. Again ironically, the same feature that defeated the government's case under the EEA - the fact that the code was not offered for sale or licensing - is essential in establishing it as a trade secret because it is a measure for shielding it from prying eyes.

Possibly disconcerted by the curious result in this case, Congress has now approved an amendment to the EEA that affirmatively protects in-house, intangible trade secrets. The bill is drafted to "clarify the scope of the Economic Espionage Act of 1996" and it expands the statute to include goods as well as services, which covers intangible property such as source code. The amendment also adds the phrase "a product or service used in or intended for use in ... interstate or foreign commerce," which disposes of the requirement that the trade secret be offered for sale or licensing in interstate commerce. Based on this, it would suffice that the trade secret be used in interstate or foreign commerce. These two changes serve as direct "fixes" to the Aleynikov decision - now it remains for them to be tested in federal court before employers may safely exhale.

January 21, 2013

Week in Review

By Martha Nimmer

Furniture Fights

It is unlikely that anyone will ever refer to the current era of reality TV as the "Golden Age" of television, but this television genre has nonetheless produced an array of interesting -- and often weird -- lawsuits. The latest noteworthy suit comes from high-end furniture maker Heptagon Creations Ltd. Last year, Heptagon sued real estate brokerage firm Core Group for copyright infringement. The suit alleged that Core Group used images of Heptagon's furniture without permission, ultimately using the images to create a "virtual, fully-furnished replica of [an] apartment to show interested buyers" on the HGTV series Selling New York. A judge dismissed this claim last year, but Heptagon appealed the decision to the Second Circuit Court of Appeals. The Second Circuit has affirmed the lower court's ruling, stating that "copyright protection does not extend to 'useful articles,' but individual design elements that comprise a portion of a utilitarian article may be eligible for copyright protection if the design element is either physically or conceptually separable form the article's functional elements."

http://www.hollywoodreporter.com/thr-esq/appeals-court-denies-copyright-claim-411452

Read the decision here: http://www.ca2.uscourts.gov/decisions/isysquery/74331957-ff26-421c-8cf4-290b68ebf656/1/doc/12-317_so.pdf#xml=http://www.ca2.uscourts.gov/decisions/isysquery/74331957-ff26-421c-8cf4-290b68ebf656/1/hilite/

Family Feud

Lady Gaga is well-known for her unconventional music, and perhaps even more for her 'unconventional' hair styles and clothing materials (meat dress, anyone?). At least for the near future, however, Lady Gaga will be known for being at the center of a father-daughter legal battle over one of her songs.

Last week, music producer Teddy Riley filed suit in California against his daughter, Taja, concerning a song that he allegedly developed with Lady Gaga back in September 2009. According to the complaint, Lady Gaga shared with Mr. Riley her concept for a composition that was originally entitled, "Show Me Your Teeth," which made it onto her Monster album as the song "Teeth." The music was written by Teddy Riley, he alleges, with lyrics from the Mother Monster herself. What followed next seems to be a classic case of sibling jealously: Taja Riley "'desirous of starting her own career in the music and entertainment business' and aware that her older sister Deja had been 'granted a gift of songwriting credit' by their father," initiated a discussion with her father about whether he would also gift a songwriting credit to Taja. Mr. Riley denies ever giving her such a credit.

Nevertheless, Taja Riley is said to have later signed a deal with EMI Music Publishing and EMI Virgin Music, claiming a co-writing credit and a 24% interest in the song "Teeth." Mr. Riley states that "the representations made by Taja Riley as to participation in the creation of the composition, authorship, and ownership are all false and untrue and that Defendant Taja Riley did not participate in any way in the creation of the composition, and did not own any rights whatsoever to The Song."

Mr. Riley raises several causes of action against his daughter, including copyright infringement, fraudulent copyright registration, unfair competition and accounting. EMI and Sony/ATV have also been named as defendants.

Hopefully for the Rileys, however, the family that sues together stays together...

http://www.hollywoodreporter.com/thr-esq/lady-gaga-producer-sues-his-412327

Read the complaint here: http://www.scribd.com/doc/120358477/Gov-uscourts-cacd-551682-1-0

Thou Shall Not Bid

A famous Hollywood prop is now at the center of a lawsuit filed in Los Angeles Superior Court last week by auction house Profiles in History. The auction house claims that a bidder owes it $60,000 for the Ten Commandments tablets used in the famous Cecil B. DeMille film, The Ten Commandments. Profiles in History claims that Albert Tapper and two unnamed co-defendants successfully bid for the tablets in December. The defendants also won at auction a letter written by Hollywood legend Clark Gable; the winning bid for the letter, according to the plaintiff, was $8,000.

The plaintiff also claims that, following the auction in mid-December, its offices were closed for Christmas and the New Year. After the winter break, however, Profiles in History "sent invoices to defendants and requested payment. Defendants . . . refused to purchase the substantially more expensive [tablets] but represented that they would purchase the . . . [Clark Gable letter]." According to the complaint, the defendants claimed that they would not pay for the tablets because they "did not receive an immediate confirmation that they had won the items but instead had to wait two weeks to find out." The auction house continues to state that the "[d]efendants concealed from plaintiff the fact that they had no intention of paying for the major item purchased at auction, but that defendants carried out an elaborate plan in which they would agree to purchase the substantially less expensive item while keeping the major item for which they were the successful bidder from being sold to anyone else at the auction. This could only have been done through intentional manipulation."

The tablets were originally created by the Paramount Pictures prop department in 1956 for the classic movie The Ten Commandments. According to the complaint, the tablets measure 23 inches by 12 inches by 1 inch, and were "(c)onstructed of richly hewn fiberglass on wood backing ... in an early Canaanite script practiced in the late Bronze Age (c. 13th century B.C.) Moses era. These tablets were created by Paramount Studios scenic artist A.J. Cirialo, who made them to be slightly irregular with molded chips, craters and dings since they were to be carved with God's fire bolts, and he painted them in great detail to appear as carved stone." Also included in plaintiff's suit is a description of the Clark Gable letter. The letter dates from fall 1928, written just before Gable's "breakout performance on Broadway." The letter, cited in full in the complaint, hints at the difficult relationship the Hollywood star had with his estranged father, Will.

The auction house demands $81,600 and punitive damages for fraudulent concealment, fraudulent misrepresentation, negligent misrepresentation and breach of written contract.

http://www.courthousenews.com/2013/01/15/53920.htm

Framed

More legal trouble for Facebook: Instagram--Facebook's recently acquired photo sharing service was served last month as part of what appears to be the first civil lawsuit to result from the photo service's newly revised terms of service. The suit, filed in federal court in San Francisco, raises breach of contract and other claims against the company. The complaint laments the fact that "customers who do not agree with Instagram's terms can cancel their profile," but then are forced to forfeit rights to photos they had previously shared on the service. "In short," the plaintiff states, "Instagram declares that 'possession is nine-tenths of the law' and if you don't like it, you can't stop us."

Instagram's new terms of service sparked outrage across the Internet over a new provision in the terms that would allow the company to utilize users' photos without compensation. The new provisions also included a mandatory arbitration clause, which forced "users to waive their rights to participate in a class action lawsuit, except under very limited circumstances." According to CNBC, the former terms of service contained no such "liability shield." Displeasure with the new terms of service eventually led Instagram founder and CEO Kevin Systrom to "retreat partially" from the new terms, ultimately deleting the language about displaying photos without compensation. Instagram did, however, keep language that "gave it the ability to place ads in conjunction with user content." The new terms also state that "[Instagram] may not always identify paid services, sponsored content, or commercial communications as such." Kurt Opsahl, a senior staff attorney with the Electronic Frontier Foundation, previously criticized Instagram for its revised terms of service; Opsahl later went on to say, however, that he was "pleased that the company rolled back some of the advertising terms and agreed to better explain their plans in the future."

So, unfortunately for Facebook and Instagram, it does not appear that 2013 will be a litigation-free year. Be sure to look out for class action notices in the mail, fellow Facebook and Instragram users!

http://www.cnbc.com/id/100339681

Armstrong Comes Clean; The Legal and Economic Fallout of an Athlete's Mea Culpa

By Jason Rindenau
New York Law School, Class of 2013

While it is difficult to know exactly what motivates a star as singularly driven as Lance Armstrong, it is not hard to predict the fallout from his decision to come clean to doping in a "no holds barred" interview with Oprah this week. As any fan of entertainment and sports can tell you, the mea culpa has become increasingly popular. What drives such ubiquitous celebrities as Michael Vick, Tiger Woods, and Arnold Schwarzenegger to commit gross iniquities and then come crawling back to their constituents (some with more convincing apologies than others) is a subject worth exploring in its own right; however, the fervor with which Lance Armstrong denied using performance-enhancing drugs in the midst of collecting seven Tour de France titles and establishing a hugely important cancer-fighting organization places him in a league of his own.

Armstrong's stellar track record in defending his poster boy-for-perfection reputation has come crashing down on top of him. With an estimated net worth of $125 million, legal experts say immediately filing for bankruptcy could be the price of coming clean, and the vultures are already circling. Sponsors and media outlets as diverse as The Times of London, who long accused the seemingly superhuman Armstrong of doping, and the U.S. Postal Service, want Armstrong to pay for his digressions. Rupert Murdoch, who paid Armstrong fortunes over the years in settlement payouts, is particularly interested. According to Eriq Gardner, reporting for The Hollywood Reporter, even cycling event organizers could sue for fraud in the collection of prize money.

According to the media, one of the reasons why Armstrong's confession is so significant is because of his iconic status. This is not a Barry Bonds or Mark McGwire-type scenario, where perhaps fans expect this type of behavior from their athletes. This is, indeed, a no holds barred retaliation against Armstrong where supporters, journalists, and fans invested in him as an individual and not merely as a member of a sport. Armstrong's admission goes beyond a simple violation of the morals clauses he undoubtedly signed with his sponsors. It represents a violation of trust by all of the supporters who stuck by him during one cancer diagnosis after another, and they want their money back.

Individual cyclists are getting in on the action, as well, as those Armstrong publicly criticized over the years in response to doping allegations could sue for defamation. Perhaps the most sensitive questions involve the future of Livestrong, the charity Armstrong founded in his home state of Texas in 1997. What is important to keep in mind is that the 501(c)(3) non-profit now operates entirely independent of Armstrong. As a result of the doping scandal, he is no longer chairman of the group, formerly known as the Lance Armstrong Foundation, nor does he maintain a seat on the board of directors.

Despite Livestrong's obvious willingness to keep Armstrong at arm's length, sponsors are still balking. Major League Soccer's Sporting Kansas City announced on Thursday, the day Part 2 of Oprah's interview aired, that it would cut ties with Livestrong and drop the organization's name from its masthead, a move that is likely to send both companies to court. Robb Heineman, CEO of Sporting Kansas City, denies that the scandal had anything to do with breaching its contract with the mega-non-profit. It was, he insists, economic.

In a deal which guaranteed Livestrong a percentage of ticket sales, concessions, and other revenue, Heineman says that Sporting Kansas City had no choice but to modify key terms of its contract, which became necessary when Livestrong could not uphold its end of the bargain. Heineman argues it was, in fact, the doping scandal which distracted Livestrong from fulfilling its obligations, a sentiment which is likely to be echoed in the coming months by nearly all of Armstrong's former business partners.

January 23, 2013

Lance Armstrong

By Suzanne Bagert
sb@sbagertlaw.com

Last week, Lance Armstrong ended an over 15-year cover up, and confessed to doping throughout his preeminent cycling career to Oprah Winfrey. Until now, the legal system has proven powerless to reign in Armstrong and his cohorts, and in fact, was often used as their sword against his detractors. Yet this confession promises to change that, and potentially gives rise to complex litigation by dozens of plaintiffs, numerous causes of action -- both civil and potentially criminal -- and even to defendants other than Armstrong himself.

To understand how one cyclist's doping confession can lead to complex litigation with international implications, we have to consider many factors. These include Armstrong's legendary story, the multi-million dollar business relationships that followed and reinforced it, the insiders club of wealthy pro cycling enthusiasts who finance and govern the sport, and the lengths and ferocity of the doping cover up that was led by Armstrong for many years in order to protect them all.

From the 1990s until last week, Armstrong had always vehemently and aggressively denied ever doping, and he viciously attacked anyone who suggested otherwise. We now know, by his own admission, that Armstrong was systematically doping all along - before he had cancer, through all seven Tour de France victories, and throughout the entire era of his cycling dominance. For all those years, Armstrong doped and covered it up with impunity from any sanction or liability imposed by any of cycling's governing bodies, or by the law. Why is he "coming clean" now?

In 2012, the United States Anti Doping Agency (USADA) commenced an investigation into the longstanding allegations that Armstrong had doped throughout his cycling career. Last October, USADA issued a detailed and reasoned decision finding Armstrong guilty of serial cheating through the use of performance enhancing drugs, and of being the ringleader of a massive doping conspiracy among those involved with his team. Based on this conclusion, USADA stripped Armstrong of all of his competitive results since August 1, 1998, and gave him a "life sentence" under the World Anti-Doping Code, making him ineligible to compete in sports that are signatories to the Code. This renders Armstrong ineligible to compete in pro cycling, and in elite triathlons, where he has recently set his sights for future competition.

USADA finally caught up with Armstrong, where the legal system never could. In fact, the legal system had failed miserably along the way, having allowed Armstrong to collect many millions of dollars in settlements as he abused the process to defend his realm. For example, when SCA Promotions refused to pay him, due to accusations of his doping, a bonus payment for winning the Tour that it had guaranteed, Armstrong sued and ultimately received a $7.5 million settlement. Armstrong also sued the Sunday Times for libel for referencing a 2004 book about Armstrong's doping, based largely upon interviews with Armstrong's former masseuse and assistant Emma O'Reilley. The case was settled in 2006, with the Sunday Times paying Armstrong almost $500,000, and after reportedly taking a terrible emotional toll on O'Reilley. Further, in 2012, the U.S. Justice Department (DOJ) suddenly dropped a two-year investigation into allegations of fraud, trafficking and witness tampering against Armstrong. The DOJ has never explained its reasoning for dropping the investigation.

The USADA report may have begun to clear the path for the legal system to finally handle Armstrong. However it is still difficult to win a case, no matter the other evidence, against a larger-than-life sport figure who aggressively maintains his innocence. One cannot help but wonder whether the DOJ lost its appetite for pursuing sports dopers after it lost the second Roger Clemens trial in 2012, and barely won its case against Barry Bonds the prior year with a one count conviction and a slap on the wrist.

Yet now, Armstrong's confession changes everything. The would-be plaintiffs do not have to prove the hardest part of the case. Armstrong has admitted it. There has been much speculation about Armstrong's motivations in admitting to doping at this point in time. It may be that he wants to compete in elite triathlons, and he hopes that coming clean will lead to a reduction in the USADA lifetime ban from competition. It may be that he has some true desire for authentic redemption. Whatever Armstrong's reason for coming clean, it is hard to imagine that any of Armstrong's lawyers advised that this would be a good move from a legal point of view.

The legal fallout from the USADA report and Armstrong's confession looks like the many-headed hydra of litigation:

• SCA Promotions wants its money back. SCA has announced that it will file suit for $12 million, to recover the $7.5 million settlement it paid Armstrong after insuring his bonus for winning the Tour de France, plus interest and attorney's fees. Armstrong lied under oath in the course of this case.

• The Sunday Times wants its money back. The paper is considering a suit to recover the monies it paid to Armstrong to settle the libel suit, which would presumably be on the order of $1-2 million.

• The U.S. Postal Service (USPS) wants its money back, times three. The USPS reportedly expended $32 million in its sponsorship of the Thom Weisel/Armstrong owned team from 2001 - 2004. Floyd Landis, one of Armstrong's former teammates and the stripped winner of the 2006 Tour, has brought a qui tam suit under the False Claims Act to recover these monies on behalf of USPS. The False Claims Act provides for treble damages, bringing the value of this suit to well over $100 million with interest. Additionally, the DOJ has the option of joining this civil suit, which seems probable, considering that Armstrong's confession makes the case considerably easier to win.

• It is unclear which of Armstrong's other personal and team sponsors will want their endorsement payments back. For years, big brands lined up to stand with Armstrong, including Nike, Giro, Trek, Oakley, Credit Lyonnais, Anheuser-Bush, the USPS, the Discovery Channel, Radio Shack, FRS energy drinks and Honey Stinger energy foods. These sponsors generally have the right to recover their sponsorship dollars based on a "morals clause" that is typically included in a sponsorship contract. This category of contingent liability could easily exceed $100 million.

• In the criminal realm, based on what Armstrong actually admitted, there is a statute of limitations issue regarding Armstrong's culpability for crimes such as perjury, witness tampering, and fraud. However, because of the multiple jurisdictions at work and numerous instances of wrongdoing, it would be difficult to flatly conclude that the statute of limitations will shield him across the board. Moreover, Armstrong's confession was extremely damaging to his credibility in an environment where there is evidence that of more recent crimes. Will the DOJ revive its criminal investigation? Are there any other criminal claims that survive? If the government were to make a conspiracy or RICO claim, could a more recent "last act" in the conspiracy be used to net the whole lot of defendants?

• Armstrong maintains that he did not dope in the 2009 and 2010 Tours, but there is blood evidence that indicates that he did, and after his years of belligerent lies regarding the 1999 - 2005 Tours, why would anyone believe him? Allegations arising from those more recent tours might not be protected by the statute of limitations.

• Who else will get caught up in the Armstrong juggernaut? What we do not know from Armstrong's confession is who helped him, who knew, and who was complicit in the deceit. In his confessional, he refused to name any of the others who knew about the epic doping program, or those who made it possible by financing, providing, procuring, and disappearing the necessary drugs and the apparatus. There are also aspects of Armstrong's confession that seem implausible, and many believe that aspects of his confession still echo significant untruths. If Armstrong does testify before USADA or in a criminal investigation, where will it lead?

• Could Nike and Oakley be viewed as complicit in the doping? Did Nike make a $500,000 payment to the Union Cycliste Internationale (the UCI), to cover up a positive EPO test? Did Nike know about the doping all along? Does an Oakley employee making threatening phone calls to a witness about baseball bats to the head mean that Oakley is implicated in the cover up?

• Who at the team level was complicit? How aware of the massive doping operation was team owner and Silicon Valley bigwig Thom Weisel? Could knowledge of the doping program be used to pierce the corporate veil?

• Was UCI complicit? Was it bribed by Armstrong and Nike?

• Finally, how many individuals who Armstrong tried to ruin will bring defamation suits against him?

This outline of potential cases clearly represents hundreds of millions of dollars in potential civil liability, through dozens of different lawsuits filed in different venues, courts and jurisdictions, against potentially multiple defendants. If such litigation proceeded on a disjointed basis, the inefficiency would likely be debilitating to the resources available in Armstrong's estate, and the team's. It would also leave the existing resources increasingly diminished for the most personally aggrieved plaintiffs, who are least able to aggressively pursue their cases. It seems that consolidation of the cases, which all arise out of the same general set of facts, may be appropriate, and would be a reasonable way to protect the interests of all the plaintiffs. This could conceivably be accomplished through the guidelines of the Manual for Complex Litigation, the operation of Bankruptcy, or both working in concert.

As for Armstrong, his confession has set table for his own financial ruin and that of his team through civil liability, and he has exposed himself to potential criminal liability. Meanwhile, if what he wants is to be reinstated and allowed to compete in pro sports, he has not gone far enough. Both USADA and the World Anti-Doping Agency (WADA) have stated, in no uncertain terms, that reinstatement is not even on the table for discussion unless Armstrong testifies under oath, and undoubtedly, unless he gives a full and unfettered testimony, giving up his many enablers and co-cheats, a direct vector to some very powerful captains of industry and regulators of the sport at its highest level.

January 28, 2013

Week in Review

By Martha Nimmer

Barbie v. Bratz

Good news for Barbie! A federal appeals court in California has ruled that Mattel, Inc. will not have to pay $172 million to MGA Entertainment, Inc. to settle a trade secrets theft suit. The court also did away with an additional $85 million in enhanced damages imposed by a lower court judge against Mattel. The court, however, kept in place more than $100 million in attorney's fees awarded to MGA.

The heart of the suit centered on MGA's big-eyed, pouty-lipped, sometimes scantily-clad Bratz dolls, introduced by the then-relatively unknown toy-maker in 2001. According to Thompson-Reuters, the "long-running saga" over MGA's Bratz dolls began in 2004 as the toys soared in popularity, ultimately leading Mattel to accuse the Van Nuys, California-based doll maker of "stealing its designs by hiring one of Mattel's key employees." In 2008, a jury ruled that MGA and its chief executive, Isaac Larian, would have to pay Mattel $100 million in damages. MGA appealed, and the 9th Circuit threw out the verdict in 2010. Following a retrial in 2011, a jury rejected Mattel's copyright claims, finding the toy maker liable on new trade secret allegations raised by MGA at retrial. Those new counterclaims were the basis of the 9th Circuit Court of Appeals' decision to throw out the 2011 jury award against Mattel. In siding with Mattel, the 9th Circuit ruled that MGA's counterclaims were not "compulsory," in that they were not "based on the same underlying facts as Mattel's trade-secret theft claims against MGA." As such, the lower court judge erred by allowing MGA's additional trade secrets claims to be part of the case. "That both Mattel and MGA claimed they stole each other's trade secrets isn't enough to render MGA's counterclaim compulsory," the court said. "What matters is not the legal theory but the facts."

The 9th Circuit closed with the following piece of advice: "[w]hile this may not be the last word on the subject, perhaps Mattel and MGA can take a lesson from their target demographic: Play nice."

The case is Mattel Inc. v. MGA Entertainment Inc., 11-56357, U.S. Court of Appeals for the Ninth Circuit (San Francisco).

http://www.bloomberg.com/news/2013-01-24/mga-bratz-win-over-mattel-partly-erased-by-appeals-court.html

http://newsandinsight.thomsonreuters.com/Legal/News/2013/01_-_January/Appeals_court_sides_with_Mattel_in_latest_Bratz_fight/

Royal Intrigue

The Queen of Versailles, one of the hit films last year at the Sundance Film Festival, follows the daily life of the Siegel family. They are just like any other family, except that they live in a $75 million replica of the Palace of Versailles. The film shows the mansion being put on the market for a fraction of the home's value, as the global economic crisis comes to a head. This "rags-to-riches-to-rags" story of David Siegel, self-made time-share baron of the Westgate Resorts empire, made for an intriguing, if at times cringe-inducing, film. Mr. Siegel, however, is not a fan of the movie--he filed a defamation action last year against the movie's director, Lauren Greenfield.

Last month, the parties gathered for an evidentiary hearing as part of Mr. Siegel's defamation suit against the film's director. Both Mr. Siegel and Ms. Greenfield testified in court, and submitted briefs on the question of whether the film was, in fact, defamatory.

However, a judge must now rule if the dispute should be resolved in arbitration. This would seem like a cut-and-dry issue, considering that the director has a signed released form, stipulating that disputes would be resolved through arbitration. To get around that form, however, Mr. Siegel alleges that his son, Richard, who signed the form, lacked the "full authority to bind Westgate Resorts to arbitration." Essentially, as Hollywood Reporter stated, Mr. Siegel is "selling out his own son . . . ." Although Richard Siegel is a vice president of Westgate Resorts, the plaintiff contends that this was a "strictly honorary" designation, "unaccompanied by any of the traditional corporate authority such as a position might otherwise garner its occupant." In fact, the plaintiff is quick to point out, "that title . . . has been bestowed upon approximately a dozen other individuals working for one of the distinct companies within the Westgate Resorts organization."

Defense counsel, in response, writes that the plaintiff's claim that Ms. Greenfiled's work was unauthorized is "incredible on its face," adding that David and Richard Siegel both authorized the making of the film and the giving of the Westgate Resorts release, and hundreds of people were aware of it. How could over 200 personal releases be signed after shooting company activities if David did not give authority -- real or apparent -- to Richard?" the defendants ask. "The content of the film is the best evidence that David is lying."

A judge is expected to rule on the case soon.

Sixteen Seconds of Fame

The 7th Circuit Court of Appeals has dismissed a woman's invasion of privacy and misappropriation of image claims against comedienne Joan Rivers. Plaintiff Ann Bogie sued Rivers, IFC Films and others following the release of the documentary Joan Rivers: Piece of Work. The documentary follows Joan Rivers and features her performing one of her stand-up comedy routines. During one particular performance, Ms. Rivers discussed her dislike of children, but said that she would have made an exception for a young Helen Keller, "because she didn't talk." Upset by the joke, an audience member heckled Ms. River for the comment. Following the show, Ms, Rivers was approached backstage by the plaintiff, and the two shared a few words that were captured by the cameras filming the documentary. Ms. Bogie told Rivers that she (Bogie) "never laughed so hard" in her life." Ms. Bogie referred to the heckler as "[that] rotten guy," adding that she "was ready to get up and . . . 'tell him to leave.'" This interaction appeared in the documentary, which aired on IFC. Ms. Bogie was none too pleased, however, and sued.

Unconvinced by her claims, the 7th Circuit Court of Appeals wrote in its decision that Ms. Bogie "voluntarily approached a celebrity just after a public performance," adding that "[a]ny reasonable person would expect to encounter some kind of security presence, and indeed here that presence was visible. Furthermore, the camera crew must have also been visible to Bogie as they were filming both Rivers and, of course, Bogie. Courts have found that even performers themselves cannot count on a reasonable expectation of privacy in their own backstage areas."

Now that the suit has been dismissed, Ms. Rivers can concentrate fully on her two self-described interests: making fun of people and getting plastic surgery.

http://www.hollywoodreporter.com/thr-esq/joan-rivers-wins-privacy-dispute-413473

Read the decision here: http://www.ca7.uscourts.gov/tmp/P91EVT32.pdf

Unsportsmanlike Conduct?

Citing the importance of football in the "social lives of Arizonans," the Arizona attorney general has sued the state's NFL team, the Cardinals, in an attempt to force the team to provide captioning for the deaf on all monitors in the team's stadium. Attorney General Tom Horne filed the suit last week on behalf of Michael Ubowski, a deaf Cardinals fan. According to the complaint, Ubowski made numerous, albeit unsuccessful, "attempts between October 2005 and 2007 to consult with Arizona Cardinals' management and encourage them to adopt effective auxiliary aids and services to provide deaf and hard of hearing patrons an experience like that enjoyed by other Arizona Cardinals fans, as the team previously had at Sun Devil Stadium". According to Courthouse News Service, the team perviously used open captioning--a service that transmits information to every person in the stadium--at Arizona State's Sun Devil Stadium in Tempe from 1988 to 2006; that practice ended, however, when the Cardinals moved to the then-new University of Phoenix Stadium. Notably, the New England Patriots, Pittsburgh Pirates, Washington Redskins, and New York Yankees use open captioning in their stadiums, according to the complaint.

Two years after moving to the University of Phoenix Stadium in 2008, the Cardinals had removed the caption-enabled monitors, and began using three wireless personal digital assistants capable of displaying captions, but allegedly "failed to post information about the availability of this auxiliary aid on their website until August 2011, one year after the devices first became available." The complaint states that Ubowski and his father tried to use a PDA during a Cardinals game on September 26, 2010, but "found that the PDA was difficult to locate, obtain, and use." Additionally, there were "delays in the transmission of the captions and frequent device malfunctions," and the PDA "made it impossible to communicate in sign language, cheer, clap, eat, and drink, and also diverted [Ubowski's] attention from the field and scoreboard."

The Arizona Attorney General is seeking a permanent injunction against the defendants so that they will "permanently provide open captioning at the stadium during Arizona Cardinals' football games and events at University of Phoenix Stadium," on all monitors, and to train their employees "regarding operation of the captioning equipment and assistance for people with sensory disabilities."

http://www.courthousenews.com/2013/01/21/54096.htm

She's a He

Bizarre is the only word that describes the Manti Te'o Internet girlfriend hoax. Fearing that this hoax may have legal repercussions, the alleged voice of Manti Te'o Internet girlfriend Lennay Kekua has hired an attorney. The lawyer for the man who has been identified as the creator of the hoax, Ronaiah Tuiasosopo, told the New York Daily News that his client "disguised his voice and assumed the identity of Lennay Kekua to try to develop a relationship with Te'o." Attorney Milton Grimes said that Te'o "thought it was a female he was talking with. It was Ronaiah as Lennay." Grimes added that Tuiasosopo was not trying to hurt Te'o: "[t]his wasn't a prank to make fun. It was establishing a communication with someone . . . It was a person with a troubled existence trying to reach out and communicate and have a relationship."

Earlier this week, the Notre Dame star linebacker appeared on Kate Couric's show, Katie, to explain his role in the apparent hoax. "It didn't sound like a man," Te'o told Couric during the interview that aired on Thursday. Te'o added "[i]t sounded like a woman. It's incredible that he can make that noise." To support his story, Te'o provided voicemails to the program that he says are from the person whom he thought was Kekua. Although the quality of the recording is poor in some of the supplied clips, in a few, the voice does, in fact, sound female. According to Te'o, Tuiasosopo called him to confess and apologize shortly before the hoax came to light this January.

For readers who have been lucky enough to miss this story, the hoax was revealed earlier this month when sports blog Deadspin.com reported that the relationship had been faked. In September, Te'o told media outlets that he had lost both his grandmother and girlfriend "within the span of one day." The Notre Dame star said that his girlfriend, Lennay Kekua, had survived a car accident, but died after an unsuccessful battle with leukemia. Despite the loss of both his grandmother and Kekua, Te'o did not miss any football games for Notre Dame, saying that he had promised his deceased girlfriend that he would play even if something had happened to her. Sports media outlets reported on these tragedies during Te'o's strong 2012 season for Notre Dame when he emerged as a Heisman Trophy candidate. After receiving an anonymous email tip on January 11, 2013, however, Deadspin.com reporters Timothy Burke and Jack Dickey conducted an investigation into the identity of Kekua. On January 16th, they published an article that said they found no record of a woman named Lennay Kekua, and that the story of her death was actually a hoax. According to the report, "the pictures published in the media supposedly of Kekua were actually taken of Diane O'Meara, an acquaintance of Ronaiah Tuiasosopo."

In a press conference following the Deadspin.com report, Notre Dame athletic director Jack Swarbrick tearily confirmed that the university had hired private investigators to uncover the source of the hoax, adding that Te'o's relationship with Kekua was "exclusively an online relationship." This characterization conflicted with Te'o's father's previous account of his son's relationship with Lennay Kekua; Brian Te'o, the football player's father, said that Te'o and Kekua had met after a football game and that she visited him in Hawaii. Te'o previously told Sports Illustrated that she had seen him at a USC game when he was a sophomore.

To make this story even stranger, Ronaiah Tuiasosopo has met with Dr. Phil to discuss the hoax in an interview scheduled to air next week.

http://espn.go.com/college-football/story/_/id/8875990/lawyer-ronaiah-tuiasosopo-was-voice-talking-manti-teo

About January 2013

This page contains all entries posted to The Entertainment, Arts and Sports Law Blog in January 2013. They are listed from oldest to newest.

December 2012 is the previous archive.

February 2013 is the next archive.

Many more can be found on the main index page or by looking through the archives.