« April 2015 | Main | June 2015 »

May 2015 Archives

May 2, 2015

Week In Review

By Chris Helsel

In Addition to Human Toll, Nepal Earthquake Destroys Countless Cultural Artifacts

The devastating earthquake that struck Nepal claimed the lives of over 6,200 people, with approximately 14,000 injured and thousands more not yet counted. In addition to the enormous toll the earthquake took on human life, the disaster has also destroyed countless historical cultural artifacts.

Numerous ancient temples collapsed or were critically damaged as a result of the quake. Amidst the rubble, onlookers noticed elaborately carved beams from the 17th century being used as ladders by volunteers attempting to locate and rescue those who were trapped inside destroyed buildings. The top official of the United Nations Educational, Scientific and Cultural Organization (UNESCO), Irina Bokova, said this week that she was unaware of any natural disaster that had damaged so much cultural heritage.

Compounding the problem is the rampant looting taking place amidst the chaos. On Monday, a citizen notified Nepal's department of archaeology that he or she had just thwarted an attempt to steal a bronze bell from the roof of a temple in Kathmandu. Although a notice was printed in the next day's newspaper warning that anyone taking artifacts would be punished, in this time of crisis, the country's law enforcement agencies can hardly spare the time and effort necessary to prevent looting.

The Kathmandu Valley was named a World Heritage Site by UNESCO in 1979. Its principal city, the Nepalese capital Kathmandu, was built at the intersection of two trade routes linking China and India and is renowned for its unique blend of cultural heritage sites. It contains a plethora of irreplaceable temples and monasteries, including some dating back to the 7th century.

Obviously, the foremost issue in Nepal at present is the search for survivors and the effort to recover and identify bodies from the rubble. Only after months of cleanup will the full extent of the damage done to the nation's extensive cultural heritage sites be revealed. Bhesh Narayan Dahal, who chairs the Nepalese Archaeology Department, perhaps summed it up best: "I am too much worried," he said. "How can I tell you? I am too much worried. How will we save our heritage?"


National Football League Relinquishes Tax-Exempt Nonprofit Status

The National Football League (NFL, league), which earned revenues of $327 million in 2013, has been qualified as a 501(c)(6) nonprofit since 1942. In a letter to team owners and members of Congress this week, however, NFL commissioner Roger Goodell revealed that such designation will change.

Until now, the NFL has been considered a tax-exempt nonprofit under the federal tax code because it works to promote its industry, like trade groups and business leagues, rather than earn actual profits. However, the NFL's tax-exempt status has long been questioned by the public and criticized by lawmakers, who point to the league's enormous annual revenue. The NFL has historically disputed this contention, pointing out that it is in fact the clubs, not the league itself, that generate the huge profits - and are taxed accordingly.

In his letter announcing the league's decision to relinquish its nonprofit status, Mr. Goodell called the tax exemption a "distraction" that has "been mischaracterized repeatedly", and whose end "will make no material difference to our business." The commissioner reiterated the NFL's long-standing position that "the business of the NFL has never been tax exempt. Every dollar of income generated through television rights fees, licensing agreements, sponsorships, ticket sales, and other means is earned by the 32 clubs and is taxable there."

While many lawmakers have celebrated the league's decision (Sen. Maria Cantwell of Washington called it a "victory for tax payers"), others, such as Sen. Richard Blumenthal of Connecticut, describe it as a mere PR stunt. These critics point out that if it is true that the vast majority of league revenue is produced by the (for-profit) teams and taxed accordingly, as the NFL claims, then virtually nothing will change. The only real difference is that now the NFL will no longer be required to publicly disclose details regarding its inner financial working, such as executive pay.

Among other major professional sports leagues and governing bodies, only the National Hockey League (NHL) and PGA TOUR will remain as nonprofit entities. With its decision to forgo its tax-exempt status, the NFL now joins Major League Baseball, the National Basketball Association and NASCAR among leagues that file as for-profit companies.


Property-Swap Tax Loophole Used by Buyers of High-End Art Faces Scrutiny

As the market for art as investment assets continues to grow, investors continue to find new ways to maximize profits and avoid taxes to the greatest extent possible. The most recent trend in creative tax-avoidance involves an obscure tax provision introduced in the 1920s that meant to ease the burden of farmers who wanted to swap property. Under Section 1031 of the tax code, sellers of real estate, art and other valuable collectibles can delay paying the required 28% capital gains tax by promptly reinvesting the profits into the purchase of a similar parcel or item. These so-called "like-item exchanges" allow investors to withhold tax payment for years, while inflation diminishes the effective cost of the delayed tax. There is no limit on how many times an investor can use this method to defer tax payment.

However, despite the obvious appeal of this system, investors intending to employ it must be wary. To qualify, a purchase must be strictly for investment purposes - that is, not for personal enjoyment. These purchased artworks therefore cannot be displayed, and as a result many art investors opt to store their pieces in warehouses away from their homes. Additionally, in order to qualify for the tax break, the proceeds of a sale must be reinvested in the purchase of a "like-kind" item. The sale of a painting, therefore, must be used to finance the purchase of another painting, not a sculpture or other form of art.

Critics of this system contend that the tax deferments act as nothing more than interest-free loans from the government, rewarding the wealthy and costing the country billions in tax revenue.

"What we are seeing is yet another sophisticated federal tax avoidance scheme," said Senator Ron Wyden of Oregon. "Some people are exploiting this tax provision as an estate planning tool to help them transfer wealth."

The Obama administration has taken notice of the issue, and has included in its 2016 budget a proposal to eliminate the tax break for exchanges of art and other collectibles. The proposal also calls for limitations on the tax break for swapping real estate parcels. According to the administration, these changes could bring in an additional $19.5 billion in taxes over the next 10 years. However, that number could be drastically reduced if the new tax implications stifle the art-for-investment market, as investors abandon art in favor of other investment commodities.


Financial Advisor Charged With Stealing Millions From NHL Players and Police Officers and Is the Subject of an Obstruction of Justice Probe

In 2013, following a three-year criminal investigation, former financial advisor Phil Kenner was indicted on fraud charges for allegedly stealing more than $30 million from nearly 20 former and current NHL players, as well as a handful of Long Island police officers.

Mr. Kenner is accused of soliciting funds from his clients, only to withdraw the funds from their investment accounts for his personal use. He allegedly told his clients that the money was being invested in a Mexican golf resorts, a prepaid credit card company and a "Global Settlement Fund." The settlement fund was apparently used in part to cover the cost of a lawsuit he surreptitiously filed in 2009 on behalf of 19 of his NHL clients against his former business partner, Ken Jowdy, who was developing the golf resorts.

The entire saga is highly bizarre and includes allegations from various factions of violent threats, signature forgeries, lawsuits used as diversionary tactics and illicit payments to porn stars and escorts. Mr. Jenner has been jailed in connection with the fraud charges since late 2013 after purportedly making threats against alleged victims and potential witnesses.

Jury selection in the fraud case against Mr. Kenner began this week.

Adding to Mr. Kenner's woes is this week's revelation that he is now the subject of a federal probe into obstruction of justice charges. On Wednesday, federal prosecutors revealed the existence of secretly recorded jailhouse telephone conversations they say implicate Mr. Kenner for obstruction of justice. The recordings were not broadcast in court and are subject to a protective order, but Judge Joseph Bianco of the Eastern District of New York suggested that they might be admissible in the upcoming trial.

Additionally, Mr. Kenner was informed on Tuesday night that he would be relocated from the Queens Detention Facility to the Metropolitan Detention Center in Brooklyn due to security concerns arising from the obstruction of justice probe. Mr. Kenner's attorney, Richard Haley, objected to the move because the new location would not allow Mr. Kenner to access his laptop to review thousands of pages of documents that may be introduced at trial.

"This is the most complicated criminal case I've seen in 30 years of practice," Haley said in court.


Courtney Love Sued by Memoir Co-Writer for Non-Payment

Anthony Bozza, who helped the musician Courtney Love write her memoir, has sued Ms. Love in New York federal court alleging that the singer and widow of Nirvana frontman Kurt Cobain failed to complete payment for his work. Mr. Bozza acknowledges that he received $100,000 for his contributions to the memoir, but contends that he was promised a minimum of $200,000 in addition to potential royalties from book sales.

The memoir was originally slated to be released in late 2012, but has yet to reach the shelves. Ms. Love was apparently unhappy with the manuscript delivered by Mr. Bozza in January 2014 and has been trying to "fix" the book ever since. According to Mr. Bozza, Ms. Love has already received $400,000 of a $1.2 million advance for the book from her publisher. On top of the $100,000 already received, Mr. Bozza seeks an additional $200,000 in damages to cover the $100,000 in unpaid guaranteed payment plus potential future royalties.


Dispute Over Ownership of Art Trove Amassed During Nazi Era Back in Court

Last month, a Munich court determined that the art collection of the late Cornelius Gurlitt, whose father was a Nazi-era art dealer, should go to the Kunstmuseum Bern in Switzerland as per the terms of Mr. Gurlitt's will. This week, a cousin of Mr. Gurlitt's, Uta Werner, challenged that ruling, alleging that the will is invalid due to Mr. Gurlitt's mental incapacity at the time when the will was executed.

The art trove in question was amassed by Mr. Gurlitt's father, Hildebrand, under the Nazi regime, and includes works by Matisse, Gauguin, Renoir and Otto Dix. As of this writing, three of the more than 1,000 total pieces in the collection have been verified to have been looted from their Jewish owners by the Nazis.

The Munich court said in a statement this week that it would weigh the appeal and decide whether to rule on its challenge or forward the appeal to a higher court. The court also said that the inheritance dispute would not affect the restitution agreements reached by the German government with the heirs of the works confirmed to have been stolen by the Nazis.


May 11, 2015

Center for Art Law Case Updates

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

Cornell University v. Pei Cobb Freed & Partners Architects LLP (N.Y. Sup. Ct. May 2015) -- Cornell University is suing the architecture firm Pei Cobb Freed & Partners LLP and its contractors for the faulty construction of the addition to the university's Herbert F. Johnson Museum of Art. Cornell's art museum was originally designed by I.M. Pei in 1968, and an addition was started in 2009 to accommodate its growing art collection. Cornell alleges that the architectural design and construction of the new addition were inconsistent with industry standards for temperature and humidity specifications to maintain the integrity of its artwork, and that water leaks in the building's roof were left unfixed by the contractors, among other problems. Cornell, represented by Nelson Roth, is suing for architectural malpractice, breach of contract and negligent construction and supervision, and alleges it has suffered at least $1.1 million in damages.

Peter Beard v. Hoerle-Guggenheim Gallery (N.Y. Sup. Ct. May 2015) -- Judge Charles Ramos will decide the case brought by photographer Peter Beard over three photographs that went missing in 2013 and recently reappeared for sale at the Hoerle-Guggenheim gallery in Chelsea. The three photographs, depicting scenes of African elephants with Beard's signature collage effects, were taken without his permission while at a friend's Park Avenue apartment. Reports indicate that the works were sold by Beard's former assistant, Natalie White. Whether she had permission to sell those works depends on a recent settlement reached between White and her former employer in a separate lawsuit.

Nungesser v. Columbia U., et al., 15-cv-03216 (SDNY, Apr.23, 2015) -- Judge Gregory Woods is assigned the case brought by the Columbia University student against the University, its president, and art professor for discrimination. The student alleges that his professional and educational prospects have been ruined by the publicity brought by the university's art student Emma Sulkowicz's "Mattress Performance." Sulkowicz, who says Nungesser raped her on campus, started the campaign in which she carries a mattress with her on campus in protest of the university's handling of her accusation of Nungesser. The complaint accuses the university for letting Sulkowicz earn course credits for the "display of harassment and defamation" and alleges that Nungesser's rights are being violated and his well-being and future prospects are suffering as a result of the campaign.

Britto Central, Inc. v. Craig & Karl, and Apple (United States District Court of Southern District of Florida, April 6, 2015) -- The Artist Romero Britto's company filed a complaint against Apple and designers Craig Redman and Karl Maier in early April in District Court of Southern Florida for allegedly misusing his imagery as part of a marketing campaign showcasing artworks made using Apple products. The plaintiff sued the defendants for unfair competition, copyright infringement, trade dress infringement, and false designation of origin or sponsorship/endorsement, and demands an injunctive relief and damages.

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

Undisclosed Manny Pacquiao Injury Spurs Slew of Lawsuits

Last weekend's record-shattering Welterweight boxing title fight between Floyd Mayweather and Manny Pacquiao, dubbed "The Fight of the Century," failed to live up to many viewers' expectations. Several of these disappointed customers are now bringing their qualms to their local courthouses.

In the ring, Mr. Mayweather emerged victorious in a 12-round unanimous decision. In the week that has followed, a total of 13 lawsuits have been filed by disgruntled viewers after the revelation that Mr. Pacquiao failed to disclose an existing shoulder injury prior to the bout.

The controversy stems from a prefight questionnaire Mr. Pacquiao filled out for the Nevada State Athletic Commission, on which the Filipino boxer checked the "no" box in response to the question, "Have you had any injury to your shoulders, elbows or hands that needed evaluation or examination?" In fact, Mr. Pacquiao had injured his rotator cuff during training and was receiving treatment, a detail not admitted until after the fight. Following the bout, Mr. Pacquiao indicated that although the injury had been healing well, he reinjured his shoulder during the fourth round, after which time his right hand was mostly ineffective. He estimated that going into the fight, he was fighting at only 60% of where he would normally be.

Mr. Pacquiao had surgery to repair his rotator cuff earlier this week, and is expected to make a full recovery in time for a possible rematch with Mr. Mayweather in about a year's time. No rematch has been officially announced, but both parties have indicated a willingness to entertain the idea.

Of the 13 suits, five seek class certification on behalf of pay-per-view subscribers who feel they were duped. All of the class actions seek more than $5 million in damages and claim that those who paid to witness a fair fight were defrauded under various states' deceptive trades acts.

Paul Mahoney, who paid $99.95 to watch the fight, brought suit in California state court this week, alleging that "Pacquiao's injury unquestionably materially, significantly and negatively affected the quality of the product."

The first suit filed, which was brought on Tuesday in Nevada state court, also seeks compensation for ticket buyers and even gamblers who laid bets on Mr. Pacquiao without knowledge of his ailing shoulder.

Another suit, filed in Illinois, names not only Mr. Pacquiao, his manager and promotion company, but also Mr. Mayweather, his production company, fight producers HBO and Showtime and pay-per-view providers AT&T, Comcast and DirecTV - all of whom, the suit alleges, were implicit in perpetrating the fraud. Said the attorney for the Illinois plaintiffs, "Our state has a law that prohibits concealing or misrepresenting material information with consumers and, within the context of boxing, Manny Pacquiao's shoulder injury is a material fact."

Now, the courts must decide whether consumers pay specifically for a fair fight or whether they simply pony up to see the fight to take place.

For their parts, Mr. Pacquiao and Mr. Mayweather (and the cable companies, and everyone else involved) had great incentive to go forward with the bout despite the injury. The fight produced an estimated $72 million in arena ticket sales, $15 million in closed-circuit ticket sales and $300 million in pay-per-view revenue, with Mr. Mayweather and Mr. Pacquiao themselves expected to rake in $180 million and $120 million, respectively, for their efforts.

In addition to the lawsuits, Mr. Pacquiao also faces possible sanctions from the Nevada Athletic Commission for his failure to disclose the injury.

Finally, the megafight has also garnered another unrelated lawsuit. This one, filed in Missouri, seeks damages from Charter Communications stemming from a cable outage that prevented St. Louis-area pay-per-view subscribers from viewing the fight for which they paid.


National Football League's Wells Report Finds That Patriots QB Brady Was "Probably" Aware of Ball-Deflating Scheme

As discussed in a previous edition of "Week in Review," the New England Patriots (Patriots, club) of the National Football League (NFL, league) came under fire following its 2015 American Football Conference (AFC) championship victory over the Indianapolis Colts in January for allegedly tampering with the game balls used while its offense was on the field. Specifically, the team was accused of deflating the balls below the level allowed under league rules in order to allow star quarterback Tom Brady to achieve a firmer grip.

Now, an exhaustive NFL-ordered report by Paul Weiss partner Ted Wells has found that a preponderance of the evidence suggests that the club did in fact deliberately and improperly manipulate the game balls - and that Mr. Brady was probably in on the scheme.

The issue first came to the NFL's attention one day prior to the game, when Colts general manager Ryan Grigson sent an email to league officials asserting that the Patriots' practice of tampering with game balls was well known. Apparently, the Colts became aware of the issue during the team's 2014 regular season matchup, when a Colts defender who intercepted two of Mr. Brady's passes reported that the balls felt "spongy or soft when squeezed." Mr. Grigson's email contended that "it is well known around the league that after the Patriots' game balls are checked by the officials and brought out for game usage the ballboys for the [P]atriots will let out some air with a ball needle because their quarterback likes a smaller football so he can grip it better." The email also requested that the Patriots' balls be checked for proper inflation throughout the course of the game.

Prior to the game, the referees checked and verified the air pressure of the game balls provided by both teams. According to the report, after the officials' inspection but prior to kickoff, Patriots locker room attendant Jim McNally broke protocol by heading out to the field, alone, with the bag of approved balls. On his way, security video footage shows him ducking into a small bathroom with the bag and remaining inside the locked room for 90 seconds.

At halftime, the balls were re-tested. Ten of the 11 balls provided by the Patriots were found to be under-inflated.

The story broke the next day. In the days that followed, Mr. Brady, Patriots head coach Bill Belichick and team owner Robert Kraft all vehemently denied any wrongdoing, with Mr. Kraft in particular stating that he expected an apology from the league office for the unfounded allegations.

The NFL then commissioned Ted Wells, a prominent litigator based in New York, to conduct an investigation. The 243-page Wells Report was finally released this week. In the report, Mr. Wells identifies Mr. McNally and Patriots equipment assistant John Jastremski as the main culprits in the scheme.

The report points to Mr. Jastremski's cell phone records, which include text message conversations with Mr. Brady and Mr. McNally, as evidence of the ball-tampering scheme. In message to Mr. Jastremski, Mr. McNally refers to himself as "the deflator." In another exchange, Mr. McNally, who was apparently frustrated with Mr. Brady's insistence that the balls be perfect, vowed to Mr. Jastremski that "the only thing deflating Sun(day)... is his passing rating."

During a game in October, Mr. Jastremski texted Mr. McNally to tell him that "Tom (Brady) is acting crazy about balls." The following morning, Mr. McNally wrote to Mr. Jastremski, "Tom sucks...I'm going (to) make that next ball a (expletive) balloon." To this, Mr. Jastremski replied, "Talked to (Mr. Brady) last night. He actually brought you up and said you must have a lot of stress trying to get that done."

When speaking with investigators, Mr. Brady claimed not to know who Mr. McNally was - a narrative that the above texts make very difficult to believe.

Additionally, despite no telephone or text communication between the two during the previous six months, Mr. Brady and Mr. Jastremski traded numerous messages and spoke on the phone six times over a three-day period immediately after suspicions of ball tampering became public on January 19th. In one exchange, Mr. Brady asks Mr. Jastremski, "You good Jonny boy?" to which Mr. Jastremski responds, "Still nervous; so far so good, though." That same day, Mr. Jastremski and Mr. McNally spoke on the phone for nearly an hour.

Mr. Jastremski's cell phone, which is the property of the Patriots, was made available to investigators by the club. Mr. Brady, however, refused to provide his personal phone records, which was noted with disfavor by the report. The NFL investigators, without subpoena power, could not legally compel Mr. Brady to hand over his phone.

Ultimately, the Wells Report concludes that it is "more probable than not" that Mr. Jastremski and Mr. McNally "were involved in a deliberate effort to circumvent the rules by releasing air from Patriots game balls after the examination of the footballs by NFL game officials at the AFC Championship Game" and that "it is unlikely that an equipment assistant and a locker room attendant would deflate game balls without Brady's knowledge and approval."

The question now is how NFL commissioner Roger Goodell will choose to discipline Mr. Brady and/or the Patriots organization. The NFL proudly goes to great lengths to ensure that the integrity of its on-field product is not compromised, and that no team or player can circumvent the rules to gain an unfair advantage - no matter how slight that edge may be. In keeping with those efforts, the league often issues heavy-handed punishments even for seemingly minor infractions which could affect the public's trust in the integrity of the sport. For instance, in 2007 the Patriots and head coach Bill Belichick were fined a total of $750,000 and stripped of a first round draft pick for illicitly filming the New York Jets' sideline defensive signals.

According to media reports, the NFL is expected to respond to the Wells Report sometime next week. It is expected that the punishment handed down will be stern and swift - and then followed by the inevitable appeal and likely appointment of a neutral arbitrator to finally decide the matter. Possible punishments include fines, loss of draft picks, or suspension. While most pundits are predicting that Mr. Brady will be suspended for four games or so (out of a 16-game season), a league source indicated this week that he could be suspended for up to a full year. "Everything is being considered," said the source.

In addition to his apparent complicity in the ball deflation scheme, Mr. Brady may also face the wrath of the commissioner for his refusal to fully cooperate with the investigation, as noted above. While Mr. Brady's agent explained to the media that the quarterback's decision to withhold his personal phone records was for fear of setting a dangerous precedent, league rules require complete cooperation with investigations. Specifically, the NFL's Policy on Integrity of the Game & Enforcement of Competitive Rules states, "Failure to cooperate in an investigation shall be considered conduct detrimental to the League and will subject the offending club and responsible individual(s) to appropriate discipline."


Mark Ronson/Bruno Mars Hit "Uptown Funk" Adds Five Writing Credits

Following the March jury verdict awarding the family of Marvin Gaye over $7 million from the "Blurred Lines" writing team for using elements of Mr. Gaye's "Got to Give it Up" without permission, industry commentators expressed concern that the decision might kick off a rash of legal battles over contemporary songs borrowing their sounds from the hits of yesteryear.

Now, in an apparent attempt to avoid similar litigation, another recent chart-topping tune has tacked on additional writing credits to acknowledge the inspiration provided by a golden oldie. On Friday, the record label RCA officially added five writing credits to the recent Mark Ronson smash hit "Uptown Funk," which features Bruno Mars on vocals. The added writers penned the Gap Band's 1979 track "I Don't Believe You Want to Get Up and Dance (Oops, Up Side Your Head)," which features a similar sound to "Uptown Funk." The five new writers join the six already credited, bringing the total to a whopping 11 for the four-minute song.

The decision to award the additional writing credits resembles the January agreement among Sam Smith, Tom Petty and Jeff Lynne to grant the latter two artists writing credits for Mr. Smith's 2014 hit "Stay With Me," which featured a similar chord progression to Mr. Petty's 1989 track "I Won't Back Down."

RCA and representatives for Mr. Ronson declined to comment, but the manager of one of the originally-credited writers described the reason for adding five writers to "Uptown Funk" thusly: "Everyone is being a little more cautious," he said. "Nobody wants to be involved in a lawsuit."


HBO Not Liable for Defamation in Mitre Sports Suit

On Friday, a Manhattan federal jury cleared HBO of defamation claims stemming from a segment on "Real Sports", which accused UK-based soccer ball maker Mitre Sports of exploiting child labor in India.

The segment, entitled "Children of Industry," aired in October 2008 and featured video footage of young Indian children stitching Mitre soccer balls in squalid conditions. According to Mitre, more than a dozen companies produce soccer balls in the region featured in the section - yet only Mitre was named in the HBO exposé. The company also claims that numerous scenes in the segment were staged, with some children even being paid for their "performances."

After the verdict in favor of HBO was announced, jurors noted that they focused heavily on Mitre's boasts regarding its involvement with Sports Goods Foundation of India (SGFI, foundation), a collective whose mission is defined as "the prevention and rehabilitation of child labor in the sporting goods industry." The foundation's project director, Ravi Purewal, stated in a video deposition that SGFI monitors 3,300 families with young laborers to protect against child abuse. The foundation, however, only employs five monitors.

According to one juror, "That's not nearly enough monitors if you really care for the kids. It made us think that the companies in SGFI are more concerned about protecting their profits and that Mitre's more concerned about protecting its reputation (than actually preventing child abuse)."

HBO, which could have faced punitive damages if it had been found liable, celebrated the ruling. "We are delighted with the jury's decision, which confirms what we have said since the beginning of this legal proceeding in the fall of 2008: This case was without merit and the 'Real Sports' reporting was unimpeachable," the company said in a statement.


Attorneys, Agents and Managers in the Entertainment Industry: Roles and Relationships

Wednesday, May 20, 2015 | 6:00 PM - 9:00 PM | Member: $229/Nonmember: $329

Don't miss next week's CLE, Attorneys, Agents and Managers in the Entertainment Industry: Roles and Relationships (https://services.nycbar.org/EventDetail?EventKey=ENT052015&mcode=ENTEM3&WebsiteKey=f71e12f3-524e-4f8c-a5f7-0d16ce7b3314&utm_source=Real%20Magnet&utm_medium=Email&utm_term=5%2E20_ENT_PRAC_SENT5%2E12%2E15_ENTEM3&utm_content=128941039&utm_campaign=74611974). Join our panel of attorneys, agents and managers involved in film, television, music, theater and publishing, who will each offer perspective on their overlapping roles in the entertainment industry.

This valuable program will examine how attorneys, agents and managers work together in different media, how their roles are complementary, and occasionally in conflict.

Topics Covered Will Include:

Agents and Managers in Different Media
The Role of the Guilds: Franchised Agents
Talent Agency Licensing and Litigation: New York and California
Attorneys, Agents and Managers: Working Together, Wearing Different Hats, and Ethical Issues and Implications
Hear from Program Co-Chairs, Judith B. Bass, Law Offices of Judith B. Bass, Alicia Glekas Everett, William Morris Endeavor Entertainment, LLC, and Jaime Wolf, Pelosi Wolf Effron & Spates LLP at this lively and interactive program - REGISTER NOW. For more information, or to view the program agenda, please click here.

Sponsoring Association Committee: Entertainment Law, Judith B. Bass, Chair

CLE Credit: New York: 2.0 Professional Practice & 1.0 Ethics; New Jersey: 2.3 General MCLE & 1.0 Professional Responsibility; California: 2.0 General MCLE & 1.0 Professional Responsibility; Pennsylvania: 1.5 General MCLE & 0.5 Professional Responsibility

This live program provides transitional/non-transitional credit to all attorneys.

Can't make it? Join us online with our convenient Live Webcast.
Watch Live via Casemaker (http://nycba.bizvision.com/product/attorneysagentsandmanagersrolesrelationshipsandrestrictions(12707))

For any questions or to register by phone please call 212-382-6663 and use Regcode ENTEM3.
Discounts will be granted to attorneys working for government agencies, public interest groups, full-time students and full-time academics.

City Bar Center for CLE

May 26, 2015

Week in Review

By Chris Helsel

NFL Hands Down "DeflateGate" Punishment - Patriots Begrudgingly Accept, Brady Appeals

As discussed at length in previous "Week in Review" posts, the New England Patriots (Patriots, club) and quarterback Tom Brady were accused of intentionally deflating the game balls they used during the National Football League (NFL, league) American Football Conference (AFC) championship game in January. An NFL-ordered independent investigation led by attorney Ted Wells found that it was "more probable than not that New England Patriots personnel participated in violations of the Playing Rules and were involved in a deliberate effort to circumvent the rules" and that it was "more probable than not that Tom Brady was at least generally aware of the inappropriate activities ... involving the release of air from Patriots game balls."

Last Monday, following the release of the Wells Report, NFL commissioner Roger Goodell announced that the Patriots would be fined $1 million and stripped of two future draft picks, and that Tom Brady would be suspended for four games (out of 16) without pay.

Patriots owner Robert Kraft released a statement that night criticizing the punishment in harsh terms. "Despite our conviction that there was no tampering with footballs, it was our intention to accept any discipline levied by the league," he said. "Today's punishment, however, far exceeded any reasonable expectation. It was based completely on circumstantial rather than hard or conclusive evidence." He also called the investigation "one-sided," an opinion echoed by the NFLPA (players union), with executive director DeMaurice Smith telling ESPN that "the Wells Report delivered exactly what the client [the NFL] wanted."

Mr. Kraft's criticism of the Report's reliance on circumstantial evidence is curious, however, as he failed to offer any similar public defense of his former player, Aaron Hernandez, who was recently convicted of first degree murder based solely on circumstantial evidence. Mr. Kraft served as a key prosecution witness during Mr. Hernandez's trial.

As expected, Mr. Brady has appealed his four-game suspension. Mr. Kraft, however, after a private meeting with Mr. Goodell, announced this week that the Patriots organization would "reluctantly" accept the punishment levied by the league. While Mr. Kraft reiterated his disagreement with the "unfair" and "unprecedented" punishment, he stated that he had respect for Mr. Goodell and believed that the commissioner was "doing what he believes is in the best interest of the full 32 (NFL teams)." He continued, "The heart and soul and strength of NFL (is the) partnership of 32 teams. At no time should the agenda of one team outweigh the collective good of the full 32."

Following this announcement, speculation ran rampant that Mr. Goodell and Mr. Kraft had brokered a deal in order to persuade the league office to reduce Mr. Brady's suspension. Mr. Goodell quickly denied these rumors, however, telling reporters on Wednesday that the Patriots' decision to stand down would have no impact on Mr. Brady's appeal. He also stated that he understood the gravity of suspending Mr. Brady, one of the game's most popular players and reigning Super Bowl Most Valuable Player. "I have great admiration and respect for Tom Brady," he said. "But the rules have to be enforced on a uniform basis. And they apply to everybody. We put the game ahead of everything."

Mr. Brady, his agent and the NFLPA clearly do not share Mr. Kraft's opinion. The agent, Don Yee, was scathing in his criticism of the Wells Report and the subsequent punishment handed down to his client: "The discipline is ridiculous and has no legitimate basis," he said. He described the Wells Report as "an incredibly frail exercise in fact-finding and logic" which contains "significant and tragic flaws," as well as accused the NFL and Indianapolis Colts (the Patriots' opponent in the AFC Championship) of conducting a "sting operation" against the club.

Mr. Brady has steadfastly denied all wrongdoing, although the Wells Report described his claims of ignorance and non-involvement as "implausible." "It is unlikely that an equipment assistant and a locker room attendant would deflate game balls without Brady's knowledge and approval," said the report. This view has been echoed by numerous former NFL quarterbacks in the media.

Under the 2011 Collective Bargaining Agreement, Mr. Goodell has the right to personally serve as arbitrator to hear Mr. Brady's appeal. The NFLPA formally requested last Tuesday that Mr. Goodell recuse himself, because the union feels that he is a "central witness in the appeal hearing," "not impartial," and has a "history of inconsistently issuing discipline against our players." Such an action would not be unprecedented, as Mr. Goodell did recuse himself from the suspension appeals of Ray Rice, Adrian Peterson, and those involved in the 2012 New Orleans Saints bounty scandal.

However, in this instance, the league rejected the NFLPA's request. Mr. Goodell said that "If there's new information that can be helpful, I want to hear it from Tom. The key is to allow for new information ... anything that wasn't in the Wells Report." Specifically, Mr. Goodell likely wants a chance to review Mr. Brady's personal phone records, which the quarterback withheld from investigators even after they offered him the chance to limit what they saw to only those texts and calls relevant to the ball-deflation investigation. (Much of the crucial evidence within the Wells Report was gleaned from the phone records of other team employees.) Mr. Brady's refusal to turn over his phone records was noted with disfavor by the Wells Report, and was in fact a major factor in the league's heavy-handed punishment against both him and the club. Although the investigators lacked subpoena power, league rules call for complete cooperation with investigations. Failure to do so warrants additional or increased discipline.

Should Mr. Brady's appeal to the commissioner fail to result in a reduction or elimination of his suspension, it is likely that he will take his qualm to federal court, as did Mr. Peterson and the Saints bounty perpetrators. While federal courts generally give great deference to the outcome of collectively-bargained internal arbitration procedures, NFL disciplinary decisions have been overturned in the past, most recently in the case of Mr. Peterson.


ISIS Seizes Syrian Desert City of Palmyra, a United Nations World Heritage Site

The Islamic State (ISIS) has seized yet another city, and once again the world fears that priceless historical artifacts will be included among the many casualties.

As "Week in Review" readers well know by now, ISIS militants have swept across Syria and Iraq in recent months, often destroying irreplaceable historical artifacts, condemning them as idolatry and an affront to Islam. Hypocritically, of course, the group has also preserved some of the most valuable pieces to be sold for millions in order to fund their terrorist activities.

Palmyra, a city of 50,000 in the Syrian desert, is a United Nations world heritage site. The city is home to a medieval citadel as well as a vast trove of other culturally significant sites and antiquities.

Last week, ISIS fighters stormed the city and had established control of it by Wednesday evening. Earlier that day, local workers could be seen packing four truckloads of items from a historical museum to be rescued before the militants arrived. Soon after, government forces and police fled the city as ISIS closed in, Syrian authorities launched airstrikes, some of which came dangerously close to the citadel, according to a resident who documents damage to the site by combatants.

That day, the director general of Unesco, Irina Bokova, said in a statement: "The fighting is putting at risk one of the most significant sites in the Middle East."


BMI Prevails in Royalty Lawsuit Against Pandora; ASCAP Does Not

Last week, a federal district court in New York ruled in favor of performing rights organization Broadcast Media Inc. (BMI) in its case against Internet radio company Pandora Media Inc. regarding the amount of royalties the company owes to the copyright holders of musical works. BMI, which represents more than 650,000 prominent songwriters, composers and publishers including Lady Gaga and Sam Smith, convinced the court to increase Pandora's payments from 2.5% of its revenue from 1.75%.

This ruling came on the heels of a federal appellate court ruling in New York earlier this month that denied BMI's major rival, ASCAP, from increasing the rate at which it was paid by Pandora. ASCAP's rate remains at 1.85%.

Pandora pledged to appeal the BMI ruling, with the company's head of public affairs declaring: "We remain confident in our legal position. We strongly believe the benchmarks cited by the court do not provide an appropriate competitive foundation for a market rate."

In another related dispute, the Federal Communications Commission (FCC) recently allowed Pandora to purchase a South Dakota terrestrial radio station. The purchase was originally made in 2013, subject to FCC approval. The Internet radio provider hopes that the purchase will pave the way for it to qualify for the lower royalty rates typically paid to performing rights organizations (BMI and ASCAP) by traditional broadcast radio companies.

Additionally, last June the Justice Department commenced a review of its consent decrees governing BMI and ASCAP, as their request. The two organizations seek to amend the rules currently in place to more accurately reflect the ever-evolving modern landscape of music consumption.

In addition to those representing the interests of songwriters and composers, performing artists have also staked their claims this year for a bigger slice of the radio revenue pie. A coalition of artists, labels and other industry figures have voiced their support for the Fair Play, Fair Pay Act, which was introduced in Congress earlier this year. The Act, among other things, would end broadcast radio's practice of not paying labels performance royalties and ensure that satellite and Internet radio companies (which fall under a different category than traditional radio) would pay labels for pre-1972 recordings.


High School Athletic Association Faces Football-Related Concussion Lawsuits

Following in the footsteps of the NFL, National Hockey League, National Collegiate Athletic Association and the Pop Warner youth football program, high school football organizers have now joined the ever-growing list of parties sued by athletes or their representatives for failing to properly disclose and prevent the dangers of concussions.

In November of last year, the Illinois High School Association became the first state association to face class-action litigation regarding its head-injury policies. The suit, filed in Cook County Circuit Court on behalf of all current or former football players in the state since 2002, alleges negligence and seeks not monetary damages, but an injunction requiring new protocols including baseline testing, concussion reporting and tracking, coaches' and trainers' education, strict return-to-play guidelines, medical monitoring and the presence of concussion experts at all games.

The rules established by high school athletics' national governing body, the National Federation of State High School Associations (which was not named as a defendant in the Illinois suit, curiously), already require the implementation of certain concussion policies, including those governing player removal and return-to-play guidelines. Additionally, every state and the District of Columbia have passed laws in the last six years dictating how head injuries should be handled.

However, state associations vary greatly in their specific policies, with many offering limited protection to student-athletes. Illinois, for example, unlike many states does not require school districts to track concussions, nor does it require medical clearance to return to the playing field to come from a specially trained expert. Utah and Wisconsin do not require concussion training for coaches, and other states allow players to return to action without written approval.

Conversely, other states have adopted a more proactive stance in protecting players from the dangers of head injuries. California legislators recently passed a law limited full-contact practices, and Massachusetts requires concussion training for coaches and has strict policies regarding the collection of concussion data.

Predictably, high school athletic administrators across the country have taken notice of the suit and are on guard. While none will deny that concussions are a serious issue, many have expressed concern that rampant litigation over the issue will do more harm than good and ultimately threaten the institution of high school sports as a whole. Marty Hickman, the director of the Illinois association, fears that the extensive new protocols the suit seeks will be extended to all sports and ultimately bankrupt his association, which oversees 600 football schools and 50,000 players - all on a budget of just $10 million. Further, he says, the courtroom is the wrong forum to determine how the issue should be handled. "Courts aren't equipped to run high school sports," he said. "We're confident no judge is going to agree with this."

Clearly, this issue is not going away any time soon. Expect a forthcoming rash of similar suits in other states, with state associations on the defensive as they attempt to implement policies that sufficiently protect their student-athletes - while somehow managing to pay for it all.


Champion Thoroughbred Owner Faces Lawsuit Amid Chase for Triple Crown

Ahmed Zayat, the Egyptian-American owner of the champion racehorse American Pharoah, faces a federal lawsuit over an alleged $2 million gambling debt. The suit, brought in the United States District Court for the District of New Jersey, contends that Mr. Zayat opened a $3 million line of credit at the Costa Rican betting website Tradewinds Sportsbook over a decade ago and, after an initial hot streak, walked away from a $2 million debt when his luck ran out.

Mr. Zayat has acknowledged that he and the plaintiff, Howard Rubinsky, are family friends. However, he claims that he has never placed any bets through Mr. Rubinsky, nor has he ever wagered with Tradewinds or any other offshore betting site. He denies that the alleged debt exists. Mr. Rubinsky pleaded guilty in 2008 for his role in the operation of an illegal bookmaking operation with two brothers, Michael and Jeffrey Jelinsky.

Mr. Rubinsky says he has attempted on several occasions to collect the outstanding debt, with no success. Text message transcripts reveal a warm relationship between the two men, and in one exchange Mr. Zayat appears to promise to settle the debt through monthly payments. Mr. Rubinsky alleges that Mr. Zayat did in fact begin making monthly payments back in 2004, but ultimately reneged on the arrangement with $1.7 million still owed.

Mr. Zayat is no stranger to financial and legal struggles. In May 2008, agents from the FBI, Homeland Security and the Nevada Gaming Board arrived visited his office in New Jersey. In December 2009, Fifth Third Bank brought suit against the thoroughbred owner and former Egyptian beer mogul alleging that he had defaulted on $34 million in loans. In February 2010, Mr. Zayat filed for bankruptcy protection for his Zayat Stables. Additionally, in 2013 the owners of Freehold Raceway in New Jersey brought suit alleging that Mr. Zayat was improperly granted credit in the state's online betting system.

During his bankruptcy proceedings, Mr. Zayat said that the Jalinsky brothers owed him $605,000, though he insisted that the debt was from personal loans, not gambling winnings. He did, however, later admit to placing bets through the two brothers and alleged that he was "scammed" by them by placing wagers based on their fraudulent advice. "I would lose because they were giving me the wrong horses," he said.

Michael and Jeffrey Jalinsky, for their part, pleaded guilty to operating an illegal gambling business during the time Mr. Zayat allegedly "loaned" them money. They were both sent to prison for over a year and together forfeited nearly $5 million seized by authorities.

In a November 2014 deposition, Mr. Rubinsky (the plaintiff in the current federal suit) said that Mr. Zayat told him that during the investigation of the Jalinsky brothers, a federal agent told him not to repay his outstanding debt. Additionally, Mr. Rubinsky claims that at one point, Mr. Zayat offered him $1 million if he told Tradewinds that he died in a car accident.

Mr. Zayat has filed a motion to dismiss the current federal suit, a ruling on which is expected in the coming weeks.

Mr. Zayat's horse American Pharoah has won this year's Kentucky Derby and Preakness Stakes, and can become the sport's first Triple Crown winner since 1978 with a win at the Belmont Stakes on June 6th.


Anti-Muslim Film Trailer Should Not Be Banned From YouTube, Court Says

The Ninth Circuit ruled this week that YouTube should not have been forced to remove a trailer for an anti-Muslim film in 2012. The film, entitled "Innocence of Muslims," was ultimately never produced, but the trailer alone was enough to spark protests around the world, including Egypt, Iran, India, Pakistan and Malaysia.

The plaintiff, actress Cindy Lee Garcia, alleged that filmmaker Nakoula Basseley Nakoula tricked her into appearing in the film and dubbed over her dialogue with anti-Muslim rhetoric. As a result of her appearance in the trailer, she says, she received death threats. Last year, a three-judge panel of the Ninth Circuit ruled in her favor, holding that her copyright claim outweighed First Amendment free speech concerns.

Last Monday, however, an 11-judge panel of the same court reversed, holding that "a weak copyright claim cannot justify censorship."

The one dissenter, Judge Alex Kozinski, who wrote the majority opinion in last year's opposite ruling, wrote: "In its haste to take Internet service providers off the hook for infringement, the court today robs performers and other creative talent of rights Congress gave them."

In a statement following the ruling, YouTube said: "We have long believed that the previous ruling was a misapplication of copyright law. We're pleased with this latest ruling by the Ninth Circuit."

The ruling represents a considerable victory for free speech advocates, as well as websites and film and television studios regarding the types of content they can utilize without facing copyright infringement litigation.


Center for Art Law Art Law Mixer - May 28th

The Center for Art Law is hosting its May Art Law Mixer at Sundaram Tagore Gallery on May 28, 2015.

In light of the gallery's recent exhibition of photographs by Sebastiao Salgado, we decided to focus our discussion on legal cases involving the medium of photography. We will provide refreshments as well as handouts about recent photo/art law cases. If you would like to list any particular case in the Case Sequence, please send us your submissions by May 27th.

Please help us get the word out about this event and its fascinating topic and special guests: Nancy Wolff (Cowan, DeBaets, Abrahams & Sheppard LLP), Judd Grossman (Grossman LLP) and Paul Cossu (Cahill Partners LLP).

For details, visit: https://www.eventbrite.com/e/art-law-mixer-sundaram-tagore-gallery-photography-and-the-law-tickets-16819675101.

May 27, 2015

A Simple Guide to Signing the Best Sync Deal Possible

By Steve Gordon

"The 11 Contracts Every Artist, Songwriter, and Producer Should Know" series includes terms and contracts that artists' attorneys should never allow their clients to sign. This is Part Three of the series.


This, the third installment of the 11-part series on basic music industry agreements, focuses on the use of music in audiovisual works such as movies, television, television commercials and video games. The Introduction, below, explains fundamental concepts, provides examples of the amounts of money an artist can expect to make, explains the role of Performing Rights Organizations (PROs) in collecting additional income on behalf of songwriters, discusses the key provisions in standard licenses and finally, briefly describes the role of publishers, synchronization (sync) reps, and other licensing agents.

This installment also provides comprehensive comments on the following three licenses. If one sees a similar deal, an attorney will know what to look out for, how to make the deal fairer, and, if the company that wants to use one's client's music won't negotiate, how to decide if it's still worth it:

(1) MTV's "Music Submission Form" - a terrible deal for any artist, songwriter or producer.

(2) A very favorable deal for a producer/songwriter involving music for a national commercial campaign.

(3) A fair, but not great, deal for a songwriter involving music in a made for television movie.


Two Copyrights: Sound Recordings and Musical Works

Sync licenses are agreements for the use of music in audiovisual projects. Used in its strictest sense, a sync license refers to the use of a musical composition in an audiovisual work. The term "master use" license is sometimes used to refer to the use of a music recording (sometimes referred to as a master) in an audiovisual work. Sync and master use licenses can make money for songwriters, and master use licenses can make money for recording artists. It is possible for a license to include both a grant of rights in a song and a master if the same person wrote the song and produced the master.

The copyright law protects musical works, including songs and any accompanying words as well as orchestral works, librettos and other musical compositions. Copyright also protects sound recordings, that is, recordings of musical compositions. Indie artists/songwriters who record their own songs generally own the copyrights in their songs and masters. However, once that artist/songwriter enters into a music publishing agreement, he or she generally transfers the copyright in the songs to the publisher, and the publisher pays the songwriter a royalty from the commercial exploitation of the songs, including syncs. If the same artist/songwriter enters into a standard recording contract, any recording that he or she records during the term of the agreement is usually a work for hire for the record company. If that's the case, as explained below, the record company owns the copyright in the recordings, and pays royalties to the artist for both record sales and master use licenses.

However, in this installment of the series, sync and master use licenses are going to be looked at from the point of view of songwriters and artists who have not entered into any exclusive publishing or recording agreements. As an indie artist/songwriter does not have a publisher or label to negotiate sync and master licenses for him or her, he or she should have a lawyer, or at least have enough knowledge to avoid bad contracts. This author's goal in writing this installation, as with the series as a whole, is to educate indie artists, songwriters and producers of bad terms, what questions to ask, what they can do to make the contract they receive fairer, and when they should just walk away.

Indie Producers and Copyrights in Musical Compositions Contained in their Masters

For many years, producers generally did not create new music. They just recorded music created by songwriters and performed by artists. However, that has changed. Often in pop, R&B, and especially hip hop, producers do create new music by providing beats or even complete music floors over which an artist sings. In that case, the producer is creating two copyrights: 100% of the sound recording and a part of the musical composition.

Producers can and do sign publishing deals because the beats or instrumentals they create are musical compositions as well as sound recordings. In that case, the producer will generally have to transfer the copyright in any part of the musical composition that he or she contributed, such as the beat.

Sync and Master Use Fees

Generally, but by no means always, the company that wishes to use an indie musician's music for a movie, commercial, television show or video game will offer an up-front, one-time payment usually called a sync fee (even if the songwriter is transferring rights in both the song and the master). The amount of the fee, if any, will depend on a variety of factors including:

The professional standing of the musician. For instance, if an ad agency regularly turns to certain producers to create music for a client, it probably will have worked out a standard fee with that producer.

The nature of audiovisual work for which the music is sought and whether the song was a hit. For instance, a major motion picture will usually pay from $10,000 to $25,000 for a song or master by an indie writer, artist or producer.

In contrast, a pop hit in major studio movie can easily fetch $100,000 or more. Yet an indie filmmaker may only be able to afford $5,000 or less for any song or master. One shouldn't be surprised if the offer to the artist and/or songwriter is no more than a credit.

At the beginning of a musical career, a credit on the movie and in IMDB (an online database of information related to films, television programs, and video games, including cast, production crew, music composers and musicians, biographies, plot summaries, trivia and reviews) could be valuable.

Some other factors are:

(a) In the case of a movie, as discussed above, the most important issue with regard to fees is whether the movie is a major big-budget studio production or an indie, but other factors include how many times the song is played in a movie and if it's used over the beginning and/or end credits. In addition, there is usually an additional fee if the music is used in a trailer.

(b) In the case of a television spot, the biggest factor is whether the commercial is national (which may pay from several thousand dollars to over $10,000 for an indie song or master) or will only play in one or several markets (which may pay less). A hit song,h however, can garner a fee well in the six figure range and even more for a hit by a superstar artist such as the Rolling Stones.

(c) In the case of a television program, the most important factor is whether the program is network or basic cable. Usually, but not always, network shows will pay better than shows on basic cable. The money for an indie songwriter or producer could range from no more than the royalty payable to the songwriter by his or her PRO (see below) to $2,500 to more than $10,000, depending on how much the production company or network wants the music.

(d) In the case of a video game producer by a major game maker, the sync fee could be a few thousand dollars. An attorney can try to include a most favored nations (MFN) clause, which states that, if the producer pays a higher fee for another song different from the one under negotiation with the songwriter client, then the songwriter will get the same (higher) amount.

If the master and the song are owned by different parties; for instance, if a songwriter wrote the song, but a producer owns the track, then a license will be needed from both parties.

Additional Income for Public Performance

When music is publicly performed, for example, when broadcast as part of a television show or publicly performed online in an online computer game, the songwriter may earn public performance income from the songwriter's PRO (i.e., ASCAP, BMI, SESAC, or the recently organized Global Music Rights (GMR)). This income is in addition to the up-front sync fee, or it may be the only income that an indie songwriter receives.

Each PRO has rules that determine the amount of money that should be paid for a performance in an audiovisual work. The public performance income from a song in an audiovisual work can sometimes be substantial. For instance, if music is used in a national television commercial which airs on network television, the PRO royalty can exceed the sync fee. However, the public performance income can be very small in other situations -- for instance, when a small amount of a song is used in the background of a single scene in a basic cable program.

Where public performance income will be substantial, the songwriter may decide to accept a lower sync fee, rather than potentially losing the deal altogether. Note that we are only discussing the public performance income payable for the musical composition. The same considerations do not apply to the owner of the master recording -- i.e., an artist or a producer. Under U.S. copyright law, the owners of master recordings, unlike the owners of the underlying songs, are not entitled to public performance income for the broadcast of their recordings except via digital transmission such as Spotify, YouTube and Pandora. If a commercial is intended to play on network television, the commissioning company will generally try to get Internet rights for little or no additional compensation (see Media below).

SoundExchange, similar to the PROs for compositions, collects income for the public performance of music recordings but solely for audio-only Internet Radio services such as Pandora. The situation is different outside the U.S., as in many other countries, artists can earn performing rights royalties for the public performances of their master recordings on television as well as standard broadcast radio.

In short, the owner of the master recording's only source of U.S. income from the master use license will be the up-front master use fee which he or she receives from the company for a television commercial, movie, or television show.

If the owner of the master is not the songwriter, he or she will not be receiving any public performance income from the PRO's (or SoundExhange) so he or she may feel more of a need than the songwriter to negotiate the highest possible up-front fee.

Proper Registration of the Song with the PRO is Crucial

Each PRO has requirements that make writers responsible for properly registering their songs and for notifying them of any audiovisual projects that may generate performance income. I spent a year trying to get one PRO to pay for the theme song of a cable talk show because the writer did not provide a "cue sheet" before the broadcast of the series. A cue sheet is a schedule of the music contained in a film or television program or any other audiovisual work, and is the essential document for the PRO to distribute royalties for musical performances in audio-visual media. It is typically prepared by the production company, but the writer will not get paid unless the production company actually files it in a proper and timely manner.

(Here is an example of a cue sheet: http://www.ascap.com/~/media/files/pdf/members/payment/samplecuesheet.pdf)

Some licenses require a songwriter to yield all rights in a song to the company. In that case, the writer has no right to receive any PRO royalties. However, there are cases where the company requires the transfer of the copyright in the song, but allows the writer to receive the writer's share of performance rights income (that is, 50% of the total amount payable by the PRO). In that case, the writer has to make sure the company is properly registering the song, providing cue sheets to the PRO, and complying with any other forms that have to be completed.

Work for Hire vs. Non-Exclusive License

An issue as important, and in some cases more important than money, is whether a license is a work for hire. In a work for hire agreement, the songwriter, artist or producer loses all rights in his or her music, including the copyright and the right to use the music again for any purpose. If, on the other hand, the grant of rights to the company is a non-exclusive license, the creator retains the following rights: the copyright in his or her music, to distribute it as a record, and to make other deals. Here is a typical work for hire clause:

WORK FOR HIRE: Artist [Songwriter and/or Producer] agrees that all of the results and proceeds of his/her services shall be deemed a "work made for hire" for the Company under the U.S. Copyright. Accordingly, the Artist further acknowledges and agrees that Company is and shall be deemed to be the author and/or exclusive owner of all of the Recordings and Musical Compositions contained therein for all purposes and the exclusive owner throughout the world of all the rights of any kind comprised in the copyright(s) thereof and any renewal or extension rights in connection therewith, and of any and all other rights thereto, and that Company shall have the right to exploit any or all of the Recordings in any and all media, now known or hereafter devised, throughout the universe, in perpetuity, in all configurations as Record Company determines, including without limitation [name of movie, TV show, TV commercial etc.] In connection therewith Artist hereby grants to Company the right as attorney-in-fact to execute, acknowledge, deliver and record in the U.S. Copyright Office or elsewhere any and all such documents pertaining to the Recordings if he/she shall fail to execute same within five (5) days after so requested by Company.

It's always better when artists, songwriters and producers retain their copyrights. However, sometimes the work for hire clause will be non-negotiable, and then the creator has to ask him/herself: does the up-front money (and in the case of a songwriter who retains the writer's share, the potential PRO royalties) compensate for the loss of the right to use the music?

Other Basic Contract Terms

Assuming that the license is not a work for hire, other important terms in sync and master use licenses are as follows:

Duration (or Term): The company will usually want the right to exploit the following durations of use:

1. Theatrical Films: Generally for the life of the copyright. In other words, the company's right to use the music will last as long as the song is protected by copyright law: as long as the songwriter's life, plus 70 years.

2. Television: Generally, the same as above.

3. Commercials: Typically an initial term of one year, often with the option for the company to renew for another equal term upon payment of an additional licensing fee (which is usually the same as the original term, although one can try to negotiate for a higher fee, for instance, 125% of the original fee.)

4. Computer Games: Could be life of the copyright, or a briefer term, such as 3 to 5 years. There are few games which will have a life span of more than a year or two, so in most instances the company won't consider it that important to obtain a long term license.

Media: The company will want the right to exploit the audiovisual work as follows:

1. Theatrical Films: Generally, a movie producer, production company or studio will want the right to use a song or master in festivals for one year, with an option to exploit the movie, including the music, in all media, which are considered broad rights.

2. Television: Generally, the network or cable service will want all media rights, because a television show can be recycled in any number of platforms, including streaming, downloading, and home video. Attorneys should, however, try to negotiate a separate fee for home video, including downloading.

3. Commercials: This is typically limited to television and Internet, but the songwriter/artist/producer can try to secure an additional fee use of the commercial on radio.

4. Computer Games: Generally all media now or hereinafter developed.

Territory: The company will want the right to exploit the audiovisual work as follows:

1. Theatrical Films: Typically worldwide.

2. Television: The creator may be able to negotiate an additional fee for foreign use.

3. Commercials: Local, multiple U.S. markets, national or worldwide.

4. Computer Games: Worldwide.

The Role of Music Publishers and Labels

Once an exclusive recording and/or publisher deal is made, an artist's label and songwriter's publisher will negotiate sync and master use licenses on the artist/songwriter's behalf. The split is generally 50% payable to the label and 25% to 50% payable to the publisher after recoupment of any advances (including, in the case of a label, recording costs) that they paid to ethe artist/songwriter.

Reps and Licensing Agents

If one is familiar with the sync business, one understands that there are many companies, such as http://pumpaudio.com/, that may be willing to represent a music client's music for sync placements. Some are more selective than others, and some are more pro-active in shopping around music than others. For instance, music libraries such as http://www.apmmusic.com/ have steady clients, such as cable networks and ad agencies, that continually scan the library's collection for interstitial or background music. The reps' fees vary from 65% in the case of Pump Audio down to 20% or less if a rep really loves the music.

The biggest controversy in the sync licensing business is the exclusive versus non-exclusive issue. The best argument to let a rep have exclusive rights is that he or she may be more motivated to shop around your client's music. The best argument for non-exclusive is that an exclusive rep may lose interest in your client's music, and let it sit on a shelf for the duration of the agreement. The primary differences between a rep and a publisher are:

1. Reps rarely pay an advance, but;

2. Rep deals are usually limited to specific song or tracks. Standard publishing agreements cover any songs a songwriter creates during the term of the agreement.

Three Sync Licenses: The Bad, the Good, and the Not Too Ugly

Attached are three different sync licenses. The first is very pro-company (Forms-synch.comparison1stCONTRACT.MTV.pdf). The second is very pro-talent (Forms-synch.comparison2ndCONTRACT.GOODDEAL.pdf). The third is in between (Forms-synch.comparison3rdCONTRACT.pdf).

Each license covers a different situation. The first license, MTV's Music Submission Form, is for use of music in any website, show or television distributed by MTV or its parent company Viacom. The second is for use of new music in a single television commercial. The third license is for the use of a relatively old song in a docudrama. In each case, the agreement was drafted by the network, agency, and production company, respectively.

About May 2015

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

April 2015 is the previous archive.

June 2015 is the next archive.

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