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February 2015 Archives

February 3, 2015

The Curious Case of the Unpaid Intern

By Maximilian J.G. Querci

An intern may be classified as a participant in a formal program to obtain practical experience for beginners in an occupation or profession. Some interns are paid, while others are not, but the latter are considered to be taking advantage of unpaid resume boosting experiences. While traditionally an intern's position and tasks are considered to be lurking in a grey area between a volunteer and an employee, it appears the grey area is considerably less so with the arrival of numerous lawsuits against major production companies and film studios.

The first slew of lawsuits that came about were brought against Fox Searchlight during the production of "Black Swan" in 2011, as well as other actions brought against Lionsgate, Warner Music Group, Atlantic Records, and publishing houses Condé Nast and Hearst Corp. http://www.latimes.com/entertainment/envelope/cotown/la-et-ct-lionsgate-interns-20140613-story.html#page=1. Since the onset of such actions, most of these companies have switched to paid internships or ceased their internship programs. Lionsgate, however, argues that if it were to change its policy and make its internship program a paid program, it would be forced to take on a substantially smaller amount of interns per term and would stand to lose approximately $300,000 to $400,000 a year in wage compensation. Id. Lionsgate's most recent turmoil involves a class-action lawsuit brought by unpaid interns who worked on The Wendy Williams Show, and claimed that the work they performed was not in accordance with the United States Department of Labor's criteria of an unpaid internship. http://www.hollywoodreporter.com/thr-esq/lionsgate-hit-class-action-lawsuit-739380.

The Fair Labor Standard Act, under enforcement by the Department of Labor, employs a six-element test to establish whether an unpaid intern's work experience and duties classify him/her as an employee. Beyond these six elements, the determination of whether an intern has an employment relationship with his/her employer depends upon all the facts and circumstances of the respective internship program. http://www.dol.gov/whd/regs/compliance/whdfs71.htm.

Of the six-element test, the two elements that serve as the basis for many of the actions being brought are the requirements that the "internship experience must be for the benefit of the intern" and the intern's duties must "not displace regular employees". Id. Herein lies the problem; when a line cannot be drawn to indicate when tasks performed by interns are no longer for the benefit of the intern vs. the benefit of the employer, it creates issues differentiating between the two.

In the lawsuit filed against Fox Searchlight by its unpaid interns, U.S. District Judge William Pauley in New York ruled last year that "Searchlight received the benefits of the interns' unpaid work, which otherwise would have required paid employees". Fox subsequently appealed Pauley's ruling with a very logical and well-supported argument that interns are not subject to wage protection under the Fair Labor Standard Act if they, and not the employers, are the primary beneficiaries of the internship. http://www.latimes.com/entertainment/envelope/cotown/la-et-ct-lionsgate-interns-20140613-story.html#page=1. Attorneys for the plaintiffs are preparing to go before the Second Circuit Court of Appeals, however no formal date has been set. http://www.hollywoodreporter.com/thr-esq/nbcu-settling-lawsuit-msnbc-saturday-741395. Such a distinction of who the primary beneficiary is in this type a relationship is murky. Is it the employer who primarily benefits from the services received, or is it the intern who benefits from the experience in performing such service? The question remains unanswered.

Could most unpaid interns be getting carried away with the current trends of these lawsuits and not really see the big picture? There is always a different perspective to take, and many former unpaid interns of Lionsgate concur. What these lawsuits and statistical figures being thrown around by the media don't explain is that many unpaid interns actually derive legitimate education and experience on the respective subject matter with which they are involved, and in many cases such instruction and experience leads to full-time employment. http://www.latimes.com/entertainment/envelope/cotown/la-et-ct-lionsgate-interns-20140613-story.html#page=1. Many previous interns for Lionsgate interviewed by the Los Angeles Times stated that their internship experience proved to be highly beneficial in their professional developments. While several of them did acknowledge they were performing tasks that coincided with the tasks of a full-time employee, they considered such experience far more valuable then sitting idly by and performing minuscule tasks. Id.

Former Lionsgate intern J.P Alanis, who interned at the film studio between 2011 and 2012, disregarded the notion that his internship was in violation of the Department of Labor guidelines. Id. Alanis, who participated in script coverage, a task usually performed by television executives or other full-time employees, saw his tasks as an opportunity to learn. "For me, I would rather stay busy and do coverage than sit around and adhere to the guidelines", said Alanis, whose responsibilities also included administrative tasks and even the occasional picking up lunch for an executive. Id. Like Alanis' circumstances, maybe the focus of unpaid interns should be on the potential for success such an opportunity can bring, rather than focus on what they think they rightfully deserve. The answer subjectively lies with each individual and what he/she seeks to from the internship experience.

While lawsuits with numerous film studios are still ongoing, the class action filed in July 2013 against NBCUniversal for misclassifying hundreds of workers as unpaid interns has reached a settlement. Due to their misclassification, the individuals bringing the suit stated in their complaint that they were "denied the benefits that the law affords to employees, including unemployment, worker's compensation insurance, social security contributions, and, most crucially, the right to earn a fair day's wage for a fair day's work." http://www.hollywoodreporter.com/thr-esq/nbcu-settling-lawsuit-msnbc-saturday-741395. While settlement terms and figures have not been released yet, the lawsuit estimated damages at approximately $5 million. Id. This may be the commencement of a shift in the trend of unpaid internships, where class-action lawsuits may start arising in various sectors outside of the film industry. With this change in trend, however, companies will start putting more stringent requirements on internship candidates, making it far more challenging for those who wish to gain valuable experience from obtaining it.

February 5, 2015

The Ongoing Washington Redskins Name Controversy

By Pedro Alvarado

Over the course of time, the word "Redskin" has a taken on a number of different definitions. "Redskin" has been used to refer to Native American warriors (http://www.washingtonexaminer.com/op-ed-redskins-nickname-honors-indian-warriors/article/2524105) and the brutal process of scalping Native Americans for a bounty (http://www.esquire.com/blogs/news/true-redskins-meaning). American English dictionaries and the Oxford English Dictionary classify "Redskin" as usually offensive, disparaging and insulting. Thus, "Redskin" is generally avoided in public usage with the exception of referencing the Washington Redskins, a National Football League (NFL) team (http://mmqb.si.com/2014/04/03/washington-nfl-team-name-debate/).

These contrasting variations have given rise to the ongoing Washington Redskins controversy. However, as the Washington Redskins team continues to face oncoming public pressure to change its name, Federal Communications Commission (FCC) regulations, Trademark Trial and Appeal Board (TTAB) rulings, the United States Constitution, and the NFL's Constitution and bylaws may legally force the team to change its name, irrespective of such pressure.

Protests over the Redskins team name have stretched as far back as 1970. Civil rights organizations, human rights activists, Native American tribes, and politicians all believe that the Redskins team name and logo begs change, as it represents a form of unacceptable ethnic stereotyping. Recently, Congress sent a number of pleas to the NFL Commissioner, Roger Goodell, asking to regulate the name. Senator Maria Cantwell (D-Wash.) and Representative Tom Cole (R-Okla.) have criticized the use of the name, claiming it to be nothing more than a racial slur (http://www.washingtonpost.com/blogs/football-insider/wp/2014/02/09/nfl-faces-pressure-from-congress-to-change-redskins-name/). Congress has also reached out to the FCC, hoping that the Redskins team name will be treated the same as other racially charged words (http://www.reuters.com/article/2014/09/30/us-usa-fcc-redskins-idUSKCN0HP2HM20140930). The FCC has argued that "Redskins" qualifies as broadcasting obscenity due to its derogatory and racist connotation. Id. Even the TTAB revoked the Washington Redskins' federal trademark registration after evidence showed a substantial amount of Native Americans believed the term Redskins to be disparaging when used in connection with professional football (http://espn.go.com/nfl/story/_/id/11102096/us-patent-office-cancels-washington-redskins-trademark).

In addition, the FCC has argued that the Redskins team name is not protected by the First Amendment since "Redskin" is a discriminatory word towards Native Americans. The FCC stated that the First Amendment does not protect obscene material and such material cannot be broadcasted at any time (http://blog.constitutioncenter.org/2013/04/could-the-feds-really-force-the-redskins-to-change-their-name/).

However, supporters of the name argue that banning the "Redskins" would harm the First Amendment, because words that give the slightest bit of offense would face greater scrutiny. The United States is a blend of numerous nationalities, backgrounds, and sensitivities, so, theoretically, an innumerable amount of words can offend somebody, hindering free expression. (http://libertycrier.com/fcc-redskins-ban-kill-first-amendment/). Furthermore, studies have shown that the majority of the general public supports the Washington Redskins' campaign to keep its team name. (http://espn.go.com/nfl/story/_/id/9235381/poll-majority-approve-washington-redskins-name). In July 2014, New Mexico, which has the second highest percentage of Native Americans in the United States, conducted a survey, which concluded that 71% of the participants voted to keep the name (http://www.washingtonpost.com/sports/redskins/new-poll-says-large-majority-of-americans-believe-redskins-should-not-change-name/2014/09/02/496e3dd0-32e0-11e4-9e92-0899b306bbea_story.html). Additionally, both the NFL Commissioner and owner Dan Snyder support the Redskins team name and logo, claiming that "Redskins" portrays Native Americans in a positive light, which displays strength and courage (http://www.washingtonpost.com/blogs/football-insider/wp/2014/03/26/goodell-praises-snyder-says-redskins-name-support-remains-overwhelming/).

Regardless of whether one approves or protests the name, the NFL's Constitution and bylaws provide a complicated and lengthy process that includes the NFL's and many of its sponsors' approvals. To gain approval, the NFL examines the impact of the team name from an ethical and financial perspective. However, Roger Goddell has claimed that the Redskins team name has no racial connotation, and no sponsor has indicated that the Redskins should change its name (http://www.washingtonpost.com/sports/redskins/redskins-name-change-would-have-to-pass-muster-with-nfl-sponsors/2013/02/24/c4fa763c-7b0b-11e2-9c27-fdd594ea6286_story.html).

The outcry over the Washington Redskins does not end with the team name. Many also oppose the Redskins' logo, which represents an extremely racist and stereotypical view of Native American culture; a red-faced Native American with a feathered hat (http://www.cnn.com/2013/10/12/us/redskins-controversy/). Some claim that this mockery of the Native American culture is analogous to individuals who do blackface to imitate African Americans (http://www.cnn.com/2013/10/12/us/redskins-controversy/). Nevertheless, as the debate rages on, there is one certainty; neither side shows any signs of giving in to the other's demands. However, change is almost inevitable. For example, the Major League Baseball team the Cleveland Indians, recently changed its logo after 33 years due to its offensive portrayal of Native Americans. Thus, as support continues for a Redskins name change, it is only a matter of time until the NFL is forced to change, as well.

February 8, 2015

Week In Review

By Chris Helsel

Minor League Baseball Players File Class Action Antitrust Suit Against MLB

In December of last year, four minor league baseball players filed a proposed class action lawsuit against Major League Baseball (MLB, league), alleging that the league and its clubs operate as a cartel and artificially suppress the minor league players' wages.

Most, but not all, MLB clubs are owned and operated by parent clubs. The parent club pays each player's wages, and team executives are free to assign a player to any of its other minor league clubs, or to promote the players to the MLB (that is, to the parent clubs themselves). The "non-affiliated" independent minor league clubs, which have no parent clubs, pay their own players' wages and do not compete against affiliated minor league teams, are not involved in this lawsuit.

The suit contends that the "uniform player contract," which nearly all players on affiliated minor league teams are required to sign, violates antitrust law. The contract contains a "reserve clause," which grants the parent club the exclusive contractual rights to a player for a seven year period. Under a reserve clause, a club retains exclusive rights to a player even after the player's employment contract expires, and the player cannot sign with another club without the parent club's consent (see below). The parent club, meanwhile, is free to trade the player to another club without his consent or unilaterally terminate his contract, but the player may not sign with another team on his own.

At the MLB level, the obviously anticompetitive practice of trading a player without his consent is permitted through the non-statutory labor exemption to federal antitrust law. This judicially carved-out exemption allows parties to a collective bargaining agreement to avoid antitrust scrutiny, provided the restraint on competition concerns a mandatory subject of collective bargaining, primarily affects only the parties to the collective bargaining relationship, and is the product of bona fide arm's-length bargaining. Under this exemption, in addition to player trades, practices such as first-year player drafts and salary caps have been upheld.

Further, the U.S. Supreme Court held (in 1922, and then twice since) that the "business of baseball" was entirely exempt from antitrust law, and that reserve clauses were therefore valid. However, in 1975, an arbitrator declared two MLB pitchers free agents, nullifying the reserve clause at the MLB level and opening the door to free agency, whereby a player not under contract is free to sign with any other team. In 1998, Congress passed the Curt Flood Act, which withdrew baseball's antitrust exemption for all labor issues - but the non-statutory labor exemption still applies where a CBA exists and the above-mentioned criteria are met.

At the minor league level, however, reserve clauses persist. Further, unlike their MLB counterparts, minor league players have no union and no collective bargaining agreement. Therefore, the players argue, the non-statutory labor exemption should not apply, and MLB parent clubs should not be permitted to suppress wages and impose the "uniform player contract" on their minor league players.

The current suit requests that the court certify a class of thousands of minor league players who are or were employed under the uniform contract during the last four years. The plaintiffs seek damages resulting from the loss of the potentially higher wages they could/would have earned in a competitive market, as well as injunctive relief prohibiting the enforcement of the reserve clauses contained in their contracts.


Three-Strike Candidate Rap Mogul Suge Knight Pleads Not Guilty to Murder

Rap mogul Marion "Suge" Knight, the co-founder of Death Row Records, has pleaded not guilty to one count of murder and one count of attempted murder following an altercation at Tam's Burgers in Compton, CA. Mr. Knight is accused of intentionally running his pickup truck over two men, Terry Carter and Cle "Bone" Sloan, outside the restaurant. Mr. Carter was killed, and Mr. Sloan remains hospitalized. Mr. Knight's $2 million bail was revoked after a court commissioner determined he was a flight risk and could intimidate potential witnesses.

According to a 911 call released last week, a witness reported that "The car ran over two guys, there was fighting and then he just pulled back and pulled forward and run 'em over."

Mr. Knight's attorneys insists that the event was an accident. He says Mr. Knight tried to escape an attack by four men who were trying to grab him through the driver's side window, and that, fearing for his life, he accelerated in order to escape, inadvertently striking Mr. Carter and Mr. Sloan.

Mr. Knight, who played briefly in the National Football League, helped usher Tupac Shakur, Dr. Dre and Snoop Dogg into the mainstream and developed a reputation as one of the most powerful and feared figures in the music industry. However, his professional career suffered in recent years, and he filed for bankruptcy in 2006.

This is not Mr. Knight's first brush with the law. In 1996, while on probation for charges including auto theft, attempted murder and carrying a concealed weapon, he and Mr. Shakur badly beat a rival at a Las Vegas hotel, hours before Mr. Shakur was fatally shot while riding in Mr. Knight's car. He was sentenced to five years in jail for the hotel attack. Mr. Knight also has prior felony convictions for armed robbery and assault with a gun.

Additionally, Mr. Knight has survived at least two shootings. Most recently, he was shot six times at a pre-MTV Video Music Awards party in Los Angeles.

His prior felony convictions make him a candidate for California's Three Strikes sentencing law, which mandates a state prison term of at least 25 years to life for a defendant convicted of any felony with two or more prior strikes. Mr. Knight's attorney acknowledged that his client is a Three Strikes candidate, but told reporters on Tuesday that he is confident Mr. Knight will be cleared of all charges.



The F.C.C. Goes Beyond Presidential Recommendations in Net Neutrality Proposal

In November, to the dismay of cable television and telecommunications companies, President Obama urged the Federal Communication Commission (F.C.C., Commission) to adopt the "strongest possible rules" to ensure net neutrality. This week, the F.C.C. went beyond even the President's recommendations.

On Wednesday, F.C.C. chairman Tom Wheeler proposed regulating consumer Internet services as a public utility, as expected. He went even further, however, in proposing to reclassify high-speed Internet service as a telecommunication service under Title II of the Telecommunications Act (Title II), instead of an information service. This bold new proposal would give the F.C.C. enforcement powers to police marketplace practices for handling of data before it enters the so-called interconnect market - that is, people's homes.

According to F.C.C. officials, this would allow the Commission to ensure that the Internet is not divided into "pay-for-play" fast lanes for those who can afford it, and "slow lanes" for those who cannot. It would also prevent providers from blocking content.

In addition, the new proposal calls for mobile data service to fall under the open Internet order and be regulated under Title II, like mobile voice service. Furthermore, it includes provisions aimed at protecting consumer privacy and ensuring Internet availability to persons with disabilities and in remote areas.

The proposal will be put to a vote by the full Commission on February 26th. It is expected to pass, and cable and telecommunications companies have vowed to litigate.

Supporters of the F.C.C. plan include major Internet companies like Google and Netflix. They argue that the Internet has become such an essential gateway of communication and commerce in everyday life that it must be regulated like any other public utility. They consider Title II protection a necessary safeguard, and believe that a robust regulatory framework will ensure continued business innovation.

Republican opponents of the F.C.C. plan agree that blocking content and enabling fast and slow lanes must be prohibited. However, they contend that classifying the Internet as a public utility under F.C.C. control will lead to over-regulation and deter investment and innovation.


Caddies File Antitrust Lawsuit Against PGA Tour, Seek Class Certification

Eighty-one professional golf caddies have filed a lawsuit against the PGA Tour alleging antitrust, intellectual property and contract violations. The suit stems from the Tour's policy that caddies wear "bibs" containing logos and other insignia of corporate sponsors without compensation.

The lawsuit was filed in the Northern District of California, where Ed O'Bannon recently prevailed in his antitrust suit against the NCAA. The caddies' suit seeks at least $50 million in damages, which the caddies claim is the approximate annual value of the bibs' display during tournament television broadcasts. The plaintiffs also seek class certification; the proposed class would include approximately 1,000 caddies.

While there is no specific rule that the caddies must wear the bibs, the suit alleges that the caddies are compelled to wear them through coercion and retribution. Specifically, the caddies allege that they are threatened with exclusion from tournaments if the bibs are not worn, golfers are encouraged to fire caddies who refuse to wear the bibs, and the PGA Tour admonishes caddies against receiving endorsement money from competing sponsors. The caddies, who are employed by individual golfers, not the PGA Tour itself, do not receive any compensation for their allegedly compulsory wearing of the sponsored bibs. They are free, however, to sign sponsorship deals with apparel companies and wear those companies' clothing during tournaments and interviews, which are often televised.

The suit contends that the bib policy violates the Sherman Antitrust Act by preventing caddies from negotiating their own sponsorship contracts. It further alleges that the policy results in decreased competition for bid sponsorships because only the PGA Tour, and not the caddies, can negotiate the sponsorship contracts. The caddies also claim that the PGA Tour has conspired with local tournament organizers to force them to wear the bibs.

In addition to the antitrust claims, the caddies allege the PGA Tour has breached the caddies' registration agreement by barring them from wearing the clothing of competing sponsors. The caddies have also raised an intellectual property cause of action, claiming that the forced wearing of sponsored bibs causes consumer confusion in violation of the Lanham Act.

While the PGA Tour is expected to contend that bibs are not a part of the official caddy "uniform" under its rules, the caddies can cite the experience of James Edmondson at last Honda Classic. Mr. Edmondson, while caddying for Ryan Palmer, reportedly removed his bib prior to a one-hole playoff and forced to explain himself to PGA Tour officials - though it should be noted that he was not punished for removing the bib.

The PGA Tour might also contend that caddies contractually assent to follow its rules, and are not obligated to participate in its competitions. The caddies will likely counter with a monopoly argument, claiming that the PGA Tour is the single highest level of male professional golf and therefore no real marketplace competition exists.

Finally the PGA Tour can argue that the bibs improve the presentation and marketability of its tournaments, which contributes to the "pro-competitive" virtues of a restraint on trade, which in an antitrust analysis must be balanced against its "anti-competitive" harms. Of course, the caddies can counter that there are less restrictive means for the PGA Tour to achieve its goal of standardizing the caddies' appearance.


Nearly 10,000 Picassos For Sale - Art Industry Fears Market Saturation and Depressed Prices

Maria Picasso, a granddaughter of Pablo Picasso, inherited approximately 10,000 of her grandfather's works upon his death in 1973. Since then, she has sold numerous pieces through private dealers and auction houses in order to support herself and her charities. Now, however, she has decided to sell them on her own.

Ms. Picasso grew up in relative poverty. She was never close with her grandfather, and recalls with shame the way he treated her father. Her brother committed suicide after Mr. Picasso's second wife banned him from the legendary artist's funeral. She now intends to sell his art in order to raise millions of euros for charity. Specifically, she plans to provide aid for a pediatric hospital in Vietnam and fund projects in France and Switzerland benefiting the elderly and troubled teenagers.

"It was really difficult to carry this celebrated name and to have a difficult financial life," she said. "I think because of it I developed my sense of humanity and my desire to help others." Regarding her decision to sell them on her own, she added, "It's better for me to sell my works and preserve the money to redistribute to humanitarian causes."

In the last year alone, Ms. Picasso has donated €1.5 million to the Hospital Foundation of Paris, with proceeds going to the psychiatric emergency unit for teenagers and a long-term hospital care program for elderly patients.

Mr. Picasso died without a will, and Ms. Picasso was awarded one-fifth of his estate, including his French villa and the 10,000 aforementioned works. The fact that she has decided to offload a significant portion of them has raised alarm in the art-for-profit community. Speculators fear that this "acceleration" of her sales will flood the market and depress prices.

It is hard to argue with Ms. Picasso's timing, however. Last year, sales of Picassos totaled $449 million, second only to Andy Warhols.


Ninth Circuit Stops Oakland Athletics' Move to San Jose

While baseball's historic exemption from federal antitrust laws regarding labor issues was finally removed by Congress in 1998, the Ninth Circuit has decided that the exemption still applies to franchise relocation.

The City of San Jose had filed suit against MLB (specifically then-commissioner Bud Selig), challenging the league's rules regarding franchise relocation. Under league rules, a team may not relocate into another team's designated operating territory unless it receives the approval of at least three-quarters of MLB's clubs. San Jose argued that the 1972 Supreme Court decision in Flood v. Kuhn, which upheld baseball's antitrust exemption, applied only to the "reserve cause" and not to other facets of the baseball industry, like franchise location.

The Ninth Circuit disagreed. The Court noted that the ability to prevent market saturation is crucial to MLB's success, and that therefore the rule regarding franchise relocation was valid.

"The designation of franchises to particular geographic territories is the league's basic organizing principle. Limitations on franchise relocation are designed to ensure access to baseball games for a broad range of markets and to safeguard the profitability--and thus viability--of each ball club. Interfering with franchise relocation rules therefore indisputably interferes with the public exhibition of professional baseball ... [F]ew, if any, issues are as central to a sports league's proper functioning as its rules regarding the geographic designation of franchises."

The court also noted that the Curt Flood Act of 1998, which withdrew baseball's antitrust exemption with respect to the reserve clause and other labor issues, "explicitly maintained it for franchise relocation" [emphasis in original].

As Judge Alex Kozinski of the Ninth Circuit so poetically put it in his decision, "Like Casey, San Jose has struck out."

Attorneys for San Jose have indicated that they will file for a petition of certiorari to the Supreme Court.


Pop Warner Sued Following Suicide of Former Player with Degenerative Brain Disease

The family of a 25-year old former amateur football player who committed suicide in 2012 has filed a lawsuit against Pop Warner, the largest and most established youth football organization in the country. The suit alleges that Pop Warner knew or should have known about the risks associated with children playing football, and failed to warn participants about, and protect them from, the dangers of head trauma. The family seeks at least $5 million in punitive damages.

The suit charges Pop Warner with failing to train coaches properly, not providing the safest helmets available, not teaching players how to wear helmets properly, and not limiting the amount of physical contact in practice. The organization is also accused of failing to follow established concussion protocols.

The deceased, Joseph Chernach, played four years of Pop Warner football, followed by four years in high school. He also wrestled for 12 years and competed in the pole vault for the track team. Although he was never diagnosed with a concussion, an autopsy revealed that he suffered from chronic traumatic encephalopathy (C.T.E.), a degenerative brain disease. C.T.E. has recently been linked to the suicides of numerous former National Football League players.

To be successful, the suit must affirmatively demonstrate that C.T.E. was the cause of Mr. Chernach's suicide. Further, the plaintiffs will need to show that the C.T.E. was the result of his time playing Pop Warner football, not high school football, wrestling, or pole vaulting.

Mr. Chernach, whose father was a volunteer football and wrestling coach while his son was participating, had dropped out of Central Michigan University and demonstrated signs of depression prior to his suicide.


International Soccer Players' Union Pledges Legal Action Over Unpaid Players

Labor disputes between football leagues and their players are apparently not confined to the National Football League and the United States.

According to FIFPro, the international soccer players' union, negotiations to reform FIFA rules regarding the transfer of players came to a crashing halt when representatives from European clubs and leagues rejected demands to protect players whose wages went unpaid or whose contracts were improperly terminated. The union has now pledged to take legal action "to restore the basic rights of players impeded by football's fundamentally flawed player transfer system."

According to Bobby Barnes, head of FIFPro's European division, "The basic right of players to be paid according to the terms laid out in their contract is non-negotiable [...] Our patience to find solutions has been exhausted and the European members are united in their belief that more forceful action seems inevitable."

FIFPro had proposed numerous new rules, including allowing a player to terminate his contract with 10 days' notice after he went unpaid for more than 30 days and entitling a player to financial compensation if his contract is terminated without just cause.

FIFPro did not disclose whether it intended to bring its case to a domestic court, the European Court of Justice or the European Commission. "All avenues are open to us. Nothing is being ruled out," said a union spokesman.


Manhattan Art Galleries Subpoenaed

Several Manhattan art galleries have received subpoenas from the borough's District Attorney requesting sales and shipping records, according to the galleries' attorneys.

Numerous galleries and the Art Dealers Association have claimed to be unaware of any investigation, but attorneys from four separate law firms told the New York Times that they had seen subpoenas sent in recent months to their gallery or dealer clients. Additionally, a tax specialist at Andersen Tax said he had direct knowledge of a subpoena received by a major Manhattan gallery.

The attorneys and accountants did not name the galleries subpoenaed to avoid risking the public identification of their clients.

Although one attorney whose client received a subpoena described this as occurring "on a fairly regular basis," another indicated that this inquiry was being handled by the Major Economic Crimes Bureau of the District Attorney's office. "This suggests a bigger scope," he said.

The District Attorney's office and New York State Tax Department declined to disclose the details of any pending investigation or audit.

This inquiry brings to mind one somewhat recent investigation - in 2002, led by then-Manhattan District Attorney Robert M. Morgenthau - which uncovered large-scale tax fraud and resulted charges against more than 300 customers and nearly a dozen galleries. Prosecutors ultimately recovered tens of millions of dollars in outstanding city and state taxes and fines.


Gaylord v. U.S.

By Barry Werbin

This case involving use of a photo of the Korean War memorial sculpture on a .U.S stamp, has been up and down to the Federal Circuit twice and ongoing for a long time. In this final chapter (we hope), the district court's after-remand copyright damages award in favor of the plaintiff and against the U.S. Postal Service based on a 10% per-unit royalty, resulting in an award of $540,000 from sales of collector stamps sold by the Post Office, plus prejudgment interest, was affirmed by the Federal Circuit. The district court based the royalty on survey evidence showing the Postal Service's commissions in its ordinary course of business, and determined that the Postal Service received $5.4 million in revenue -- "'almost pure profit'"--from unused stamps depicting the image that had been sold to collectors during the limited life of the stamp issue.

Of particular interest is the Federal Circuit's re-affirmance of a reasonable royalty for copyright damages, an idea common in patent cases. The Court noted that: "Consistent with the conclusions of other circuits that have considered the issue, we held [in Gaylord II, 678 F.3d 1339 (Fed. Cir. 2012)] that actual damages for copyright infringement may be based on a reasonable royalty representing 'the fair market value of a license covering the defendant's use.'" While setting a royalty is typically tied to a hypothetical license/royalty negotiation, the Court emphasized that this "determination must be tied to the particular work at issue and its marketplace value--much as, in patent law, the determination must be tied to the particular patented technology and its footprint in the market."

After reviewing all the evidence assessed by the district court, the Federal Circuit concluded that "giving the Postal Service 90% of the profits and Mr. Gaylord 10%--is within the range of reasonable findings from the evidence." This was so even if the Postal Service might have negotiated a flat license fee instead of a running royalty due to "the uniqueness of the work at issue here, including its status as a distinctively recognized symbol of the Korean War for most Americans...."

A copy of the decision is available here Gaylord v. US.pdf

February 10, 2015

Grammys, Love, Angst, Striving, Synergy, Creativity & Copyright

By Bob Bernstein

I greatly enjoying Sunday's Grammys from a front-row seat in my favorite chair, feeling all the love and power of music to bring together different generations and cultural backgrounds with synergistic results. The power of music is so great, and the fragility of its remunerative distribution system so precarious in these times, that I only wish the important message of securing fair and deserving compensation for the creative blessings bestowed upon us by composers, lyricists, artists, performers, producers, designers and the entire panoply of persons responsible for such a great night of music had been delivered early and often rather than at the end of the broadcast.

There must be a more direct connection between, and an omnipresent awareness of, the connection between our enjoyment of musical treasures and the promotion of their creation. By ensuring that artists, musicians, songwriters and other creators enjoy the fruits of their glorious labors -- most of which are spent in arduous hours of striving before their works see the light of day and the love of their fans -- we invest wisely in the cultural wealth that makes living worthwhile. So let's show more love for what we receive from these modern Michelangelos, and work together to ensure that their livelihoods and those of emerging artists are unblemished by piracy, casual theft, or inadequate attention to appropriate distribution controls.

Music is a gift, but it is not free. The artists, composers and performers who work so hard to make the most of their gifts and who delight us with their creations are certainly no less entitled to receive the fruits of their labors than the butcher, baker or candlestick maker. Given the intangible character of copyright; the elusive but sublime combinations of melody, harmony, rhythm and lyrics that characterize our greatest songs; and the resulting far greater obstacles to keeping adequate track of their distribution in comparison to the butcher's inventory, we should be striving to ensure widespread societal recognition that, if we allow the songs to leave the barn before they enter the royalty stream, it will not only be the cows who have nothing to dance to.

Death and Dying - Film at Eleven. The Narrow Scope of Right to Privacy in New York

By Rosemarie Tully and Diane Krausz

In New York, your right to privacy dies with you, but should your consent be required for the filming of your death in the hospital emergency room? In the northeast, a variety of well-known hospitals regularly allow filming of emergency room activity along with commentary from the treating physicians and interaction among medical staff, patients, their family and friends - for television broadcast. Oddly enough, it seems that most subjects are open to having their real-life traumas splashed across the screen, but what of those patients that are not competent to give meaningful consent or die in the process? Is consent even required?

Thanks to a recent New York Times headline about the Chanko family's lawsuit regarding an episode of "NY Med," we will all be more aware of the possibility that our own dying on the table may be filmed and broadcast without our consent.

Mark Chanko, then 83, was rushed to New York Presbyterian after being hit by a truck while crossing a Manhattan street late one night in April 2011. Dr. Sebastian Schubl (known on "NY Med" as "Dr. McDreamy") was the supervising treating physician. When Mr. Chanko's adult children, his daughter-in-law, and his wife, Anita, arrived at the hospital, they were ushered into a separate room to wait for news about Mr. Chanko. Unable to save Mr. Chanko, Dr. Schubl delivered the sad news to the family. The grief-stricken family left the hospital unaware that Mr. Chanko's demise in the operating room and the family's reaction to the news of his death had been captured on film.

Over a year later, in August 2012, Anita Chanko tuned into to "NY Med" and saw the episode in which her husband dies. Although his face is blurred out and he is not otherwise identified, Mrs. Chanko recognizes his voice and body image and hears her husband asking Dr. Schubl, "Did you speak to my wife." These same words are flashed on the screen in big letters. Mrs. Chanko describes the episode: "...my husband is heard moaning. Bloody sheets are waived in front of the camera. My husband's blood is being displayed to me. Dr. Schubl then discusses with an unseen cast member cutting off a leg, narrates my husband's deterioration and asks, 'Anybody have a problem with calling it?'" She concludes with, "My husband has died before my eyes." Chanko v American Broadcasting Companies, Inc., et al., 122 A.D.3d 487, 997 N.Y.S.2d 44 (Anita Chanko aff.)

The Chanko family sued the network, American Broadcasting Companies, Inc. (ABC), the hospital, and the treating doctors, with Mrs. Chanko as plaintiff individually and on behalf of Mr. Chanko's estate. Among the claims were violations of §§50 and 51 of the New York Civil Rights Law, the right to privacy statute.

Regarding the right to privacy claims, defendant ABC moved to dismiss the complaint for failure to state a cause of action, arguing that (i) New York's right to privacy statute does not apply to news programs, and (ii) any claim that Mr. Chanko may have had died with him. In its decision dated November 18, 2014, the Appellate Division, First Dept., agreed. Chanko, supra.

"NY Med" is an ABC News documentary program and is described as real-life show that "... sheds light on the inner workings of hospital life by educating viewers about how different medical conditions are treated, how doctors make decisions about medical options, and other features of a workplace that routinely confronts life-and-death situations. ... there are successes and there are failures." Chanko, supra (ABC Brief, pp. 1, 2) It should be noted that upon the Chanko family's complaint to ABC after the initial broadcast, ABC responded with deference to the family by releasing a second version of the episode without the offending segment. The initial broadcast version is no longer available to the public. Chanko, supra (ABC Brief, p. 4)

In New York, meaningful discussion of the "right to privacy" begins in the early 1900s with Roberson v. Rochester Folding Box Co., 171 NY 538, 64 NE 442. Abigail Roberson, then a teenager in Rochester, NY, complained that the Franklin Mills Company printed about 25,000 posters using her photographic portrait (head and shoulders in profile) along with the words, "Flour of the Family" above "Franklin Mills Flour" below, framing her image. The posters were circulated among warehouses, stores, saloons, and other public places for display, including some in Rochester where Abigail's friends and acquaintances recognized her image. With her good name tarnished by these advertisements, Abigail suffered great humiliation, distress, and nervous shock requiring treatment by a physician. She sought $15,000 in damages and an order enjoining the Franklin Mills Company from further use of her image.

The lower courts found for Ms. Roberson, noting that if her beauty was of such value as a "trademark or an advertising medium, ... it is a property right which belongs to her." Roberson v. Rochester Folding Box Co., et al., 32 Misc. 344 (Sup. Ct., Monroe County, 1900); 64 A.D. 30 (4th Dept., 1901). This new-found property right was promptly extinguished on appeal. The New York Court of Appeals, by a 4-3 vote, determined that such a property right had no foundation in the law and would not only result in widespread litigation, but "litigation bordering on the absurd." It posited that once established as legal doctrine, the "right to privacy" would not be confined to restrain the publication of likeness, but would include the "publication of a word picture, a comment upon one's looks, conduct, domestic relations or habits." The right to free speech and public discourse would surely be threatened. While the Court of Appeals in Roberson would find no remedy for Abigail, it suggested that the legislature might provide distinctions for nonconsensual use of one's image for advertising purposes.

The New York legislature responded by enacting a privacy statute, making it the first state to establish a right to control the use of one's name and image, albeit a very limited right and one reserved only for the living. Civil Rights Law §50 makes it a misdemeanor to use a living person's "name, portrait, or picture" for advertising or trade purposes without having first obtained written consent of the person. CRL §51. provides the teeth for a civil action allowing the aggrieved victim to maintain an equitable action to prevent and restrain unlawful use of her or his image and sue and recover damages for any injuries sustained. The language of §50 remains unchanged from its 1909 version. CRL §51 was amended in 1995 to include the use of a person's "voice" in certain circumstances.

Soon after Roberson and the enactment of the statue, the doctrine of the newsworthy exception evolved: if the use of a person's name, portrait or picture has a real relationship with the context of the newsworthy item -and- is not used for trade purposes or an advertisement in disguise, then there is no violation of the statute. The real relationship requirement is notoriously broad, and even though the medium (e.g., magazine, television program, or documentary) contains advertising or has the attendant purpose of increasing audience or revenue, such use will not be deemed to be for trade purposes, and therefore not actionable. Messenger v. Gruner + Jahr Printing & Pub., 94 NY2d 436, 727 NE2d 549 [2000] The "newsworthy" exception has been expanded over time to include matters of public interest, all types of factual, educational and historical data, or even entertainment and amusement, concerning interesting phases of human activity in general. See Lemerond v Twentieth Century Fox Film Corp., No. 07 Civ. 4635, 2008 WL 918579, (SDNY Mar. 31, 2008) While all this may leave us with the uneasy feeling that the notion of privacy and the right to be left alone is just about non-existent, when we consider the role of social media in our lives and how we, as publishers of a sort, consistently expose ourselves and others (without their consent) to the world at large, the Roberson court's concern for free and unhampered public discourse has merit. Yet, there is something about death and dying that feels sacred, and we are disturbed that Mr. Chanko's last moments were filmed without his or his family's knowledge and then broadcast on national television.

While there is no relief for the family members under New York Civil Rights Law, and there would likely have been none for Mr. Chanko, had he survived, Mrs. Chanko remains undeterred and an appeal is planned. "If there's no applicable law, there most certainly should be," she told the New York Times. " I'm willing to just pursue it all the way. Why shouldn't there be a law against this kind of thing?"

As it happens, the New York Assembly is taking a look at modifying §51 to include a private right of action in the instance of unlawful surveillance and has introduced a bill to "allow victims of unlawful surveillance ... a civil cause of action to seek injunctive relief and damages when their privacy is violated." 2015 New York Assembly Bill No. 3576 While the purpose of the bill seems to be geared toward surveillance of a sexual nature, the publicity of the Chanko case may help shape its ultimate form.

In the meantime, you might want to consider adding a "do not film" clause to your healthcare directives, as dying in the E. R. in New York is not the private matter many of us may have assumed. It will not likely change the result vis a vis your right to privacy in New York, but at least you will have gone on record with your wishes.


Ed O'Bannon Antitrust Lawsuit

By Matthew Sledzinski

Under current National Collegiate Athletic Association (NCAA) rules and regulations, college student-athletes are not entitled to financial compensation for the NCAA's commercial use of their names, images or likeness via jersey sales, live television, video games and other merchandise. Ed O'Bannon, former UCLA basketball star, is leading an ongoing antitrust class action lawsuit in California challenging the NCAA's use of the images of its current and former athletes for commercial purposes. http://www.si.com/college-football/2013/06/19/ed-obannon-ncaa-hearing. The NCAA argues that its restraints on student-athletes' names and likeness are imperative to maintaining a competitive balance in college sports, and that if these restraints were overturned, it would financially destroy college sports for the majority of student-athletes. http://www.lawinsport.com/articles/regulation-a-governance/item/expansion-of-o-bannon-a-threat-to-the-ncaa

The original defendants in this suit, alongside the NCAA, included popular video game company Electronic Arts (EA) Sports and the Collegiate Licensing Company (CLC). Ed O'Bannon first filed suit in 2009, alleging violations of the Sherman Antitrust Act and the deprivation of his right of publicity by the NCAA and CLC. He noticed that an EA sports college basketball videogame, under contract with the NCAA, allowed its users to play with his classic 1995 UCLA championship team. The team featured a power forward that matched O'Bannon's height, weight, bald head, skin tone, jersey number and left-handed shot. http://espn.go.com/espn/otl/story/_/id/11255945/washington-attorney-michael-hausfeld-most-powerful-man-sports. EA sports and CLC settled their case for nearly $40 million. This money will be disbursed to nearly 100,000 current and former athletes whose likenesses had appeared in football and basketball video games since 2003. EA Sports has since ceased its annual release of both NCAA football and basketball games.

The O'Bannon class action plaintiffs continued their antitrust suit against the NCAA and gained momentum with the addition of basketball icons Oscar Robertson and Bill Russell. The class was certified by Judge Claudia Wilken to include current men's Division 1 football and basketball players. The inclusion of current student-athletes opened the door for the trust to claim a stake of the revenue derived from live event broadcasts and their billion-dollar television contracts in addition to jersey, merchandise and other commercial components containing the image or likeness of student-athletes. http://espn.go.com/espn/otl/story/_/id/8895337/judge-rules-ncaa-athletes-legally-pursue-television-money. Another major component of the suit revolves around NCAA Form 08-3a. Each year every athlete must sign this form, which authorizes the NCAA to enter into licensing agreements with companies that use student images perpetually. O'Bannonespn.go.com/espn/otl/story/_/id/11045682/ed-obannon-lawsuit-ncaa-paying-players-set-begin.

Unlike the Northwestern suit against the NCAA regarding athletes who wish to form a union and receive salaries, this suit is not about seeking labor payment for athletes as employees of the NCAA. Rather, the O'Bannon proposal is the establishment of a temporary trust for the licensing revenue earned by student-athletes. Players would be entitled to a portion of television rights deals, videogame sales, jersey and merchandise sales that the NCAA and universities currently receive. The trust would allow student-athletes to receive their money upon completion of their collegiate careers. http://www.si.com/college-football/2014/06/30/obannon-ncaa-antitrust-case-next-steps. The argument is that student-athletes would bypass NCAA regulations restricting compensation as amateurs, but be entitled to the profits they directly earned through their likenesses upon graduation. The inclusion of current players opens the door to tap the billion dollar television contract market that comprises various companies across the NCAA. The NCAA argues that an imbalance among conferences and universities would be created as power conference schools receive the vast majority of national television coverage and media attention. It fears that top tier talent would not be as diluted among universities, as athletes would flock to a small handful of schools to receive more exposure to receive compensation off their names and likenesses. Currently the Big Ten, ACC and SEC all have created their own conference television network. The plaintiffs argue that a competitive imbalance would not be created, because schools with more resources and a winning tradition already dominate the recruiting of top talent athletes. http://espn.go.com/espn/otl/story/_/id/11131166/all-need-know-ed-obannon-v-ncaa-trial.

Additionally, the NCAA argues the element of "student" in student-athlete. As this compensation would apply only to Division 1 male basketball and football players, other student-athletes would be adversely affected. The NCAA fears that if basketball and football players were allowed to be compensated, they would be unfairly distinguished from their peers and isolated from the values and benefits of their academic programs. http://espn.go.com/espn/otl/story/_/id/11131166/all-need-know-ed-obannon-v-ncaa-trial.

The O'Bannon camp argues that this NCAA landscape is not the same one that existed at the creation of these regulations. At stake is millions, if not billions of dollars. The NCAA and present day universities bring in millions upon millions of dollars in revenue every year via ticket sales, merchandise and major deals with networks, such as ESPN and CBS. The universities benefit from the names, images and likenesses of the players by paying out million dollar salaries to head coaches and building lavish stadium/training facilities while the student-athletes receive no compensation.

In August 2014, Judge Wilken ruled against the NCAA and in favor of the ED O'Bannon class. A prolonged appeals process of the ruling is currently being filed and litigation over this matter is likely to drag out for months, as this contentious issue is far from settled.

February 11, 2015

Three Things to Consider Before Making Employee Loans

By Kristine Sova

If your company is considering developing (or revising) an employee loan policy, or even just making a one-off loan to a stellar employee, read on. Unbeknownst to many employers, there are a number of laws and regulations that impact almost every facet of the loan - from who can receive one to how your company will be repaid.

1. Governance Laws Restrict Who You Can Issue Loans To

For example, the Sarbanes-Oxley Act of 2002, which applies to publicly-traded companies or companies preparing for their initial public offering, places restrictions on which employees may receive personal loans. So, too, do some laws affecting non-profit organizations. For this reason, you'll want to speak to a corporate lawyer with experience in corporate governance and/or a regulatory lawyer with experience in non-profit organizations to review the parameters of any loan policy you may adopt or loan you may make.

2. Employee Loans Have Tax Consequences

Depending on how a loan is structured, it can have adverse tax consequences for an employee. For example, interest-free and below-market loans may result in the spread between the reduced or non-existent rate and the market rate of interest being treated as taxable compensation to the employee. You'll want to speak with an accountant or tax lawyer to navigate this and other tax issues relating to employee loans.

3. Labor Laws Restrict Repayment Methods

The easiest way to collect loan payments is through payroll deductions, but applicable wage-and-hour laws may either restrict your ability to do so, or specify parameters within which those deductions can be made. For example, the New York Labor Law permits employers to make deductions from an employee's wages for repayment of a wage/salary advance, but only if the employer follows certain rules requiring written authorization and adoption of a dispute resolution procedure as well as rules relating to the timing and duration of the deduction. Furthermore, under the New York Labor Law, if payment of interest or loan fees is contemplated, those monies may not be repaid through a wage deduction, or even by a separate transaction.

These are only three, of many, legal issues to consider before making an employee loan. Once you have the legal implications sorted out, and still want to move forward with an employee loan, your company should consider developing a written employee loan policy to ensure consistent treatment of employees. In addition to the issues above, you'll want to consider and address the following in any policy: circumstances for making a loan, employee eligibility, total and individual loan maximums, and length of loans.

Supreme Court to Decide Whether Issue Preclusion Applies to TTAB Findings on Likelihood of Confusion in Infringement Litigation

By Tim Buckley

On December 2, 2014, the Supreme Court heard oral arguments in B & B Hardware v. Hargis Industries, which presents the following issues for resolution:

1. Whether the Trademark Trial and Appeal Board's (TTAB or Board) finding of a likelihood of confusion precludes a party from relitigating that issue in infringement litigation, in which likelihood of confusion is an element; and
2. Whether, if issue preclusion does not apply, district courts are obliged to defer to the Board's findings concerning likelihood of confusion absent strong evidence to rebut them.


Since 1997, B & B and Hargis have been contesting each other's rights in the marks "SEALTIGHT" for aerospace fasteners and "SEALTITE" for construction fasteners, respectively. B & B was the first to the market and also won the race to the Patent and Trademark Office (PTO), receiving a certificate of registration in 1993 for "SEALTIGHT" based on an application filed in 1990. Hargis filed an application to register "SEALTITE" in 1996, but registration was refused based on a likelihood of confusion with B & B's senior mark. Multiple administrative and judicial proceedings ensued, and in 2007 the TTAB again denied Hargis's application to register SEALTITE based on a likelihood of confusion.

In a subsequent action for infringement by B & B against Hargis, the Eastern District of Arkansas refused to apply issue preclusion on the question of likelihood of confusion and submitted the case to a jury, which returned verdicts against B & B on all of its claims and for Hargis on all of its counterclaims. The United States Court of Appeals for the Eighth Circuit affirmed, reasoning that the TTAB is not an Article III court, and the likelihood of confusion issues decided by the TTAB were not the same as those brought in the action before the district court.

The doctrine of issue preclusion, or collateral estoppel, is appropriate where (1) the issues in both proceedings are identical, (2) the issue in the prior proceeding was actually litigated and actually decided, (3) there was full and fair opportunity to litigate in the prior proceeding, and (4) the issue previously litigated was necessary to support a valid and final judgment on the merits.

B & B maintains that Congress's use of the language "likely to cause confusion" throughout the Lanham Act at 15 U.S.C. §§ 1052(d) (registration), 1114(1)(a) (infringement of registered marks), and 1125(a)(1)(A) (infringement of unregistered marks) indicates that the concept has the same meaning in each context, and therefore the issue of likely confusion is the same in TTAB proceedings and in infringement suits. As the registration provision mandates consideration of a mark as it is "used on or in connection with the goods of the applicant," the TTAB's inquiry is not divorced from marketplace context. Moreover, because the TTAB follows the Federal Rules of Civil Procedure and Federal Rules of Evidence, B & B argues that TTAB proceedings are similar to civil actions, so preclusion should apply.

In opposition, Hargis argues that registration proceedings and infringement actions resolve distinct issues, in that the TTAB looks to whether an applicant's mark "so resembles" another mark that it is likely to cause confusion, whereas district courts are tasked with deciding whether a party's actual use of the mark in the marketplace is likely to cause confusion. At oral argument, Hargis's attorney, Neal Katyal, detailed technical aspects of trademark prosecution and paraphrased the Federal Circuit's decision in Mayer/Berkshire as follows:

[A] claim of infringement before the court and a . . . likelihood of confusion before this Board are different claims. . . . [I]n Board proceedings, likelihood of confusion is determined independent of the context of actual usage. In an infringement action, on the other hand, the context of the use of the mark is relevant. Mayer/Berkshire Corp. v. Berkshire Fashions, Inc., 424 F.3d 1229, 1233 (Fed. Cir. 2005) (internal quotations omitted).

Hargis's lawyer also distinguished the Lanham Act from sections 315 and 325 of the patent statute, which under certain circumstances explicitly provide for preclusion in civil actions after the Patent Trial and Appeal Board (PTAB) issues a final written decision. The Lanham Act contemplates some effects of TTAB decisions in the infringement context (e.g., presumptions of validity and ownership), but it is silent on the issue of preclusion.

The Circuit Courts of Appeal have taken scattered approaches to this issue. The Third and Seventh Circuits have each applied issue preclusion, albeit with different justifications. Jean Alexander Cosmetics, Inc. v. L'Oreal USA, Inc., 458 F.3d 244 (3d Cir. 2006); EZ Loader Boat Trailers, Inc. v. Cox Trailers, Inc., 746 F.2d 375 (7th Cir. 1984). The Fifth and Eleventh Circuits deny preclusive effect to TTAB decisions, but apply a form of deference. Am. Heritage Life Ins. Co. v. Heritage Life Ins. Co., 494 F.2d 3, 10 (5th Cir. 1974); Freedom Sav. and Loan Ass'n v. Way, 757 F.2d 1176 (11th Cir. 1985). The Second Circuit, which is regarded by some practitioners as the preeminent court with respect to intellectual property law, conducts an "identity of issues" analysis and applies preclusion only when the TTAB has determined likelihood of confusion by reference to the entire marketplace context of the conflicting marks, as required in infringement actions. Levy v. Kosher Overseers Ass'n of Am., Inc., 104 F.3d 38 (2d Cir. 1997). J. Thomas McCarthy, author of the leading treatise on trademarks and unfair competition, endorses the Second Circuit's approach. 6 McCarthy on Trademarks and Unfair Competition § 32:101 (4th ed.).


The Supreme Court will likely hold that issue preclusion does not attach to TTAB findings on likelihood of confusion. In its amicus curiae brief, the International Trademark Association (INTA) took the position that TTAB determinations should not have preclusive effect in subsequent civil court proceedings because of the significant differences in the standards and procedures applied by the TTAB and federal courts.

The Trademark Manual of Examining Procedure (TMEP) at section 1207.01(a)(iii) provides that the "nature and scope of a party's goods or services must be determined on the basis of the goods or services recited in the application or registration." (emphasis added). Section 1207.01(c)(iii) provides that if "a mark (in either an application or a registration) is presented in standard characters, the owner of the mark is not limited to any particular depiction of the mark. . . . The rights associated with a mark in standard characters reside in the wording (or other literal element, e.g., letters, numerals, punctuation) and not in any particular display."

The TTAB is required to consider trademarks in hypothetical scenarios that do not comport with reality. For instance, it must presume that a registered standard character mark could be used in the same manner of display as an applied-for mark presented in special form, even if the registered mark is in fact only used in one particular manner. In infringement litigation, by contrast, Article III courts consider how the marks are actually used in the marketplace and how consumers encounter conflicting marks. These different standards reflect the fact that the TTAB's primary focus is on the registrability of marks, whereas Article III courts are concerned with the actual use and effect of marks on consumers in the marketplace.

At oral argument Justices Scalia and Breyer apparently struggled to grasp the differences between the relevant inquiries in Board proceedings and infringement litigation. Justice Ginsburg was more receptive to the Respondent's arguments and noted at the outset that perhaps preclusion should not apply because the stakes are much higher in infringement litigation. Chief Justice Roberts proposed a general rule of preclusion unless the issue of use in litigation involves something "other than what the TTAB would have been looking at . . . ."

The high court may take a middle ground and align itself with the Second Circuit by requiring preclusion only if the likelihood of confusion issues before the TTAB and district court are in fact identical. Regarding the second issue presented, if preclusion does not apply, district courts may nevertheless be required to give deference to decisions of the TTAB because of that administrative body's expertise in the field.

The court's opinion is expected to be released by April or May. Further analysis will be provided at that time.

Timothy J. Buckley is an associate at the law firm of Powley & Gibson, P.C. in New York. The views expressed herein are those of the author and do not necessarily reflect those of the Powley & Gibson firm or its clients.

February 12, 2015

Penn Law Sports Law Symposium

On Friday, February 13th, the University of Pennsylvania Law School Entertainment and Sports Law Society (ESLS) and the Heisman Trust are presenting the Penn Law Sports Law Symposium.

This year, the symposium will address the intersection of the sports and entertainment industries in relation to business and law. As currently planned, the symposium will be composed of three panels:

1) Broadcasting & Media Rights: Negotiations Between Professional Sports Leagues/Teams and Television Networks
2) The Emergence of Conglomerate Sports Agencies Including those with an Entertainment Representation Component
3) Challenges of Managing Facilities and Entities with a Cross-Appeal Between Sports and Entertainment

Adam Schefter, ESPN NFL Insider, will be delivering the keynote address. The event will also feature more of the top names in the sports and entertainment industries, including: Executive VP of Business for Major League Baseball Tim Brosnan, Founder/President of Octagon Phil de Picciotto, Executive VP of Corporate Strategy and General Counsel for Fenway Sports Group Ed Weiss, and CEO of Relativity Sports Happy Walters, among many other extremely well respected practitioners and academics.

Attorneys will be able to obtain 5.0 CLE credits for New York State.

Tickets can be purchased at:

February 14, 2015

Center for Art Law Case Updates

The following case selection first appeared in this week's Center for Art Law newsletter:

Plumb v. Casey, 469 Mass. 593 (Sept. 8, 2014) -- J. Duffly of the Supreme Judicial Court of Massachusetts answered a lingering question regarding consignments of artworks under M.G.L. Chapter 104A § 2b, stating that the delivery of an artwork by consignor and acceptance of the work by consignee is enough to create a consignment, and any lack of a separate written statement of delivery does not destroy the consignment relationship. The court reasoned that the law was established for the purpose of protecting artists rather than galleries.

King v. Park West Galleries, Inc. (MI, 2014) (unpublished) -- Reversal from trial court's order granting summary judgment to defendants. While on a cruise in 1999, plaintiff Mattie King bought supposed Salvador Dali originals for $165,000 at defendant Park West Galleries' auction. King received certificates of authenticity signed by Defendant CEO. She held on to the paintings for ten years before deciding to sell in 2009. King soon learned that defendant had been accused of forging artwork. An independent appraiser confirmed that her paintings were forgeries. On appeal, the court reversed lower court's findings and ruled that King was entitled to a tolling of the limitations period for the fraudulent concealment and breach of warranty claims. A party in Michigan that has a viable claim of fraud owes no duty of diligence to discover the claim. Defendants fraudulently concealed the existence of a claim by certifying the authenticity of the paintings and inducing King to rely on their artistic expertise. In an action alleging breach of warranty, the claim accrues once the breach of warranty is or reasonably should be discovered. As an art merchant, defendant created an express warranty of authenticity when providing King, a non-merchant buyer, with a certificate of authenticity. In providing inauthentic art, defendants breached that warranty.

Gordon v. Invisible Children, Inc. et al, 1:14-cv-04122, (SDNY, 6 June 2014) - The artist Janine Gordon sued a non-profit group for copyright infringement. Defendant allegedly copied Gordon's photograph and used it in a video campaign on the fugitive Ugandan war criminal Joseph Kony. Gordon asserted that the image used copies the "composition, total concept, feel, tone, mood, props, settings, decors, wardrobe, and lighting" from her 2001 photograph "Plant Your Feet on the Ground."

Phillips v. Macy's, Inc., 1:2015-cv-10059 (1st Cir. MA, Jan. 9, 2015) -- Award winning sculptor, David Phillips, originally from Flint, MI, brought a copyright infringement claim against Macy's for reproducing one of his iconic Frog's that decorate the Frog Pond in Boston on the Commons.

Aquino et al v. Zephyr Real Estate LLC, 5:15-cv-00060-NC (N.D. Cal., 6 Jan. 2015) - Amidst mounting tensions over soaring prices and gentrification in San Francisco, eight mural artists filed a complaint against the city's largest independent real estate firm alleging copyright infringement by reproducing their work in a 2013 promotional calendar which advertised "luxury homes."

Cindy Garcia v. Google, Inc., et al., (9th Cir., Nov. 13, 2014) - J. Thomas presiding, a panel of non-recused judges voted in favor of rehearing the 9th Circuit case that previously held that actress and plaintiff Cindy Lee Garcia had a "copyright interest" in her performance in the film "Innocence of Muslims" which gives her the right to have the video taken offline.

Polvent v. Global Fine Arts, Inc., 14-21569-CIV-MORENO (S.D. Fla., 18 Sept. 2014) - J. Federico A. Moreno granted a motion to compel arbitration filed by Defendant, American art dealer Global Fine Arts, Inc. in its copyright dispute with Plaintiff, French artist Jacqueline Polvent. The court ruled in favor of arbitration even though the licensing agreement between the parties, which stipulated for a compulsory arbitration in case of a legal dispute, had expired in 2013, an auto-renew provision provided for a successive and consecutive five-year period unless terminated in writing one-year prior to expiration.

The Center for Art Law strives to create a coherent community for all those interested in law and the arts. Positioned as a centralized resource for art and cultural heritage law, it serves as a portal to connect artists and students, academics and legal practitioners, collectors and dealers, government officials and others in the field. In addition to the weekly newsletter (http://cardozo.us2.list-manage.com/subscribe?u=78692bfa901c588ea1fe5e801&id=022731d685), the Center for Art Law subscribers receive updates about art and law-related topics through its popular art law blog (http://itsartlaw.com/blog/)and calendar of events (http://itsartlaw.com/events/). The Center for Art Law welcomes inquiries and announcements from firms, universities and student organizations about recent publications, pending cases, upcoming events, current research and job and externship opportunities. To contact the Center for Art Law, visit our website at: www.itsartlaw.com or write to itsartlaw@gmail.com.

Week in Review

By Chris Helsel

Chicago's Little League National Champions Stripped of Title

Chicago's Jackie Robinson West Little League Baseball team, which last year became the first all-African American team to win the United States national championship, has been stripped of its title following an investigation revealed that it had fielded ineligible players from outside its district.

The team, which lost to a South Korean squad by a score of 8-4 in the international championship game, had galvanized urban Chicago during its tournament run and is credited with inspiring renewed interest in the sport among African-Americans. Jackie Robinson West is a product of Little League's Urban Initiative program, which along with Major League Baseball's Reviving Baseball in Inner Cities aims to promote the sport in inner-city areas by providing resources and training coaches.

During the tournament, the team was praised for its exciting brand of play and exemplary sportsmanship. Specifically, one player personally apologized to the coach of a team from Rhode Island following an excessive home run celebration, and another gave an elaborate handshake and hug to a South Korean player following the international championship game.

However, a month after the tournament concluded, an official from a neighboring suburban Little League district contacted officials with concerns that Jackie Robinson West had fielded players from outside its prescribed regional boundaries. In January, Little League International launched an investigation, which revealed that team officials had knowingly fielded players from outside Jackie Robinson West's district. It found that the officials illicitly expanded the district's boundaries to include territories belonging to other districts and improperly altered the boundary map. The suburban whistleblower claims that he has received death threats.

Going forward, Jackie Robinson West will remain ineligible to compete until its president and league treasurer, Anne Haley and her son William, respectively, are replaced. Mr. Haley, whose father, Joseph, founded the league in 1971, was named Little League's Urban Initiative volunteer of the year in 2010.

Perhaps the most tragic aspect of this sad story is that the players themselves were apparently completely unaware that they were doing anything wrong. Stephen D. Keener, president of Little League International, said in a statement, "This is a heartbreaking decision. What these players accomplished on the field and the memories and lessons they have learned during the Little League World Series tournament is something the kids can be proud of, but it is unfortunate that the actions of adults have led to this outcome." In an interview with ESPN, he described the players as victims. "No one should cast any blame, any aspersions, on the children who participated on this team," he said.

Following its run to the national championship, the team was honored with a parade in Chicago and visited the White House. Upon learning that Little League International had stripped Jackie Robinson West of its title, a White House spokesman stressed that the president was proud of how the players had represented Chicago and the United States. "The fact is, some dirty dealing by some adults doesn't take anything away from the accomplishments of those young men," said the spokesman.

Little League International also announced that the United States championship would be awarded to Mountain Ridge Little League, a team from Las Vegas that lost to Jackie Robinson West in the national title game. Prior to that decision, Mountain Ridge's coach, Ashton Cave, suggested that Little League should send a more powerful message by leaving the title vacant.

This is not the first time a Little League team has had its tournament victories vacated for fielding ineligible players. In 1992, Little League International stripped a team from the Philippines of its championship after learning that some players had not met age or residency requirements. Additionally, a New York team, the Rolando Paulino Little League, was famously stripped of its third-place finish in 2001 after star pitcher Danny Almonte turned out to be two years older than permitted under Little League rules.

Following the announcement that Jackie Robinson West's tournament exploits would be vacated, district officials retained an attorney and pledged to review the fairness of the investigation. Specifically, they intend to investigate whether the rules were applied equally to every other team in the 2014 tournament, and confirm that Jackie Robinson West had not been unfairly singled out. At a news conference, the attorney indicated that the league is not - for now, at least - contemplating filing a lawsuit.

As for the players themselves, they believe that nothing can take away what they accomplished on the field. Speaking at a news conference, pitcher Brandon Green said that the players were not involved "in anything that could have caused us to be stripped of our championship." He added, "We do know that we're champions."


Pandora/BMI Trial Begins This Week in Manhattan Federal Court

This week, Internet streaming music service Pandora and licensing agency BMI square off in federal court over music royalties.

Currently, Pandora pays BMI, which handles the songwriting and publishing rights of artists, 1.75% of its revenue. Pandora seeks to reduce that fee to 1.70% to match the rate paid by most traditional radio broadcasters. The company contends that its online streaming service is essentially just an alternate form of radio.

BMI, on the other hand, contends that Pandora's rate should raise to 2.5%. It believes that because Pandora listeners have more control over the songs they hear, and lacks non-music programming such as news and talk, the service extends beyond a traditional radio station by making more extensive use of music.

This case mirrors a similar case between Pandora and BMI's biggest rival, ASCAP, last year. In the ASCAP case, the judge declined to alter Pandora's royalty rate, but expressed concern that ASCAP and two prominent music publishers, Sony/ATV and Universal, demonstrated "troubling coordination" in their negotiations with Pandora. Following the judge's ruling, the Justice Department issued inquiries to ASCAP, Sony/ATV and Universal.

ASCAP and the publishers appealed the decision, and appellate oral arguments are set to begin in March.

In addition to its legal battles with the agencies regarding songwriting and publishing rights, Pandora is embroiled in another legal dispute with the music industry over the price of recording rights. The cost of these rights are set by a panel of federal judges in Washington.

While the difference in the royalty rates proposed by Pandora and BMI seems slight, music industry insiders note that given the increasing shift in music consumption away from albums and radio and toward online platforms, each percentage point is crucial to the economic interests of artists. Expect this fight to drag on for months, if not years, as the percentage of music consumed online continues to grow exponentially.


Millennial News Site News Director Fired For Plagarism

The news website Mic, which caters to the millennial generation, has fired its news director after finding that he committed plagiarism. On Wednesday, the news and gossip website Gawker published a story accusing the news director, Jared Keller, of copying or liberally borrowing passages from other news outlets in at least 20 of his pieces. The following day, after an internal investigation, Mic announced that Mr. Keller had been fired.

Mr. Keller, who previously worked at Bloomberg, Al Jazeera America and The Atlantic, copied passages verbatim or with minor changes from numerous outlets, including Vox, Reuters and The Atlantic, without giving his sources proper credit. He issued an apology on Twitter on Thursday afternoon and declined to comment further.


New Jersey Approves Gambling Based on "Physical Skills"

For the first time, an American casino will offer a competition based purely on gamblers' physical dexterity.

Atlantic City casinos, which have faced enormous financial difficulties in recent years following the opening of casinos in Philadelphia and New York, now have the ability to offer something their competitors cannot - yet. Executives at The Borgata Hotel Casino and Spa, an Atlantic City staple, announced yesterday that they have received permission from New Jersey gambling regulators to host a basketball-shooting contest next month. The contest, which will cost $20 to enter, gives entrants 90 seconds to make as many free throws as possible. The top 16 performers will enter a tournament, with the top four finishers splitting $10,000, $5,000 of which goes to the winner.

The program, which according to the American Gaming Association is the first of its kind offered by a licensed U.S. casino, was approved by the New Jersey Division of Gaming Enforcement under its "New Jersey First" initiative. The initiative seeks to adopt and enact unprecedented gambling products before other states do.

The program is expected to be followed by many similar programs in the coming months. According to Borgata senior vice president Joe Lupo, "This is a first step, something we've never been able to do until now. A year from now, you'll probably see a lot more of these skill-based tournaments or even games on the casino floor."

Other Atlantic City casinos are free to propose similar games, but each must be specifically evaluated and approved by the state prior to enactment.

The casino stressed that the contests are open to any and all persons age 21 and above - including professional athletes.

The approval of this new mode of gambling comes on the heels of the state's failed attempts to legalize sports betting, as covered in previous editions of "Week in Review."


February 18, 2015

28th Annual Horace S. Manges Lecture - Columbia Law School

The Dean of the Faculty of Law and the Kernochan Center for Law, Media and the Arts at Columbia Law School kindly ask that you save the date for the 28th Annual Horace S. Manges Lecture, "Optional Copyright Renewal? Lessons for Designing Copyright Systems"

To be given by:

R. Anthony Reese
Chancellor's Professor of Law
School of Law, University of California•Irvine

Monday, February 23, 2015 at 6:30 p.m.
Columbia Law School • Jerome Greene Hall

Please direct inquiries to Cindy Tangorra at ctango@law.columbia.edu or 212-854-9073.

Kernochan Center for Law, Media and the Arts • 435 West 116th Street, Box A-17 • NY, NY 10027
t: 212-854-7424 • f: 212-854-9111
kernochancenter@law.columbia.edu • www.law.columbia.edu/kernochan

Jane C. Ginsburg
Morton L. Janklow Professor of Literary and Artistic Property Law; Faculty Director, Kernochan Center

June M. Besek
Lecturer-in-Law; Executive Director, Kernochan Center

Philippa Loengard
Lecturer-in-Law; Assistant Director, Kernochan Center

Identity Crisis! Legal and PR Aspects of Managing Brand Image in Celebrity Endorsements and Licensing Agreements [Gone Wrong]

The Fashion Law Committee of the Entertainment, Arts and Sports Law Section presents: Identity Crisis! Legal and PR Aspects of Managing Brand Image in Celebrity Endorsements and Licensing Agreements [Gone Wrong]

March 6, 2015
10:30am - 1:00pm (with breakfast served at 10:00am)

Fashion Institute of Technology
227 W 27th St
New York, NY 10001

Register Online Now at http://www.nysba.org/store/events/registration.aspx?event=EA3200MR15 or call our State Bar Service Center at 1-866-640-4404

This program qualifies for 2.0 MCLE Credits in professional practice

As you wait in the checkout line at your local supermarket, you are so bored that you grab a gossip mag from the display above the mints. (OK, so it's really because you secretly love the sleaze... but we won't tell.) Flipping through the pages, you are consumed by the latest celebrity news: love, heartbreak and... uh oh... scandal. The top news story recounts a young celebutant's night of partying that ended in her arrest. In the wake of this incident, said starlet has been dropped by the trendy clothing line she served as brand ambassador for. "How can they do that!?" you think to yourself. "Isn't there a contract they have to honor?" "And what about free speech?"

Recently, such situations have become quite common, resulting in an increased importance placed on contract terms designed to protect a fashion brand's reputation. This need for image control does not stop at celebrity endorsements. A brand's reputation can be at risk if the brand is associated with manufacturers or factories alleged to be in violation of health, safety and labor laws.

NYSBA's Fashion Law Committee, in partnership with the Fashion Institute of Technology's Jay and Patty School of Business and Technology, invites you to attend its annual CLE event for a lively discussion of these issues. Industry attorneys and PR professionals will discuss the ins-and-outs of image protection from a legal and public relations perspective. Hear as they relay best practices in negotiating celebrity endorsement deals, discuss the importance and effectiveness of morality clauses and advise on avoiding reputational damage in the event of a "rogue" brand representative. Panelists will also discuss these issues as they apply to labor and safety standards.

For questions Contact Beth Gould at bgould@nysba.org

Old Rules, New Enforcement

By Angele Chapman

On March 24, 2014, the Bose Corporation extended its contract as a sponsor with the National Football League (NFL, league). The implications of this contract have changed the face of the NFL and how its players use products that are shown on television. On October 5, 2014, Business Insider reported that players were barred from wearing any non-Bose headphones during televised broadcasts.

Beats Electronics, a rival of the Bose Corporation, is a division of Apple Inc., which produces audio products. It gained its popularity and was co-founded by rap producer Dr. Dre and Interscope-Geffren-A&M Records chairman Jimmy Lovine. Many NFL players have contracts with Beats Electronics, commonly known as "Beats by Dre." Most recently, the public has been seeing star players like 49ers quarterback Colin Kapernick and Seahawks cornerback Richard Sherman, wearing "Beats by Dre" headphones during warm-ups and games.

The NFL released a statement confirming Bose's relationship as a sponsor. It was reported that: "Under the terms of its agreement with the league, the NFL confirmed, Bose received a broad set of rights that entitle it to prevent players (or coaches) from wearing any other manufacturer's headphones during televised interviews." The ban includes pre-season interviews and remains in effect until 90 minutes after a play has ended. An NFL spokesperson stated that:"The NFL has longstanding policies that prohibit branded exposure on-field or during interviews unless authorized by the league. These policies date back to the early 1990s and continue today." In 2006, running back Reggie Bush was fined $10,000 for wearing Adidas cleats because of the NFL's contractual partnership with Nike and Reebok that prohibited any other brand to be worn during games. This type of enforcement is similar to what occurred during the 2014 FIFA World Cup, when Beats headphones were banned because of FIFA's contractual agreement with Sony.

The question is: If the NFL had these brand exposure policies since the 1990s, why is it only recently enforcing them? Perhaps the league's new legal issues and criticism make it an easy target for heavy sponsors to void their contracts. After the recent incidents with Ray Rice's alleged domestic violence caught on video and Adrian Peterson's child abuse allegations, many sponsors like Procter & Gamble have taken the sidelines when it comes to supporting the NFL's decisions. While Procter & Gamble remains an NFL sponsor, it issued a statement that: "Domestic violence is completely unacceptable and we have strongly urged the NFL to take swift and decisive action to address this issue, and we will determine future actions as needed." This statement comes after Procter & Gamble decided to remove itself from the NFL's Breast Cancer Awareness campaign with its Crest Toothpaste brand. Other companies, such as Anheuser-Busch InBev, PepsiCo and Radisson Hotels, have questioned the NFL's handling of its recent legal issues with the players. The possibility of losing millions of dollars in sponsorships could be a reason why the NFL wants to hold on dearly and enforce the contracts with the sponsors that remain.

Another reason as to why the NFL may be enforcing this policy is because Bose sued Apple's Beats Electronics in July 2014 for patent infringement for allegedly infringing on its noise-cancelling technology. In the complaint filed in the United States District Court in Delaware, Bose Corporation alleges that Beats Electronics infringes on five patents, and seeks an injunction and damages for all infringing sales. Although the NFL denies that Bose's contract has influenced its enforcement policies, upcoming litigation may play an underlying role in NFL's decision. This theory is in comparison with Microsoft, which had a $400 million agreement for the NFL to exclusively use the Surface tablet on the field, but announcers and players are still referring to the tablets as "iPads", according to Business Insider.

Whatever reason the NFL gives for enforcing its branding policies, one can expect to see a difference in advertising among players (and coaches) and the technology they use during Monday night football and the upcoming season. While this level of brand enforcement is emerging, players such as Colin Kapernick decided to test how stringent the NFL is willing to go with its rules. After being fined $10,000 for wearing his Beats by Dre headphones during a conference, Kapernick decided to keep his headphones on, but put tape over the logo. So far, it seems as though the NFL is willing to accept the tape as conforming with the regulations and contractual obligations to its sponsors.






Bose Corporations v. Beats Electronics Complaint: https://docs.rpxcorp.com/lits/641/94801/dedce-55457.pdf?Signature=PoTMsCH7QY29PagvVajsar%2BnEmo%3D&Expires=1412564095&AWSAccessKeyId=AKIAI2UWKALIEYBVOKDA

February 21, 2015

Week in Review

By Chris Helsel

Off Broadway Company Fights to Retain Right to Buy Helen Hayes Theatre

Second Stage Theater (Second Stage), an off Broadway company, has brought an action in New York state court seeking an extension in order to secure financing to complete its purchase of the Helen Hayes Theatre (the Hayes). The deal, originally negotiated in 2007, calls for Second Stage to purchase the theater for $25 million. The closing was set for last Tuesday, but when Second Stage could not come up with the money, the Hayes sought to void the deal. Second Stage contends that the Hayes intended to offer to the theater, which has likely grown in value since 2007, to a higher bidder. The Hayes' owners, meanwhile, claim that they were ready to sell on Tuesday but would now prefer to retain ownership of the theater and have no plans to sell it to anyone else.

On Thursday, Judge Joan M. Kenney of the New York State Supreme Court urged the two parties to settle the case, rather than prolong litigation. Attorneys from both sides have made contradicting claims about settlement negotiations conducted last week. Both parties indicated they had been willing to accept a deal whereby Second Stage would pay $175,000 in exchange for a 90-day extension - both sides then said the other party rejected the deal.

Meanwhile, the Hayes' owners now claim that the delay in finalizing the purchase has cost them significant rental income for the theater. "We had several producers who were interested in putting shows in the theater this spring, but that won't be possible," said one of the Hayes' co-owners.


Letters of Intent Called Into Question

The official process by which high school athletes make their college choices, which has long been derided as unfair and exploitative, may have reached its tipping point. This year, on National Signing Day (February 4th), a star high school football player in Georgia announced on national television that he would be attending the University of California at Los Angeles (UCLA). What he did next may alter the history of college recruiting forever.

Traditionally, a player signs his letter of intent and sends it in to the school. The player is then bound by that agreement, and no other school can recruit him. The chosen school, though, has no obligations to the player. It can drop the player (that is, revoke his acceptance and scholarship) at any time between the receipt of his letter of intent and the commencement of preseason practice.

For obvious reasons, this practice has been railed by critics as monumentally one-sided in favor of the schools. High school athletes, however, typically do not complain - they are thrilled to be offered scholarships and announce their decision on national television. In many cases, however, schools pull the rug out from their recruits and revoke their offers after receiving letters of intent. These players are often stuck, as virtually every other school has filled its scholarship limits and have no room for the now-available player.

Another way this system can harm the players is if a school's coach decides to leave. In many cases players are recruited by a college coach, sign a letter of intent binding them to attend that coach's school, only to later learn that the coach had subsequently accepted a job elsewhere. In that case, because he signed the letter of intent, the player has no choice but to attend the school despite the coach's departure, or sit out a full year before enrolling elsewhere.

The aforementioned high school football player from Georgia, however, appears to have changed the game. On ESPN, Roquan Smith announced that he would be attending UCLA. However, acting on the advice of his high school coach, he declined to sign a letter of intent. This leaves him free to switch schools at any time before the start of the preseason.

The wisdom of his decision revealed itself almost immediately. In the hours following Mr. Smith's televised "commitment" to UCLA, the school's defensive coordinator, Jeff Ulbrich (who had been Mr. Smith's primary contact during the recruitment process), accepted an NFL coaching position with the Atlanta Falcons.

According to Mr. Smith, during the recruitment process, Mr. Ulbrich outright told him that he had turned down the offer to join the Falcons. Thankfully, Mr. Smith never submitted his letter of intent, so he was free to rescind his acceptance and enroll elsewhere once the truth was revealed. He announced on February 13th that he would be attending the University of Georgia.

Going forward, it seems likely that many high school players (at least the top-ranked players - those with many college options) may opt out of the practice of signing a letter of intent. As Mr. Smith's case demonstrates, the letters of intent serve only to bind the player to the school, but do nothing to stop the school from acting in its own best interest - often at the expense of impressionable 17- or 18-year-old young men and women.


Lance Armstrong Ordered to Pay $10 Million to Sports Insurance Company

Earlier this month, an arbitration panel ordered American bicyclist Lance Armstrong to pay $10 million to SCA Promotions (SCA) for bonuses fraudulently won as a result of his seven Tour de France victories.

In 2005, Mr. Armstrong sued SCA, a sports insurance company, seeking to recoup a $5 million bonus that the company had withheld after allegations of Mr. Armstrong's doping surfaced. During that proceeding, Mr. Armstrong stated under oath that he did not use performance-enhancing drugs. Without probative evidence, SCA could not prove that Mr. Armstrong was not entitled to the bonus. The case was ultimately settled, with Mr. Armstrong was collecting the $5 million bonus, plus $2.5 million in fees.

Mr. Armstrong retired from competitive racing in 2011, as he faced a U.S. federal investigation into allegations of doping. The following year, federal prosecutors dropped their criminal investigation. However, the United States Anti-Doping Agency (USADA) conducted its own investigation, and found that Mr. Armstrong had indeed violated the World Anti-Doping Agency (WADA) code throughout his career. In August 2012, USADA issued Mr. Armstrong a lifetime ban from all sports that follow the WADA code, and stripped him of all seven Tour de France titles. The international cycling federation, Union Cycliste Interationale (UCI), upheld USADA's decision in October 2012.

Soon thereafter, SCA announced its intention to recoup the amount it paid to Mr. Armstrong. In January 2013, Mr. Armstrong finally admitted to using performance-enhancing drugs throughout his career in a television interview conducted by Oprah Winfrey.

On February 4th of this year, the arbitration panel awarded SCA $10 million. The panel's decision highlighted Mr. Armstrong's prior declaration under oath that he had never doped, and declared, "Perjury must never be profitable." The decision referred to Mr. Armstrong's doping regimen, bullying tactics against whistle-blowers and steadfast denials as "almost certainly the most devious sustained deception ever perpetrated in world sporting history."

SCA has now filed a claim in Texas state court, asking the judge to enforce the arbitration ruling. In addition, SCA has sued Mr. Armstrong in Texas civil court for an additional $5 to $10 million. SCA's attorney, Jeff Tillotson, said, "This is just a very good start to getting SCA full compensation. Oh, no, we're not finished with Mr. Armstrong yet."

In addition to the SCA actions, Mr. Armstrong faces a $100 million federal whistle-blower case, in which the U.S. Postal Service (USPS) claims that he defrauded it during its sponsorship of his riding team. The USPS sponsorship contract demanded that Mr. Armstrong not use performance-enhancing drugs, which he (until recently) vehemently denied he ever did.

As if 2015 wasn't going poorly enough for Mr. Armstrong, he received two traffic tickets this month for his involvement in a hit-and-run in Aspen, Colorado. His girlfriend originally took the blame for the accident, but later told police that she had lied about driving the car in order to protect the car's actual driver - Mr. Armstrong - who had been drinking.


NHL Concussion Suit Gains Steam

While the class action suit brought by former players against the National Football League (NFL) has garnered the majority of concussion litigation headlines in the past few years, the National Hockey League (NHL, League) also faces a similar legal challenge.

In 2013, following the announcement that the NFL had reached a preliminary settlement in the suit involving thousands of former players, 10 former NHL players brought a suit of their own. That suit, which now includes over 70 named plaintiffs, raises many of the same arguments as the NFL case. Specifically, the players argue that the League failed to address the dangers of head injuries, despite mounting evidence of the long-term ramifications of concussions.

The case has returned to the headlines in recent weeks as an additional 29 former players signed on and another, Steve Montador, was found dead at age 35 last Sunday. Mr. Montador had a history of concussions, which forced his premature retirement, and had hired an attorney with plans to join the suit before his untimely death. His brain will be studied by scientists to determine whether he suffered from chronic traumatic encephalopathy (CTE), a degenerative brain disease, which has been linked to the early deaths of numerous other former NHL and NFL players.

In the current case, the NHL has raised two main defenses. First, like the NFL, the League contended that the suit was preempted by the collective bargaining agreement with the players. Second, the NHL has also argued that most of the plaintiffs' complaints are barred by the statute of limitations. Those arguments were heard in January, and a ruling is expected shortly.

In the meantime, the class continues to grow. According to plaintiffs' attorneys, another 200 former players have retained counsel with plans to join, and roughly 500 have expressed their support.


February 23, 2015

The 11 Contracts Every Artist, Songwriter & Producer Should Know

The following is the first installment in a series of articles from entertainment industry attorney Steve Gordon. In each installment, Steve discusses a particular music industry form of agreement from the point of view of both parties (that is, artists, songwriters and/or producers on the one hand), and those they do business with (that is, record labels, music publishers, managers, etc. on the other). Steve is writing these blogs primarily for the benefit of indie musicians. His hope is that they will read this series in other outlets. EASL is publishing these because they may be of interest to attorneys, particularly attorneys with limited experience in music business transactions.


Although there is no truly "standard" agreement, many music business contracts begin as "form" agreements before the terms are negotiated. Often, there are two versions of a form agreement: one that represents the best interests of creators, including artists, songwriters, and producers, and one that represents the best interests of the companies that do business with them, such as record labels, publishers, and managers.

These parties typically have adverse interests. For instance, while a record label will often attempt to secure rights in an artist's sources of income beyond mere record sales, such as touring, merchandising and publishing, it is usually in the artist's best interest to retain as much income from these secondary sources as possible. Other agreements, such as contracts between co-songwriters or band members, seek to delineate the rights and duties of similarly situated parties in order to avoid disputes that might otherwise arise.

In this upcoming series, I will review the form contracts that artists are most likely to encounter in their music careers and provide commentary on each provision.

My focus will be on the types of agreements typically offered to indie artists, songwriters and producers who are taking the step to the next level.

In the first installment, below, I take on management agreements. I have re-printed a standard "pro-manager" form of agreement and provide paragraph by paragraph commentary from the artist's point of view. I also include a complete pro-artist management form of agreement.

Future installments will tackle these agreements:

2. Indie record deals
3. Synch licenses for original music
4. Co-writer agreements
5. Producer agreements for the licensing and sale of beats
6. Band agreements
7. Investment agreements
8. Agreement for production of music for TV ad campaign
9. Synch rep deals for artists, producers, and songwriters
10. Merchandising agreements; and
11. Performance agreements with clubs and promoters.

It is my hope that this series will be used as one tool to educate and prepare artist and artists' attorneys for the negotiations that will help define music careers.



Managers have never played a more important role in the music business than they do today.

A good manager advances the career of his or her client in a variety of ways. Traditionally, a manager provided advice on all aspects on the artist's professional life, used his or her relationships to generate opportunities, negotiated deals when the opportunity to do so arose, and helped the artist select other members of the "team," such as accountants, lawyers, booking agents, and publicists. A manager's principal job was, however, searching for the "holy grail" --- shopping the artist to record labels, particularly the majors, with the hope of signing a lucrative recording agreement. Signing a record deal meant a payday for both the artist and the manager. Managers work on commission, so the goal was to sign with a major label and negotiate the largest advance possible. In the 90's, when I was a lawyer for Sony Music, we paid advances to new artists ranging from $250,000 to upwards of $500,000. If the artist caught fire, both the artist and the manager could become very wealthy from record sales alone. Those days are largely gone.

Starting in 1999, income from recorded music has declined more than 75%, accounting for inflation. As a result, the major labels (Sony, Universal, and Warner, along with their affiliates) sign fewer artists and pay those new artists far more modest advances. An artist may never get a deal, or may be dropped from the label's roster much faster than in the past, when labels had spare cash to support a developing artist. For instance, Bruce Springsteen did not catch fire until after Columbia (now a Sony affiliate) released two albums. However, Columbia had faith and supported him through the early disappointments. Today, with the major labels fighting just to survive, a story like that is far less likely to occur. Labels would rather put their resources behind already established acts, where a return on investment is more certain.

In these days of financial insecurity in the record business, the manager's role is more important than ever. In the past, once the artist was signed to the major label, the manager's primary function became to serve as liaison between the record company and the artist. The manager lobbied the label to do more, spend more, and focus more on his or her artist(s). However, due to budget cuts and massive layoffs at the labels, today's manager does much of the work that the label used to do. For example, the manager may take over social networking, search for opportunities to get the artist's music in movies or commercials, or find branding opportunities with sponsors. Furthermore, if the artist cannot find an acceptable record deal, the manager may become the artist's de facto label, and take on the responsibility of securing funding from investors or crowdfunding to produce records, arranging physical and digital distribution, and everything else the record companies traditionally do.


In this PDF, I critique a standard pro-management agreement and explain in the comments the changes an artist should negotiate. There are a number of important terms where the interests of the manager are directly adverse to the interests of the artist. For example, it is generally in the manager's interest to have a long initial term and several options to extend the duration of the agreement. The artist, conversely, will want to be able to get out of an agreement quickly if the manager is not meeting the artist's goals. This issue is addressed in the comments for the first paragraph of the pro-management agreement.

Most management agreements base the manager's commission on gross income that an artist earns from any activities in the entertainment business. It's crucial for the artist to insist that monies paid to the artist, or on the artist's behalf, for recording costs, touring expenses and other business expenses are not included in gross income. For instance, if a record company gives an artist an advance of $100,000, and the artist spends $80,000 on recording costs, the manager should not calculate his or her commission on $100,000. If the contract allowed her do so, she would be entitled to $20,000 and the artist would be left with nothing. This issue is addressed in the comments for subparagraphs 11(b) and (d).

Another very important provision is whether the manager has the right to receive a commission from any contract negotiated during the term -- even after the management contract terminates. Pro-manager agreements will usually include such a provision. The artist will want to terminate the manager's right to commission his or her income when the contract ends. However, the manager's position is that if the manger lands a multi-album deal or long-term publishing agreement, the manager should continue to receive money because he or she helped create that source of income. The compromise is called a "sunset clause." Under this clause, the manager still receives income from contracts negotiated during the term of the agreement, but that amount of income declines over time and eventually ends within a reasonable time. An example of a sunset provision is included in the comments for paragraph 13 in the pro-management agreement, and is also contained in the pro-artist agreement provided in this installment.

Other terms are mere boilerplate that are important to the agreement but equally protect the interests of both parties. I will point out these terms and explain their significance as well. One example is paragraph 29, which states that any amendment to the contract must be made in writing and signed by both parties.

PRO-ARTIST MANAGEMENT AGREEMENT: Forms-management.pro-artist.2.16.pdf

This PDF provides an example of a pro-artist management agreement. The contract a new manager presents to an artist will often start out resembling the pro-manager agreement, and the closer one can negotiate it to the pro-artist agreement, the better.

Steve Gordon is an entertainment attorney with over 20 years of experience in the entertainment industry, including 10 years as Director of Business Affairs for Sony Music, attorney at a law firm representing Atlantic and Elektra Records, and in-house music counsel for a Hollywood studio. His clients include Time Life Films, Soul Train Holdings, Smithsonian Folkways, Music Choice, Maryland and Louisiana Public Broadcasting, and established and up and coming artists, producers, indie labels, and managers. He is the author of The Future of the Music Business (4th ed. 2015 Hal Leonard).

Steve Gordon gratefully acknowledges the assistance of Ryanne Perio and Anjana Puri in the preparation of this material. Ryanne Perio is a graduate of Columbia Law School and a former legal intern at Atlantic Records and SAG-AFTRA. She is currently an associate at Wilmer, Cutler, Pickering, Hale & Dorr, where she focuses on intellectual property litigation. Anjana Puri is a lawyer pending admission to the New York bar. She currently works as an associate of Mr. Gordon. She received her JD from Benjamin N. Cardozo School of Law (2014) and received her B.A. in International Development Studies from UCLA.
Disclaimer: The information in this series has been prepared for informational purposes only and does not constitute legal advice. This series should be used as a guide to understanding the law, not as a substitute for the advice of qualified counsel. You should consult an attorney before making any significant legal decisions.

February 28, 2015

Week in Review

By Chris Helsel

ISIS Destroys Ancient Assyrian Relics in Iraqi Museum

After months of threatening to do so, Islamic State (ISIS) militants have destroyed numerous ancient statutes in the Northern Iraqi city of Mosul. The artworks were among the recent archaeological finds housed at the Mosul Museum, which had not yet opened. The museum was captured by ISIS in June.

The destruction was in keeping with the Islamic State's practice of eliminating non-Islamic religious relics. A video released by the Islamic State's media office for Nineveh Province showed militants smashing the ancient pieces with sledgehammers and sawing them apart with power tools. On the video, a man declared: "The monuments that you can see behind me are but statues and idols of people from previous centuries, which they used to worship instead of God."

"The prophet ... ordered us to remove and obliterate statues. And his companions did the same, when they conquered countries." A message displayed on the screen during the video read, "Those statues and idols weren't there at the time of the Prophet nor his companions. They have been excavated by Satanists."

Amr al-Azm, a Syrian anthropologist and historian addressed the video on his Facebook page, calling the destruction: "A tragedy and catastrophic loss for Iraqi history and archaeology beyond comprehension." In an interview, he said, "These are some of the most wonderful examples of Assyrian art, and they're part of the great history of Iraq, and of Mesopotamia. The whole world has lost this."

The destroyed relics included items from the palace of King Sennacherib of Assyria, who reigned from 705-681 BC and whose siege of Jerusalem is recounted in the Bible.

Despite its stated desire to stamp out all offending relics, ISIS's treatment of ancient works has been somewhat inconsistent. While the group has destroyed historic mosques, tombs and artifacts it considers impermissible forms of idolatry, it has also sold some smaller, more portable relics in order to raise funds.

Mr. Azm believes that the motive behind the destruction in Mosul - and subsequent release of the video - is two-pronged. Not only do the militants want to stamp out heretic idolatry, he says, but they also intend to provoke the West into invading the city. "They want a fight with the West because that's how they gain credibility and recruits."


F.C.C. Votes to Regulate Broadband Internet as Pubic Utility

After months of political debate, the Federal Communications Commission (F.C.C., commission) voted Thursday to regulate broadband Internet service as a public utility. The new rules are intended to realize the long-pursued ideal of "net neutrality" - that is, that the Internet is not divided into "fast" and "slow" lanes that depend on the amount a user is willing to pay.

F.C.C. chairman Tom Wheeler said that the commission was using "all the tools in our toolbox to protect innovators and consumers" and preserve the Internet's role as a "core of free expression and democratic principles." He said that access to the Internet is "too important to let broadband providers be the ones making the rules."

Under the new policy, wired lines and mobile data service will each be regulated as a public utility. The new rules will now classify broadband Internet service as a telecommunication service, rather than an information service, under Title II of the Telecommunications Act.

Opponents of the new rules, including Republican lawmakers and cable and telecommunications companies, insist that they will stifle a competitive market by deterring investment and undermining innovation. Michael Powell, former chairman of the F.C.C. and current president of the National Cable and Telecommunications Association, said in a statement that: "Today, the F.C.C. took one of the most regulatory steps in its history. The commission has breathed new life into the decayed telephone regulatory model and applied it to the most dynamic, freewheeling and innovative platform in history."

Supporters of the new policy include major Internet companies and President Obama. In November of last year, the president urged the commission to adopt "the strongest possible rules" regarding net neutrality. Mr. Obama specifically advocated classifying broadband Internet as a public utility, because "for most Americans, the Internet has become an essential part of everyday communication and everyday life."

Following the F.C.C.'s announcement, the Internet Association (which includes Google and Facebook) called the new plan "a welcome step in our effort to create strong, enforceable net neutrality rules."

In the weeks leading up to the vote, some Republicans in Congress were harshly critical of the proposed F.C.C. plan. Senator Ted Cruz (R-TX) described the F.C.C. rule-making process as "Obamacare for the Internet." However, GOP leaders changed course this week, saying they did not plan to introduce legislation attempting to undermine the new rules. In conceding the issue, Senator John Thune (R-SD), who serves as chairman of the Senate Commerce Committee, said, "We're not going to get a signed bill that doesn't have Democrats' support. This is an issue that needs to have bipartisan support."

Nonetheless, cable companies and Internet service providers are expected to challenge the new rules in court.



Federal Judge Rules That the NFL Overstepped Its Authority in Suspending Adrian Peterson

Federal district court Judge David Doty ruled this week that National Football League (NFL) Commissioner Roger Goodell had overstepped his bounds by suspending Minnesota Vikings running back Adrian Peterson for more than two games.

In September, after playing in the Vikings' first game of the 2014 season, Mr. Peterson was indicted by a grand jury on child abuse charges. He was placed on the Commissioner Exempt List, where he was barred from playing, but continued to be paid his salary. In November, he pleaded no contest to reckless assault and was subsequently suspended without pay until at least April 15th, during which time he missed a total of 15 games. Mr. Peterson filed an appeal before NFL arbitrator Harold Henderson, who upheld the suspension under the Collective Bargaining Agreement (CBA). The NFLPA (players' union) then petitioned Judge Doty of the District of Minnesota to vacate Mr. Henderson's arbitration award, which he did.

The decision comes as somewhat of a surprise, as federal judges normally accord high deference to arbitration awards. Only in cases where an arbitrator grossly exceeds his or her bounds, acts with bias, or flagrantly strays from the terms of a CBA will a court overturn an arbitration award. In his ruling, Judge Doty, who has a history of ruling against the NFL, was harshly critical of Commissioner Goodell. He focused on the timing of the infraction and disciplinary measures, and took note of the NFL's new player conduct policy. The new policy took effect in August of last year, and while Mr. Peterson was not indicted until September, the underlying act had occurred in May.

"The Commissioner," Judge Doty wrote, "has acknowledged that he did not have the power to retroactively apply the New Policy ... Yet, just two weeks later, the Commissioner retroactively applied the New Policy to Peterson." The judge also criticized Mr. Henderson for ignoring former District Judge Barbara Jones' October arbitration award overturning the suspension of Baltimore Ravens running back Ray Rice. "Henderson simply disregarded the law ... and in doing so failed to meet his duty under the CBA."

"It is undisputed that under the previous policy, first-time offenders faced a likely maximum suspension of two games," Judge Doty wrote.

The NFL appealed the decision immediately. "We believe strongly that Judge Doty's order is incorrect and fundamentally at odds with well-established legal precedent governing the district court's role in reviewing arbitration decisions," it said in a statement. "As a result, we have filed a notice of appeal to have the ruling reviewed by the Eighth Circuit Court of Appeals. In the interim, Adrian Peterson will be returned to the Commissioner Exempt List pending further proceedings by appeals officer Harold Henderson or a determination by the Eighth Circuit Court."

On appeal, the NFL will likely seek a stay of Judge Doty's decision, on the argument that it would suffer irreparable harm if it were prevented from enforcing its collectively bargained code of conduct. On the merits, it seems unlikely that the opinion will be upheld, because Mr. Peterson's was in fact upheld through a system of arbitration explicitly agreed to by the players in collective bargaining.

For now, Mr. Peterson and the NFLPA have won a great victory. Between this and the Rice appeal, the players' union has achieved very favorable legal precedent on the limits of the NFL's power to discipline players. However, all of that could change once the Eighth Circuit rules on the matter.



Numerous NCAA Conferences Considering Making Freshmen Ineligible

Citing concerns that collegiate basketball players who leave school and enter the National Basketball Association (NBA, League) Draft after only one year do not receive a sufficient academic experience, several major college conferences have suggested plans to make freshmen ineligible for athletic competition. While no formal plans have been announced, officials from the Big Ten, Pacific 12, Big 12 and Athletic Coast Conferences have expressed their support for the action.

Under current NBA rules, players entering the draft must be at least 19 years old, and American players must be at least one year removed from high school. This rule was enacted in 2005, in response to the growing trend of players skipping college entirely and declaring themselves eligible for the draft immediately after high school. Once a player declares for the draft, he loses National Collegiate Athletic Association (NCAA) eligibility permanently. That is, players who leave school early only to go unselected in the draft are forbidden from returning to their college teams.

Under the current rules, most players qualify for the draft after their freshman basketball season. This has resulted in the "one-and-done" phenomenon, where top high school players enroll at universities fully expecting to stay for only one year. In fact, the top five picks in the 2014 NBA Draft were all only one year removed from high school.

As a result, university and conference officials contend that many of these purported student-athletes do not receive a meaningful education during their times on campus. In support of this argument, they point to numerous examples of freshmen basketball players dropping out of school before completing their spring semesters -- staying academically eligible only long enough to conclude the basketball season.

In the conferences' minds, a rule change making freshmen ineligible would virtually ensure that players stayed on campus for one extra year, because an NBA team would not risk drafting a player with no collegiate playing experience who has not played in a competitive game in over a year.

In reality, the conferences would prefer that the NBA amend its draft eligibility requirements to increase the League's age minimum. This, they argue, would virtually force college players to stay enrolled (and achieve sufficient grades to maintain their eligibilities) for at least another year, thereby affording them a more meaningful educational experience.

Either way, the conferences have made clear that they believe collegiate athletes would be better served by remaining in school for a longer time. According to Pacific 12 Commissioner Larry Scott, "It would make sure freshmen have time to make ties, socially adapt, and academically be going to classes and obtaining appropriate grades to stay eligible."

In lieu of the NBA changing its rule, the conferences appear ready to take action. While there has been no official proposal as of yet, officials have indicated that a "national discussion" on the topic is in the works.


Manhattan Court Upholds Landmarks Commission Decision Banning Addition to Underground Railroad House

The Manhattan Appellate Division of the State Supreme Court has upheld city officials' denial of a real estate developer's plan to add a story to a prominent stop on the Underground Railroad.

Back in 2005, the New York City Building Department approved developer Tony Mamounas' plan to add an addition to a house he owned in Chelsea. Four years later, however, officials revoked the permit after an inspection revealed that the project did not meet fire safety codes. Soon thereafter, the New York City Landmark Preservation Commission designated the building as a landmark, citing its vital role as a shelter for escaped slaves in the nineteenth century. On appeal, the Board of Standards and Appeals (Board) determined that the addition required the Landmark Preservation Commission's approval, despite the fact that it had been proposed prior to the house's landmark designation.

Mr. Mamounas then sued the city. This week, the Appellate Division upheld the Board's ruling. A spokesman for the city's Law Department said that he was pleased with the court's ruling that the Board's "determination regarding the development of this historic site was proper, rational and not arbitrary."


About February 2015

This page contains all entries posted to The Entertainment, Arts and Sports Law Blog in February 2015. They are listed from oldest to newest.

January 2015 is the previous archive.

March 2015 is the next archive.

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