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August 2013 Archives

August 1, 2013

Pace University School of Law seeing Career and Professional Development Advisor

Pace University School of Law in Westchester is seeking a part-time Career and Professional Development Advisor for law students and alumni (20 hours weekly; please note this will include afternoon hours). Responsibilities will include working with the Assistant Dean for Career & Professional Development and the other counseling and other administrative staff of the Center for Career & Professional Development to counsel JD and LL.M students and alumni about legal careers and career paths, identifying internship and employment opportunities, reviewing and critiquing resumes and cover letters, interview preparation, maintaining student counseling and job placement records, developing career panels and other programs and events, and assisting with other projects as requested by Assistant Dean and Directors.

Applicants must have a Juris Doctor degree, a minimum of 3 years of law practice experience, ability to maintain confidentiality, strong writing skills and computer literacy; ability to work in a team environment and must be able to work some afternoon hours. Prior legal career counseling and/or mentoring experience preferred.

Applicants may apply through the website at: https://careers.pace.edu/applicants/jsp/shared/frameset/Frameset.jsp?time=1375299434937

August 2, 2013

Week in Review

By Martha Nimmer

"Passing Off" a Popstar

Popstar Rihanna can now count United Kingdom High Court Justice Birss among her many fans. On Wednesday, Justice Colin Birss ruled that a Topshop jersey sold with the singer's image "caused consumers of the London-based retailer to be misled into thinking she had endorsed" the item. In ruling in Rihanna's favor, Justice Birss also called the artist a "style icon."

Rihanna initiated the lawsuit in the U.K. after seeing her image on an oversized, sleeveless jersey sold by the British apparel label Topshop. The "style icon" alleged that the retailer was "passing off" her approval of the shirt, essentially making a claim similar to what in the United States would constitute a claim of false advertising. (It should be noted that Great Britain does not recognize rights of publicity, so that cause of action was unavailable to the popstar.) In weighing Rihanna's claim, Justice Birss was tasked with investigating why consumers purchase t-shirts and other items that feature the faces of celebrities. Essentially, the Court pondered, did consumers buy t-shirts and the like because they thought that the celebrity depicted endorsed the product, or was it because buyers simply liked the look of the items?

In this case, Justice Birss concluded that, although the mere sale of a t-shirt featuring the likeness of a celebrity is not "passing off" an item, "the sale of this image of this person [Rihanna] on this garment by this shop in these circumstances is a different matter." What made this situation different is that Rihanna is regarded by many people as a style icon, and as such, those individuals are interested in Rihanna's opinions of and preferences in fashion: "if Rihanna is seen to wear or approve of an item of clothing, that is an endorsement of that item in the mind of those people." This perceived endorsement, however, does not rise, on its own, to the level of "passing off." "Selling a garment with a recognizable image of a famous person is not, in and of itself, passing off. To be passing off, a false belief engendered in the mind of the potential purchaser must play a part in their decision to buy the product." Justice Birss, however, was convinced that Topshop had, in fact engendered such a false belief, writing that even though a notable number of consumers would acquire the t-shirt without "giving the question of authorization any thought at all, in [his] judgment a substantial portion of those considering the product will be induced to think it is a garment authorized by the artist."

http://www.hollywoodreporter.com/thr-esq/rihanna-declared-style-icon-winning-597072

Players Get Played, Plaintiff Claims

Electronic Arts (EA) has another class action on its hands: this week, in a suit filed in Brooklyn federal court, plaintiff Justin Bassett alleged that EA sold games online and then eliminated them, despite claims to consumers that the games would be available for unlimited time.

In his complaint, Bassett states that he purchased several sports-themed video games for Xbox 360, relying on the videogame maker's representation that the games were enabled for unlimited, online play. The games included FIFA Soccer 2011 for PCs and videogame consoles for PlayStation 3, Wii and Xbox 360; EASports Madden NFL 10 for Xbox 360; EA Sports NCAA Football 10; EA Sports Tiger Woods PGA Tour; EA Sports NHL 09; EA Sports Tiger Woods PGA Tour 09; and EA Sports NHL 08. Despite paying around $59.99 for each, the games were available for only a limited time, he states. "Had plaintiff known at the time that he would not be able to play the products online for a certain amount of time, he would not have purchased the products or paid the price he paid for the products," avers the complaint. Bassett claims that EA engaged in this activity in order to reduce market share for other, similar videogame products. This campaign to defraud consumers is, the complaint declares, "misleading and deceptive to consumers because EA only provided online support for the products for a limited time." "Consumers," the complaint continues, "frequently rely on labels in making purchase decisions. Here, plaintiff and the other class members reasonably relied to their detriment on defendant's misleading representations and omissions. Defendant's misleading affirmative statements about the capability of online play for the products obscured the material fact that defendant failed to disclose about the limited nature of its online support for the products."
The plaintiff seeks compensatory, statutory and punitive damages for consumer law violations; false advertising, unfair competition and breach of warranty.

So for now, just remember: EA giveth, and EA taketh.

http://www.entlawdigest.com/2013/07/31/2591.htm

Fear and Loathing in Sochi

Seemingly unafraid of an international backlash, Russia has announced its intentions to enforce a new and controversial law targeting gay rights activism when the country hosts the 2014 Winter Olympics in Sochi. The decision was announced on Thursday by the country's sports minister, despite assurances to the contrary from the International Olympic Committee that the law would not be enforced during the 2014 games.

Russia's draconian law was signed into law by President Vladimir Putin in late June. The law will impose fines on individuals accused of spreading "propaganda of nontraditional sexual relations" to minors. Specifically, the law allows for the punishment of foreign citizens, including fines of up to 100,000 rubles ($3,000), time in prison for up to 15 days, deportation and denial of reentry into Russia. The statute also "proposes penalties for those who express these views online or in the news media." Unsurprisingly, gay pride rallies and other public displays of support are also banned under the law.

Seeking, perhaps, to counter its image as a bastion of anti-gay sentiment and fear-mongering, the Russian government assured Olympic hopefuls and tourists that "an athlete of nontraditional sexual orientation isn't banned from coming to Sochi, but if he goes out into the streets and starts to propagandize, then of course he will be held accountable." This clarification, however, brings little comfort to gay athletes and others planning to attend the Olympic Games. Just recently, four Dutch citizens filming a documentary about gay rights in the northern Russian town of Murmansk were the first non-Russian nationals to be detained under the new law. Fortunately, their case did not go to court, according to Russian government-run news agency RIA Novosti.

In response to the oppressive law, some gay rights activists and organizations have called for a boycott of Russian-made products in North America, leading at least one bar in the United States to stop serving and stocking Stolichnaya vodka. Other critics of the law have called for a complete boycott of the 2014 Winter Olympics, while some athletes have called for protests, such as a pride parade, to be held during the games. Some American media outlets, however, have yet to map out their strategy for dealing with the law. Human rights activists have called on American news networks and athletic sponsors to boycott the games; other observers, citing the United States' strong commitment to free speech and freedom of the press, have encouraged American media to report on the controversial law. Mark Lazarus, chairman of the NBC Sports division, recently commented that the International Olympic Committee had assured Olympic athletes, fans, and media "that there won't be any issues," with the enforcement of the new law. Lazarus later added, however, that should the new law affect any part of the Winter Olympics "we will make sure we are acknowledging it and recognizing it."

http://news.findlaw.com/apnews/721b7a87956641e9af7ef482c8f209c9

http://www.jdsupra.com/legalnews/us-media-to-report-on-russias-anti-ga-57092/

NCAA Gets Tough

Don't mess with the NCAA: The athletic association is now holding "everyone more accountable" with the debut of harsher punishments that were approved in October of last year, but which just took effect today.

The tougher penalties facing NCAA rule breakers come more than a year after Pennsylvania State University (Penn State) faced punishment for the Jerry Sandusky child sex abuse scandal. Now, instead of what some critics have called an "outdated" two-tiered penalty structure and deliberative hearing process, the NCAA has adopted new policies that "could result in the suspension of coaches and more consistent punishments for major infractions," writes the Associated Press (AP). In the past, infractions were categorized as major or secondary. Now, there will be four categories, and corresponding punishment will be lightened or beefed up, depending on the presence of mitigating or aggravating circumstances. Teams or colleges that are found to be "in serious breach of conduct" with aggravating circumstances present would face the most severe penalties, even approaching those levied on Penn State. Readers will recall that Penn State faced a four-year postseason ban and a $60 million fine.

Head coaches are not immune from the stricter penalties, either. These coaches will, according to the AP, find themselves under more scrutiny: "by changing the burden from "presumption of knowledge" to "presumption of responsibility," head coaches could now be suspended for up to one full season if any member of their staff commits a serious rules infraction." The goal of this change, according to the NCAA, is to encourage head coaches to be aware of and more actively involved in the day-to-day activities of the team and its members. The effect of this burden shifting will, according to NCAA President Mark Emmert, make "the coaches have a responsibility to set the tone in that room on a daily basis and if they are not, then they will be held accountable."

The infraction committees charged with meting out punishment will also change under the new rules. The NCAA has already increased the number of committee members from ten to eighteen, and could add up to six more members. Emmert believes that this change will lighten committee members' workload, allow smaller groups to conduct many more hearings each year, and speed up a decision-making process that has long been decried as "far too slow." Additionally, under the new regulations, former college coaches will be permitted to hear cases and issue decisions.

Rule breakers beware.

http://news.findlaw.com/apnews/14d5cbc6a29f48b68d30c2e7737096ca

August 12, 2013

Week In Review

By Martha Nimmer

Slugger Suspended

Another MVP has been SWP (suspended without pay). Last Monday, Major League Baseball Announced that New York Yankees third basemen Alex Rodriguez would be suspended without pay for 211 games, based on his alleged violation of league rules that ban the use of performance-enhancing drugs (PEDs). Rodriguez's suspension comes just two weeks after MLB suspended Milwaukee Brewers player Ryan Braun for 65 games.

Rodriguez's suspension began last Thursday, and covers the remainder of the 2013 and the entire 2014 regular season. The 38-year old Yankee announced his intention, however, to appeal his suspension. Pursuant to baseball's collective-bargaining agreement, A-Rod is permitted to play and be paid during that appeals process, which may take a few months to complete. If an independent arbitrator upholds the 211 game suspension, the punishment would be the longest non-lifetime ban in MLB history, costing Rodriguez more than $31 million in lost salary. It is unlikely that the arbitrator will weigh in on Rodriguez's appeal before November, "meaning the suspension, if upheld in its entirety, would not take effect until 2014 and then would cover part of the 2015 season, when Mr. Rodriguez will be turning 40 years old."

The MLB has also accused A-Rod of attempting to obstruct a League investigation into banned drugs. This allegation explains why the former 2003 American League MVP received a much harsher punishment than the other 12 baseball players who were also punished on Monday. The suspended players include Jhonny Peralta of the Detroit Tigers, Everth Cabrera of the San Diego Padres, Antonio Bastardo of the Philadelphia Phillies and Francisco Cervelli, another New York Yankee. Each of these 12 players must sit out 50 games, roughly the remainder of the regular MLB season. All suspended players, according to The Wall Street Journal, are connected to Biogenesis, a now closed Florida clinic that MLB alleges distributed PEDs to athletes.

http://online.wsj.com/article/SB10001424127887324809004578637683563569160.html?mod=e2fb

A Jumpstart for Crowdfunding

Beginning on September 23rd, start up companies will be able to advertise investment opportunities on television, via Facebook, Twitter, and at crowdfunding sites, such as Indiegogo. This change, signed into law in April 2012 by President Obama, comes courtesy of the Jumpstart Our Business Startups Act (JOBS). One of the goals of JOBS is to do away with "some Depression-era restrictions on how fledgling businesses raise money could boost the economy."

Currently, startups are "required to pitch investment opportunities to individuals rather than broadcast them to the masses." Under the new law, filmmakers could gain "access to $300 billion from regular Joes with net worth over $1 million who can own part of the movies they fund." Under the new law, potential investors must be "accredited," meaning an individual (or married couple) with a net worth of $1 million--excluding his/her/their primary residence(s)--or an income exceeding $200,000 in the two most recent years ($300,000 for a couple). About nine million Americans fit those parameters, the effect of which is to open "up access to a lot of capital for filmmakers," according Jason Best, co-founder of Crowdfund Capital Advisors. "There's a lot of people who are passionate about film but can't make one themselves, but they want to be a part of one. Soon, they can."

People who do not qualify as "accredited" can also participate in the new investment scheme: individuals with a net worth or annual income of $100,000 can invest 10% of their income, and individuals with a net worth or incomes less than $100,000 may invest up to 5% of their incomes, or $2,000, whichever is greater. This part of the law will go into effect in 2014. A limitation on the use of unaccredited investors is that a filmmaker may raise only up to $1 million a year per film from these investors.

The new law does have its detractors, however. Critics worry about unsophisticated investors losing money, "especially considering Hollywood's notoriously opaque accounting practices." Supporters of the new investment strategy remain optimistic, crossing their fingers that equity crowdsfunding will be a boon to the still struggling economy. Jason Best estimates that the equity crowdfunding market could reach $4 billion in four years, "with a nice chunk of that going to filmmakers." The new investment measure also has the potential to empower moviegoers and involve them in the filmmaking process: "in the future, predicts EarlyShares chairman Stephen Temes, 'The audience will see a trailer and not only say, Wow, that looks great. I'd like to see it, but also, That looks like such a great movie, I want to invest my hard-earned money into it.'"

http://www.hollywoodreporter.com/news/forget-kickstarter-how-obamas-new-600233

Nava-no

Urban Outfitters is unlikely to win an award for cultural sensitivity. Merchandise sold in Urban Outfitters stores has managed to offend African-Americans, Mexicans, Jews, Democrats, Republicans and eating-disorder awareness groups, among others. Native Americans have also joined the list. The Navajo Nation sued the hipster retailer in March of last year for the company's use of the trademark "Navajo" in connection with the sale of underwear and a flask wrapped in what was described as "Navajo Print Fabric." Other items mentioned in the lawsuit included an "Unknown Techno Navajo Quilt Oversized Crop Tee" and a "Truly Madly Deeply Navajo Print Tunic," according to court papers. Now, Urban Outfitters and the Navajo Nation have announced that mediation efforts ordered by a federal court in New Mexico have failed.

Last September, the Philadelphia-based retailer attempted to have the trademark lawsuit moved from New Mexico to Pennsylvania. Urban Outfitters argued that the New Mexico court was inconvenient for the parties, including the Navajo Nation, headquartered in Arizona. The retailer also argued that the Philadelphia court was "particularly well-versed in intellectual property matters," and that the case would, consequently, be decided more quickly. Unconvinced, U.S. District Judge C. LeRoy Hansen rejected Urban Outfitters' arguments, saying the transfer would inconvenience the plaintiff. Judge Hansen also took issue with the retailer's argument that the Philadelphia court was more experienced in handling IP disputes, adding "all federal courts are presumed to be equally competent" in federal-question cases.

The court eventually sent the dispute to mediation, which took place on July 17th. The mediation, however, proved unsuccessful. Consequently, "pretrial events are scheduled throughout 2014, with the trial set for some time after May 1 2015, according to an Aug. 2 joint filing."

http://about.bloomberglaw.com/legal-news/gsk-urban-outfitters-craigslist-intellectual-property/

Peace, Love & Trademarks

The U.S. Patent and Trademark Office (U.S.P.T.O.) has rejected Craigslist's bid to register the peace sign as a trademark. The San Francisco-based company filed three applications in March 2010 to register the peace sign for use in the company's ad services, online computer databases and interactive online bulletin boards. According to Bloomberg Law, the peace sign "was created in 1958 by British designer Gerald Holtom, for use by the Campaign for Nuclear Disarmament." The symbol is "based on the semaphore symbols for the letters N and D, standing for nuclear disarmament." Since 1958, the symbol has been used in everything from jewelry, anti-war protest signs, bellbottoms and recently, a McDonald's print ad in Finland (http://www.huffingtonpost.com/2011/05/27/mcdonalds-ad-cow-udder_n_868046.html).

The U.S.P.T.O. rejected the first registration, later issuing a second rejection after Craigslist "tried to limit its application to cover only purple-colored representations of the peace sign." This limitation, however, did not change the minds of the trademark examiners. In an opinion, the board said that adding the color purple did "nothing" to render the mark distinctive and hence eligible for trademark protection. "We find that the purple color claim is not sufficiently distinctive to transform the universal peace symbol into an inherently distinctive mark, even as to the applicant's specific services," wrote the board. The board ultimately concluded that the peace sign is a "universal symbol that retains its message in all context. As a result, it "fails to function as a mark."

Peace out, Craigslist.

http://about.bloomberglaw.com/legal-news/gsk-urban-outfitters-craigslist-intellectual-property/

Dereck Seltzer v. Green Day, Inc. et al

By Barry Werbin

The Ninth Circuit issued its significant opinion on Aug. 7th in Dereck Seltzer v. Green Day, Inc. et al., affirming on fair use grounds the District Court's grant of summary judgment to the rock band Green Day and its concert tour video producer and photographer, who had created a four-minute video that included an image of the plaintiff's copyright-protected "Scream-Icon" poster affixed to a wall on Sunset Boulevard. The still image of the poster was taken by the photographer and set designer, Roger Staub, initially for his personal use, who also was a co-defendant and made the video. The video added graphic elements to the plaintiff's work, and was played as a backdrop for one of Green Day's songs ("East Jesus Nowhere") on its 2009-10 national concert tour, including at some 70 concerts and the MTV Video Music Awards.

The Court recognized this was a "close and difficult case," but found that this was a fair use and was [no surprise] "transformative." Yet the Court to its credit delves into the propriety and scope of "transformative use," including as it has been applied by other courts and discussed in various respected law review articles and commentaries.

From the case syllabus: "First, the purpose and character of the use was transformative because the video altered the expressive content or message of the illustration, and the use was not overly commercial. Second, the illustration was a creative work, but its nature included its status as a widely disseminated work of street art. Third, the defendants copied most of the illustration, but it was not meaningfully divisible. Fourth, the video backdrop did not affect the value of the illustration."

The court's description of the video and how the image was "modified" is important and is analogous to Cariou v. Prince (which is referenced in the opinion):

"The video depicts a brick alley way covered in graffiti. As "East Jesus Nowhere" is performed, several days pass at an accelerated pace and graffiti artists come and go, adding new art, posters, and tags to the brick alleyway. The graffiti includes at least three images of Jesus Christ, which are defaced over the course of the video. Throughout the video, the center of the frame is dominated by an unchanging, but modified, Scream Icon. Staub used the photograph he had taken at Sunset and Gardner, cut out the image of Scream Icon and modified it by adding a large red "spray-painted" cross over the middle of the screaming face. He also changed the contrast and color and added black streaks running down the right side of the face."

With respect to the first Section 107 factor, the Court cited to the Supreme Court's statement in the Campbell case (1994) that the "central purpose" of this factor is to see "whether and to what extent the new work is transformative." However, the Court noted (citing to the dissent in Cariou) that "whether a work is transformative is a often highly contentious topic." The Court described the legal body of transformative use cases and commentaries as "treacherous waters." In particular, it focuses on the creation of the doctrine in Campbell based on Judge Leval's 1990 Harvard Law Review article, and found that under that analysis, the use of the poster here was transformative because Scream Icon is only one component of "what is essentially a street-art focused music video about religion and especially about Christianity." While the "message and meaning" of Scream Icon "is debatable," it "clearly says nothing about religion."

The Court also noted that "Although the law in this area is splintered ... our conclusion on transformation is generally in line with other appellate authority on transformative use. In the typical "non-transformative" case, the use is one which makes no alteration to the expressive content or message of the original work.... In contrast, an allegedly infringing work is typically viewed as transformative as long as new expressive content or message is apparent. This is so even where--as here--the allegedly infringing work makes few physical changes to the original or fails to comment on the original." [Citing Cariou v. Prince]

Last, under the first factor, the Court found that "Green Day's use of Scream Icon was only incidentally commercial; the band never used it to market the concert, CDs, or merchandise. Under these circumstances, the first fair use factor weighs in Green Day's favor."

With respect to the second factor, while "Scream Icon is a creative work, meriting strong protection," at the same time the Court considered as a mitigating factor that Scream Icon also had been widely published initially by Seltzer himself as street art, including on the Internet, which "weighs only slightly in Seltzer's favor."

On the third factor, because it is a single image, "Scream Icon is not meaningfully divisible..." Thus, "this court has acknowledged that this factor will not weigh against an alleged infringer, even when he copies the whole work, if he takes no more than is necessary for his intended use."

Finally, on the fourth potential market harm factor, the Court noted that "Where the allegedly infringing use does not substitute for the original and serves a 'different market function,' such factor weighs in favor of fair use." This factor also weighed in favor of fair use because: "The original, created six years before Green Day's use, was primarily intended as street art. Green Day's allegedly infringing use, on the other hand, was never placed on merchandise, albums, or promotional material and was used for only one song in the middle of a three hour touring show. In this context, there is no reasonable argument that conduct of the sort engaged in by Green Day is a substitute for the primary market for Seltzer's art."

The Court did reverse the District Court's award of legal fees against Seltzer, finding that his position not "objectively unreasonable" especially in this case: "This was a close and difficult case. We concluded that Seltzer's work was transformed by Green Day's use. But that transformation was far from obvious given Green Day's only slight alterations to the original. Furthermore, of the remaining three factors, one was in Seltzer's favor, one was in Green Day's favor, and one was neutral. There is simply no reason to believe that Seltzer "should have known from the outset that [his] chances of success in this case were slim to none."

A copy of the decision is attached.Green Day decision.pdf

Dish Network

By Barry Werbin

On July 24, 2013, the Ninth Circuit affirmed the District Court's denial of a preliminary injunction against Dish Network over its "Hopper" DVR that skipped over commercials, as well as its PrimeTime Anytime service. The Court held that the record did not establish that the provider, rather than its customers, made copies of television programs for viewing. The broadcaster did not establish a likelihood of success on its claim of secondary infringement because, although it established a prima facie case of direct infringement by customers, the television provider showed that it was likely to succeed on its affirmative defense that the customers' copying was a "fair use." Applying a "very deferential" standard of review, the panel concluded that the district court did not abuse its discretion in denying a preliminary injunction based on the alleged contract breaches. (The contract claims related to the broadcast contract between Fox and Dish and are not summarized here).

In order to skip over ads on DVR recorded programs, an end user consumer has to enable an "Auto-Hop" feature for programming recording within the Dish PrimeTime Anytime service, which option is not selected by default. Once enabled, however, the consumer only sees the first and last few seconds of an ad. The ads themselves are not deleted from the recording. To create the Auto-Hop functionality, Dish technicians "manually view Fox's primetime programing each night and technologically mark the beginning and end of each commercial. The program content is not altered in any way." These "marked" files are then uplinked and transmitted to subscribers in a special "file" made available to subscribers after a prime time show has aired. Simultaneously with the uplink, Dish records the marked programs for transmission in three selected states for quality assurance testing purposes to make sure that no parts of the programs themselves are cut off.

Citing the Second Circuit's 2008 Cablevision decision (which has been getting quite a lot of mileage lately, but notably had been rejected by the Cal. District Court in the Fox v. Aereokiller case now on appeal), the Court note that "Cablevision's remote-storage DVR system did not directly infringe the plaintiffs' copyrights", because even though a copy made by a user was stored on Cablevision's server and not the user's own equipment, it was akin to making a copy with a VCR. Although here Dish exercised some discretion in setting up the Hopper system, ultimately it was the end user who "must take the initial step of enabling" the prime time viewing option where Auto-Hop was available as an option. Thus, the Court agreed there was no direct infringement because "operating a system used to make copies at the user's command does not mean that the system operator, rather than the user, caused copies to be made. Here, Dish's program creates the copy only in response to the user's command." (This may foreshadow the Ninth Circuit's approach in the Aereokiller appeal with respect to the validity of Cablevision, even though it is a different issue.)

Although the District Court had also found that "Dish likely breached its contract with Fox and directly infringed Fox's reproduction rights" by making the quality assurance copies, it held that Fox was not entitled to injunctive relief because it failed to establish "irreparable harm" as a result of those copies, and the Ninth Circuit agreed, because money damages could be assessed and awarded and "the harms Fox identified - including "loss of control over its copyrighted works and loss of advertising revenue" - did not "flow from" the quality assurance copies themselves, but from the entire AutoHop program."

With respect to secondary infringement, the Court noted that Fox would first have to establish direct infringement by its end users. While the Court agreed that Fox had "established a prima facie case of direct infringement by Dish customers because Fox owns the copyrights to its shows and the users make copies," Dish established that such end use was fair use under Section 107, citing to the Sup. Ct.'s 1984 Sony decision (the "Betamax" case). Fox argued that the time-shifting involved in Sony differed from ad skipping and library building (although the Sony Court had briefly discussed ad skipping by some users and had noted that 25% of users had been fast-forwarding past ads on their Betamax recorders). However the Sony Court never decided whether such skipping was fair use.

Nevertheless, the Ninth Circuit agreed with the District Court that "commercial-skipping does not implicate Fox's copyright interest because Fox owns the copyrights to the television programs, not to the ads... If recording an entire copyrighted program is a fair use, the fact that viewers do not watch the ads not copyrighted by Fox cannot transform the recording into a copyright violation."

With respect to the PrimeTime Anytime service, the Court found that Dish made out a fair use defense. PrimeTime Anytime recordings are stored locally on a customer's Hopper device for a preselected number of days. On the first Section 107 factor, the Court found home viewing was a non-commercial use, as in Sony, because PrimeTime Anytime was a form of time-shifting.

Sony also was cited to support the second and third Section 107 factors, addressing the "nature of the copyrighted work" and "the amount and substantiality of the portion used in relation to the copyrighted work as a whole." The Ninth Circuit found that "the fact that Dish users copy Fox's entire copyrighted broadcasts does not have its ordinary effect of militating against a finding of fair use."

Finally, with respect to the fourth market harm factor, the Court held that this is the "most important element of fair use." As end users record for non-commercial uses, harm to the potential market for the copied works cannot be presumed but must be proven. Unlike in Sony, where no secondary market existed, here Fox licensed its programs to distributors, including Hulu and Apple. However, the Court noted that the trial court record establishes "that the market harm that Fox ... allege[s] results from the automatic commercial-skipping, not the recording of programs through PrimeTime Anytime. Indeed, Fox often charges no additional license fees for providers to offer Fox's licensed video on demand, so long as providers disable fast-forwarding." Thus, "the commercial skipping does not implicate any copyright interest."

A copy of the decision is attached here.Fox v Dish 9th Cir .pdf

August 18, 2013

Week in Review

By Martha Nimmer

Faking It

An elderly man from Queens appears to be at the heart of an $80 million art forgery scandal, according to a federal indictment filed earlier this week. The federal government alleges that Pei-Shen Qian, a 73 year old Chinese immigrant living in the Woodhaven section of Queens, created dozens of paintings modeled after America's Modernist painters, which "were later sold as their handiwork for more than $80 million." Notably, Qian is not named in the indictment, according to The New York Times, but his neighbors report that the FBI searched his home earlier this week. One individual named in the indictment is Glafira Rosales, an art dealer, who is accused of selling the fakes. She is also charged with money laundering and tax evasion.

Qian came to the United States more than 30 years ago, but had struggled to make a living in the American art world, despite meeting with some success in his native China. By the 1990s, Qian had "becoming increasingly disenchanted with his own work." He was eventually "discovered selling his art on the streets of Lower Manhattan in the early 1990s by Ms. Rosales's boyfriend and business partner, an art dealer named Jose Carlos Bergantiños Diaz, who recruited him to make paintings in the style of celebrated Abstract Expressionists." Over the next 15 or so years, the painter "churned out at least 63 drawings and paintings that carried the signatures of artistic giants like Jackson Pollock, Barnett Newman, Robert Motherwell and Richard Diebenkorn, and that Mr. Bergantiños Diaz and Ms. Rosales boasted were authentic." These works were not copies of paintings, but were touted as newly discovered works by famed American artists. Rosales then sold or consigned the works to two well-known Manhattan dealers, Knoedler & Company and a former Knoedler employee named Julian Weissman. These dealers then sold the pieces for millions of dollars, even though the works did not come with any supporting documentation of authenticity. Rosales explained to the dealers that many of the paintings came from a collector who had inherited the works from his father, and refused to be identified. This unnamed owner eventually came to be referred to as "Secret Santa" and "Mr. X."

The scheme, writes The New York Times, began to collapse in 2009, "when questions raised about the authenticity of some Motherwells reached the FBI." Once these concerns about authenticity came to light, angry buyers began to file lawsuits, demanding millions of dollars in damages and reimbursement from the dealers. One of the plaintiffs is a Kuwaiti sheikha.

It remains unclear the extent of Qian's knowledge of the fraud. It is not, after all, against the law to make a replica of a famous painting, or even to sign the name of an acclaimed artist, as long as the work is "clearly identified as a fake." What is illegal, however, is to market the work as authentic. As for Qian, his house in Queens lays empty. He and his wife, according to neighbors, had left suddenly a few months ago. Although he is known to travel frequently to China, his current whereabouts remain unknown.

http://www.nytimes.com/2013/08/17/nyregion/struggling-immigrant-artist-tied-to-80-million-new-york-fraud.html?pagewanted=all

Sorry, I'm Suing You

"Plaintiffs, who have the utmost respect for and admiration of Marvin Gaye, Funkadelic and their musical legacies, reluctantly file this action . . . ." is how singers Robin Thicke and Pharrell Williams' began their lawsuit against the heirs of Marvin Gaye. Who knew that a legal action could be so apologetic?

Thicke, Williams and Clifford Harris, Jr. filed the lawsuit on Thursday in California federal court "in the face of multiple adverse claims from alleged successors in interest to those artists." The complaint says that the Gaye family has continued to allege that "Blurred Lines" and Gaye's "Got to Give It Up" "feel" or "sound" the same. The family of Marvin Gaye and Bridgeport Music are also accused of threatening litigation if the plaintiffs did not pay a monetary settlement. The suit, not so apologetically this time, also claims that the "Gaye defendants are claiming ownership of an entire genre, as opposed to a specific work." Thicke, Williams and Harris, however, hope to put that controversy to rest.

In their suit, the plaintiffs adamantly maintain that "Blurred Lines"--the musical hit of the summer--was created "without copying anyone else's composition." Thicke, Williams and Harris, Jr. seek a declaration that that "there are no similarities between plaintiffs' composition and those the claimants allege they own, other than commonplace musical elements." Further requested is a declaration from the court that says the "Gayes do not have an interest in the copyright to the composition 'Got to Give It Up' sufficient to confer standing on them to pursue claims of infringement of that composition."

http://www.hollywoodreporter.com/thr-esq/robin-thicke-sues-protect-blurred-607492

Read the complaint here: http://www.hollywoodreporter.com/sites/default/files/custom/Documents/ESQ/Robin_Thicke_Complaint%20for%20Declaratory%20Relief%202013.08.15.pdf


Breathing New Life into The Beatles

Fearing that later generations will grow up without The Beatles, Owen Husney, a veteran music executive, has teamed up with a small music publisher to breathe new life into the famed musical works. This collaboration is, it turns out, "the result of a little-known kink in the Beatles' business history." The publishing rights for most of the British group's works are owned by Sony/ATV Music Publishing, a joint venture between Sony and the estate of Michael Jackson; the North American rights to six early songs, however, were owned separately by the Pincus family of publishers in New York. According to The New York Times, Round Hill Music, a small publisher, and the Adage Group, an intellectual property rights firm, purchased these rights from the Pincus family for an undisclosed figure early last year. Usually, for most Beatles works, a party seeking to utilize a song would need the approval of Sony/ATV, EMI, the Beatles and their estates. Just last year, for example, the popular AMC show Mad Men paid an estimated $250,000 to use the Beatles' "Tomorrow Never Knows." According to Matthew Weiner, the creator of the show, it took several years for him to get the required approvals to use the song.

Seeking to capitalize on their investments, Round Hill Music and Adage Group began commissioning covers of the six songs. The earliest example of this licensing strategy appeared on Sunday night's episode of the HBO show True Blood: "a version of 'I Wanna Be Your Man' -- a song that John Lennon and [Paul] McCartney wrote for the Rolling Stones in 1963 and also recorded with the Beatles -- played by Mobley, an indie band from Austin, Tex."

A new Beatles album will also be born of this licensing plan. The album, "Beatles Reimagined," will be released on October 1, 2013 by Community Music, and will feature songs such as "She Loves You," "I Saw Her Standing There" and other early Beatles works. Mostly "underground bands," including Badwolf and the Well Pennies, will play on the album.

http://www.nytimes.com/2013/08/15/business/media/licensing-plan-gives-fresh-plays-to-beatles.html?ref=arts&_r=0&gwh=22FED07535D30A99CCDCAAC4A63532D5

Crime and Punishment

The state of North Carolina and the city of Charlotte have sued the gang Hidden Valley Kings (HVK) and its record label, ICEE Money, in Mecklenburg County Court. The plaintiffs claim "the gang uses its hip-hop label to promote its drug deals, armed robberies and drive-by shootings." According to the complaint, Charlotte says it has no "other adequate means of stopping gang members from associating with one another to plan and commit crimes." The city further claims that the gang, which "has developed a social hierarchy comprised of member 'tiers,'" formed its rap label, which stands for "I See Money," as a front for HVK. "According to its members, ICEE is a record label that promotes gangster rap . . . However, public source information provided by the 'promoters' on YouTube and Twitter accounts, along with interviews conducted by police with ICEE associates, clearly indicates that ICEE is predominately comprised of Tier 1 HVK members is being operated as a front for HVK."

The gang was formed in the late 1980s, and rose to infamy when it was featured in an episode of the television show Gangland, titled "Killing Snitches," which aired in 2009. "On information and belief, HVK is believed to be responsible for several drive-by shootings which are deployed to protect their turf or to retaliate against other gangs or persons. While the Hidden Valley Neighborhood in general is a safe place to live, the increase in HVK's violent actions threatens the health, safety and welfare of the neighborhood and surrounding areas." Unfortunately, the citizens who live and work in the Hidden Valley community are "suffering immediate and irreparable harm" because they are "being denied the quiet enjoyment of their homes and businesses due to the criminal street gang activity engaged in by the defendants and other identified gang members."

The city seeks an injunction under the North Carolina Street Gang Nuisance Act to prohibit gang members and associates from criminal gang activity. As a result of the injunction, HVK members would be prohibited from "driving, sitting, standing, walking, gathering or appearing anywhere in public with other gang members, except to attend church, school or counseling."

http://www.entlawdigest.com/2013/08/15/2628.htm

Time Warner Woes

Time Warner Cable (TWC) has another problem on its hands. First, CBS pulled its channels from TWC's service in several major markets, including New York City and Los Angeles. Now, the cable provider has been hit with a class action lawsuit related to the blackout. In a suit filed Wednesday in Los Angeles Superior Court by James Armstrong, Michael Pourtemour and Vatsana Bilavarn, the plaintiffs say that they were "enticed into subscribing to TWC service by the promise of CBS-owned channels CBS, Showtime, Movie Channel and Los Angeles station KCAL, but have been unable to access them due to the two-week blackout."

CBS and TWC are in the middle of a standoff over CBS' attempt to increase carrying fees for its channels. TWC, however, refuses to budge on pricing. As a result, CBS has pulled its channels. Many New Yorkers are affected by the blackout, but are being "treated" to free re-runs of 1990s family movies on the Starz channel, thanks to TWC's generosity...or fear of losing customers.

In the suit, the lead plaintiffs claim that if they had known of the threat of a program blackout, they would not have subscribed to TWC. Pourtemour specifically states that he would not have purchased TWC's Internet services, either, if the cable TV service was not offered "to his satisfaction." The plaintiffs further state that they had complained to the defendant that they could not watch Big Brother, the PGA Championship, Dexter and Ray Donovan because of the blackout. They also quote TWC advertisements from October 2012 that promise "six free months of Showtime for signing up to TWC basic cable services." "The courtesy replacement programming," the plaintiffs state, "is not a reasonable substitute for programming blacked out, as it does not include a fungible offering of programs relative to CBS and Showtime."

The suit raises several causes of action, including breach of contract, unjust enrichment and violations of California's business and professions code. The class action also hopes to encourage other TWC customers to join the suit. The plaintiffs are seeking an unspecified reimbursement for subscription fees paid.

Enjoy your free Starz while you can!

http://www.hollywoodreporter.com/thr-esq/time-warner-cable-hit-class-606634

Read the complaint here: http://www.hollywoodreporter.com/sites/default/files/custom/Documents/ESQ/bc518210_WM.pdf

United States of America v. One White Crystal-Covered "Bad Tour" Glove and Other Michael Jackson Memorabilia: A 'Thriller' of a Case!

Michael Jackson is a common topic in litigation nowadays. The singer's wrongful death lawsuit is in its fourth month, but the federal government takes the prize for Michael Jackson-related litigation, although the relation is tenuous, at best: the United States government's legal wrangling to seize a Jackson glove from a dictator's son is currently in its 28th month, and is headed for a hearing on Monday, according to The Hollywood Reporter.

The United States initiated its suit in April 2011 when the federal government filed a complaint for forfeiture in rem. The purpose of this action was to obtain over $70 million of possession from Teodoro Nguema Obiang Mangue, the son of the president of Equatorial Guinea. More than 70% of the population of Equatorial Guinea lives in poverty, yet the president's son is said to have somehow "amassed over $300 million in net worth, all while earning an income of less than $100,000 per year as an unelected public official appointed by his father." How did Mangue accomplish such a financial feat, you ask? Officials in the country are corrupt, according to the complaint, and have used bank accounts scattered across the globe to launder funds earmarked for public infrastructure improvement and development. The U.S. government alleges that some of these funds were used to purchase, among other things, the famous "white crystal-covered glove" worn on tour by the late pop star.

Despite the government's efforts, obtaining this glove has not proven easy. In April 2012, after Mangue's legal counsel "objected to the vague charges against him," a California federal judge threw out the complaint, stating that the government had failed to show how Mangue had accumulated wealth in a manner in violation of his country's laws. The judge, however, permitted the United States to file an amended complaint. Now, Mangue is accused of committing bank fraud.

A hearing in Los Angeles is scheduled for Monday. Thus, we await the fate of the "white crystal-covered 'Bad Tour' glove."

http://www.hollywoodreporter.com/thr-esq/us-battling-dictators-son-michael-607295

August 19, 2013

Metropolitan Regional Information Systems v. American Home Realty Network

By Barry Werbin

Metropolitan Regional Information Systems v. American Home Realty Network (4th Cir. July 17, 2013) is an interesting and important decision involving compilation registrations and copyright protections in databases, here consisting of real estate multiple listing service (MLS) data and related photos. The case also addresses the novel but important question of the enforceability of online electronic transfers of copyright ownership interests under E-Sign.

Metropolitan Regional Information Systems (MRIS) offers an online fee-based MLS to real estate brokers and agents. Defendant American Home Realty Network (AHRN) "circumvents those brokers and agents by taking listing data from online database compilers like MRIS and making it directly available to consumers on its 'real estate referral' website." Brokers/agents subscribing to the MRIS service assign to MRIS their copyrights in photos submitted along with the listing data. MRIS also registers is databases with the Copyright Office under regulations covering automated computer databases, which include the photos, text and the collection and compilation of the MLS listings.

The District Court, which is affirmed by the 4th Cir., issued a preliminary injunction against AHRN based on copyright infringement but limited it pending the appeal to enjoining only AHRN's use of the MRIS photos, not the compilation itself or any textual elements. On appeal, the Fourth Circuit initially rejected AHRN's blanket argument that there was no copyright protection in the MLS database as a whole because of a lack of originality as a compilation, citing the Supreme Court's 1991 decision in Feist; however the Court did not rule on that issue in the context of the MRIS database because the scope of the preliminary injunction was limited to the photos.

AHRN made two arguments against the preliminary injunction: (1) when MRIS registered the database it failed to properly register its copyright in the individual photos; and (2) MRIS did not possess copyright interests in the photos because the subscribers' electronic acceptance of MRIS's terms of use failed to transfer those rights. The Court characterized these arguments as presenting "novel questions," but ruled in favor of MRIS.

The Court discusses the copyrightability of "compilations," noting that the "protection afforded to a compilation is independent of any protection that might be afforded to its individual components." However, "compilations made up of individual components which are themselves copyrightable are called 'collective works.'" Section 201(c) of the Copyright Act also provides "a default presumption that the author of a collective work does not own the copyright in any component part" in the absence of an express transfer of copyright.

With respect to the first question on scope of protection arising from the registration of the compilation, the Court held that Section 409, which provides for registration of compilations, "[a]s applied to a collective work whose author has also acquired the copyrights in individual component works, the text of Section 409 is ambiguous at best." The Register of Copyrights, however, has promulgated regulations on this process under 37 C.F.R. § 202.3(b)(5)-(10), "allowing for group registration of certain categories of collective works: automated databases..." "Under this provision, the author of an automated database may file a single application covering up to three months' worth of updates and revisions, so long as all of the updates or revisions (1) are owned by the same copyright claimant, (2) have the same general title,(3)have a similar general content,including their subject, and(4)are similar in their organization."

The Circuit noted that "courts have disagreed on how to apply the Copyright Act's registration requirement to collective works and their component parts," particularly as to whether the underlying "authors" of the components must be identified in a registration application as a precondition to bringing suit for infringement, as was the ruling in a 2010 SDNY case, Muench Photography, Inc. v. Houghton Mifflin Harcourt Publ'g Co., 712 F. Supp. 2d 84.

Here the Fourth Circuit adopts the view that such disclosure is not necessary and that "[t]he Copyright Office is optimistic that those decisions will be overturned on appeal." As MRIS owned the copyrights in the constituent photos that had been transferred prior to its database registration applications, and listed "photographs" as the basis for updating its database registration claims, "'it would be... [absurd and] inefficient to require the registrant to list each author for an extremely large number of component works to which the registrant has acquired an exclusive license.'" [Citation omitted] "Adding impediments to automated database authors' attempts to register their own component works conflicts with the general purpose of Section 409 to encourage prompt registration... and thwarts the specific goal embodied in Section 408 of easing the burden on group registrations."

[Note that there is a new Copyright Office regulation effective August 8, 2012, requiring that "when a registration is made for a database consisting predominantly of photographs, and the copyright claim extends to the individual photographs themselves, each of those photographs must be included as part of the deposit accompanying the application."]

With respect to the second issue, the Court upheld MRIS's argument "that an electronic transfer may satisfy Section 204's writing and signature requirements, particularly in light of the later-enacted Electronic Signatures in Global and National Commerce Act (the "E-Sign Act"), 15 U.S.C. § 7001 et seq...." The Court discusses this point in detail under E-Sign, particularly in the context of the enforceability of an online terms of use that are affirmatively "accepted" by subscribers. The Court found that none of the express exceptions to coverage in E-Sign applied to copyright transfers and emphasized it was not about to imply any such exception. It did note that there has been only one other case to date in the Southern District of Florida that has addressed electronic copyright transfers, where the court held that email conveyance of copyrights was sufficient. The Fourth Circuit thus concluded that "[t]o invalidate copyright transfer agreements solely because they were made electronically would thwart the clear congressional intent embodied in the E-Sign Act. We therefore hold that an electronic agreement may effect a valid transfer of copyright interests under Section 204 of the Copyright Act."

A copy of the Fourth Circuit decision is available here: MGIS decision (4th Cir ).pdf

Faulkner Literary Rights, LLC v. Sony Pictures Classics Inc., et al

By Barry Werbin

The decision in Faulkner Literary Rights, LLC v. Sony Pictures Classics Inc., et al., (N.D. Miss. July 18, 2013) dealt a quick Rule 12(b)(6) dismissal death-knell to a widely criticized claim by the Faulkner folks who alleged that Sony infringed the copyright in Faulkner's book Requiem for a Nun, where, in Woody Allen's film Midnight in Paris, Owen Wilson's character (Gil Pender) at one point misquotes a line from that book (with attribution credit). The misquoted and original lines are:

Original: "The past is never dead. It's not even past."

Misquote: "The past is not dead! Actually, it's not even past. You know who said that? Faulkner. And he was right. And I met him, too. I ran into him at a dinner party."

The District Court had no trouble finding this was fair use. The court in particular cited to Fifth and Second Circuit precedents for the contention that "the substantiality of the similarity is measured by considering the qualitative and quantitative significance of the copied portion in relation to the plaintiff's work as a whole." Qualitative and quantitative significance of course are one of the four core fair use factors under Section 117 of the Copyright Act.

The court also referenced the de minimis copying doctrine, which has been recognized in the Fifth Circuit but without having "specifically enunciated its proper place in the infringement analysis." The doctrine "is part of the initial inquiry of whether or not the use is infringement in the first instance, as opposed to the fair use inquiry, which is an affirmative defense." Either way, the court deemed "both the substantial similarity and de minimis analyses in this case to be fundamentally related, and wholly encompassed within the fair use affirmative defense." As the de minimis doctrine is "largely undeveloped" the court was "reluctant to address it, except within the context of Sony's affirmative defense, fair use."

With respect to the first fair use factor, the court found that "[t]he speaker, time, place, and purpose of the quote in these two works are diametrically dissimilar... It is difficult to fathom that Sony somehow sought some substantial commercial benefit by infringing on copyrighted material for no more than eight seconds in a ninety minute film." Other factors included the comedic context of the film and that the "minuscule" nine words in issue "adds something new, with a further purpose or different character, altering the first with new expression, meaning, or message." (quoting Campbell) Thus, the court readily found "heavy [in] favor of transformative use that... diminishes the significance of considerations such as commercial use that would tip to the detriment of fair use."

The second factor (nature of the copyrighted work) was found to be "neutral" - the court was not prepared to characterize the film as a parody, but nevertheless did say it was "highly transformative under the first factor, whether parody or not."

Under the third "substantiality" factor, Falkner argued that the quote described the "essence" of Requiem for a Nun, that "there is no such thing as past." Yet the court deemed this to refer to the qualitative theme of Requiem itself, not the "not the qualitative importance of the quote itself." The ideas embodied in Requiem for a Nun cannot be protected, only its expression, which here "constitutes only a small portion of the expression of this idea throughout the novel." The quote itself in the film "is a fragment of the idea's expression."

Interestingly, the court on this factor also held that "the quote at issue is of minuscule quantitative importance to the work as a whole. Thus, the court considers both the qualitative and quantitative analyses to tip in favor of fair use. The court concludes that no substantial similarity exists between the copyrighted work and the allegedly infringing work." [Emphasis added]Query in light of this finding of no "substantial similarity" why fair use even had to be addressed as fair use presupposes there is infringement.

On the last potential market effect factor, the record in the case was silent. In any event, the court considered this factor "to be essentially a non-issue in light of the stark balance of the first factors weighing in favor of Sony..." Nevertheless, the court did not see any relevant market harm resulting from Sony's use of the quote. If anything, the use in the film helped Faulkner's legacy.

Finally, the court expressed its frustration at the entire lawsuit: "How Hollywood's flattering and artful use of literary allusion is a point of litigation, not celebration, is beyond this court's comprehension."

A copy of the decision is available here: Faulkner decision (ND Miss ) (2).pdf

August 25, 2013

Unclaimed Property Recovery Service, Inc., v. Kaplan

By Barry Werbin

The Second Circuit issued a decision of first impression filed on August 20th in Unclaimed Property Recovery Service, Inc., v. Kaplan, holding that "that where the holder of a copyright in a litigation document has authorized a party to the litigation to use the document in the litigation, this constitutes an irrevocable authorization to all parties to the litigation (and to their attorneys, as well as the court) to use the documents thereafter in the litigation throughout its duration."

Here, the plaintiff failed to state a claim for copyright infringement tied to the defendant's use of a complaint written by co-plaintiff Gelb and copyrighted by plaintiff Unclaimed Property Recovery Service, where the plaintiffs alleged that the defendant's amendment of the pleadings infringed on their copyrights.

The Court held:

"This case presents an issue of first impression: whether the holder of a copyright in a litigation document who has authorized a party to a litigation to use the document in the litigation may withdraw the authorization after the document has already been introduced into the litigation and then claim infringement when subsequent use is made of the document in the litigation. We hold that such an authorization necessarily conveys, not only to the authorized party but to all present and future attorneys and to the court, an irrevocable authorization to use the document in the litigation thereafter."

Click here for a copy of the decision: OpenAppellateOpinion aspx.pdf

New Rules Allow Crowdfunding Campaigns to Offer Profit Participation

By Adam Beasley

President Obama signed the awkwardly named Jumpstart Our Business Startups (JOBS) Act on April 5, 2012. The JOBS Act seeks to encourage investment in small businesses by easing certain securities regulations. Title II is the first implementation of the Act to effect crowdfunding by giving birth to an "equity crowdfunding" market. Public solicitation of early stage investment has been banned for the past 80 years.

New SEC Rules will give filmmakers the ability to provide equity to investors through crowdfunding platforms. The new rules implement Title II of the JOBS Act and are set to go into effect on September 23rd. Currently, investment opportunities may only be presented to individuals through private offerings and cannot be publicly solicited because of perceived investment risk. The new rules allow those seeking funding to advertise investment opportunities on television, Facebook, Twitter, and basically everywhere else, including through crowdfunding sites. This development will greatly impact filmmakers, startup companies, and others utilizing crowdfunding platforms by giving them the ability to offer profit participation if the ventures are successful.

Title II applies to investment from "accredited investors," which are individuals with (a) a combined net worth, excluding the primary residence, in excess of $1 million, or (b) an annual income of $200,000 over the previous two years ($300,000 for couples). An estimated nine million Americans qualify. Title II creates a special type of offering called 506(c) allowing advertisement of fundraising opportunities.

The SEC Rules for Title III of the JOBS Act, which applies to non-accredited investors, are estimated to go into effect in 2014. Investors who make at least $100,000 annually will be allowed to invest up to 10% of their incomes. Investors who make less than $100,000 can invest up to 5% of their incomes or $2,000, whichever is greater.

Many companies are positioning themselves to move into the equity crowdfunding market, including Indiegogo, Slated, EarlyShares, and Crowdfunder, among others. Kickstarter, the largest crowdfunding platform, has stated that it has no current plans to offer equity investments.

It is estimated that the equity crowdfunding market could reach over $4 billion in the next four years. Due to the allure of the film industry and many filmmakers' early adoption of crowdfunding methods, it stands to reason that the industry would be a major beneficiary of these dollars. In fact, EarlyShares and Crowdfunder are already in talks with independent studios to set up projects, some seeking as much as $5 million.

Filmmakers will still be able to set their own rules for campaigns, including minimum investment and profit participation. In an article for THR, Earlyshares chairman Stephen Temes estimated that filmmakers would likely require minimum investments of at least $1,000 to much more from accredited investors but will set far lower minimums from unaccredited investors -- perhaps $100. The idea being that more investors will mean more marketing evangelists. As the market is currently embryonic, there will likely be various profit participation models ranging from basic 50/50 deals (investors/producers) to complex Hollywood-style definitions before industry standards emerge.

It will remain to be seen how popular equity crowdfunding becomes. It could completely change the world of independent film finance as more established players utilize the platform, and one can only anticipate the potential headlines if individual investors start making real money crowdfunding films.

The rules: https://www.federalregister.gov/articles/2013/07/24/2013-16883/eliminating-the-prohibition-against-general-solicitation-and-general-advertising-in-rule-506-and

Adam Beasley is an entertainment and intellectual property attorney in New York City. He can be reached at www.adambeasleylaw.com. A previous version of this post can be found here, at http://adambeasleylaw.com/new-rules-allow-crowdfunding-campaigns-to-offer-profit-participation/

About August 2013

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

July 2013 is the previous archive.

September 2013 is the next archive.

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