Main

Entertainment Archives

May 31, 2009

Copyright Office Improves Processing Time and Service

From the U.S. Copyright Office as of May 29, 2009:


A recent Washington Post article focused on the lengthy processing times the Copyright Office is experiencing in wake of its transition from a paper-based to an electronic processing environment. The Copyright Office is working diligently to improve processing times and service to the public in general. To clarify, current processing times by filing method are as follows:

E-Service with Electronic Deposit: 5 months for 90% to be completed; 33% completed in 2.5 months
E-Service with Physical Deposit: 6.5 months for 90% to be completed; 33% completed in 3 months
Paper Claims: 18 months for 90% to be completed; 33% completed in 12 months
You can save money and time and help us improve our services by filing claims online via eCO. Please visit www.copyright.gov for more information.

June 13, 2009

Entertainers and Athletes Must Report their Foriegn Bank Accounts Too (UPDATE)

By Daniel J. Scott

Entertainers and athletes who are not citizens or residents of the United States, and entities that are not domestic entities, can relax when it comes to worrying if they have to disclose their foreign bank accounts to the United States government, at least for now. On June 5, 2009, the IRS announced that it is "temporarily suspending the reporting requirement with respect to foreign bank accounts . . . due on June 30, 2009, for those persons who are not citizens, residents, or domestic entities." See IRS Announcement 2009-51 (http://www.irs.gov/pub/irs-drop/a-09-51.pdf). In doing so, the IRS noted that is "has received a number of questions and comments from the public concerning the new filing requirement that may require additional guidance."
For purposes of filing Forms TD F 90.22-1 ("FBARs") due June 30, 2009 only (i.e., relating to foreign accounts with a value that exceeded in the aggregate $10,000 at any time during the 2008 calendar year), only (i) citizens and residents of the United States, (ii) domestic partnerships, (iii) domestic corporations, and (iv) domestic estates and trusts are subject to the reporting requirement. It is unclear at the moment who will be required to file and FBAR in subsequent years, and the IRS has promised to issue additional guidance on this point.

September 29, 2009

Google Fairness Hearing Adjourned

Judge Chin has adjourned the fairness hearing scheduled for October 7th. The Judge agreed with many of the Copyright Office and Department of Justice's comments, in that there are many potential positive aspects to a settlement.

Judge Chin ordered the parties to the settlement to appear on October 7th for a status conference in order "to determine how to proceed with the case as expeditiously as possible".

The link to a PDF copy of Judge Chin's order is: here.">app.bronto.com/public/?q=ulink&fn=Link&ssid=896&id=j34eotazvv4nizkodyiqhotu4msq8&id2=4flt8qlr6hbvriss53izj4efwk4g7">here.

November 3, 2009

CMJ MUSIC AND FILM FESTIVAL

Monica Pa is an associate with Davis Wright Tremaine LLP who attended the CMJ seminar. Here is a summary of her general report of the panel's discussion, but questions concerning the information provided at the seminar or the accuracy of advice given should be referred to the panel members.

The welcoming remarks were delivered by Ken Swezey, Esq., who is the Chair, of the Entertainment, Arts & Sports Law Section, New York State Bar Association, and a partner at Cowan, DeBaets, Abrahams & Sheppard LLP, New York City.

The program was introduced by Joanne Abbot Green and Rebecca A. Frank, Esq.
“Recession Deal Making”

The moderator was Susan Butler, Esq., Executive Editor of Music Confidential, Butler Business & Media LLC.

The panelists were: Helen Murphy President, International Media Services, Inc.; Jonas Kant, Esq. Senior Vice President, Business and Legal Affairs, Sony/ATV Music Publishing; Michael Poster, Esq., partner at Sonnenschein Nath & Rosenthal

General Discussion Regarding the Publishing Industry During A Recession

Helen spoke about trends in the film and television industry in LA. She observed that publishers are still deriving income from synch licenses in advertising and TV, but generally, the industry is under tremendous pressure. Studios are cutting back on both internal spending and outside talent. For example, terms that were once standard are not being given out anymore. T&E for talent is being cut, which was historically sacrosanct. And these cuts have had a ripple effect throughout the industry.

The panelist observed that publishing is actually doing OK, while the rest of the music industry is suffering. Joel observed that “this is a changed environment, even from last year.” He noted that there has been some increase in performance-side royalties (because of streaming services like Rhapsody and Pandora), and this may increase if, for example, iTunes starts a streaming service. But this increase isn’t sufficient to offset the tremendous loss in CD sales.

Sale of Catalogues

The panel spent a good deal of time discussing this issue. The Rogers and Hammerstein catalogue was sold this year, but this catalogue and its sale was unusual for a variety of reasons. In this economy, many catalogues are not up for sale. There are few buyers, and many sellers are not compelled to sell, so there aren’t many “fire sales” happening. The owner of the catalogue is going to wait for the economy to rebound before going into the market.
Joel Schoenfeld pointed out that, while many catalogues are not formally up for sale, some sellers may be informally testing the waters (e.g., “I’m not for sale, but I’m willing to talk”). So whether a catalogue is up for sale depends on knowing who to ask and what to say.
It’s also unclear how catalogues are being priced. A deal can include bells and whistles that exaggerate the catalogue’s sale price, such as “kickers” or “earn outs”. With respect to “earn outs”, in a perfect world, if certain targets are hit, only then would the total price of the deal be achieved. Michael Poster pointed out that “earn out” provisions are incredibly risky. The buyer has to jump through hoops and meet the seller’s (perhaps inflated) expectations, may also incur high deal costs, and such provisions may likely end up in litigation. With an “earn out”, the seller has some control over the buyer’s future conduct and has a right to audit.

Michael pointed out that a notable exception to the lack of “fire sales” is the case of private equity funds that purchased publishing catalogues during boom times and now have to unload this asset. Accordingly, private equity firms are selling their catalogues for cheap. Jonas pointed out that Sony is happy to see these catalogues go up for sale by these private equity firms, and has been able to buy these catalogues at a discount.

Alterative Income Stream and Advertising

With declining music income, people are looking creatively at ways to attach other non-traditional income streams. Helen pointed out that the agent’s business model has changed. Agents and labels have been aggressively attaching a percent of the talent’s various income streams (e.g., the emergence of 360 deals). In light of all these hands in the artist’s pockets, artists are now trying to do something different, which is facilitated by the fact that digital distribution is possible, and the rights business is becoming more transparent.

On the other hand, while there has been an obvious decline in CD sales, music can be monetized is creative and unpredictable ways. No one expected cell phone ring tones to take off, and now music video games generate a substantial and unexpected source of revenue. There is also the Beatles Cirque de Soleil show, and there will soon be one for Elvis. The biggest growing source of music revenue is digital content. Publishers and traditional music industry have been slow to incorporate these developments. Digital content is now 40% of the market. Maybe the industry will finally be forced to shift when digital content is 70% of the market.

The panel discussed whether, at this point, substantial income can be derived from advertising. This was one question that seemed to really boggle the panel. One panel member noted that it can be done. For example, Google derives almost 90% of its income from advertising. There may be more targeted advertising. For example, Google is best at linking ads with digital content (using an algorithm), but perhaps there will be other ways of linking content with advertisers, or more integration of advertisement with content.

Jonas Kant, speaking from his perspective as the music publisher, noted that publishing is generally an ad based income, and there are fewer ads now. When an advertiser, filmmaker, or television program selects a song to synch, they want to go with “a sure thing”, meaning a song that resonates with the audience. Therefore, well-known songs are more often being selected because this may resonate more with the audience, and accordingly, advertisers are unwilling to go with lesser-known artists.

* * *
“Starting From Zeroes: Start-Ups & Digital Distribution”

The Moderator was Lisa Weiss, Esq., Partner, Sonnenschein Nath & Rosenthal LLP.
Panelists: Aileen Atkins, General Counsel, Napster, Inc.; Mark Eisenberg, Esq. Executive Vice President, Global Digital Business Group, Sony Music Entertainment, Inc.; Drew Lipsher, Esq. Partner, Greycroft LLC.

Discussion

Lisa gave a background on copyright law and the DMCA. She summarized recent safe harbor decisions, including the summary judgment decision in favor of Vios. In one decision, the court held that failure to use filtering technology (which is widely available) does not undermine the applicability of the DMCA Safe Harbor provision.

Drew, as venture capitalist, discussed what VCs consider when deciding whether to invest in a digital content service. He was asked how important was it that a business have a license before launching. The issue is whether a service should build a business first and then get a license, or get the licenses first and then build business. “Ask forgiveness, not permission?” As an investor, his preference is for the companies to get permission first because the risk of litigation– from a financial return strategy – is unpredictable. But he may be more liberal depending on the service’s proposed business model (i.e., whose behind the service, whether the service has good terms and conditions, whether the company is more established, etc.) A separate business question is whether there is any value in a user generated model, whether advertisers are going to pay the service, and whether the service has any hope of generating a profit.

When asked how a new business can balance the cost of a license versus the cost of an eventual settlement/litigation, Drew characterized this situation as: “death by firing squad or death by hanging.” The service knows that it is going to have to pay; it’s just a matter of ascertaining what will be their greater cost. He observed that this is a return on investment issue, which is largely driven by time. Moreover, services face the problem that the process of obtaining licenses is fraught with defragmented rights in a work, and the lack of transparency.
Aileen observed that, for many start-up services, they will not be able to get a license unless they can convince the content owners they have a viable business model, and then the question becomes the terms and conditions of the license. So for many start-ups, the content companies are actually the ones determining the business model for them.

Marc, who represents Sony, gave the label’s perspective. The general assumption is that everyone wants to make money. What labels look at is the service’s business model and its path to profitability. “We know that music is popular and consumption of music is high – but this isn’t a business model.” While labels do not need the services to prove profitability on day one, there needs to be some way to pay for the license, which is why it’s necessary to look at the overall credibility of the service. “Just because you have an idea doesn’t mean that you can be licensed.”

All business must pay their suppliers. A business rarely asks the landlord to give them space for free. For a restaurant, there can be a great chef, great cuisine, excellent space, but people are at the restaurant for the food. If food is what customers are going to eat, then the restaurant should pay for the food. In this case, the sine qua non of the start-up service is the musical content, so why is there a debate about whether the labels should be getting paid for this.

Aileen pointed out that services want to pay for the music they use, it’s just impossible to wrangle all the different interests (publishers, labels, etc.) prior to launching the service. There is no consistency in the process or terms. This difficulty is exacerbated by the fact that labels are trying to hold onto a business that is in decline, and are unable to shift their business approach to accommodate digital content.

Drew pointed out that the problem with the “restaurant” analogy is that a restaurant only has to negotiate with a single landlord, and there is a standard in pricing, a known market. The difference is that, in the licensing process for music, the terms are constantly shifting. A landlord doesn’t ask to see a business model when renting out space. A music service wants to be legitimate, but the terms and rates are constantly shifting. As such, there are tremendous inefficiencies in music licensing.

Marc responded that there is a difference between frustrations with market inefficiencies and throwing up your hands and acting in blatant disregard of copyright law. When asked whether the terms of a license depend on whether the service comes to Sony before launching, versus launching first and then seeking a license, Marc said that rates depend on how the service operates. An infringer isn’t necessarily going to do better in terms of rates. If someone comes to Sony having launched first, there may be a premium that Sony exacts. On the other hand, if the business is successful, it may have more negotiating leverage.

Aileen was asked whether, if she were now mentoring a young service, what her advice would be. She said that Napster launched in 2001 with only a handful of licenses. At that time, no one knew what they were doing. The environment now is completely different than in 2001. The financial cost for litigation is substantial, which includes both time as well as attorneys fees. On the other hand, the costs associated with obtaining a license from content companies are also high.

Moreover, services may develop and change as it grows. For example, Facebook did not have an obvious path to profitability but it had millions of users and a huge platform. When Facebook launched, it didn’t necessarily realize that there was going to be a huge business for games (which could now generate billions of dollars in revenue). It’s unclear how Twitter is going to make money, but lots of people are using it, so we’ll just have to see.

In terms of music publishing, Drew observed that rights disaggregation is the biggest problem. A licensee can go to a publisher, get rights and rerecord the work. Rights have to come back together because digital content is increasingly sophisticated. For example, all services now include video, so this implicates a host of issues, including synch and publishing rights. With traditional distribution of music, the labels use to take care of publishing. How many different ways are there to divide a pie? There cannot be meaningful negotiations with this many competing interests. If the labels do not want a compulsory licensing system, and do not want arbitrators saying what the rates are, then they need to come up with a way to make licensing more regular, standard and systematic.

* * *
“Footprints In Cyberspace: Following Consumers Online”

Moderator, Marc S. Reisler, Esq., Partner at Holland & Knight.

Panelist: Flora Garcia Privacy Director, Time, Inc.; Laura Stack, Esq. Division of Privacy and Identity Protection, Federal Trade Commission; Shane M. McGee, Esq. CISSP, Partner, Sonnenschein Nath & Rosenthal LLP.

The panel addressed privacy issues by using a hypothetical multimedia entertainment company to discuss various digital projects that this company wanted to launch.

The first hypothetical involves the company’s music division which wanted to launch a website to promote the latest release from their 12 year old pre-teen pop sensation named Rhoda. Rhoda’s website featured a section on “Rhoda Memories” where visitors could share online (including videos or picture format) their memories or personal encounters with Rhoda. The website could also include a section called “Rhoda dress-up” where visitors could post pictures of themselves dressed as Rhoda.

Flora said that, from an in-house perspective, the first question is whether users are going to have to register online, and if so, would they be asking only for their email address and user name, or would they be asked for additional information. Another issue is that, since this website concerns and likely targets younger consumers, the Children’s Online Privacy Act (“COPA”) is implicated. This law prohibits companies from marketing to children 13 or under without parental consent.

If the website is going to market to children under 13, then it needs to obtain verifiable parental consent. Even if the website only collects an email address, the company still needs to send an email to the parent to confirm that their child has permission to register with the site. The email to the parents should also notify them of what type of information was collected, whether information will be shared with third parties, whether there is a way to opt-out of the sharing of information or receipt of emails, and how the company is going to protect and use collected information.

COPA provides a sliding scale of necessary parental verification depending on the type of information collected and how the information is being used. If the website wants to collect additional information from the child, like what school they go to or their favorite mall, and perhaps share this information with third parties, then the company needs to provide additional information when obtaining parental consent. The website may need the parent to sign a form, provide credit card information to confirm their identity and consent, etc.

Laura represented the view of the FTC. She noted that deceptive practices are pretty straightforward: do not create a material deception that will mislead a reasonable consumer. If the website is aimed at children, then the standard is the reasonable child.

COPA generally requires a privacy policy, notice of certain rights (what are you collecting, why are you collecting it, etc.), what do you do to safeguard information, and it provides requirements for verifiable parental consent.

This hypothetical website also involves children disclosing more than just an email address because it permits users to share Rhoda photographs and stories. As such, even though the initial registration does not ask for any information other than an email address, because of this feature, COPA may treat this website as collecting personal information from children, which triggers heightened requirements of verifiable parental consent. Moreover, even if the website does not specifically target children, if the service has reason to know that children are accessing their site, then it needs to comply with COPA. The website should use some filtering technology, and/or hire moderators for the website (which can be outsourced). There is software available to websites to strip personal information from users (with mixed success).
The FTC applies the standard of “what would a kid normally do, what should you be doing to keep kids safe.” In seeking parental consent, there needs to be transparency. Parents need to understand what they are saying yes to. This is especially the case where the website includes posts of children’s photographs given that there is such a problem with child pornography. A practical advice for websites for children is to stay away from all photographs unless the service uses a good moderator.

Aside from COPA, the FTC looks at whether the website has provided full and accurate disclosures. For example, was there a full disclosure that the child’s information would be shared to marketers? Do the parents realize that their child is going to be on marketing list? Where the company’s subsidiaries, divisions or affiliates are marketing to the user, its unclear whether this counts as a “third-party marketer.”

Motion Picture Division

The second hypothetical involves the motion picture division wanting to launch a new website to promote its new PG13 film. The website includes the ability to purchase movie related gear and merchandise, and visitors will be able to register to receive texts from their favorite characters from the film.

Because this film is PG 13, we can assume that its a general purpose site targeting audiences over 13 years old. The website does not necessarily need to comply with COPA, but when users register for the website, the company should utilize an age-screening process that is age neutral (e.g., the website can’t just ask whether the user is “over 13.” The website also needs cookies to prevent “back buttoning” (if the user realizes that he or she will be prohibited from accessing the website because he or she initially truthfully said that they were twelve, this prevents the child from hitting the “back” button and changing their initial selection).
Data security is about avoiding unintentional disclosures of information. Financial information and SS# are the big concerns. So websites that collect financial information need to utilize reasonable security measures. Even if it is not engaged in any financial transaction, if the website requests credit card information (even if only to confirm parental information), it still needs to comply with “PCI standards”, which are industry standards that credit card companies have developed for security on the Internet.

Video Game Division

The third hypothetical involves a video-game division that wants to launch a website where it can have attorneys who represent clients in parking court to sign up. [This hypo didn’t make a lot of sense to me.] The video game division intends to sign up this website as a member of a behavioral advertising network that uses a click-track company (meaning, the browsing behavior of website will be tracked and it will share the data with targeted advertising).

The concern is that this website should not sell information that will permit marketers to identify any user; instead, they should just receive information about anonymous IP addresses that the marketer could pop ads to. Generally, where a third-party advertising network wants to collect information about a user’s web behavior, the privacy policy should disclose the fact that the website is selling information to third parties, and must make clear that there is an opt-out option (although to be safe, the website should use an opt-in option instead).

The FTC has published guidelines on behavior advertising based on browsing behavior, and guidelines have also been promulgated by trade groups. The FTC is in a “wait and see” mode; they are going to give self-regulation a final chance.

* * *

The Luncheon Keynote Address was given by John Scher, co-CEO of Metropolitan Talent Ons
John started his address with the general bleak observations that the concert business is in chaos and record labels are failing. His view is that the labels were counting the merchandiser’s money, counting the promoter’s money, and counting the artist’s money, with their hands out to take a piece of these income stream, but they weren’t trying to make their own money. He talked about how labels historically paid as little as possible (there was a time when labels paid only 2 4% of royalties to artists, or paid with Cadillacs). Artists had to fight to get a decent royalty, and once they get a royalty, they had to force the labels to pay them the full amount due.

The concert promotion business is also struggling, especially since the business of concert promotion has shifted over the past few decades (especially, consolidation of the concert business). Currently, Live Nation is the largest and only public corporation in the concert business, but it has never made a profit. When Clear Channel spun off its concert division into Live Nation, John claims there was about 3 billion debt written off by Clear Channel. “Live Nation was a disaster for Clear Channel; there was no synergy.” The lack of profit by Live Nation seems inconsistent with its monopoly status. It controls the shows, ticketing, the “essence of the business”. The reason why it is not profitable is because Live Nation is a monolithic company, which is only going to get bigger if its attempt to merge with the largest ticketing company (Ticketmaster) is successful.

John spoke about the history of the concert business. He said that in the 60’s the only acts that toured were successful artists pushed by the labels. As the music concert business matured, promoters realized that they needed to get involved in youth culture to know what hot acts were emerging. So concert promoters began working with young artists to develop them.
Historically, the promoters’ deal with the artist was that there would be a guarantee. Once gross ticket sale came in, the promoter would pay its bills, pay the guarantee, the next 15% went to the promoter, and anything left was split between the artist (60%) and the promoter (40%).

As the industry evolved, artists were not making a fair share on the recording side so they needed to make more from concerts. The deals began to change. First, artists received a reasonable guarantee, but started demanding that the split of net profits be increased from 60% to 85%. Then, guarantees started increasing.

John observed that “All graduates from Wharton should go to hell.” Since the artist’s business managers took in 5%, they needed to justify their existence by pressuring promoters because they couldn’t pressure labels (which were large companies with sophisticated lawyers). The guarantees increased substantially, which meant that promoters took on greater risk and “the deals got tighter.”

The concert promotion business was stable those day because of Premiere Talent and its owner, Frank Barcelona. Premiere was the largest talent agency in the music industry. Frank understood that promoters needed to make a fair living so he instituted the idea of paying the artist 85% of the net profits (not gross) but no guarantees (so the promoter would never lose). This idea didn’t last because the business managers insisted on a guarantee.

As a result, John contends that deals in the concert business are extremely one-sided: enormous guarantees (regularly $500K-1 million) plus 90- 95% net. The venue receives income from ancillary sales (concessions and service or ticketing charges). Profit margins are incredibly thin, and there can be no real competition with Live Nation. Its now extremely difficult for any party to make money in the concert business. Superstar acts do well because they receive huge guarantees, but concert promoters are unable to afford any artist development. “The Deal has strangled the industry.”

John then discussed how 360 deals with artists put additional pressure on the concert business. Labels wanted a percentage of the artist’s merchandise and/or touring, but they do not provide any additional service in exchange for this new income stream. John warns that, if this continues, there will not be a live music industry that anyone wants to participate in. Attorneys need to make deals that are fair and reasonable for all parties. Do not try to take advantage; instead, the best deal is one where neither side in 100% satisfied. Record companies need to stop holding their hand out, and the industry needs to be better at protecting intellectual property. The industry needs to realize that, without artists creating content and performing, then there will not be a music industry.

* * *

“Ethical Negotiation Practices”

Panelists: Howard Siegel, Esq., Partner, Pryor Cashman LLP, and Professor John P. Sahl Faculty Director, Miller-Becker Institute for Professional Responsibility, The University of Akron School of Law.

Howard and John opened the discussion by observing that there is a general preconception that entertainment lawyers are unethical. Namely, that the artist’s criminal problems can be attributed to the their lawyers. But this is because the media is focused on celebrities, and entertainment attorneys are in their orbit. There are few news stories about non-celebrities (or their lawyers).

Practical Tips

• Do not “shoot from the hip” when giving advice to individuals about potential legal problems because the standard for finding a lawyer/client relationship is a low one. By giving quick advice, you run the risk of exposing yourself to potential malpractice liability.
• Always Have a Retention Letter. Contingency fee arrangements must be in writing. In New York, an attorney must have a written retention letter even if he or she has a non-contingency relationship if the fees will be in excess of $3000. The letter should also make clear the scope of representation. In taking on new business, keep in mind what is your level of competency and expertise.
• Communicate. The key source of trouble is lawyers who fail to maintain adequate contact with their client.
• If you receive a letter of inquiry from a disciplinary committee, participate fully and promptly. The key is to short circuit a full disciplinary inquiry. Even if you believe the disciplinary complaint is baseless, cooperate with the investigation because you can be reprimanded just for failing to respond.
• Analyze your errors and omissions policy, and be sure you know what is covered. Statistically, law graduates will have 3 to 5 malpractice actions initiated against them, which does not include disciplinary proceedings. Have an office policy about client files, client confidences, how the phone is answered, how you advertise for services, etc.
• Fee Disputes. because a client may elect mandatory fee arbitration (in New York), your retainer agreement should not be inconsistent with this. If there is a fee dispute, don’t take the disputed amount out of the client’s trust account.
• Ethics of Negotiation. You can refer to the law and other considerations in negotiating with third parties. When negotiating contracts, your client needs to agree to the terms of the agreement. If you are given oral authority for a range in negotiations, its best to put this authority in writing.
• Have a Scrubbing System. All drafts of agreements are discoverable in any subsequent litigation and can be used against you. So consider whether you should use oral communications instead of email.
• Be careful about threatening criminal action in communications with opposing counsel. This is not prohibited, but you should have some basis for threatening it rather than using it as negotiating leverage. By contrast, an attorney may not threaten to bring a disciplinary action. Although you can remind opposing counsel that they are crossing the line, you cannot blackmail or threaten a disciplinary action because you are obligated to report all disciplinary violations.

Representing Multiple Parties

In representing multiple parties (e.g., musical group), or in motion picture deal where you represent both the producer and director, bear in mind that groups always get along great in the beginning; “every divorce started out in a mad love affair.”

When representing multiple individuals, there may be differing goals and expectations. Rule 1.7 provides that a group’s lawyer may represent an individual member of the group provided the representation is not inconsistent with the group’s interest. This rule also provides a list of possible conflicts of interest, but try to “listen to your gut.”

You may continue to represent the group and/or stay involved in representing client where there is a potential conflict of interest if you obtain informed consent (and the conflict does not arise in litigation). Informed consent includes a full disclosure of the benefits and risks of continued representation, and a discussion of alternatives.

A multiple representation may require the lawyer to provide the client with a new or revised disclosure statement, retainer agreement and at least a written waiver. Courts are more likely to uphold waivers signed by clients when it provides specific and complete information about all possible conflicts.

Truthfulness with Persons Other than Clients

Aside from the obvious duty of be truthful to your client, you also have an obligation not to make false representations of material fact to third parties on your client’s behalf. And you also may have an affirmative duty to disclose material facts when necessary to avoid assisting clients in a fraudulent action. A “material” fact is broadly defined as any fact that will change a person’s course of conduct. Finally, a misrepresentation can occur if you incorporate or affirm another person’s false statements.

This begs the question of the difference between commercial puffery versus false representation. Statement that may be the “strict truth” may be technically true, but if you suggest a falsity, this may also subject you to a disciplinary violation. In attempting to create a bidding situation, take the high road. Permissible commercial pufferies are statements of opinion. You cannot misrepresent a fact.

* * *

“From Treatments To Royalties: The Basic Lifespan Of An Indie Film”
Moderator: Susan Bodine, Esq., Cowan, DeBaets, Abrahams & Sheppard LLP.
Panelists: Madhu Goel, Esq. Director, Legal & Business Affairs, A&E Television Networks LLC, Dan O’Meara Green Film Company; Marc Simon, Esq. Partner, Cowan, DeBaets, Abrahams & Sheppard LLP.

1) PURCHASING RIGHTS: Madhu Goel

Madhu first set forth the basic development deals that studios have with a producer. This can range from (a) an exclusive deal (where the producer is tied to the studio, which may be costly but then this gives the studio a lot of freedom) (b) a first-look deal (the studio has right of first refusal on a project); or (c) a housekeeping deal (where the studio provides some support, like an office space and a secretary), which is usually offered to a younger producer.

If there is no overall deal with a studio, an independent producer can pitch an idea, treatment, or screenplay to a studio through a pitch meeting. In order for the producer to protect his or her idea, he or she should try to get the studio to sign an NDA/confidentiality agreement prior to disclosure of the idea, which ensures the confidentiality of the pitched idea. But, if the director/producer is just starting out and doesn’t have any leverage, it may not only be difficult to have studio sign the NDA, the studio may have the director/producer sign a submission release, which is an acknowledgment that the pitch may not be unique, that the studio receives millions of pitches all the time, and even if the studio decides not to do business with that person, there is a chance that it will develop a property that is similar to the one that was pitched, and the producer promises not to sue the studio. Bear in mind that ideas are not protectible under copyright law, only the expression of ideas are protected. So if the expression of the producer or director’s idea is expressed in a “treatment”, then the treatment is protected by copyright law, and any derivate work created based on the treatment may also be barred. The director or producer, however, may have other state law claims, like breach of implied contract, but this may require a showing of novelty, depending on whether you are in New York or in California.

Option Purchase Agreement: Deal Points

Generally, the buyer of option rights wants the longest period of time to exercise the option. The standard option period is 12-18 months, but this can be much shorter. The price for the first option may be a percentage of the purchase price of the property, based on a higher back-end price or a percentage of a the film’s budget. Note that you may want flexibility in determining the option price. If the film development is only at the beginning stages, the parties don’t know the type of studio or the financiers who will support the project, so someone selling the rights does not know whether they are going to be involved in a $20 million or $80 million budget movie.


2) FILM FINANCING: Dan O’Meara

Two key concepts to keep in mind: (1) the waterfall; and (2) control by investor. All the other deal terms tend to be pretty boilerplate, but these are two issues can be deal-breakers.
“The Waterfall” is shorthand for a provision in a financing agreement that describes how the film’s profit will be allocated. The money is paid out in tiers. Most investors are concerned with where they are located “in the waterfall”, meaning their priority in being repaid their investment. Typically, two interests will be paid first: (1) the film’s sales fees (must hire an attorney and sales agent) and (2) the costs associated with a full theatrical delivery. After all the investors recoup their investment and premium, then the remaining money is divided between the producers, partners, investors, and other interests.

The second issue is the extent of control that an investor can have over what the producer does. The investor may have some general rights. For example, whatever was represented to them about the film’s budget and financing cannot change materially without the investor’s approval. (There may be a “most favored nation’s” clause providing that the producer cannot make any other finance deals on terms that are better than the terms that the producer has with that investor.) An investor may want to have some meaningful approval or consultation concerning the sale or distribution of a film, or some right to have control over key creative decisions. All of these deal terms will depend on how much leverage the respective parties have.

3) FILM PRODUCTION: Marc Simon
Creation, development, and production are the mechanics of film. The goal is to have the production team moving forward. A producer will want to create an entity (typically an LLC) to own the film, which facilitates accounting, clarity of ownership, and limits liability.
Some production considerations include:

• Location. Many states offer substantial tax credits, and some are transferable credits that can be sold. In New York, film tax credits can be turned into actual cash down the road, a money back credit, which can be substantial. Another issue is that film financing may be a tax deduction, which can be a selling point when trying to raise funds from wealthy individuals. An equity investor may be able to “write off” 100% of his or her capital contribution in the current year of production.

• Chain of Title Issues. Who owns the underlying property rights in the film. All the ownership agreements between producers and investors should explicitly address who owns the film, and there should be no conflicts among the various agreements so the LLC can sell the film without any issues.

• Clearly Defining the Term “Budget”. Many financing terms are based on the budget, such as bonuses.

• “Back End”/Contingent Compensation or Profit Participation (also known as the “producer’s share”). In an actor’s agreement, there may be a provision that the actor may recover 5% of the “producer’s share” as part of the actor’s contingent compensation.

• Writer’s Agreement. One issue may be the writer’s credits, including whether the writer receives shared or sole writing credit. The writer’s compensation and/or bonus may be based on his or her respective credit. There are certain industry standards for agreements with writers.

4) DISTRIBUTION: Susan Bodine

The process for obtaining film distribution is currently going through substantial changes. Its becoming increasingly rare for an independent film to be purchased wholesale by one distribution company who will pay a large advance and distribute the film worldwide on all different platforms. The film industry is reconsidering how films get seen and monetized. Right now, its hard to say “this is how it works” because this is a time of great experimentation. Traditionally, the goal for independent filmmakers was to have the film financed with private equity, then the film debuts at Sundance. The producers hire a great indie sales agent and the day after the film’s debut, it is sold to a distributor and then wins a bunch of Oscars.
Newer and smaller distribution companies have emerged, and they do not necessarily purchase worldwide rights. There are also newer models of distribution (Internet, VOD, TV) or distributors who start investing during the film’s production. Indiewire is a good website which discusses what’s going on in the industry, and covers DIY film distribution and marketing.

* * *

“Destination Unknown: What’s Next For The Industry In 2010”

Moderator: Vejay G. Lalla, Esq., Moderator Associate, Davis & Gilbert LLP
Panelist: Stanley Pierre-Louis, Esq. Vice President, Associate General Counsel, Intellectual Property & Content Protection, Viacom, Inc.; Drew Stein President & COO, IMO; Lance Podell, Esq., CEO, Next New Networks; Peter Drakoulias President, GAF Holdings

The panel addressed a range of issues. Here are just a few of the topics that they touched on.

(1) DRM Free Websites. Consumers apparently prefer MP3s without DRM (“digital rights management”) protection. Is DRM dead or are there different models to choose from? Content creators, however, want DRM and are still testing other ways to protect digital content. Consumers may want to be able to burn CDs, so are there other ways to have the content locked up, and under what terms. There can also be rental models or different uses. ITunes, which represents 80% of the market, does not use DRM.

Stanley talked about Viacom’s approach to DRM protection for audio-visual works. Consumers can view its shows in different ways (either pay by downloading on iTunes or free on Hulu). Mobile is still a growing area, especially since bandwidth constraints are improving. The key is to have the flexibility to test various ways of getting content to consumers by using different models.

Piracy is obviously a big concern (e.g., the Viacom-YouTube litigation). There are ways to create a filter to track unauthorized uploading on peer to peer networks. The content owner can use “watermarking” on blue ray disc. Another way to stem the tide of piracy is to give notice to persons engaged in illegal peer-to-peer downloading without suing them (a three-strike rule for infringement).

(2) How to Make Money from Content. Newer trends include TV on the Internet. There are two types of content. Content that was originally shown on TV and then repurposed for the Internet, and content created FOR the Internet. Content for the Internet is less expensive to create, there is less production and a quicker turnaround time. TV for the Internet is an exploding market. One way to keep cost down is to steer clear of copyrighted music by creating their own music for these programs.

(3) Another Emerging Trend is Branded Entertainment. Content created for the Internet is better able to utilize branded entertainment because of its ability to turn around content so quickly.

Branded entertainment includes more than just product placement. For example, the Gates Foundation has sponsored TV shows where the “product” that was being “placed” was a concept (e.g., encouraging kids to finish high school). The foundation paid the TV program to convey that message, which weaved the “staying in school” theme into that TV program.

(4) Is Music Superstardom Still Possible? What is role of marketing for superstardom? In marketing new content, what is role of the record label? Historically, the label’s main job was to put their muscle behind an emerging and promising musical act. They would distribute the artist’s music, promote the artist, give tour support, give an advance, and then these costs would be recouped through the sales of the musician’s recordings. Now, with mp3 files, the label’s control over the channels of distribution are less relevant, and MySpace and Facebook has usurped a part of the label’s promotion functions.

The question was posed on whether record labels missed the boat on digital content. Labels were slow to come to the party, and now they are trying to innovate. For example, Warner just inked a deal with YouTube where Warner may be involved with the sale of music video on YouTube.

The key to innovation is finding out ways to get consumers to engage with the content on the website, and for that, there needs to be compelling content. For example, games on websites are now huge. Both labels and other content generators need to use new technology to reach people and get them to come to their website. Larger, monolithic companies are not able to innovate the same way that smaller companies can. So now large companies are working with young entrepreneurs companies.

Lightening round predications for 2 years from now: what will be super hot/cold

Stan: As TV become more adapted to the computer, there will be a switch to Internet TV, and more people will be listening and watching content on their mobile devices. Screens hooked up to televisions will be better quality, and there will be more VOD and Netflix instant-movie streaming models.

Liam: prices will start rising for content. On the web, there was initially a culture of “I shouldn’t have to pay for content”. It will become more accepted over time that content/information is no longer free on the Internet (e.g., newspapers charging for membership).

Peter: larger industries are going to be more nimble, and will start looking at smaller channels, which will create new opportunities.

Drakoulias: Consumers are demanding everything on their time and on their channels. In two years, while traditional advertising will still be around (e.g., sponsorship), the general trend will be towards more accountability of advertising dollars. Also, more directed advertising to consumers, so it’ll be a tension between algorithms (e.g., Google and Pandora) and instinct.

January 28, 2010

Today is the Deadline for Objections and New Opt-outs in the Google Books Settlement

By Mary Rasenberger

Today is the deadline for filing objections to the amended settlement agreement in the Google Books case. It is also the deadline for opting back in to the settlement (for those who opted out of the original settlement) and for opting out (for those who did not opt out of the original settlement and wish to do so now). There are clear directions on the Google Books Settlement site http://www.googlebooksettlement.com for opting out or opting back in.

The original settlement agreement, filed in October 2008, was the result of two years of negotiations among the named parties in the class action lawsuit brought by U.S. authors and publishers claiming that Google infringed their copyrights by scanning their books and displaying excerpts without authorization. The amended settlement agreement was filed this past November in response to objections submitted by the U.S. Department of Justice and numerous class members.

We'll see what today brings, but so far it's been relatively quiet compared to the storm of filings that preceded the original September 4th deadline for objections to the original settlement agreement. Hundreds of objections had been filed well in advance of that deadline.

The first objections to the amended settlement agreement were filed Tuesday; and less then a dozen appear on the court's docket as of this writing. A couple dozen opt-outs have been filed with the court, some expressing their objections - although anyone who opts out technically does not have standing to file objections. Ursula LeGuin's petition requesting that the United States be exempt from the settlement and signed by over 350 authors does not appear on the docket yet - but she states on her website that the petition has been filed. In addition, a couple of letters in support of the amended settlement have been filed.

One explanation for the apparent relative apathy is that objectors and supporters feel they have already said their piece in objections filed to the original settlement and don't have much to say about the amendments. Indeed, the amendments do not address most of the objections to the original settlement raised by class members, but are mainly directed to the anti-trust and class action concerns that the Department of Justice raised in its brief. Judge Chin clearly instructed in his November 19, 2009 order that objections be limited to the amendments, which thus far most objectors seem to be heeding to.

Most of the actual objections filed thus far (i.e., not amicus or opt-outs) focus on the amended definition of the settlement class. Class members are now limited to authors or publishers of a book published and registered in the U.S., or published in, the U.K., Australia or Canada prior to January 5, 2009. This amendment was clearly intended to remove many foreign rights holders and their objections from the settlement, including the Germans and French, whose governments had filed objections. Over three-quarters of the more than 400 objections to the original settlement were filed by foreign rights holders. The new definition does not actually remove many foreign right holders, however. It encompasses right holders of any book published at any time prior to January 5, 2009 in any of the named countries; and this includes numerous books by authors and publishers of excluded countries. Go to any foreign language or university book store in Canada, the U.K. or Australia, and you will find many foreign language books. Thus, many of the objectors this time around have complained that the new definition is murky and does not resolve their concerns.

Another explanation for the relative quiet around this deadline might be mere ennui - is this becoming like the health bill - how much longer can we talk about it? Also, there appears to be a coming to terms with the settlement, or perhaps its inevitability, at least among some of the former opponents. Gail Steinbeck, an early and vocal opponent of the settlement, has recently come out in support of it.

The filing that will undoubtedly have the most influence is the U.S. Department of Justice Statement of Interest on the amended settlement agreement, due next Thursday, February 4th. It will be interesting to see what positions Justice takes to the amendments, since so many of them are intended to directly address its objections -- mainly the more easily remedied specific anti-trust concerns. The amended settlement agreement does not fully address all of Justice's concerns, however, most notably the issues Justice raised about the opt-out provisions for out-of-print works, especially as applied to unclaimed works. Justice indicated that converting the opt-out to an opt-in would resolve many of the problems with the settlement, but never stated that it was necessary to eliminate the opt-out provisions. The opt-out is likely an area of some contention within the government, given Google's heavy lobbying and public insistence that eliminating the opt-out would kill the deal, side by side with a recognition that opt-outs in copyright law are better suited to legislation. As such, I would expect to see continued ambiguity in the government's brief.

The Fairness Hearing scheduled for February 18, 2010. Objectors and supporters may discuss issues related to the original settlement and the amendments. If you wish to appear, you must file your notice of intent to participate by next Thursday, February 4th.

Mary Rasenberger is an attorney with Skadden, Arps, Slate, Meagher & Flom. This blog entry represents her personal views in her individual capacity and not those of Skadden, any other law firm or any client. This blog is not sponsored by Skadden or any other law firm, or any client.

February 9, 2010

Rescheduled - Seton Hall University School of Law, Sports and Entertainment Law Journal 2010 Sports & Entertainment Law Symposium

Seton Hall University School of Law, Sports and Entertainment Law Journal

Presents: 2010 Sports & Entertainment Law Symposium
Newark, New Jersey

The SHU Law Journal of Sports and Entertainment Law Symposium has been rescheduled from its original date, which had to be cancelled due to inclement weather.

New Date: April 12, 2010

Time: 8am-3:45pm

Registration: is required and can be completed at: http://law.shu.edu/Students/academics/journals/sports-entertainment/symposium/registration.cfm.

Panels will remain the same, with the exception of a few speakers.

Keynote: Lou Lamoriello, CEO and GM of the New Jersey Devils

5 NYCLE Credits (full day attendance required) $100

General Public $25

Free Admission for Students

Breakfast & Lunch will be provided to all attendees

More details to follow along with the official list of panelists.

If you have any questions, please contact Brett Theisen at brett.theisen@gmail.com

February 15, 2010

Justice Department's Statement of Interest - Google Books Case

By Mary Rasenberger


A careful reading of the Statement of Interest filed in the Google Books case by the Justice Department last week shows a harsher assessment than was evident in its earlier filing. The government’s brief rejects the amended settlement agreement (“ASA”), finding that the parties’ attempts to cure the issues the government identified in its earlier brief do not go nearly far enough: “Despite this worthy goal [trying to create a mechanism to allow for lawful large-scale book digitization], the United States has reluctantly concluded that the use of the class action mechanism in the manner proposed by the ASA is a bridge too far.”

Given the stakes and pressures that were likely put to bear on the government, it is an incredibly strong document. It will be remarkable if Judge Chin (or his successor in the case, if he is moved up to the Second Circuit soon) approves the ASA as-is, even after the substantial responses filed by the parties.

The government’s main issue with the ASA is that it uses the class action suit to create a far-reaching commercial arrangement that looks far into the future (indeed in perpetuity) and far beyond the claims off the suit. It does this by granting Google legal rights that it never could have obtained through a private arrangement or through a judicial resolution of the suit – and these legal rights fly in the face of “the core principle of the Copyright Act that copyright owners generally control whether and how to exploit their works during the term of copyright.” Secondarily, providing these rights, the government argues, confers significant, possibly anti-competitive advantages to Google.

The government’s September 18th brief focused on the anti-competitive concerns and more technical class action issues, and did so in an equivocal enough way that it left room for the parties to make the minor changes they did in the ASA and be able to wipe their hands with a straight face. The recent brief, in contrast, does not mince words and hits hard on the underlying problem many objectors have with the ASA - it attempts to use the class action process to get around the existing legal system rather than to support it. As Marybeth Peters, the Register of Copyright, has said, and many have repeated: the settlement turns copyright on its head. It creates a whole new legal system of opt-out regime for the benefit of a single entity, which is totally at odds with copyright’s grant of exclusive rights to authors.

To summarize the government’s brief at a very high level, there are three key objections to the ASA:

1. Class action law does not permit settlements to replace commercial transactions that go far beyond the claims at issue in the case or restructure the law;

2. The settlement turns copyright on its head by creating an opt-out regime for the vast majority of works at issue; and

3. Granting an across-the-board license to Google for non-commercial works on an opt-out basis creates potential anti-competitive advantages, as no competitor will be able to obtain those rights, especially in the case of unclaimed works.

At the same time, the government is rightly sympathetic with the parties’ attempt to use the class action process in this way. The current law and practice is arguably defective, and makes mass-digitization, even when it serves a good public purpose, impossible to do legally. Orphan works legislation might help some, as would collective licensing arrangements or perhaps a statutory license for libraries. But you don’t have to be a class action lawyer to know that Rule 23 (the civil procedure rule allowing for class action lawsuits) is not intended to be used to create new law. We have one mechanism for fixing the law in this country – legislation. As judges in countless cases have said: you have a problem with the law, take it to Congress.

Sure, it’s been impossible in recent years to pass copyright legislation, but that doesn’t mean we get to amend the law ourselves in class action lawsuits.

For those interested in more detail, I’ve summarized some of the specific arguments in the government’s February 4th Statement of Interest below. The arguments are made in the context of two separate sets of laws: class action law and antitrust law.

Class Action Law Related Issues

The Government’s brief states: “The Supreme Court has cautioned that 'Rule 23… applied with the interests of absent class members in close view, cannot carry the large load of restructuring legal regimes in the absence of congressional action – however sensible that restructuring might be.'”

The arguments regarding non-compliance with the Rule 23 class action rules are some of the more interesting and compelling ones raised in the case. The Rule 23 law gets at some of the smell test issues in this case, described above – i.e., even though it sounds good, it looks good, it doesn’t smell quite right. It seems at odds with some of our underlying basic legal principles to allow a class action law suit filed by a small group of associations and individuals, who admittedly do not represent all author and publisher class members throughout the world or even the U.S., to take away hundreds of thousands (if not millions) of individuals’ rights without their consent. It’s even odder when you consider that the law suit was brought to enforce those very rights.

It turns out, according to one Justice (and certain other objectors, e.g., Microsoft, Amazon, Scott Gant) that the class action law does have standards, if not crystal clear ones, that don’t necessarily promote this kind of sweeping conversion of rights.

Both the parties’ and the government’s briefs discuss the standards set forth in the Supreme Court’s Firefighters case (Local Number 93, Int’l Assoc. of Firefighters v. City of Cleveland, 478 U.S. 501 (1986)). Under Firefighters and its progeny, the Court may approve a settlement that meets the following three-prong test: (1) the settlement springs from and serves to resolve a dispute with the Court’s subject matter jurisdiction, (2) the settlement comes within the general scope of the case made in the pleadings, and (3) it furthers the objectives of the law on which the complaint was based. The government concludes that:

1. It’s difficult to see how this settlement meets the first prong in that it resolves future claims by absent class members for activities well beyond the facts underlying the complaint;

2. The ASA does not meet the second prong because it creates a business relationship that covers future conduct that goes way beyond the claims in the complaint and provides Google with benefits that it never could have obtained through the litigation itself or even through a privately negotiated deal (i.e., the opt-out for non-commercial works); and

3. The ASA does not further the objectives of copyright law, but is inconsistent with the policy of Copyright Act, which provides for exclusive rights and not opt-outs.

The government concedes that a settlement of a class action may go “somewhat” beyond the conduct complained of in the complaint, but can’t go so far as “to abridge or enlarge substantive rights” and “usurp the legislative function.”

The government further states that the ASA does not remedy the lack of adequate representation of the interests of a large number of members (namely, unclaimed work owners, foreign rightsholders) in the settlement negotiations, and that appointing a fiduciary with limited powers for unclaimed works at the Registry does not solve the problem. It also exhorts the Court to look more closely at the notice provided to potential class members to determine if it was adequate, specifically requesting that the Court “undertake a searching inquiry to ensure both that a sufficient number of class members have been or will be reached and that the notice provided fives a complete picture of the broad scope of the ASA…”

Last, the government raises concerns about Attachment A of the ASA. Attachment A is a sub-agreement that controls potential disputes between authors and publishers, mainly regarding possession of rights and splits, and supersedes all agreements between publishers and authors, even foreign ones. The government notes that there may be a conflict of interest between subclasses of authors and publishers, which raises “serious questions” regarding adequacy of representation under Rule 23.

Antitrust Issues

The antitrust issues discussed in the brief are essentially the same ones addressed in the government’s September 18th brief; and they are the primary issues that the parties attempted to address in the ASA’s amendments. The government states that the parties made “constructive revisions” to address these potential anti-competitive problems, but that the amendments do not go far enough to remedy:

1. The creation of an industry-wide revenue-sharing formula at the wholesale level applicable to all works;

2. The setting of default prices and the effective prohibition on discounting by Google at the retail level; and

3. The control of prices for orphan books by the known publishers and authors with whose books the orphan books likely will compete.

With respect to the first issue, the government notes that the ASA gives Google the right to renegotiate the wholesale revenue split with rights holders, but only for commercially available works. The government believes that the carve-out for non-commercial works may render the amendment somewhat meaningless, given the fact that the vast majority of works at issue are not commercially available under the ASA’s definition and that this will be especially true if the publishers take commercially available books out of the settlement, as many have suggested they will do.

The government also does not believe that the “fixes” regarding the use of pricing algorithms go far enough to prevent a de facto horizontal agreement. It analogizes the publishers’ and authors’ agreement to allow Google to price the works (using its algorithms) to the delegation of pricing to a common agent - a practice found to be unlawful. Far preferable would be actual bilateral negations than the ability to opt-out of the default use of algorithms.

The government’s biggest concern, however, relates to the pricing of orphan works, since the Registry’s board, consisting primarily of commercial publishers and authors, would have the ability and incentive to limit competition from unclaimed works. The parties have responded to this criticism (also in the government’s September brief) by providing in the ASA for an “Unclaimed Works Fiduciary,” but this fiduciary’s powers are limited – for instance, he or she will not have the ability to set prices for works, or renegotiate splits. As such, the government does not believe the appointment of fiduciary cures the underlying problem.
Last and most importantly perhaps, the government finds that the amendments do not address Google’s de facto exclusive rights to use orphan and rights-uncertain works. The government states that no other entity will have the ability to offer these works legally. Although the ASA attempted to address this concern by expressly allowing resellers to provide access to these works, the government does not equate these reseller rights with the right Google has to freely exploit orphan and other unclaimed works. It concludes: “the reseller clause cannot create new competitors to Google.”

So now what?

The government’s brief advises the Court that the public interest would best be served by direction from the Court encouraging the continuation of settlement discussions between the parties. But if we can be realistic for a moment – what are the chances of Google agreeing to all of the concessions that Justice’s analysis would require to make the settlement copasetic? Google has made it clear that, from its perspective, the opt-out for out-of-print works, and especially the orphans, is essential to the deal. If you read the government’s brief carefully, it does not appear that its cumulative objections all could be adequately addressed without getting rid of the opt-out for non-commercial works. The government does state, however, that if the opt-out is retained, Google should be required, among other things, to conduct a search for unclaimed work prior to their use, similar to the reasonable search requirement in the last iterations of the orphan works bill. Google has publicly stated that, although it supports orphan works legislation, that legislation would not provide it with the flexibility it would need to create the inclusive database envisioned.

Briefs Filed in Support of the Amended Settlement Agreement in the Google Books Case

By Mary Rasenberger

An impressive number of pages were filed this past Thursday (February 11, 2010) by the parties in the Google Books Search case in support of the amended settlement agreement (“ASA”). Only a week after the Justice Department filed its brief, both Google and the named Plaintiffs (publishers and authors collectively) filed briefs worthy of fat binder clips. The Plaintiffs' briefs alone comprise nearly 250 pages, including a 170 page Supplemental Memorandum Objecting to Specific Objections (and with the numerous declarations and exhibits the parties' papers amount to over 2,500 pages altogether).

The briefs remind the Court of the benefits of and support for the settlement, and as would be expected, address the government’s concerns set out in its February 4th Statement of Interest. Google’s brief addresses the government’s objections in great detail supported by substantial case law; the brief also discusses a somewhat random, handful of objections filed by others (fairness to third parties, burden of determining whether a book was registered, inaccuracies in the database, security, and time limit on removal).

The Plaintiffs’ principal brief makes some compelling arguments as to why the ASA is preferable to the alternative outcomes in this case (e.g., protracted litigation, the risk of an on/off decision) and why the settlement is reasonable in light of the case. It summarizes the ASA and its benefits and takes on some of the Rule 23 and other concerns raised by the government. The Plaintiffs’ supplemental brief appears to take on the entire catalog of objections filed by all objectors with standing. Impressive as it is, the supplemental brief may have bit off more than it could chew. Some of the responses, some even to significant objections, come off as non-responsive or conclusory. Moreover, the same objections in some cases are addressed separately in the two briefs, not always completely consistently. They don’t always cross-reference arguments made in the other brief (e.g., the discussion of adequacy of notice in the supplemental brief seems very conclusory if not read alongside the discussion in the principal brief, which is not referenced).

For instance, in response to arguments that the ASA cannot bind foreign members of the class because (1) the law is at odds with that of other countries and (2) the Court lacks personal jurisdiction, the Plaintiffs state in the supplemental brief (pp. 61-63) that members of the class can be bound so long as notice meets the Rule 23 requirements, and that notice was compliant (here referencing their arguments as to why it was compliant). Admittedly, I have not read the cases they cite, but maybe they could explain why compliant notice would address these concerns.

In response to Justice’s and others’ concerns about the fact that Google alone will have the right to offer orphan works (i.e., books for which a copyright owner cannot be located) and the impossibility for others to obtain the rights to the orphans and enter that market, in the Supplemental Motion (pp 149-150), the Plaintiffs summarily respond: "This argument relies on unsupported and illogical speculation that the subset of out of print [orphan] books is so uniquely valuable and desired that other subscription products will be unable to compete with the Institutional Subscription."

Considering that the government and many others viewed this as a significant issue, the response seems flippant. Of course, a subscription database that includes all books, including out-of-print books for which no owner has come forward, is much more valuable than one that is created on an opt-in basis and so would not include orphans. As a library, which one would you chose? And if these works don’t increase the value of the database, then why is the opt-out so crucial to the settlement? Why does Google insist it needs these out-of-print works (a huge portion of the books at issue in the settlement)? If the out-of-print, unclaimed works really are so valueless, then make them available to Google on an opt-in basis and 95% of the objections go away.

Some odd responses aside, the parties’ recent briefs keep the ball in play. Perhaps most interestingly, filing these briefs indicates that the parties do not intend to go back to the negotiating table again as the government recommended. Moreover, the briefs contain some solid, convincing arguments. They are worth a thorough read for the interested – who have a lot of free time. (It does feel like reading the original settlement agreement all over again.) Most importantly, one hopes that Judge Chin will have the time to read it all. He may just want to run for the hills when he sees all that paper. I mean the Second Circuit.

The briefs have good table of contents, as you’d expect. One approach to reading the briefs is to do so on a topic by topic using the table of contents, rather than try to read them in linear fashion. And for those of us who’d love to see a list of all objections filed in the case, the supplemental brief serves as a pretty good proxy.

February 16, 2010

Billboard Program - DEALS & DEALMAKERS... DRIVING THE BUSINESS

Coming up on March 4, Billboard is having its 9th Annual Music & Money Symposium at the St. Regis in NYC and it is offering EASL Section members a special promotional rate to attend the conference.

Please use the promo code: LAW for the special rate of $749 (a $450 savings).

Now in it's 9th year, this one-day event brings together the best minds from the music, legal, financial and Wall Street communities for an in-depth examination of the financial realities with which the music industry is contending.

This annual event attracts almost 250 top-level executives from record labels, publishing firms, marketing and promotion companies, as well as artist managers, attorneys, accountants, strategic advisors, distributors, financial services, analysts and consulting firms.

DON'T MISS:
Keynote Interviews With C-Level Executives
Informative Panel Sessions Featuring:
Media Investors, Music Publishers, Equity Groups, Venture Capitalists,
Digital Music Executives & Brand Marketers
Networking Receptions...and More!

www.BillboardMusicandMoney.com
http://www.billboardevents.com/billboardevents/mms/speakers/index.jsp

March 9, 2010

Supreme Court Clarifies Jurisdictional Requirements; Revives Copyright Class Action Settlement

By Cliff Sloan, Judith Kaye, Mary E. Rasenberger & David W. Foster

On March 2, 2010, in Reed Elsevier, Inc. v. Muchnick, the Supreme Court reinstated a class action settlement, approved by the district court, of copyright claims entered into by freelance authors, publishers and electronic database companies. In doing so, the Supreme Court provided important guidance on whether mandatory pre-conditions for suit, such as the requirement for copyright registration in the copyright statute, are jurisdictional.

The Reed Elsevier case involves a longstanding dispute between freelancers and publishers and databases. Nearly a decade ago, in New York Times Co. v. Tasini, 533 U.S. 482 (2001), the Supreme Court held that “owners of online databases and print publishers had infringed the copyrights of six freelance authors by reproducing those authors’ works” in electronic databases “without first securing their permission.”

After Tasini, attention turned to a class action lawsuit by freelance authors against publishers and databases in the Southern District of New York. After years of negotiation and mediation, the freelancers, publishers and electronic database companies agreed on a global settlement. Although the copyright statute requires registration of a creative work before a copyright infringement suit can be brought, the class action settlement resolved potential claims regarding both registered and unregistered works. The district court certified the class and approved the $18 million settlement.

Ten freelancers objected to certain provisions of the settlement on procedural and substantive grounds, and they appealed. The Second Circuit sua sponte asked the parties to address whether the district court lacked jurisdiction to approve the settlement because it included unregistered works. All parties maintained that there was no jurisdictional problem with the settlement, but the Second Circuit disagreed. Ruling that the district court lacked jurisdiction, it threw out the settlement.

The publishers and databases then sought certiorari from the Supreme Court, which was granted. Because none of the parties agreed with the Second Circuit’s holding on jurisdiction, the Supreme Court appointed a law professor as amicus to defend the Second Circuit’s opinion. Skadden filed an amicus brief in the Supreme Court supporting reversal on behalf of ten leading media and publishing companies and organizations.

In an 8-0 ruling (with Justice Sotomayor recused), the Supreme Court reversed. It held that the copyright registration requirement — Section 411(a) of the copyright statute — is mandatory, but not jurisdictional and thus the Second Circuit should not have thrown out the settlement on jurisdictional grounds. Writing for the court, Justice Thomas applied the rule from Arbaugh v. Y & H Corp., 546 U.S. 500 (2006), for distinguishing between jurisdictional statutes, which govern a court’s power to hear a case, and mandatory claim processing rules. The court held that Congress had not clearly stated that the limitations in Section 411(a) are jurisdictional. As a result, the court would not conclude that the mandatory registration requirement is jurisdictional.

Justice Ginsburg, joined by Justices Stevens and Breyer, concurred in part and concurred in the judgment. They stated that there appears to be some tension between the rule announced in Arbaugh and the result in Bowles v. Russell, 551 U.S. 205 (2007), which found that a time limit for an appeal was jurisdictional. The concurring justices resolved that tension by reading Bowles to apply only when a long line of Supreme Court cases has held a statute to be jurisdictional, and that interpretation has been left unchallenged by Congress.

The Supreme Court emphasized the limits of its Reed Elsevier decision. In sending the case back to the Second Circuit, the court expressed no opinion on the merits of the settlement. It also observed that the registration requirement remains a “precondition to suit,” and left open the possibility that “district courts may or should enforce sua sponte” the registration requirement by “dismissing copyright claims involving unregistered works.” The court also noted that it did not reach the question whether, even if the registration requirement were jurisdictional, the court would have authority to approve the settlement.

Beyond the impact in the Reed Elsevier case itself, the most important effect of the decision is the court’s emphasis that it will not lightly presume that statutory requirements are jurisdictional. A conclusion that a requirement is jurisdictional is warranted only if it is clearly stated or mandated by Congress. The court stressed, as it has in other recent opinions, that it will look skeptically at “drive-by jurisdictional rulings” ­— casual statements about “jurisdiction” in past opinions that are unsupported by clear authority in statutory language or intent.

The decision leaves open the question of whether and how compliance with section 411(a) may be waived by a defendant, whether expressly or by default. Until there is a fully developed body of law on the issue, copyright litigators would be wise to raise failure to comply with section 411(a) at the earliest practical moment in the litigation.


Cliff Sloan, Judith Kaye, Mary E. Rasenberger, David W. Foster are attorneys with Skadden, Arps, Slate, Meagher & Flom. This blog entry does not represent the views of Skadden, any other law firm or any client. This blog is not sponsored by Skadden or any other law firm, or any client. The blog is provided for educational and informational purposes only and is not intended and should not be construed as legal advice.

April 23, 2010

Judge Chin Confirmed to Second Circuit

In a unanimous 98-0 vote, Judge Denny Chin was confirmed to a seat on the Second Circuit. We will have to wait to see what this will mean for the Google Book Project/Authors Guild proposed settlement. What we do know is that the class action suit brought against Google by photographers and visual artists will be reassigned to someone else.

Elissa D. Hecker

CopyRight and Risk in Film Practice Program

Co-sponsored by the Young Professionals Division of the Copyright Society of the USA
and the New York State Bar Association's Entertainment, Arts and Sports Law Section

Date: April 29, 2010
Time: 6:00 p.m - 7:00 pm.: FREE Cocktails
7:00 p.m. - 8:00 p.m.: Program (will start and end promptly)

Place: The Benjamin N. Cardozo School of Law, 55 Fifth Avenue, New York, NY

Cost: FREE

CLE: The Copyright Society of the U.S.A. is a NY CLE Approved Provider. This course is Transitional and Nontransitional, and provides 1 Credit (based on 60 minutes).

Please join us for a free, jointly-sponsored evening of cocktails and film discussions on Thursday night, April 29th, 2010 from 6-8 PM at the Benjamin N. Cardozo School of Law. Whether you are young or simply young-at-heart, the Young Professionals Division of the Copyright Society of the USA and the New York State Bar Association's Entertainment, Arts and Sports Law Section are excited to invite you to come, network and hear from some experts in the film industry. And, thanks to the generous support of the Cardozo Intellectual Property Society enjoy an open bar and snacks as well.

CopyRight and Risk in Film Practice

This panel will provide a look into business and copyright aspects of the film production, finance and distribution. Topics may include mitigation of production and distribution risk, chain-of-title, errors and omissions insurance, and determination of copyright infringement damages. The panel may also address the controversy surrounding the proposed Cantor Exchange which, if approved by federal regulators, will provide a platform for trading of derivatives based on domestic box office receipts.

SPEAKERS: We are privileged to present respected practitioners Ezra Doner and Dennis Angel and our moderator Professor Derek Bambauer (Brooklyn Law School).

To attend this exciting panel discussion, please complete the registration form, and mail or fax it to: The Copyright Society of the U.S.A., 352 7th Ave., Suite 739, NY, NY 10001, Fax # (212) 354-2847, by Tuesday April 27th. We look forward to seeing you on April 29th!

Go to www.nysba.org for a complete listing of association events and web resources.

April 27, 2010

USING MUSIC IN DIGITAL MEDIA: BUSINESS AND LEGAL ISSUES

Lunch Program on Wednesday – June 16, 2010
(12 – 12:30 p.m. lunch, 12:30 -2 p.m. program)
(re-scheduled from February 26 snow day, non-CLE)
at the New York City Bar Association Building, 42 West 44th Street, New York, NY
(between Fifth and Sixth Avenues in mid-town Manhattan)

Co-sponsored by:
The New York State Bar Association's Entertainment, Arts and Sports Law Section
- Television and Radio Committee
Co-Chairs: Pamela Jones and Barry Skidelsky
- Motion Picture Committee
Co-Chairs: Steve Rodner and Mary Ann Zimmer

and

The New York City Bar Association
- Copyright Law Committee
Chair: Joel Hecker

Speakers: David Oxenford and Robert Driscoll of Davis Wright Tremaine LLP

In today’s digital world, more and more companies want to use music for their business purposes – whether as the primary focus of an entertainment web-site, the background to a commercial or video, or otherwise.

This non-CLE program will focus on business and legal issues regarding the use of music in digital media, and discuss related rights and clearances that need to be obtained, other steps one should take to minimize potential legal liability, and current controversies that remain to be resolved by the Courts and Congress.

Registration:
Program Fee, including lunch, is $35 for members for either the NYSBA or the NYCBA.

$40 for all others.

Space is limited, so please register ASAP on-line at:

http://www.nycbar.org/EventsCalendar/show_event.php?eventid=1377

April 29, 2010

Should violent video games be disqualified as speech?

By Marie-Andrée Weiss

The U.S. Supreme Court agreed this week to review next term the constitutionality of a California law prohibiting the sale of violent video games to minors, Schwarzenegger v. Video Software Dealers Association (08-1448).

This law was to take effect on January 1, 2006, as new California Civil Code §§ 1746-1746.5, but the Video Software Dealers Association and the Entertainment Software Association challenged it as violating the Free Speech Clause of the First Amendment, which is made applicable to the states through the Fourteenth Amendment.

A district court permanently enjoined enforcement of the law, and the State of California appealed. The Ninth Circuit affirmed the district court judgment, and the Supreme Court granted certiorari on April 26, 2010.

First question presented to the SCOTUS: Does the First Amendment bar a state from restricting the sale of violent video games to minors?

The first question that was presented to the Supreme Court is whether the First Amendment bars a state from restricting the sale of violent video games to minors.

The California law prohibits the sale of violent video games to minors if “a reasonable person, considering the game as a whole, would find [that it] appeals to a deviant or morbid interest of minors.”

This is not the first time that the Supreme Court must consider whether the definition by a state law of what constitutes material unprotected by the First Amendment, may vary according to the group to whom the material is directed. In Ginsberg v. New York, 390 U. S. 629 (1968), the Supreme Court held that a New York criminal obscenity statute could prohibit selling materials to minors even though these materials were not considered obscene for adults.

Variable obscenity standard

Obscene material, which is not protected by the First Amendment, is defined as whether, to the average person applying contemporary community standards, the dominant theme of the material, taken as a whole, appeals to the prurient interest of a person. This definition is similar to the wording of the California video game statute.

In Ginsberg, the Supreme Court applied a “variable” standard for obscenity. The State could bar selling to minors material defined as obscene on the basis of its appeal to minors (Ginsberg, at 631), because there is an important state interest in protecting the welfare of minors. The State of California argued in front of the Ninth Circuit that this variable standard should apply as well to the regulations of violent videos sold to minors.

Strict scrutiny standard

However, the Ninth Circuit refused to apply that variable standard, and applied instead the strict scrutiny standard, Video Software v. Schwarzenegger 556 F.3d 950, 2009. According to the Ninth Circuit, the California Act must be narrowly tailored to promote a compelling Government interest, because it is a content-based restriction. If a less restrictive alternative is available, the legislature must use that alternative, United States v. Playboy Entertainment Group, Inc., 529 U.S. 803, 813, (2000).

Should the depiction of violence become a new category of unprotected speech?

The governor of California argued in his petition for a writ of certiorari that the Ginsberg “variable obscenity standard” should apply to extremely violent material because such material “can be obscene as to minors, even without a sexual element.”

Obscenity is not protected by the First Amendment. However, violent video games, if devoid of sexual content, are a protected form of speech. For instance, the Eighth Circuit held that videos “contain[ing] violence but not depictions or descriptions of sexual conduct cannot be obscene,” Video Software Dealers Association v. Webster, 968 F.2d 684, 688 (1992).

In U.S. v. Stevens (08-769), the Supreme Court refused this month to add the depiction of animal cruelty to the list of the few categories of speech which may be disqualified as speech. Just as some video games merely portray violent acts, the federal statute which was held unconstitutional in Stevens only criminalized the portrayal of animal cruelty, not the actual acts of cruelty, which are indeed unlawful in all 50 states and in the District of Columbia.

The “exception clause”

The Government had argued in Stevens that the Supreme Court should use a balancing test, measuring the value of the speech against its societal costs, to determine whether such speech should be protected by the First Amendment. Indeed, the Government was seeking the total ban of depiction of animal cruelty, except if, under an “exception clause,” such depictions had “serious religious, political, scientific, educational, journalistic, historical or artistic value.”

While the Supreme Court had held in Miller v. California, 413 U.S. 15 (1973) that having a “serious” value shields depictions of sex from being considered obscene, the Supreme Court was careful in Stevens to explain that the mere determination of some material having “serious” value cannot be used “as a general precondition” to protect other types of speech as obscene speech, and thus such clause was not sufficient to narrowly tailor the statute.

The federal “exception clause” at stake in Stevens was similar to the wording of the California law, forbidding the sale of violent video games to minors only if such games lack “serious literary, artistic, political or scientific value for minors.” It is thus likely that the Supreme Court will also consider next year the California “exception clause” as being insufficient to narrowly tailor the statute.

Second question presented to the SCOTUS: Is the State required to demonstrate a direct causal link between violent video games and physical and psychological harm to minors in order to prohibit the sale of violent games?

The second question presented to the Supreme Court is whether, if indeed the standard to apply is the strict scrutiny standard, the State must demonstrate a direct causation between violent video games and the resulting harm to minors.

California had passed the Act because it was concerned about the actual harm to the brain of the child playing video games. Protecting the well-being of minors is indeed a compelling interest, Sable Commc’ns of Cal., Inc., 492 U.S. 115, 126 (1989). However, in Turner Broadcasting System, Inc., 512 U.S. 622 (1994), the Supreme Court had held that, when seeking to restrict speech, the Government “must demonstrate that the recited harms are real, not merely conjectural, and that the regulation will in fact alleviate these harms in a direct and material way.” Id., at 664.

The Ninth Circuit was not convinced by the evidence of harm presented by the State, as this research was based on correlation, not evidence of causation. Since the State failed to prove direct causation, it also failed to demonstrate the existence of a compelling Government interest.

The State cited Turner Broadcasting System in its petition, but argued that the Supreme Court had also held in this case that ”a court must accord substantial deference to the predictive judgments of Congress.” Id., at 665. Therefore, according to the petitioner, a state’s predictive judgments must be upheld so long as a court finds that “in formulating its judgments, [the state] has drawn reasonable inferences based on substantial evidence.” It is doubtful that the Supreme Court will be convinced by these arguments.

In conclusion, it is very unlikely, in spite of the changes ahead in the composition of the Supreme Court, that violent video games will no longer be protected as speech. Instead, parent warnings and voluntary rating systems will probably continue to be employed to protect minors from ill effects of violent games.

June 28, 2010

YouTube Wins Landmark Copyright Case

By Barry Skidelsky, Esq.

In a 30 page decision dated June 23, 2010 (Viacom et al v. You Tube et al, CV Civ. 2013), Judge Louis Stanton of the United States District Court in the Southern District of New York granted summary judgment sought by defendant Google-owed YouTube, dismissing before trial copyright infringement claims brought by plaintiff Viacom seeking more than $1 billion in damages in connection with video clips culled from the media giant’s cable channels such as Comedy Central and MTV.

The opinion and order focused on whether the defendants were entitled to so-called “safe harbor” protections found at 17 U.S.C. § 512(c) in the Digital Millennium Copyright Act (DMCA), which 12 year-old statute provides protection against copyright infringement claims brought against various types of on-line providers who qualify.

To qualify for this protection, the DMCA in part requires that service providers designate an agent to receive statutorily defined notices of alleged copyright infringement, as well as establish and follow certain notice and take-down policies. After a lengthy review of the DMCA’s legislative history, the court found that the safe-harbor did apply here.

A key issue involved whether the defendants had either actual knowledge or a form of constructive knowledge of copyright infringing activity or material, as specified in the statute. The court interpreted this to require “... knowledge of specific and identifiable infringements of particular individual items. Mere knowledge of prevalence of such activity or material is not enough.” The court went on to find that YouTube lacked the requisite specific knowledge that would disallow the safe harbor.

Reportedly, about 24 hours of new video is uploaded by users to YouTube every minute, which the court found YouTube had no obligation to affirmatively monitor or police for possible copyright infringement. That burden more properly lies with copyright holders. The court also noted that Viacom had spent several months compiling a list of 100,000 videos that it attached to the single takedown notice it sent YouTube in February of 2007; and, that by the next business day, YouTube had removed virtually all of them.

To some, the plaintiff’s case is seen as one of sour grapes, given that Viacom tried to buy YouTube but was out-bid by Google -- which successfully purchased the enormously popular video web-site in 2006 for $1.76 billion, likely motivated in part by the DMCA’s safe harbor provisions. To others, this case is seen as a victory for creative expression and maintenance of the internet as both an outlet for expression and a participatory medium.

Barry Skidelsky co-chairs EASL’s TV & Radio Committee. A former broadcaster and musician, Barry previously served as General Counsel to an Internet Service Provider where his work in part involved the DMCA safe-harbor issues raised in this case. Now in private practice, Barry offers a broad range of legal and business services to those involved directly and indirectly with traditional and new media, telecommunications, technology and entertainment. Contact: bskidelskly@mindspring.com or 212-832-4800.

June 30, 2010

More on Viacom v. YouTube: Another View

After reading Barry Skidelsky's description of the decision in Viacom v. YouTube, a case that will certainly be brought up on appeal, I thought it appropriate to make a few observations. In my view, the court, by requiring "item specific" knowledge in all circumstances before a service provider could be disqualified for protection of the DMCA safe harbor, ignored significant aspects of the statute's language, legislative history and important policy considerations. (Full disclosure - I currently represent a client adverse to YouTube and my firm represented one of the amici who submitted a brief in support of Viacom.)

For example, the statute, in listing certain conditions which a service provider must meet to enjoy the safe harbor does state that the provider must not have "actual knowledge" of infringing material. With respect to the other conditions, however, there is no such requirement of lack of "actual knowledge." Indeed, Sec 512(c)(1)(A)(ii) - the so called "red-flag" knowledge section - explicitly provides that "in the absence of such actual knowledge" the service provider must also "not [be] aware of facts or circumstances from which infringing activity is apparent." By reading the need for item specific knowledge into the red flag exception, the court essentially eviscerated the statute's distinction between red flag constructive knowledge and the actual knowledge applicable to the earlier provision. Given the court's reading, there is essentially no instance of red flag knowledge which would not also constitute actual knowledge.

Congress's intention in adopting the DMCA was not simply to shield service providers from the threat of unpredictable litigation, but also to control piracy on the Internet and to forge cooperation between content owners and service providers in preventing widespread infringement. DMCA did not simply set up a notice-and-takedown system, and I believe Judge Stanton's ruling virtually reduces the legislation to just that.

Most importantly, the decision puts an enormous burden on content owners, especially harmful to independent or individual copyright holders, to monitor vast Internet sites which, if they simply adopt a notice-and-takedown system, may operate even if - in Judge Stanton's words - such sites "not only were generally aware of, but welcomed, copyright-infringing material being placed on their website[s]." Moreover, as a practical matter, the decision will likely discourage the use of the kind of filtering technology several service providers - including YouTube - have begun to employ to respond to the needs of copyright owners. If "actual knowledge" of specific infringing items is the only disqualifier from the safe harbor, why would any service provider go to the expense and trouble of adopting a filtering system which is designed to acquire such knowledge? This is a serious danger which hopefully will be considered by the Second Circuit.

Paul LiCalsi co-chairs EASL's Litigation Committee. He is a partner at Mitchell Silberberg & Knupp LLP

August 15, 2010

Report on the ABA Forum on the Entertainment and Sports Industries –Part II: “Clash of the Titans: Viacom v. YouTube – Will Copyright Law Undo Goggle’s Internet Juggernaut?”

By Monica Pa

This panel was held on Friday, August 6, 2010 at the InterContinental Hotel in San Francisco.
The panel included Jennifer Golinveaux, Marc Greenberg, and Jennifer Seibly and was moderated by David Given.

This panel raised some unique points about this heavily discussed litigation, including several interesting background facts surrounding this case. Even before the litigation was filed, there was a fair amount of trash talk by Viacom. When YouTube debuted, Viacom issued negative press about YouTube’s business model. Viacom has a lock on the “youth-market” as far as cable TV content (it owns MTV, VH1, Comedy Central, and Nickelodeon). Billions of dollars every year are earned in licensing fees and advertising revenue from programs on these channels. Viacom was appropriately concerned about YouTube, given that a significant percent of the youth market was trending towards turning to the Internet for media consumption. Google purchased YouTube in 2006, one year after YouTube’s public launch, for 1.65 billion dollars (a tremendous price for a company that has never made a profit), and Viacom filed suit shortly thereafter in March 2007.

Viacom’s lawsuit claimed that YouTube and Google were guilty of massive copyright infringement. The initial reaction was that, given the results in Napster and Grokster, this should be a slam dunk case for copyright infringement. Viacom’s complaint anticipated many of the defenses that YouTube would raise under the DMCA, accused YouTube of willful copyright infringement (which allows for enhanced statutory damages), and sought preliminary and permanent injunctive relief.

At the close of discovery and summary judgment briefing, there were supposedly “smoking gun” documents leaked to the media. Notably, the first source of that leak was a former subsidiary of Viacom (CBS.com), which suggested that there was evidence adduced at discovery extremely detrimental to YouTube’s defenses, including documents showing the state of YouTube’s knowledge and encouragement of infringing activities.

Turning to the merits of the decision, Professor Marc Greenberg from Golden Gate University Law School pointed out that this case turned on the straight forward issue of how to interpret the safe harbor provision of the DMCA, which provides that the content owner must give notice to the ISP identifying where on the website the infringing materials is located, and then the ISP must investigate this claim and perhaps take it down. The district court’s decision carefully parsed the DMCA provisions and legislative history, focusing on the question of whether it was sufficient for the content creator to provide only general notice to the ISP of a problem.

The court held that general notice is not sufficient; instead, the DMCA requires the content owner to provide specific information about infringements of particular individual items. This is a burden shifting issue - who should, in the first instance, be required to identify infringing works and police infringement. The court makes clear that the DMCA places the burden on the copyright holder to identify the infringing activity.

The panel discussed the fact that the more significant issue, and what the appeal may hang on, is the availability of the statutory exception for a “representative list,” which provides that, if copyright owner can identify a representative class of infringing items, then the burden shifts to the ISP to take down similar instances of infringement. Specifically, the statute provides that “works” may be described representatively, so long as the content owner provides
“information reasonably sufficient to permit the service provider to locate the material.” The very purpose of this exception is to relieve copyright owners of the need to specifically identify each and every infringement. The court found that merely giving a representative sampling of infringing content undermines the DMCA’s general requirement for content owners to identify the location of the infringing material. But, this undermines the fact that the apparent purpose of the statutory exception is to shift the burden to the ISP. As such, the district court’s construction and application of the “representative list” exception may be Viacom’s strongest argument on appeal.

The panel also discussed the decision in UMG Recordings, Inc. v. Veoh Networks, Inc., 665 F. Supp.2d 1099 (C.D.Cal. 2009), with counsel for Veoh speaking on the panel. Veoh’s counsel pointed out that it is not easy for an ISP to identify what constitutes infringing content. For example, when a content owner says to take down unlawful copies of a music video, a broad sweep for videos containing a particular song may capture home videos with someone playing that song on the piano or kids dancing to that song. She argued that content owners are the ones in the best position to identify infringing content. You do not want ISPs guessing at what is infringing; this is not the case of “know it when you see it.”

She pointed out that in both UMG and Viacom, neither ISPs were ignoring infringement notices. As soon as they received a DMCA notice, they immediately took the infringing materials down. For example, when Viacom sent more than a hundred thousand DMCA infringement notices to YouTube on the eve of litigation, by the next business day, the majority of those allegedly infringing files had been taken down. She argued that this shows that the “take down” method actually works.

The panel also discussed the potential for a technological fix for these legal problems. Viacom argued that YouTube could have used filtering technology early on. Notably, Viacom’s infringement claim is predicated only on infringement occurring before YouTube enacted filtering technology. It’s unclear why Viacom would choose to limit liability for pre-filtering activity because the use of such technology is not relevant under the DMCA, which does not predicate the availability of safe harbor immunity on the use of filtering technology.

Early on, there was hash filtering software, which is a more precise but limited filtering system. It identifies any identical files on the system and disables them. But, all a user has to do to avoid this filter is to crop off one or two seconds at the end of the film clip. Veoh and YouTube employed more advanced and less precise “Audible Magic” fingerprinting filtering technology, which matches the “fingerprints” within a file with other files on the system. Thus, the file need not be identical to be captured by the filter. This is one of the most effective filtering software available right now.

These filtering fixes, however, are not without their issues. The EFF is vocal about over-filtering, especially since much non-infringing original content is being taken down without the ISP serving a DMCA counter-notice to the poster. Robust and broad filter technology takes away the opportunity to challenge a take down of allegedly infringing files, and also undermines the chance to consider fair use and other defenses.

As a final point, it bears observing that, when the DMCA was enacted in the late 90’s, there were no social networking sites (which is essentially how YouTube operates). It is extremely burdensome for content owners like Viacom, which generates thousands of hours of programming that results in thousands of infringing uploads on YouTube on a daily basis. The problem may be that legislation has not caught up with technological advances. The DMCA is just a poor fit to address user generated content on social networking sites. The 2d Circuit Court of Appeals may uphold this decision, or perhaps overturn the “representative sampling” holding, but the panel expects some language in the decision asking Congress to revisit the “take down” structure in the DMCA.

Report on the ABA Forum on the Entertainment and Sports Industries –Part I: “From Music, Film and Art to Motorcycles and Other Sports: Hot Issues and Disputes in Entertainment, Art and Sports Licensing Deals”

By Monica Pa

This panel was held on Friday, August 6, 2010 at the InterContinental Hotel in San Francisco.

The panel included Richard J. Idell, Idell & Seitel; Jessica Darraby, the Art Law Firm; Samuel Lew, Feldman Gale PA; Jann Moorhead; and Rob Rieders, Pixar Animations Studios. This blog entry only discusses Rob’s presentation, which I thought raised excellent points about entertainment licensing by a content creator.

Pixar has been involved in numerous award-winning animated movies, including Toy Story, Up, Cars, etc. Rob’s presentation provided practice tips for how to negotiate and work with content owners, licensors, creative executives and the marketing team in setting forth the parameters of the licensing agreements and the scope of permissible use for creative works.

He used the movie Toy Story as an example of various entertainment licensing issues that come up in a movie. Toy Story licensed a tremendous number of characters (e.g., Ken and Barbie, Mr. Potato Head, Slinky the dog, lots of Fisher Price toys, etc.). When you are licensing a character, you want to consider all the artistic interpretations of the licensed elements and potential changes to the brand identity from these interpretations. For example, if you are licensing Mr. Potato Head, you want to think about what happens when a toy becomes a “living character,” animated with a voice, personality and 3D design. Similarly, if you are licensing a historic character like Kasper the Ghost, and the licensee intends to update this character, are these updates going to be appropriate for the character? Will it be positive for the brand and/or the overall line of business?

For example the movie Cars animated several iconic cars and gave them distinct personalities. Pixar depicted the 1960 VW Bus as an old hippie van narrated by George Carlin. The 1959 Chevrolet Impala was updated as a snazzy slick Hispanic car narrated by Cheech Marin. In Toy Story, Barbie and Ken were primary characters. Pixar was unsure whether Mattel would be comfortable with the depiction of Ken as a fashionista metrosexual. Barbie, on the other hand, was depicted as very intelligent, which Mattel liked. Similarly, Mr. Potato Head is an important brand for Hasbro (it's the company's Mickey Mouse), so it is protective of this character. In Toy Story, Mr. Potato Head was depicted as a folksy character narrated by Don Rickles. Pixar queried whether Hasbro would be comfortable with the fact that Mrs. Potato Head was depicted walking around for half the film without an eye. Notably, Mr. Potato Head was depicted with a bowler hat and mustache, which was not original to the toy. By doing this, Pixar added to the Mr. Potato Head character, thereby creating new intellectual property that Pixar now has some ownership interest.

In entertainment licensing, you want to continually consult with the licensor along the way. Even if you have a broad license, you do not want to have the licensor unhappy with the resulting product or be surprised about how its character was depicted. Once a film is made (which can take up to five years), it is extremely difficult and expensive to extract elements from the animated work if a dispute arises.

In licensing a character or toy, you’ll also want to consider unexpected uses of the licensed element. For example, Pixar created a Mr. Tortilla Head (which took Mr. Potato Head’s features and put it on a tortilla because at one point the toys needed to slide under a closed door.) Make sure the license provides for whether the elements of the intellectual property can be disembodied and whether it governs the “whole” work. Remember, people love mash ups.
In seeking to obtain a license for a character, as a preliminary consideration, analyze whether a license is even obtainable given the intended use. For example, in the current Toy Story, the nemesis was an evil teddy bear. There is no famous teddy bear brand (such as Paddington Bear) that would be willing to license their character for this use because this would be so detrimental to the brand. Accordingly, Pixar created its own teddy bear character that is pink, bitter and walks with a cane. Indeed, it’s sometimes better to create your own content rather than operate under a restrictive license where the licensor is uncomfortable with the intended use.

However, if you are going to license a character as a nemesis, e.g., a “Bad Guy”, make sure you fully and accurately disclose your intended use because, again, you do not want the licensor to be unhappy later. Put a full disclosure in writing setting forth the intended use (e.g., this character is going to be depicted as a homicidal maniac). Regardless of how the character is going to be used, the licensee should never agree to a “positive light” provision, which provides that the character will be portrayed positively; at most, agree to a “neutral light” provision. Also pay attention to the precatory language in the agreement, and be careful about boiler-plate provisions, including provisions for injunctive relief, venue, choice of law, and publicity rights the content creator should control the publicity of the film and not the licensor).
A content creator also wants to avoid giving the licensor script approval or final product approval. This, however, depends on the bargaining power of the respective parties, and on the reputation of the content creator. Pixar does not give story approvals, but they have good relationships with their licensors. They work closely with those companies to keep people on board all along the way. With smaller content creators, a licensor may want to be more careful and protective of their brand. In these instances, the licensor may want to push for some level of script approval.

Rob pointed out the challenges that arise when the creative team insists that an element is a “must have.” This results in the loss of negotiation leverage (e.g., the licensor know that you need them more than they need you). If the content creator has an unequal bargaining position (desperation can be obvious), the resulting license will not only be more expensive, it can be limited in the scope of granted rights, and other provisions (e.g., the representations and warranties, indemnification) may be compromised. The in-house lawyer should be willing to push back on the creative team. Try exploring available alternatives with them, such as creating a new character instead.

Another practice point is to make sure that the in-house lawyer is consistent with licensing methods and practices. If the company has a best practices policy, these should be consistently followed. For example, if Pixar is licensing several characters from various toy companies, all of the companies should be treated fairly and subject to similar deal terms. For example, do not give one company script approval when no other company go this and/or there is a company practice against this. Try not to make exceptions, even if the licensed elements is a “must have.” Bear in mind that the licensing community is tight knit and people talk.
In drafting, make sure the license contains contingent obligations. Obligations for payment and screen credit should be contingent on actual use. Without this provision, if the product or character does not actually appear in the film, there is a chance that the content creator will still need to pay the licensor.

License agreements should also contain certain non-contingent obligations, such as a strict confidentiality clause. If the creator discloses preliminary drafts of its film and marketing campaign with its licensing partners, this needs to remain confidential. Another non-contingent obligation should be that the creator reserves the right to use or not use any licensed element. The content creator wants to make sure that no one is shoving their product into a film or marketing campaign.

Finally, Rob pointed out that, in entering into a license, the content creator should assume success; meaning, the film is going to have sequels, toys, books, games, theme parks, etc. For example, there is a “Cars Land” theme park now based on the Cars movie. Try not to give away toy merchandising rights, book rights, and other derivative rights. The creative team may not think this far ahead and, if this is a “must have,” may be willing to forgo these rights in order to get the deal done.

August 24, 2010

Update in Fairey v. AP (Obama Hope Poster Case)

By Joel L. Hecker

This copyright infringement proceeding in the U.S. District Court for the Southern District of New York case became a little simpler on August 20, 2010, when the parties filed a stipulation with the court dismissing AP photographer Mannie Garcia from the case. As you may recall, Garcia was the photographer who took the photograph which was used as the basis for Shepard Fairey's poster. Although Fairey initially claimed that he relied upon a different photo, he later recanted, admitting that he had lied, thereby removing the question of which photo was copied.

Garcia dropped his claim that he owns the copyright to the photo and AP dropped its counterclaim against him. This is not surprising since the documentary evidence filed in the case appeared to clearly establish that the copyright did in fact belong to AP.

Judge Hellerstein, who has in the past pushed for a resolution to the case, has now scheduled what he anticipates to be a three week trial for March 21, 2011, at which time the selection of an eight person jury will commence.

Joel L. Hecker, Of Counsel to Russo & Burke, 600 Third Avenue, New York, NY 10016, practices in every aspect of photography and visual arts law, including copyright, licensing, publishing, contracts, privacy rights, and other intellectual property issues. He can be reached at (212) 557-9600, website www.RussoandBurke.com, or via email: HeckerEsq@aol.com.

September 1, 2010

New York's Film Tax Credit in the 2010 Legislature

By Bennett Liebman

In the course of final passage of the State budget, the State legislature, followed by gubernatorial approval, passed a significant extension and expansion of New York's existing film tax credit. The 30% film production tax credit was extended for five additional years, and it was funded at the rate of $420 million per year for this five year period.(1)

Additionally, the legislature added a standalone credit for productions that do their post production in New York State. Eligible productions that complete 75 percent of their post production in New York can now apply for a 10% credit for the post production work done in NY.(2)

The legislation allocates additional $420 million in each of 2010, 2011, 2012, 2013, and 2014 and defines this as an "additional pool" for those years. Previously, the legislature had allocated $85 million in 2010, $90 million in 2011 and 2012, and $110 million in 2013 for the film credit.(3) In 2009, the legislature allocated an additional $350 million for the film credit for that year (4) on top of $75 million that had been previously allocated.(5)

New York State is among numerous states that have provided tax incentives to the film and TV industries. According to the nonpartisan Tax Foundation, 44 states plus the District of Columbia and Puerto Rico offered significant movie production incentives in 2009, up from five states in 2002.(6) 28 of these states offered tax credits. In the Unites States, the film tax credit concept started in Louisiana which in 1992 passed legislation for tax credits for investment losses for films which contained substantial Louisiana content.(7) The initial Louisiana experiment did not spur much added economic activity. Minnesota similarly enacted a film credit in 1997, (8) but by 2002, there were only four states in the nation that had film incentives. New Mexico (9) and Louisiana,(10) however, changed the entire ballgame in 2002 by expanding the monetary value of the film tax credits significantly. The 2002 Louisiana legislation included "a series of incentives designed to revitalize the state's movie business, which had declined in part because of a nationwide migration to Canada, where producers enjoy generous incentives and a favorable currency exchange rate."(11)

New York State has one of the larger film production industries in the United States. "Sources generally conclude that the states of California, New York, and New Mexico receive the most economic impact (in that order.)"(12) The Motion Picture Association in 2006 estimated a $1.5 billion economic effect for the film industry in New York.(13) The New York Governor's Office for Motion Picture and Television Development states that in 2009 the film production credit led to $1.88 billion in direct production spending.(14)

New York started its film production credit in 2004 with the aggregate amount of annual tax credits capped at $25 million (15) It was expanded in 2006 to increase the cap to $60 million.(16) It was further expanded in 2008 and 2009 to increase the cap, and with the 2010 legislation, it has reached its highest levels of State support.

The New York 30% credit applies only to below the line film expenses. According to the Governor's Office for Motion Picture and Television Development, below the line film expenses "mean hard costs of production including the salaries of crew and extras as well as equipment and facility rental, lab costs, construction materials, props, wardrobe, locations, editing and catering, etc. Typically, BTL represents 65 percent of the average budget."(17) Thus, the 30% credit would typically provide a benefit that approximates "18 percent of a project's total budget."(18)

Besides the additional $2.1 billion in funding, the 2010 legislation placed some qualifications on claiming the credit. The legislation specifies a time frame which will determine the tax year for which the credit can be claimed. It requires that at least 10% of the principal shooting days be spent at a qualified New York film production facility. This 10% requirement is waived for "qualified independent film production companies" which are smaller entities defined as entities "principally engaged in the production of a qualified film with a maximum budget of fifteen million dollars, and (ii) controls the qualified film during production, and (iii) either is not a publicly traded entity, or no more than five percent of the beneficial ownership of which is owned, directly or indirectly, by a publicly traded entity".(19)

The legislation requires that the completed DVD release of the production either contain an end credit acknowledging New York State support of the production or contain a New York promotional video approved by the governor's office of motion picture and television development. The production must also "certify that it will purchase taxable tangible property and services, defined as qualified production costs" only from companies registered to collect sales tax in New York.(20)

Postproduction costs of a qualified production will only be eligible for the general film credit where "the post production costs paid or incurred that is attributable to the use of tangible property or the performance of services in New York in the production of such qualified film equals or exceeds seventy-five percent of the total post production costs spent within and without New York in the production of such qualified film."(21)

The 2010 legislation also provided a separate credit that would cover 10% of work at a post production facility. This would cover works not eligible for the general 30% film production tax credit. It would cover works only where the costs at the New York post production facility met or exceeded "seventy-five percent of the total post production costs paid or incurred in the post production of the qualified film at any post production facility."(22)

$7 million is allocated annually for the post production tax credit. A separate chapter amendment makes clear that this $7 million allotment is part of and not in addition to the overall $420 million annual allocation.(23) The chapter amendment provides "that the post production tax credit will be allocated $7 million annually from the $420 million pool of available tax credits. Unallocated post-production tax credits may be made available for the Empire film production credit upon the exhaustion of the aggregate amount of film credits."(24)

In an especially tight budget year, there was significant legislative support for the film credit in New York. Governor Paterson's initial budget proposed the $2.1 billion in additional funds for the credit, and the only action taken by the legislature to in any way alter this funding was to use $35 million of the $2.1 billion allocation to establish the post production credit.

There was little substantive discussion given to curtailing or suspending the film credit. There were few questions raised about the overall merit of the program. While the Governor's Office for Motion Picture and Television Development maintains that the funding is necessary to make New York competitive with states such as Connecticut Michigan and Massachusetts that have more generous film credits, (25) some studies have questioned the overall value of the film credit.

The Tax Foundation has stated, "While broad-based tax competition often benefits consumers and spurs economic growth and development, industry-specific tax competition transfers wealth from the many to the few. Movie production incentives are costly and fail to live up to their promises."(26)

"A 2005 study from the Louisiana Legislative Fiscal Office found that the state could expect to recoup 16 percent to 18 percent of the tax revenue it spends on the film incentive program. This means Louisiana--often held up as the standard-bearer for successful film incentive programs--loses about 83 cents for every dollar it spends on movie production incentives."(27) A Pennsylvania legislative study found some limited justification for its film credit. The report stated, "While there is a net fiscal loss when comparing the net present cost of the Film Tax Credit program ($58.2 million) to the taxes generated by productions directly receiving tax credits ($17.9 million), there is a net fiscal gain to the Commonwealth of $4.5 million when considering all of the revenues generated by the entire industry. While some of this activity would occur without the benefit of the FTC, a significant proportion of this activity would be at risk without such a tax credit program."(28)

This year, Iowa, Kansas, and New Jersey terminated or temporarily suspended their film tax credit program, the first states in the nation to do so.(29) The Iowa suspension was largely due to corruption found in the film office,(30) and the New Jersey suspension, which was based on budgetary concerns, has been harshly criticized by officials in Bergen County which has often been the site of Law& Order SVU episodes.(31)

Nonetheless, a serious review of the New York film credit will not likely occur in 2010.

1Ch. 57, Part Q, L. 2010.
2Id. See Tax Law §§31, 210.41,and 606.(qq).
3 Ch. 57, L. 2008.
4 Ch. 57, L. 2009.
5See note 3 supra.
6 Tax Foundation, "Study: Film Tax Credits, Production Incentives Fail to Spur Economic Growth," January 14, 2010, http://taxfoundation.org/research/show/25707.html.
7 Louisiana Act 894 (H.B. 252) (1992).
8 Tax Foundation, "Movie Production Incentives: Blockbuster Support for Lackluster Policy," January 2010; The Hollywood Reporter ,June 25, 1997.
9 2002 N.M. ALS 36.
10 2002 La. ACT 6.
112002 La. ACT 6; La. R.S. 47:6007; Stewart Yerton, "Counting on Film Credits," New Orleans Times Picayune, May 11, 2003.
12 Michal H. Salima, "State Film Tax Incentives and the Related Potpourri of Federal Income Tax and Tax Accounting Considerations," 62 The Tax Lawyer 1085 Summer, 2009.
13Motion Picture Association of America, "The Economic Impact of the Motion Picture and Television Production Industry in the United States," 13-14 (2006), http://www.mpaa.org/press_releases/mpa%20us%20economic%20impact%20report_final.pdf.
14 Report on the Empire State Film Production Tax Credit, August 2010, http://www.tax.state.ny.us/pdf/stats/policy_special/film_production_credit/report_on_the_empire_state_film_production_credit_august_2010.pdf .
15Ch. 60, L. 2004.
16Ch. 62, L. 2006.
17 See note 14 supra at p. 24.
18 Id. Besides the state film tax credit, new York City provides a 5% credit applied to the applicant's New York City tax liability. See Tax Law, §1201-a.(b).
19 Tax Law, §24.(b)(7).
20Tax Law §24.(a)(4).
21 Tax Law §24.(b)(1).
22 Tax Law §31.
23 Ch. 312, L. 2010.
24 New York State Assembly Memorandum in Support of Legislation, A. 11678.
25 See note 14 supra at 24.
26See note 8 at 16. See also Mark Sanchez, "Tax Foundation Report Hits Film Incentives by States," West Michigan Business Review, January 14, 2010 http://www.mlive.com/business/west-michigan/index.ssf/2010/01/tax_foundation_report_hits_fil.html.
27Tax Foundation Commentary, "Michigan Should Stop Red-Carpet Tax Treatment of Film Industry," May 4, 2010 http://www.taxfoundation.org/research/show/26275.html.
28 Pennsylvania's Film Production Tax Credit and Industry Analysis, Legislative Budget and Finance Committee May 2009, Pg. 5 http://lbfc.legis.state.pa.us/reports/2009/35.PDF.
29 Tax Foundation, "A Review of 2010's Changes in State Tax Policy, "August 23, 2010. http://www.taxfoundation.org/research/show/26645.html.
30Associated Press, "Iowa AG Files Charges over Film Tax Credits," February 8, 2010 http://wcco.com/local/film.tax.credits.2.1480422.html. Corruption issues have also arisen in Louisiana. See "Film Tax-Credit Scam That Ensnared Dozens With Ties To New Orleans Saints Leads to Guilty Plea," New Orleans Times Picayune, May 13, 2010, http://www.nola.com/crime/index.ssf/2010/05/film_tax-credit_scam_that_ensn.html; "Editorial: Lights, Camera, Corruption," New Orleans Times Picayune, August 20, 2007, http://www.nola.com/news/t-p/editorials/index.ssf?/base/news-4/1187589162244190.xml&coll=1.
31"Freeholders Call for Restoration of Tax Credit for NJ Filmmakers," South Bergenite, August 26, 2010, http://www.northjersey.com/arts_entertainment/101535368_Locals_could_lose_big_on_area_filming_loss.html; "Law & Order: SVU Moves Production," Philadelphia Business Journal, July 30, 2010, HTTP://WWW.BIZJOURNALS.COM/PHILADELPHIA/BLOGS/STIMULUS_TRACKER/2010/07/LAW_ORDER_SVU_MOVES_PRODUCTION.HTML.


September 29, 2010

Second Circuit Confirms Digital File Download is Not a Public Performance

By Joel L. Hecker
HeckerEsq.com

The United States Court of Appeals for the Second Circuit has just issued its decision, dated September 28, 2010, affirming the district court ruling that a download of a digital file containing a musical work does not constitute a public performance of that work under the U.S. Copyright Act. However, the appellate court vacated the district court's assessment of fees for a blanket ASCAP license and remanded it for further proceedings. The decision can be found at US v. American Society of Composers, Authors and Publishers, decided September 28, 2010, docket number 09-0539-CV.

Digital File Downloads

The first issue before the court on appeal was whether a download of a digital file containing a musical work constitutes a public performance of that work. It was not disputed that playing the music after it had been downloaded is a public performance, since the downloading of the files actually created copies of the musical work. Therefore, the copyright owners must be compensated for these downloads. However, the case involved the public performance right, which is a separate and distinct copyright right.

The court first turned to Section 101 of the Copyright Act, which defines "performance" to mean to "recite", "render", "play", "dance", or "act it". The court stated that a download is plainly neither a "dance nor an act", and went on to determine whether the download falls within the meaning of the terms "recite", "render", or "play".

The court had no difficulty determining that the ordinary sense of these words entail what is called contemporaneous perceptibility. That is, a "recital" is a performance before an audience and a performance, as defined in the audio-visual context of Section 101, requires such contemporaneous perceptibility.

The court also dismissed ASCAP's interpretation of the definition of "publicly", holding that "publicly" simply defines the circumstances under which a performance will be considered public and does not define the meaning of "performance".

In further support of its decision, the court juxtaposed the parties' agreement that stream transmissions constitute public performances because streaming entails a playing of the song that is perceived simultaneously with the transmission. In contrast, said the court, downloads do not immediately produce sound. That only occurs after a file has been downloaded and played back. Accordingly, the court concluded that transmittal without a performance does not constitute a "public performance" under the Copyright Act.

Fee Determination for Using the ASCAP Repertory

The district court had determined royalty rates for blanket licensing fees for the uses involved in the case. The Second Circuit found that the district court did not adequately support the reasonableness of its methods or royalty rate applied. Accordingly it remanded the case to the district court to redetermine reasonable fees for the licenses in light of the guidelines set forth in the opinion. A discussion of those guidelines is too involved for this blog and the reader is referred to the opinion itself.

Joel L. Hecker, Of Counsel to Russo & Burke, 600 Third Avenue, New York, NY 10016, practices in every aspect of photography and visual arts law, including copyright, licensing, publishing, contracts, privacy rights, and other intellectual property issues. He can be reached at (212) 557-9600, website www.heckeresq.com, or via email: HeckerEsq@aol.com.

October 13, 2010

The 5th Annual Entertainment Business Law MCLE Seminar

"How To Take It With You"

One-Day Event Offers 6 MCLE Credits for Attorneys

Presented by the CMJ Music Marathon in Association with the New York State Bar Association Entertainment Arts & Sports Law Section

The 5th Annual Entertainment Business Law Seminar at CMJ Music Marathon & Film Festival 2010 in New York City has announced its complete panel schedule and participants including keynote speaker, President of Lava Records Jason Flom.

The Mandatory Continuing Legal Education (MCLE) accredited one-day event titled “How to Take it With You” will be held on Friday, October 22, 2010 at New York University’s Helen and Martin Kimmel Center, in the Richard L. Rosenthal Pavilion. Leaders at the center of the entertainment industry will discuss how legal practitioners can best protect their clients’ creative property in the digital age. The seminar is presented by CMJ Music Marathon & Film Festival in association with the New York State Bar Association Entertainment Arts & Sports Law Section (EASL).


Program panels for the law seminar include:

Today Manhattan, Tomorrow The World - How U.S. entertainment content providers can succeed in foreign markets.

Compensation is the Sincerest Form of Flattery - Exploring the latest developments in likeness & publicity rights.

The End is Near: What You Need to Know About Copyright Terminations - Discussing key issues in copyright terminations including who is eligible and what is dissolvable as well as termination impacts and gray areas.

How to Avoid the FRPR Blues: Ethical Issues in Music, Film & Entertainment Law - Exploring ethics issues that arise when lawyers assume non-traditional legal roles or take on multiple roles while representing entertainment clients.

Rights, Restrictions & Compatibility: The Challenges of Mobile TV - Addressing issues facing lawyers negotiating distribution deals for mobile content including what is “mobile” versus “Internet.”

The Changing Landscape of Film Distribution: A Digital Vision - Examining new partnerships between film festivals and digital platforms to increase the accessibility and visibility of independent films.

The Kid Stays in the Picture: Agreements with Minors - Investigating the rules and risks of contracting with minors including tips on the best approach to dealing with them.
How to Legally Make an App for That - Looking at dealmaking issues in this new media stream including licensing and content use.

Lawyers attending the seminar will receive six (6) New York State MCLE credits, consisting of four (4) in Practice Management, one (1) in Skills and one (1) in Ethics, plus breakfast, lunch and refreshments.

For registration and complete line-up of panelists please visit http://cmj2010.com/daytime-events/cle-legal-program/ or www.nysba.org/EASLCMJ2010.

NOTE: An additional amount of fifty dollars ($50) will be added to the registration fee if you register after 5:00 p.m. on Wednesday, October 13 so REGISTER TODAY!!

USING SOCIAL NETWORKING TO BUILD YOUR BRAND

The Copyright Society of the U.S.A. is pleased to invite you to a program on Monday, November 8, 2010, entitled:

USING SOCIAL NETWORKING TO BUILD YOUR BRAND

Why has social media become essential to marketing and brand development? It’s because Facebook, LinkedIn, Twitter, blogs and other platforms are powerful devices to engage with customers and clients, build relationships and monitor the marketplace. But the learning curve to master and exploit these tools is steep.

The Copyright Society of the U.S.A. has assembled a distinguished panel of professionals. They will help you understand, navigate, employ and not misuse these new technologies to enhance your business and brand. Please join us.

Location and Date of the Program:

November 8, 2010 at Hit Entertainment
230 Park Avenue South, 13th Floor, NYC (Entrance on 19th Street)

Time:

6:00 p.m. -- 6:30 p.m. Registration, networking and light refreshments
6:30 p.m. -- 8:15 p.m. Program
There is no charge to attend this program.

To Register, click on http://csusanmi2010.eventbrite.com/ or please use the attached form.
Registration deadline is November 3, 2010.

Panelists:

Andrew Berger will outline some simple steps you may take to avoid the legal risks arising from your use of social media tools and will also help you create a social media policy to protect your company should your employees misuse these tools.

Andrew Berger is a copyright/trademark lawyer at the New York firm of Tannenbaum Helpern Syracuse & Hirschtritt. He authors a blog on IP issues at www.ipinbrief.com, speaks about them frequently and is an active Twitter user.

Julie Haas Brophy will discuss how her use of Facebook grew her unorthodox company into an international phenomenon that spurred a book publishing deal and other projects.
Julie Haas Brophy earned a BA from Columbia University and is a mother of two young children. She created S**tMyKidsRuined.com and****MyPetsRuined.com, two sites that have attracted hundreds of thousands of visitors from all over the world in the past year. Her book, **** My Kids Ruined - An A-Z Celebration of Kid Destruction will be released on November 23rd. Julie and her brother recently co-founded Sibling Thrivelry, LLC, a small media company, and together they’ve launched a number of other humor websites.

Yao-Hui Huang will give a general overview of social media platforms and also focus on search engine optimization, blogger outreach, affiliate marketing and ecommerce.

Yao-Hui Huang, with extensive experience in business, marketing and technology, functions at the heart of entrepreneurship in New York. She founded the Hatchery, http://www.hatchery.vc/, in 2007, a venture collaboration forum that assists emerging companies to grow their businesses. The Hatchery also sponsors Hatch Match, an annual event that brings together entrepreneurs, investors, and other parties interested in growing and being part of New York’s vibrant internet/web/information economy. Further, Yao for the last six years has served as CEO of GigaPixel Creative, an award-winning New York-based strategic design and development agency.

Mistina Picciano will discuss how you can blog and use Twitter to brand and market your business to a global audience.

When a college professor convinced Mistina that good writing could actually pay, and after spending several years as a brand manager in the corporate world, Mistina founded Market It Write, http://marketitwrite.com/blog/I, a writing and marketing firm. She is an expert in corporate communications with a large Twitter following and an active blog.

Elissa D. Hecker will moderate the program.

Elissa D. Hecker is an attorney who practices in the entertainment and business fields, specializing in copyright, trademark and business law. In addition to her private practice, Elissa edited the books Entertainment Litigation - Know the Issues and Avoid the Courtroom and Counseling Content Providers in the Digital Age. Elissa is also the Editor of the Entertainment, Arts and Sports Law (EASL) Blog, http://nysbar.com/blogs/EASL/. Her website is EHECKERESQ.com.

The Copyright Society of the U.S.A. is the premier organization in the U.S. serving the copyright community of business people, lawyers in private practice and in-house, law professors and law students who share a common interest in copyright and related intellectual property rights. A not-for-profit corporation founded in 1953, the Society works to advance the study and understanding of copyright law and related rights, the scope of rights in literature, music, art, theater, motion picture, television, computer software, architecture, and other works of authorship, and their distribution via both traditional and new media.

The Copyright Society of the USA
352 Seventh Avenue Suite 739
New York NY 10001
P: 212- 354-6401
F: 212-354-2847
W: www.csusa.org
E: amy@csusa.org

October 19, 2010

Dora Explores a Minor Platform

By Diane Krausz and Jennifer Bellusci

Chapter Nine "Contracting with Minors", in the recently published Counseling Content Providers in the Digital Age, describes and compares the approval procedures required by New York and California courts for agreements signed by minor performers. Glenn Litwak and I, as the co-writers of the Chapter, conclude as follows: "...California offers a more streamlined and less expensive process than that required under the laws of the State of New York." For this reason, apparently, many New York based production companies have decided not to petition for court approval when dealing with agreements for minor performers with, until now, very little publicly reported consequences.

On October 7, 2010, it was reported that a complaint had been filed by Caitlin Sanchez, performing as the voice of "Dora the Explorer", against MTV Networks, et al. Ms. Sanchez, who is now 14 years old, lives in New Jersey. Her services for Dora were performed in New York City pursuant to an agreement with Uptown Productions, Inc., a production entity of Nickelodeon. The complaint claims that Ms. Sanchez was "swindled", "deceived" and signed a contract with "convoluted, vague, incomplete and misrepresented terms." It also claims that both MTVN (Nickelodeon's parent company) and CESD, Ms. Sanchez's agent, failed to pay Ms. Sanchez appropriate compensation for her services in connection with the program, including residuals, merchandise products, and recordings. The complaint does not contain even one citation for a law, statute or case in support of its position. More interestingly, it fails to allege or even mention, what if true, is the most important fact: Neither of the contracts signed by Ms. Sanchez was submitted to a court and was not court approved pursuant to New York State Arts and Cultural Affairs Law 35.03, and therefore, Ms. Sanchez, a minor, has the right to disaffirm and void the contracts as a matter of law.

A minor disaffirming a production, agent, or manager contract is nothing new. This is precisely why Section 35.03 was enacted, to provide a mechanism similar to the California procedure where a production company/employer could have a minor's employment contract approved and rendered not able to be disaffirmed. In New York, this procedure is neither required nor used as often as in California, where its frequent application and use is limited mostly to certain counties in the Los Angeles area. Further, the extent of effort and time required to file a petition either in New York Supreme or Surrogates' Court is often a significant deterrent to a company's desire to protect the enforceability of its minors' contracts. In many instances, a minor’s reputation and employability are factors in that decision, i.e., who wants to hire someone, even a minor, who would void an agreement after the fact? So it is interesting that the Sanchez case was brought at all, and that when it was in fact commenced, the claims contained no grounds that involved her status as a minor, but rather, included claims that could apply to any actress of majority that had been allegedly treated improperly in contractual dealings.

There is virtually no case law in New York that deals with what should occur where a minor disaffirms on a completed services agreement that has not been approved by the court. The law has been upheld to allow a manager or agent to collect the value of his or her respective commission for the work done to date, on a quantum meruit theory (see Scott Eden Mgmt vs. Kavovit (149 Misc 2d.262, 563 N.Y. S. 2d. 1001 (Sup Ct. Westchester Co. 1990) and Rice v Butler (160 N.Y. 578)), which held that a talent manager or an agent must be paid for commissions actually earned, even if a contract was disaffirmed.

In the case of Sanchez, it appears that with a non-court approved contract, provided that the producer does not remove the minor's services from the continued exploitation of the program, it is likely that the minor will be able to claim a greater amount of compensation, as well as a full accounting of "back-end" merchandising and other royalties given the subsequent huge success of the "Dora" franchise. This is, of course, provided that the complaint is re-pleaded in the future in accordance with the comments in this article.

November 1, 2010

Copyright Office Notice of Inquiry

By Barry Skidelsky

On October 29th the Copyright Office released a Notice of Inquiry (NOI), asking whether federal protection should be extended to sound recordings made prior to February 15, 1972 (when sound recordings were apparently first protected under federal law). The following link should take you to the NOI: http://www.copyright.gov/docs/sound/FRDocument-2010-4-pre1972-sr.pdf.

One of the many complicated issues raised by the NOI is how a change in the law could affect royalties paid by or otherwise impact webcasters, satellite radio and other digital music providers under the statutory license of Copyright Act section 114 (regarding digital transmissions of sound recordings) -- although many such providers have not excluded pre-1972 recordings from royalty payments based on any possible exception, as that possibility has not been widely publicized.

The comments filed in this proceeding will help inform the record that will be created in connection with the Copyright Office making a recommendation to Congress about any suggested changes in the law. Comments are due on December 20th, with replies 30 days later.

November 10, 2010

CMJ Entertainment Business Law Seminar – Afternoon Session

By Eva Dickerman

Rights, Restrictions & Compatibility: The Challenges of Mobile TV
Seth Metsch, Digital Counsel, Business & Legal Affairs, A&E Television Networks (Moderator); Jeffrey D. Neuburger, Partner, Proskauer Rose LLP; Shirin Malkani, Vice President, Legal & Business Affairs, National Basketball Association; Sharon E. Kopp, Assistant General Counsel, Business & Legal Affairs Verizon FiOS TV & V CAST Video; Salil Gandhi, Co-Founder, Crybaby Media

Due to the increasing capabilities of mobile devices, the cell phone has become the primary gadget for Americans. Television content providers are eager to take advantage of the unique opportunity to get their programming quite literally into the pockets of consumers. As they negotiate the deals that make mobile distribution of television programming possible, the panel members are shaping the law in this area. The panel discussed the obstacles and issues they face in making top shows and events available to our fingertips.

How Should Clients Be Advised As They Draw Up New Deals?

One of the primary issues is that it is difficult to define a mobile device. Is it just a device that fits into your pocket? How should the iPad be categorized? If mobile but not Internet rights are granted, can the content be hosted on an iPad? One of the greatest difficulties with mobile video distribution is its very newness – in previously written deals there may not have been mention of mobile distribution.

Neuberger noted that there are no clear definitions of the different kinds of mobile devices. As technology evolves, we have to ask whether those distinctions are even meaningful. Neuberger suggests that licensing should be articulated in terms of functionality. Agreements written in the past defined scope of rights in terms of the device, but now the scope of rights should be defined in terms of functionality. Gandhi, referring to his experience at Joost, noted that the focus should be on branding and functionality rather than screen size.

Going forward, when negotiating deals, distributors will want to secure all rights in all media.

There is also the possibility of longer term contracts to define the license based on external factors that will exist even in spite of technological change (i.e. target demographics.)

The Evolution of the Mobile Platform

Kopp noted that Vcast serves as an aggregator. She described the unique position of Verizon – it seeks to provide content to customers in any format that customers might want – so the company is simultaneously negotiating television, mobile and Internet rights. The goal is to give customers a uniform experience across screens.

Vcast is offered using carrier bandwidth. The service has some streaming and downloadable programs. From the perspective of delivery method, Vcast uses mobile bandwidth, and, vis-à-vis the discussion above, is clearly a mobile service. An app that uses WiFi, however, will be harder to describe as a purely mobile app.

The Sports Context

Malkani discussed some of the idiosyncrasies of delivering sports content on mobile devices. All leagues do not deal with rights in the same way – there are some national rights and some team rights, the latter of which serve internal markets. It is hard to know if the consumer can ever have a single, unified package in light of these different markets.

Malkani also noted that although mobile is a desirable new format, traditional television is still incredibly important for sports because fans want to see the action on the big screen. Furthermore, since sporting events are live, fans want to watch a game when it’s happening. Malkani explained a little bit about NBA’s developing mobile strategy. The app Gametime allows users to get scores, stats, and video highlights. There is also a ‘league pass’ that is offered through the Gametime app. Although previously the NBA had separate apps for the League and the team, now users will get league updates or team versions within Gametime – in other words the strategy shifted to allow for a single streamlined app, rather than a set of disaggregated apps. Verizon also has an NFL app that has been quite successful – Kopp credited the ‘front and center’ branding of the app – when a Verizon user looks through the icons on a phone’s display screen, the NFL symbol is clearly visible.

How Important Is the Screen Size?

Several of the panelists noted that older deals articulated the distinctions between devices in terms of screen size. Neuberger suggested that screen size might not continue to be as relevant.

Indeed, the importance of the labels given to different devices is a shifting one. For example, in the past the terms “TV” or “television” were equivalent to broadcast television, but as time went on, the definitions came to include cable networks.

TV Remains a Driving Force…

However, the screen size issue does still matter to a certain extent. As the big cable networks pay content providers large license fees, the networks want to make sure that these agreements are still valuable to them by ensuring the uniqueness of the content that they are receiving.

Some of the Difficulties of Mobile Deals

As previously mentioned, there is an overarching issue of how to define mobile devices and how to determine the rights required to distribute programming via those devices. Some contracts limit the definition of mobile to ‘cellular technology’ – but what about the increasing reliance upon WiFi networks? What about the phone versus tablet distinction? In general, contracts are also more likely to grant broadband rights rather than mobile rights.

Another important question concerns how to deal with territory restrictions on content. The whole point of a mobile device is that its owner takes it with him or her wherever he or she may go. How can companies ensure that restricted content stays within authorized territories? Do there need to be authentication license-keys?

Malkani explained that when the NBA launched a mobile app, the vendor incorporated a geofiltering device to make sure that the streaming complied with the geographical blackouts mandated by the different cable companies. When Malkani herself used the mobile app, if she were to be in LA in the morning, then the corresponding blackouts in the California market would mean that certain content would be unavailable on her phone. If she were to return to NY later that day, then the corresponding blackouts in the NY market would also be reflected in the content available on her phone.

Several panelists noted that content providers will also want to insure that the video is captive within the device, and cannot easily be acquired within the mobile context but watched on different screens. In other words, providers do not necessarily want to grant users mobile access to content if these users will simply be hooking up their phones to their televisions, and watching the content through the latter rather than their mobile devices.

Talent and Mobile Content

Gandhi noted that talent is now going directly to consumers through apps. He noted that the advantage of straight-to-consumer delivery is the allowance of preserving the rights needed to build a brand. There is also the desire, in the attempts to build a brand, to try to maintain as many revenue streams as possible; one is doing oneself a disservice in the age of television everywhere. Distributors want to make content available to customers in any way, but talent may want to divvy up the rights.

Furthermore, there are important distinctions based on the device, since the expectation will be that consumers will pay for mobile uses but not on the Internet.

There is also the sense that it may be better for talent to use short-form content in the mobile context – consumers want to see new and specially produced content. The NBA too looks strategically for potential other content beyond the games. Vcast however is moving towards long-form programming.

Where Is the Business Model of Mobile Video Going?

Neuberger suggested that as there is increasing pressure on companies to collect revenue from all of their interactive applications, there may be an approaching end to free, meaningful content, and hence, more rigorous pay models will emerge.

The panelists agreed that social networking would make its way into the mobile app context. Since consumer engagement is the ultimate goal, having ‘check-ins’ as a way to make television more social may increase consumers engagement with the content that they are purchasing.

The Changing Landscape of Film Distribution: A Digital Vision
Marc Jacobson, Entertainment Attorney, Marc Jacobson, P.C. (Moderator); Betsy Rodgers, Vice President, Legal and Business Affairs, IFC Entertainment; Jessica Nickelsberg, Director of Legal and Business Affairs, Tribeca Enterprises; John Logigian, Attorney and Independent Film Consultant, Isil Bagdadi, Co-founder and President of Distribution, CAVU Pictures.

The panelists began the discussion by explaining their work within the film distribution industry, with a focus on new and emerging modes of distribution.

Betsy Rodgers explained IFC Entertainment’s "festival stunt” partnership with film festivals. IFC acquires films at festivals (such as Sundance and SXSW), or immediately prior to the festival’s start date. Then IFC releases the film on VoD concurrent with the festival. Since IFC already had an established relationship with the cable companies, this creative turn seemed to be a natural step. These partnerships require IFC to establish a legal relationship with the festivals, and IFC must gain licensing rights to the trademarks, branding and intellectual property of the festival. Rodgers said these partnerships are valuable to IFC as a distributor, because the buzz from the festival can help to get viewers excited about the films. This arrangement allows the distributor to capitalize on the value created at the festival. Furthermore, many of these films would not be able to reach audiences otherwise. It is also a cost-effective process, because prints are incredibly expensive to create.

However there are also some complications with festival stunts.

Time Constraints: In the case of the Sundance Film Festival, IFC might already have acquired some films before the festival has begun. In that case, the delivery materials might have been received from the filmmaker prior. The difficult situation is when IFC wants to license films that have not been acquired before the festival. By the time the IFC team discovers what films are in the festival, the delivery materials might already be due in order to ensure a concurrent release on the VoD platform. In this case, there needs to be an incredibly quick turnaround – in papering the agreement, making sure the films are fully cleared (which can be a challenge since often filmmakers will only have festival rights to music in their films), and in ensuring that the film is fully finished and can be encoded in time to make it onto the VoD platform.

Psychological Hurdles: Filmmakers often dream of having their films get wide releases in theatres. Since most big theatre chains will not take a film that has been previously released on VoD, accepting such a distribution ‘stunt’ for the filmmaker may mean giving up certain expectations. Furthermore, if the primary release of a film occurred on the VoD platform, the film might be disqualified from the big awards races.

Financial Hurdles: Producers need to read their agreements. Low budget films will often contain a provision that allows the use of SAG actors at a low rate. If the film is not given a theatrical release, however, there might be significant penalties.

Jessica Nickelsberg next explained the evolution of the Tribeca brand. From the flagship Tribeca Film Festival, Tribeca Enterprises has recently launched a new initiative, Tribeca Films, a distribution arm which underlying mission is to get independent films out to a wider audience. Tribeca Films distributes on a variety of platforms; in theaters, online, on DVD, and on demand.

Tribeca also has its own version of the festival stunt. During the 2010 festival, Tribeca Enterprises launched “Tribeca Film Festival Virtual,” a digital festival experience. For one week during the festival, viewers could (at the price of $45) go and watch eight feature films online (otherwise only available at the festival), at an encrypted site.

John Logigian focused on broader distribution trends within the industry. Traditionally it has been the ancillary markets (i.e., home distribution) that have been the big money earners. The profit margin is much greater in the home entertainment sphere than it is in the theaters. However, home entertainment is becoming less profitable for the studios. Now that delivery is digital, (whether digital streaming or downloading), there is no longer the ‘packaged goods’ element (i.e. selling of DVD’s at a retailer). Profit margin was much greater in the packaged goods market.

An upside of the digital revolution has been digital projection. Digital projection allows a reduction in the enormous cost of manufacturing and shipping of prints. Certainly there is a cost to convert to digital projection, but it is possible that companies will help theaters underwrite the costs of digital projection. Another notable development has been the spectacular growth of 3D.

Isil Bagdadi focused upon the growth of the DIY (do it yourself) movement in film. Her major concern was that filmmakers are losing ownership rights to their works by entering into certain agreements with distributors. Her concern with the festival relationships described above is that if festivals get into the distribution game, will there be favoritism in programming at the festivals themselves?

Bagdadi championed a ‘services deal’ agreement, in which a distributor gets a fee for providing the services of distribution, but does not get ownership rights. Bagdadi also suggested the possibility of self-distribution.

In response to Bagdadi, Logigian brought up some counterarguments to the benefits of the DIY approach. Although it looks great on paper to retain ownership rights, it is the distributors who have leverage in the ancillary marketplace – and most revenue comes from the ancillary marketplace rather than from the theatrical release.

The panel as a whole engaged in a discussion of the different types of financing arrangements for independent films. Investors will have different expectations and different risks depending on where their money is going. If investors are putting in money for marketing, then they will be the first individuals to be repaid. Investments in production, however, hold a different kind of risk profile.

The panel also discussed the option of bifurcating the investment (i.e., various parties investing money for production and marketing), which might allow the filmmaker to get a better deal. Logigian noted that the foreign pre-sales market (selling a film to distributors overseas before the film is made) has largely dried up except for the biggest-name films. The panel also briefly touched upon the value of getting a high net worth individual to put equity into a film if studio financing is not a possibility. Jacobson also mentioned the option of state tax credits as a means of filling gaps in the financing of a film, and providing early capital for a marketing or festival campaign.

How to (Legally) Make an App for That - Dealmaking in the Mobile Media and Gaming Arena
Kenneth N. Swezey, Esq., Managing Partner, Cowan DeBaets Abrahams & Sheppard, LLP (Moderator); Hayley Geftman, Esq., Vice President, Business and Legal Affairs, MTV Networks; Sam Howard-Spink, Clinical Assistant Professor of Music Business, NYU; Amy Lauren, Esq., Vice President, Digital Legal & Business Affairs, EMI; Stephen Sternschein, Esq., Founder, Heard Games; Artist Manager, Heard Games

Sam Howard-Spink began by discussing some sweeping trends. He noted that in the first half of 2010, between 2.6 and 2.9 billion dollars were spent on content (excluding consoles, controllers and other devices). Spink also noted the importance of the growing phenomenon of “in-app” purchasing; once a consumer is inside the app, the consumer makes a further purchase. Spink suggested that when a consumer has taken the effort to spend a few dollars to buy the app, the consumer is more likely to go spend more money on content within the app itself. Spink also noted the different ways that music can be used within app games: original compositions, the use of existing music licensed into the game, rhythm action games (i.e. Guitar Hero), and generative games (the user creates music in real time by using a set of protocols – although such games might pose greater licensing issues).

What Is the Best Business Model For An App?

Geftman noted that apps have had an increasing presence at MTV for the last few years. MTV has been involved in the apps world in different contexts: distribution of content to third party apps, creation of paid apps, free apps surrounding certain temporal awards, and ad-supported apps.

Sternschein noted that at Heard Games, apps are being built and designed to engage and monetize a particular brand. In other words, each app has a unique and specific approach on a band-by-band basis. Sternschein hopes for the growth of artist-based apps as a means to re-contextualize and repackage music in the digital environment. Apps may play a role in integrated marketing campaigns promoting artists.

Lauren noted that at BMI, apps are still a hybrid form. Certainly many apps are getting traction, and sometimes these apps are tied into the overall strategy of an album release.

Then the audience had some fun as Spink showed a few apps, including the Gorillaz app (BMI), Shinobi Ninja Attacks (Heard Games), and Bloom – a generative game. These apps are just a few examples of a new approach in the music industry. These games create a narrative framework, which is in turn tied to music and lyrics, and reward users for interacting with the content that is being promoted.

Licensing Issues:

a) Costs There are different costs associated with the development of apps depending on the level of involvement – if creating a highly customized app, the process might be quite expensive. There has to be a developer deal in place, in addition to due diligence review on all of the content going into the app. Geftman noted that there must be clear language about merchandising and marketing within app agreements, since apps generally will be tied to MTV’s content.

b) Artist Concerns v. Developer Concerns When working with a developer on an app, the primary concern of the artist will always be: what is the scope of the intellectual property rights being given away? Will use of the song be limited to one app? Developers, on the other hand, are trying to get as many rights as possible.

c) Licensing to Different Devices As previously discussed by the Mobile TV panelists, there is segmentation in the current licensing schemes – different rights are granted for mobile, television and Internet (and apps may be used in any of these contexts). Therefore rights owners must be very specific about the rights they are granting to developers.

It is possible that a ‘new creature’ might come about – that of the music game, in which music and coding is treated as a single creative gesture. Such an evolution of the app might be an alternative to the segmentation of rights.

App Developer Agreements

Geftman stressed that the developer agreement should stipulate that apps are being created as works for hire. The developer will own his or her own source code, but anything being built for the content provider, will remain the provider’s property. In general, the panelists concurred that there should be a flat fee, such that at the point of delivery the process is completed. BMI’s Amy Lauren noted that the app developer agreement has many similarities to a standard software development agreement.

There is also an understanding that terms of use and privacy terms need to be placed on the launch page, otherwise this information may be hard to fit into the app.

The Apple Deal

Although typically when dealing with Apple, content providers will serve as the retailers, in the context of apps, EMI or MTV may serve as the retailer. This arrangement shifts the risk from Apple, and is in some sense new terrain for record labels based on previous relationships with Apple. As a retailer, the content provider will face consumer issues, tax implications, and territorial issues. Although Apple has an end-user license agreement for retailers, this agreement may not address all of the issues relevant to the app. It can be difficult to renegotiate the terms of a developer agreement with Apple. Yet in the case of an independent entity (such as Heard Games), since there is less of a potential financial gain at stake, Apple may be more flexible with the types of marketing it allows.


November 25, 2010

Score: SAP – 0, Oracle – 1.3 Billion

By Andrea Ruth Grace Annechino

“Whatever money is, it's just a method of keeping score now. I mean, I certainly don't need more money.”
– Larry Ellison, CEO of Oracle Corporation

Larry Ellison may not need more money, but more he shall get - - loads more. By awarding Ellison’s Oracle Corporation $1.3 billion in damages from SAP, a federal jury set a new record for copyright infringement cases. The Oracle award easily takes the top spot, beating out the second by a factor of ten - - and the intellectual property in that case involved songs by The Material Girl, The King *and* The Godfather of Soul.

After SAP admitted liability, the only open question was how much it would pay for it. The jury was instructed to award Oracle actual damages in either the amount of the fair market value for the rights infringed or the amount of profits Oracle lost as a result of SAP’s swipe. Oracle fought for the former, claiming damages of up to $3 billion. SAP lobbied for the latter, aiming for $40 million, but the jury would have none of it - - according to the foreman, no jury members considered anything less than $500 million. Another juror explained: “It was the principle of the whole thing. If you take something from someone and use it, you have to pay.”

The view from SAP’s seat is bleak. The billion-topping award dwarfs the $160 million the company set aside for this litigation and constitutes one-third of their cash holding. Probably worse than the financial hit, though, is the potential impact of the reputation stain. SAP is now officially The Bad Guy, as well as the subject of a Department of Justice investigation that could raise the specter of criminal charges. This could make life rather difficult for its sales force when seeking new business or renewing existing contracts. The only glint of a PR bright spot for SAP is the chance that Oracle’s sharp tactics will reap a bit of sympathy for SAP. As for SAP’s legal options, the appeal process is available and the award may be reduced, although probably not by much.

One way or another, Mr. Ellison will be getting more.

November 30, 2010

Harper v. Maverick

By Barry Werbin

The news of the moment is that yesterday, Nov. 29., the U.S. Supreme Court denied cert. in the Harper v. Maverick case, which had raised the question of whether the Copyright Act's innocent infringer defense could apply to when a person downloads digital music files so as to further reduce the minimum statutory damages award below the $750 threshold per work infringed to as little as $200 under 504(c)(2). The Fifth Circuit had held that Section 402(d) foreclosed application of the innocent infringer defense because it provides that if a copyright notice "appears on a published phonorecord or phonorecords to which a defendant had access...then no weight shall be given to...a defendant's interposition of a defense based on innocent infringement in mitigation of actual or statutory damages."

Justice Alito, however, filed a dissent, which can be accessed here for anyone interested: www.supremecourt.gov/orders/courtorders/112910zor.pdf. He noted that Section 402(d) is limited to "phonorecords," which the Act defines as including only "material objects." He argues that this Section was adopted in 1988, long before the digital revolution, and a person who downloads a digital music file does not and cannot see any copyright notice. In such a case, he argues (as did the District Court that was reversed by the Fifth Circuit) that the defendant (here, 16 years old) should have the opportunity to establish that she was not aware of or did not have reason to believe she was engaging in illegal infringing activity. The Fifth Circuit interpreted 404(d) as only requiring that the original phonorecord display a copyright notice, and that an infringer could have ascertained the work was copyrighted. Justice Alito wrote that "The Fifth Circuit did not specify what sort of inquiry a person who downloads digital music files is required to make in order to preserve the §402(d) defense, but it may be that the court had in mind such things as research on the Internet or a visit to a local store in search of a compact disc containing the songs in question."

December 1, 2010

HarperCollins Publishers v. Gawker Media

By Barry Werbin

The HarperCollins case settled on Nov. 30 according to the latest news reports, after the court ordered Gawker last Saturday to remove 21 pages. "'In settling the case, Gawker has agreed to keep the posted material off its website and not to post the material again in the future,' HarperCollins spokeswoman Erin Crum said in a statement."

Please see the following link for more information: http://www.stuff.co.nz/entertainment/books/4405549/Gawker-com-settles-Sarah-Palin-book-dispute

January 10, 2011

J.K Rowling Succeeds in Copyright Infringement Case

By Barry Werbin

On Jan. 6, Judge Shira Scheindlin rejected a copyright suit brought by Paul Gregory Allen, as Trustee for the Estate of Adrian Jacobs, against Scholastic, alleging that J.K. Rowling's 4th Harry Potter novel, published in 2000, copied parts of a 1987 book about a character named Willy the Wizard, which was published in the UK in 1987. The court found that no reasonable trier of fact could find any substantial similarities between the works at a copyright level.

What is particularly interesting from an infringement litigation perspective is that the court, after reading the books and engaging in a "detailed examination of the works themselves," granted Scholastic's motion to dismiss under Rule 12(b)(6) at the outset of the case before any factual discovery record was developed. On this point, Judge Scheindlin noted that: "'When a court is called upon to consider whether the works are substantially similar, no discovery or fact-finding is typically necessary, because what is required is only a visual comparison of the works.' Thus, while the question of substantial similarity often presents a close issue of fact that must be resolved by a jury, district courts may determine non-infringement as a matter of law 'either because the similarity between two works concerns only non-copyrightable elements of the plaintiffs work, or because no reasonable jury, properly instructed, could find that the two works are substantially similar.'"

The court emphasized that the contrast between the "total concept and feel" of the two works - a test particularly appropriate given that the two works targeted children - was "so stark that any serious comparison of the two strains credulity." Just one example was the comparative lengths of the two works - 734 and 16 pages, respectively. Significant differences also were found in the works' "structure, mood, details and characterization" and other general similarities were expected under the scenes a faire doctrine.

UMG v. Augusto

By Barry Werbin

In another case testing the bounds of the first sale doctrine, on Jan. 4, 2011, the Ninth Circuit upheld a district court's decision that a record label's printing of a restrictive stamp on promotional CDs that the CDs could not be re-distributed did not create a license agreement, such that promotional CDs can be resold under the first sale doctrine without further permission from the record label. The decision in the case, UMG vs. Augusto, can be accessed here: http://www.ca9.uscourts.gov/datastore/opinions/2011/01/04/08-55998pdf.

The case was filed in 2007, when Universal Music Group (UMG) sued a California resident, Troy Augusto, who sold promotional CDs on eBay. Promotional CDs are given away by record labels to "music industry insiders" to provide publicity and exposure for upcoming commercial releases of new CDs. In 2008, a district court ruled against UMG on the ground that the promo CDs were gifts under federal law and that the terms under which the CDs were furnished were consistent with ownership, not a license. Augusto, who was not a music industry "insider," acquired promo CDs from music shops and online auctions, then resold them on eBay, advertising them as "rare collectibles not available in stores."

The Ninth Circuit held in pertinent part: "Because the record here is devoid of any indication that the recipients agreed to a license, there is no evidence to support a conclusion that licenses were established under the terms of the promotional statement. Accordingly, we conclude that UMG's transfer of possession to the recipients, without meaningful control or even knowledge of the status of the CDs after shipment, accomplished a transfer of title." The court noted that "nothing on the packaging of the Promo CDs or in the licensing label requires that the recipient return the Promo CDs to UMG" and "UMG receives no recurring benefit from the recipients' continued possession."

Further supporting the concept of a "gift" is The Postal Reorganization Act, which prohibits "the mailing of unordered merchandise" without "the prior expressed request or consent of the recipient." The court found that under this statute, such unsolicited materials "may be treated as a gift by the recipient, who shall have the right to retain, use, discard, or dispose of it in any manner he sees fit without obligation whatsoever to the sender." UMG, however, argued that The Postal Reorganization Act applied only to "consumers", and record industry insiders were not "consumers." Nevertheless, in what appears to be a novel interpretation, the court deemed such insiders as the equivalent of "consumers", because "music industry insiders consume the Promo CD just as any other purchaser would, by listening to it. The reason these insiders are selected to receive the Promo CD is because they are not just consumers, they are consumers with influence."

Significantly, just a few months earlier, the Ninth Circuit went in the opposite direction when it decided the long awaited Vernor v . Autodesk case, in which it held that various "license" terms accompanying software - in that case the popular AutoCAD program - which restricted its transfer or lease, did not convey "ownership" of the particular copy of the software purchased by an end user. As only the "owner" of a particular "copy" of a copyrighted work may resell it under the first sale doctrine, one who only possesses but does not own a particular copy of software cannot resell or further distribute it without violating the rights of the copyright owner.
Without mentioning the Vernor case, the UMG Court contrasted cases involving computer software: "Unlike the use of software, which necessitates a license because software must be copied onto a computer to function, music CDs are not normally subject to licensing. Therefore, the benefits of a license for software do not exist under these facts."

February 23, 2011

A Friday Night: Reflections on the Critiques of "Would the Bard have Survived the Web?"

By Mary Rasenberger

The excellent op-ed entitled "Would the Bard have Survived the Web?," written by Scott Turow, Paul Aiken, and James Shapiro (the Authors Guild's President, Executive Director and a member, respectively) and published in the New York Times on February 15th (available at: http://www.nytimes.com/2011/02/15/opinion/15turow.htm?_r=2), generated numerous responses and a great deal of controversy in the blogosphere. The op-ed took a look at the golden age of English theater in the late 16th and early 17th centuries when there was "a wave of brilliant dramatists", and described how the erection of walls around theaters (literal pay-walls) allowed theaters to charge theater-goers, which enabled playwrights and actors to get paid by the public for the first time, rather than only by patrons. When authorities knocked the walls down in the mid-17th century to silence the seditious political ideas they feared were being expressed within, the ability to make a living from playwriting came to an end for a time and so did the "explosion of playwriting talent." The article warned that if we allow the copyright system we currently have in place to crumble under prevailing attitudes and internet piracy, the explosion of creative talent we have today may likewise dwindle. A number of letters to the editor and blogs have criticized the op-ed and used it against copyright law generally. The primary arguments can be summarized as follows: (1) there was no copyright at the time of Shakespeare, so clearly money can be made without copyright, and (2) Shakespeare copied from others, showing that copyright law restricts rather than induces creativity.

The first point does not even merit a response, since the op-ed authors themselves describe how copyright developed a half century later, providing a new, more stable way for authors to make a living. The second point belies a complete over-simplification and misunderstanding of U.S. copyright law. Incorporating elements of a prior work into one's own is not necessarily infringement and has always been part of the creative process. Copyright law, as construed by the courts, has long-since accommodated this process through, among other doctrines, the substantial similarity test, lack of protection for ideas, facts, common expression, and scènes a faire, the fair use doctrine, and for older U.S. works, formalities that put a large number of works into the public domain, as well as the almost 80 pages of exceptions and limitations in the Copyright Act. As a copyright practitioner, rarely a day goes by when I don't tell a client, usually a copyright holder, that it is free to use elements of another's work in some manner or another. While the courts don't always get copyright right, they often do, and through the last two centuries they have demonstrated enormous flexibility in their applications of the copyright law as technologies have shifted, including expanding fair use considerably in a manner that reflects evolving practices and technological advancements.

While the analogy to Shakespearean theater in the op-ed was imperfect, as most analogies are, the point of the article was clear and an excellent one - that "a rich culture", such as we now have requires a large number of creative individuals - "authors and artists", who devote their careers to their art. Indeed, our Founders were wise enough to understand that a true democracy requires a proliferation of free expression, that individuals not be beholden to any patron including the government, and that this can only be achieved by allowing professional creators to earn money from their works on the open market. Copyright is a brilliant way to achieve that end. The Shakespearean era theater grew out of the literal pay-wall described in the op-ed; our vast, prolific culture today has largely grown out of copyright law, a legal pay-wall.

The Guild's op-ed acknowledges that there is a place for free creative work online; and certainly there are those who will create for free, as many of the responses also point out. Indeed, many professionals who make a living from their works often will produce, perform and/or distribute works for free for any number of reasons (marketing, friendship, philanthropy, or the desire to see a particular work "out there"). Copyright gives creators the flexibility to do that - to decide when they want to assert their rights. Yet that is not what the op-ed is talking about; rather, it reminds us that copyright law enables artists and authors to make a living and is why we have the tremendous creative output we have today -- just as the theater's literal pay-wall was key to the creative burst in the theater in Shakespeare's time.

Let me give you a concrete example. Friday, after finally having acknowledged that my son was too sick to join my husband skiing, I cancelled our plans and we found ourselves with a delightfully free weekend ahead of us. I worked late and, among other things, read posts critiquing the op-ed forwarded to me by my co-teacher at Fordham Law (of a seminar "Copyright Reconsidered - Authorship in Historical Perspective"). Pondering the posts, I signed off and decided to indulge myself for the rest of the evening: I went to the gym and watched a movie on TV. As I later realized, it had been a truly indulgent evening -- over the next four hours my two kids (ages 13 and 14) and I had consumed millions and millions of dollars' worth of copyrighted works.

First, my daughter and I listened to the radio on the way to the gym, switching stations to find songs one or both of us liked; we heard some hard rock that was too hard for me, the Rolling Stones, Pink Floyd, and Rihanna (my choice --over her eye rolling). At the gym, she listened to her iPod, with a collection of about 2000 songs -- post-1990 alt-rock, punk rock and hard rock (all legally downloaded). I watched and listened to music videos licensed by the health club chain. I surfed between 6 or 7 stations, including dance, top hits, rock, alternative, rap, and whatever was playing songs that would keep me moving, some of which were creative and fun - lots of great choreography, dancing and/or special effects. On the way home, we listened to Evanescence (I'd been watching one of their videos when my daughter came to find me and we started to talk about it), and an Angels and Airwaves song that my daughter had heard in the locker room and wanted me to hear, on her iPod. She also played me a Blink 182 song and another sister band of Angels and Airwaves to compare the music.

At home, my son suggested I watch the "The Other Guys" on video-on-demand (a superb, hilarious movie). He listened to his iTunes songs (a collection of pre-1980 rock, also legally downloaded) on the computer while playing Wii Ski (which has wonderful artwork - it makes you feel like you are there on the powder covered mountain). He also watched the George Lopez sitcom simultaneously while checking out interactive ski trail maps. My daughter took pictures on her digital camera of our new kitten, then edited them and added special effects using iPhoto and Picnik software, chatted with friends on Facebook, texted others, all while listening to her iTunes collection on her computer. Then, we all got into bed and read - different books. (I read Just Kids by Patti Smith - a testament to the artistic soul and the difficulties creators experience for their art. Thanks to copyright, Smith's and Mapplethorpe's days of privation when "just kids" paid off and they both were eventually able to make a living off of their art.)

As spoiled as we are with an abundance of creative content, our activities on Friday evening were not completely atypical for Americans. I am sure that even those who object to copyright laws and believe that somehow art gets produced without it, also have iPods full of songs, watch TV and movies, read books, and rely on a large assortment of software programs, and would feel deprived without this "content."

The reason why I describe all this is because it's important to bear in mind that it took hundreds of professional creators who work full-time honing their art so that we can enjoy it to produce what the three of us consumed in just one evening. At a minimum, the following full-time creative professionals were involved in creating our evening at home, most of whom you can assume need to earn a living:

• Recorded music: performers (lead and side musicians) and song writers for about 50 songs, amount to at least several hundred people.

• Music videos: recording artists, professional dancers (hundreds among all the videos), choreographers, sound engineers, directors, cinematographers amount to several hundreds of people for all of the videos combined.

• Movie and TV: screen writers (probably several for just the movie), actors (who clearly added some of their own creativity/improvisation), directors, editors, cinematographers, special effects artists, sound artists. Don't forget the scores and accompanying background music, which are in addition to the music listed above.

• Wii Ski: visual artists, computer programmers -a couple dozen at least, I'd guess.

• Computer programs (iPhoto, Picnik, digital camera, cell phone, interactive maps, Facebook ... among others) - involving dozens, if not hundreds of people

• Books: Each one probably took the author the equivalent of at least one year (and probably much longer) of full-time work, plus there may have been ghost writers, and editors likely played a creative role.

All of those people make a living doing their work and had to get paid (in most cases, not a heck of a lot but enough to make a living) - before the big bad media companies who are, according to some, ruining the world with copyright, made a cent of profit. Although I paid for every item of content where payment was required, my amortized costs for our evening were maybe $20.

How fortunate we are. We have access to so much wonderful and creative art that brings us together in the ways we share and experience it. Yet we take all this content and the shared experiences it provides us for granted. Try to imagine our lives without music everywhere we go, TV, movies, books, newspapers and software. (What if we didn't have music, movies, TV, and books to share and talk about with our teenage kids? The arts afford so many opportunities for sharing thoughts, feelings and learning - and the kids don't even realize it!) The reason that we are able to have access to an abundance of really great content is that we live in a country with so many creative people who have devoted their lives to their art -- and they can do so because we have copyright laws that work.

What if we couldn't support professional creators anymore because no one could afford to pay them - which, as the Authors Guild op-ed warns, could happen if it becomes impossible to make money on content because everyone is stealing it online? The op-ed authors' point is that we, as a culture, have been lulled into taking that kind of creative output for granted, but there is no guarantee it will continue. While it's certainly true that there will always be people who will create regardless, do we really want to rely on the creativity of kids, academics, moonlighters and retirees, or, blogs for our culture? Without copyright, we certainly wouldn't have anyone to underwrite the significant costs of creating film, videos, computer games or software - so just say good bye altogether to those arts. There are few creators who could afford the time to write a book, write or record original music, or choreograph if they had to find other ways to make a living.

Copyright propelled a huge explosion of creative output in America. The production of our creative works is so vastly more complex than any patronage system could muster, even if we were willing to give up expressive and artistic freedom - which we are not. Furthermore, creativity is one of the things we are really good at in this country. We excel at teaching our kids to think creatively in and out of school, and as a society at large. As a result, copyrighted works are one of our largest exports. Let's celebrate that creativity. Let's not let rhetoric and the imperfections of current copyright law diminish it. Rather, let's learn from the past and help steer copyright law so that it continues to morph to accommodate the evolving technologies and practices of our arts today.

July 5, 2011

DANCING AROUND THE ISSUE OF COPYRIGHT OF CHOREOGRAPHIC WORKS

By Merlyne Jean-Louis

Identical twins Laurent and Larry Bourgeois (known professionally as Les Twins), who are currently touring with Beyonce Knowles, are two of new style/studio hip-hop dance's rising stars. In 2010, on the San Diego leg of the World of Dance Tour, the brothers performed an eight minute self-choreographed routine that displayed their remarkable technical ability and quirky personalities. (See http://www.youtube.com/watch?v=_XLGYxeL1iQ.) In June 2011, Fox broadcasted a portion of the audition piece of D*Day, an Atlanta hip-hop dance duo, on the dance competition "So You Think You Can Dance." For one minute, practically step for step, D*Day performed a sequence from Les Twin's routine. As a result, judges allowed D*Day to proceed to the next stage of the competition. Some of Les Twins' outraged fans posted on YouTube videos that compared both routines to ensure that the "biters" did not become finalists on the show. (See http://www.youtube.com/watch?v=3s1doSilyQc.) If Les Twins desired to do something about this controversy, they would have a powerful weapon in their artillery: copyright.

Note: Because the twins are from France, they would probably choose to enforce their copyright under French Law or the Berne Convention. To simplify the legal analysis, I use American law.


Requirements of Copyright Protection for Choreographic Works

To qualify for copyright protection under the Copyright Act of 1976, a choreographer must satisfy three requirements. First, a choreographer must create a choreographic work. Although the 1976 Act defines the majority of copyrightable subject matter, the statute does not define the term choreographic works. However, the U.S. Copyright Office provides a standard definition for the term choreography ("the composition and arrangement of dance movements and patterns, and is usually intended to be accompanied by music") and dance ("static and kinetic successions of bodily movement in certain rhythmic and spatial relationships"). (Compendium of Copyright Practices ("Compendium II") §§ 450, 450.01 (1984).) Although Compendium II prohibits the copyrighting of dance steps and simple routines, such as the basic waltz step, the manual permits copyright registration of dances that incorporate of improvisation, which is relevant to many forms of hip-hop dance. Given these provisions, even though it contains improvised moves, the Les Twins' piece does constitute a choreographic work.

Second, the choreographic work must also qualify as an "original work[] of authorship." (Copyright Act of 1976, 17 U.S.C. § 102(a) (2010).) Today, a work is deemed to be original if it is "independently created by the author [and if] it possesses at least some minimal degree of creativity." (Feist Publ'ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 345 (1991).) A choreographic work can be deemed to be original if similarity to another piece is "fortuitous [and] not the result of [deliberate] copying." (Id.) Thus, because the twins created the work and it is creative, the Les Twins piece is original.

Third, the choreographic work must be "fixed in any tangible medium of expression" in a manner that it "can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device." (17 U.S.C. § 102(a).) Currently three forms of fixation for choreography satisfy the Act's requirement: video recording, notation, and computer technology. As the Les Twins' piece was recorded and posted on YouTube by Yak Films, the work was fixated. Thus, assuming that the Bourgeois brothers 1) jointly claim copyright of the piece and 2) do not encounter work for hire issues, Les Twins own the copyright of the World of Tour piece under American law.

Potential Claims of Les Twins

As copyright protection provides the holder with a bundle of exclusive rights, Les Twins could have three major claims. First, the brothers could sue D*Day for infringing upon their right to perform, because D*Day performed most of Les Twins' piece in front of judges and other dancers in Atlanta's Fox Theater. (See 17 U.S.C. §§ 101 (defining public performance), 106(4) (enumerating exclusive right).) Second, because D*Day used dance moves that differed from those used in the Les Twins' piece, the Bourgeois brothers could claim that D*Day created a derivative work of their piece. (See 17 U.S.C. § 106(2).) Finally, Les Twins could sue Fox Television for transmitting the infringing D*Day piece to the American audiences via television and the Internet. (See 17 U.S.C. § 101.)

Potential Defenses of D*Day and Fox

D*Day and Fox could have some potential defenses to such a lawsuit. D*Day could claim that use of the Les Twins piece constituted fair use, because the members were somehow commenting on the piece or teaching the judges about new style/studio hip-hop dance. Balancing the four factor test of fair use, this defense would probably fail, however, because D*Day used a substantial portion of the Les Twin piece and used it for a commercial purpose (to audition for a show on which they could ultimately win $250,000). (See 17 U.S.C. 107.) With respect to the second claim, although D*Day could claim that the piece was sufficiently original and unlike that of Les Twins', this claim would also probably fail because D*Day stated that the piece was a tribute to and inspired by Les Twins. Finally, with respect to Les Twins' third claim, Fox could state that the piece was not transmitted over the Internet, because a viewer would have to take proactive steps to download and view the video of the show that displayed the D*Day audition piece. This defense could survive.

The Implications of a Suit by Les Twins

Although Les Twins can benefit from copyright protection of their works, they have chosen not to enforce their exclusive rights. This is most likely because of the dance culture: choreographers are honored and feel respected when others perform their pieces. According to D*Day, Les Twins told the group not to worry about the negative feedback from Les Twins' fans and wished them luck in the next stage of the dance competition. When Les Twins were asked about the D*Day incident by a dance magazine, Les Twins avoided answering the question. They do not even realize that Fox Television, whose legal department ensures that it secures all licenses for the music used on "So You Think You Can Dance" to avoid lawsuits, is not concerned about a suit from choreographers whose works they transmit on television.

Thus, my hypothetical suit will not occur. As evidenced by the action of the fans, most members of the hip-hop dance community may not even know about copyright protection. Until dance's most recognized choreographers start to enforce their copyright, all choreographers (especially the average, less known choreographers) will not be able to fulfill their earning potential.

The State of Copyright Protection for Choreographic Works in General

Using copyright law is an excellent tool because it assists most who devote their time to creating art to reap the financial benefits of their works. While copyright protection can serve well other artistic industries, the law as it stands does not help most choreographers. In essence, average choreographers encounter hurdles from the moment they attempt to secure copyright protection to when they file infringement suits because of the lack of clear standards from the judiciary as to the boundaries of their copyrights.

How is the state of copyright protection and choreography? Currently, the two are not dancing in unison.

September 5, 2011

The Comprehensive Guide to Reclaiming Old Masters

By Steve Gordon, with assistance from Nari Roye

'Legacy' recordings, or reissues from the vast catalogs of Sony, EMI, Warner and Universal and their associated labels such as Epic, Columbia, Capitol, and Atlantic, are still a huge business for major labels. According to Billboard, as of the first half of 2011, sales of catalog music accounted for 47% of all album sales and 60% of track sales. Spotify's top 50 albums contain many compilations with older titles including The Essential Michael Jackson, Fleetwood Mac's Rumours, 100 Hits of the '80s, and The Essential Journey. Yet most of the income from these sales accrues to the benefit of the record companies, rather than the artists or their estates, because the labels only have to pay royalties after fully recouping production and marketing costs, and recoupment occurs at the artists' royalty rates.

This means that the labels are making money even if the artist has not earned enough to repay the labels' expenses. Sales of legacy records is a huge factor in keeping the majors afloat as they continue to suffer from competition from free music made possible by illicit websites. The demographic for legacy recordings tends to consist of older fans who are not as adept at using the internet to collect free music downloads or are more apprehensive of the legal consequences than their children.

Meanwhile, income from recorded music has plunged to approximately $6 billion from more than $14 billion over the past decade, in large part because of unauthorized downloading. As this downloading is oftentimes skewed towards newer releases, the record labels have become disproportionately dependent on sales of older recordings.

Artists' Right to Terminate

Under the Copyright Act, classic albums by Bob Dylan, Billy Joel, Van Halen, Talking Heads, AC/DC, and many others will begin to be subject to 'termination'. Termination also applies to a vast number of less famous recordings, starting with those produced in 1978. This could have a significantly negative economic impact on the labels.

The 1976 Copyright Act includes a "termination right," which cannot be contractually given up, which allows the original content creator to "reclaim" the copyright on his or her works. Congress recognized the disparity in bargaining power between creators and assignees, usually corporations, and provided a practical compromise that would recognize the interests of both sides. In addition, the termination right acknowledges the impossibility of determining the value of a work until it has been exploited. Ideally, artists would have the opportunity to sign better deals after the value of their works are recognized.

What This Means to the Songwriter and Artist

In regard to the music business, this means that songwriters and artists are entitled to recapture the rights in their songs and records, even though they previously granted exclusive rights to music publishers and record labels.

Authors of songs and sound recordings produced after January 1, 1978 can terminate a transfer in two ways: (1) the sooner of 35 years after 'publication' (that is, commercial release) or (2) 40 years after the date of the contract (songs written prior to 1978 may also be subject to termination, but the rules pertaining to that are beyond scope of this blog).

The reason this issue is important now is because the 35 year period will be coming to an end in 2013, and many artists/songwriters have already given notice of termination (the law requires, as discussed in the last section of this article, authors or their successors to provide at least two years notice prior to the year of termination, but not more than 10 years.) If recording artists or their successors can recapture rights in their records, it is now easy to distribute those records at almost no cost through the internet.

Now, the Hard Part Begins

This blog focuses on the hurdles that recording artists, their successors or estates will have to jump over in order to take advantage of termination rights. It also addresses how the record companies will try to prevent the artists from doing so.

There are two major obstacles confronting artists in terminating the transfer of rights in their records to the record companies:

(1) Termination rights only apply to records that were not created as 'works for hire,' and
(2) the artist may not have been the only author of the recording.

Some Legal Nitty-Gritty: The Work for Hire Issue

Standard recording contracts almost always state that any records made pursuant to the agreement are 'work for hire.' This would make the record company the 'author' of each record and the artist would have no right to terminate his or her grant of rights to the label. However under the law, these clauses may not be valid or enforceable.

There are to date no cases on this point. Traditionally, the labels hedged their bets by inserting an additional clause that if, for any reason the recordings were not deemed to be a work for hire by a court of competent jurisdiction, then the artist agreed to assign all of his or her rights, including the copyrights in the recordings. However, under the latter provision, the artist would have the right to terminate because an assignment is considered a 'transfer' under the Copyright Act, and the termination provision applies to transfers.

Section 101 of the Copyright Act defines a work for hire as follows:

(1) a work prepared by an employee within the scope of his or her employment; or

(2) a work specially ordered or commissioned for use as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, as an instructional text, as a test, as answer material for a test, or as an atlas, if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire.

In 1999, the recording industry, represented by the Recording Industry Association of America (RIAA), tried to insert sound recordings into subsection (2) by including the words "as a sound recording" after the words "audio visual work". The RIAA actually did temporarily succeed in inserting this change in a 'technical amendment' to a bill called the Satellite Home Viewer Improvement Act of 1999, thus conferring full authorship of those recordings on record companies rather than recording artists if the recording agreement stated that an artist's services were provided on a work for hire basis.

The amendment had no connection to the subject matter of the bill, which concerned statutory licenses applicable to retransmission of television signals. It was also not included in prior drafts of the bill, but rather crept in at the last moment. According to press reports, this amendment (which clearly served the interests of record companies) was drafted and shepherded through Congress by a particular legislative aide, who, shortly after its adoption, accepted a position as a lobbyist for the RIAA. With neither analysis nor debate, the amendment was accepted by both houses of Congress and signed into law by President Clinton.

When outraged musicians and scholars discovered that the substantive law of copyright had undergone this dramatic change, the reaction was swift, loud, and overwhelmingly disapproving. Reeling from the bad press, Congress held a brief hearing, during which Sheryl Crow and Don Henley testified, and retroactively repealed the amendment.

Notwithstanding Congress' repeal of sound recordings in subsection (2), it is likely that the record companies in a court battle would still contend that sound recordings are covered by subsection (2) because each recording an artist makes can be considered to be a contribution to a collective work as a compilation, that is, an album.

In fact, many recording agreements include language describing an artist's performance "as a contribution to a collective work", one of the listed categories. Record labels would argue that each individual sound recording of a musical composition is a contribution to the collective work or compilation, that is, the finished album and, thus, a work made for hire. Artists may contend that each individual sound recording stands by itself and is only incidentally compiled into a collective work as one of its uses. They would also argue that an album is no more of a compilation than a novel with multiple chapters.

Of course they could also argue that if Congress intended to include sound recordings in subsection (2), it would have not have retroactively deleted sound recordings after inserting them in 1999. However, the RIAA was able to insert in the Copyright law that the fact of the repeal of sound recordings from subsection (2) would not establish that sound recordings were not works for hire.

Since the second part of the definition of work for hire may not include sound recordings, in order for record companies to deny artists their right to termination, they may also argue that artists were 'employees' rather than independent contracts. The determination of whether an individual is an employee for the purposes of the work made for hire doctrine is determined under the common law of agency, in which a court looks to a multitude of factors to determine whether an employer-employee relationship exists. In the Supreme Court case affirming that the common law of agency should be used to distinguish employers from independent contractors in the work for hire context, Community for Creative Non-Violence v. Reid, 490 U.S. 730 (1989), the Court listed some of these factors:

In determining whether a hired party is an employee under the general common law of agency, we consider the hiring party's right to control the manner and means by which the product is accomplished. Among the other factors relevant to this inquiry are the skill required; the source of the instrumentalities and tools; the location of the work; the duration of the relationship between the parties; whether the hiring party has the right to assign additional projects to the hired party; the extent of the hired party's discretion over when and how long to work; the method of payment; the hired party's role in hiring and paying assistants; whether the hiring party is in business; the provision of employee benefits; and the tax treatment of the hired party.

Under these criteria, most sound recordings would not seem to be works for hire because most record companies generally do not control artists when the latter is in the studio making a record. In addition, artists almost never receive employee benefits, don't record on company premises, and record companies generally do not withhold payroll taxes from any advances or royalties. The labels, however, may argue that the artists were in fact employees because the record companies usually have the right to approve the songs artists record, they control the studio time for the recording, have approval rights over what was recorded, and in what studios the artists could record. On the other hand, some experts contend that the labels may be reluctant to make the employee argument, because if artists were found to be employees, the labels may be responsible for paying back taxes. Indeed, most recording agreements specifically state that the artists are not employees.

Second Problem: The Artist May Not Be the Only Author

Even if the artist is not an employee and is entitled to terminate his or her grant of rights in the recordings to the label, there is another important issue that must be considered. Producers may be considered as authors too. This is because they don't necessarily act at the direction of the label or the artist (although they usually enter into work for hire agreements, in which case they would not be considered to be authors). Absent a work for hire agreement, producers are often an integral part of the creative process, and may be deemed to be "joint authors." Therefore an artist who notifies his or her record company that he or she is terminating the transfer of rights in any recording to the company may have to sort out a new deal with the producer prior to exploiting the re-captured recordings or risk a lawsuit by the producer. In addition, if an artist had to battle a record company in court, the artist may first have to seek the cooperation of the producer, as one of the issues in such a court battle would be whether the artist was the sole author.

It is also possible that audio engineers and session musicians may have a claim of authorship, but these would be harder cases to argue, as they generally work at the direction of others, taxes are usually withheld and they may well be considered to be employees. The RIAA warns on its website that if recordings are not considered to be works for hire "all collaborators on a sound recording ... would be in competition with each other and commercial exploitation ... would be impossible without the agreement of all of the collaborators, to the detriment of both artists and consumers." As we discussed, though, sound engineers and session musicians would probably not qualify as authors.

What Happens Next?

Many experts think that there will be multiple settlements between recording companies and artists, whereby the artists get additional advances for legacy recordings by waiving their rights to terminate, and the record companies try to avoid court battles that could backfire if they lose. According to the New York Times ('Record Industry Braces for Artists' Battles Over Song Rights' by Larry Rohter, August 15th, 2011), "Given the potentially huge amounts of money at stake and the delicacy of the issues, both record companies, and recording artists and their managers have been reticent in talking about termination rights."

The article quoted a record company executive as stating that there are significant differences of opinion among the big four, which has prevented them from taking a unified position. "Some of the major labels," he said, "favor a court battle, no matter how long or costly it might be, while others worry that taking an unyielding position could backfire if the case is lost, since musicians and songwriters would be so deeply alienated that they would refuse to negotiate new deals and insist on total control of all their recordings."

In the absence of a definitive court ruling, some recording artists and their lawyers are talking about issuing termination notices, eventually distributing the recording themselves, while daring the record companies to stop them. "Right now this is kind of like a game of chicken, but with a shot clock," the Times quoted Casey Rae-Hunter, deputy director of the Future of Music Coalition, which advocates for musicians and consumers. "Everyone is adopting a wait-and-see posture. But that can only be maintained for so long, because the clock is ticking."

According to noted copyright scholar David Nimmer, a legislative solution would be best solution, but until then the courts will decide on a case by case basis.

The Steps Artists Need to Take Right Now

Whatever the ultimate result, here are the actual steps that artists, their successors or estates need to take to initiate termination of transfer of rights in records:

Who Can Terminate

If the artist is deceased, his or her "statutory successor" can terminate. The statutory successor is the surviving spouse, or surviving children or grandchildren. If none of them are alive, the author's executor, administrator, personal representative, or trustee can terminate. If the artist is a band or group, termination requires a majority vote of the joint authors or their successors.

When Notice Must Be Served

The artist or statutory successor may give notice of termination no less than two years and no more than 10 years before the date that the transfer will terminate.

Content of Notice

The notice must be in writing signed by the owner(s) of the termination interests or by their duly authorized agents, and must state the effective date of the termination. The notice must also comply, in form, content, and manner of service, with requirements that the Register of Copyrights.

To Whom Should They Send Notice

The notice must be served upon the grantee (i.e., the label with whom the artist contracted) or the grantee's successor in title. A copy of the notice must also be recorded in the Copyright Office before the effective date of termination, as a condition to its taking effect.

Congressional Debates

The New York Times recently reported that John Conyers (D. Mich) is proposing legislation that would clarify that artists can terminate their grant of rights in their recordings to record labels. The Times article commented, "With years of costly litigation looming, groups that represent the interests of recording artists and songwriters said they found Mr. Conyers's remarks encouraging. But given the issue's legislative history any amendment process in Congress is likely to be long and complicated."

I agree with this and would only add that although many experts have already suggested federal legislation would be a good solution to the ambiguous state of the law as discussed above, any such legislation would have to be very delicately drafted to address the interests of possible co-authors including producers.

Steve Gordon is an entertainment attorney and author of The Future of the Music Business (Hal Leonard 3rd ed. 2011) who would like to express his appreciation to Nari Roye, Esq, who assisted in writing this article. A version of this blog was originally published by digitalmusicnews.com on Monday, August 29, 2011.

November 17, 2011

Universal Music Group Purchases EMI's Recorded Music Assets for $1.9 Billion

By Tyler Mazey

In a widely reported sale, Vivendi's Universal Music Group (UMG) purchased EMI's recorded music assets at auction for a price of $1.9 billion. However, UMG did not pickup EMI's valuable publishing assets, which were bought for $2.2 billion by a group of investors led by Sony. This split and sale raises a host of issues that look to change the face of the music business in its entirety, including the future of the recording industry, government approval, and current and future licensing deals.

Sale

UMG's purchase of EMI's recorded music operations leaves only three major record labels. It also creates an interesting difference among the three. Prior to the purchase, UMG had close to $6 billion in revenue, Sony had $5.7 billion, and Warner had $3 billion. EMI had $1.8 billion in revenue according to annual reports from March of 2010. (http://www.nytimes.com/2011/11/12/business/media/emi-is-sold-for-4-1-billion-consolidating-the-music-industry.html) With the addition of EMI's, UMG will control close to 40% of the market share in recorded music.

Even though CitiGroup was not able to recoup its entire EMI purchase price from a decade ago, some say that UMG overpaid for EMI's recorded music operations. Warner was a major participant in the EMI auction, but balked at the apparently exorbitant price tag. Warner's purchase of EMI would have been a significant deal, putting it closer to the same market share as the other two majors. Considering that EMI would have been a nice jewel in Warner's crown, one can assume that the value of the assets was not nearly as high as the price UMG paid at auction. Even though consumers are no longer purchasing recorded music at the same levels as they were at the turn of the millennium, record labels are still being purchased at near millennial prices.

Assuming EMI's recording assets were overvalued as a separate entity, those assets still provide an exciting opportunity for UMG to leverage its combined market share in the face of an uncertain digital future. Greater market share creates the opportunity to generate greater revenues from on-demand digital music services. While some independents may be pulling catalogues from services such as Spotify, Rhapsody, and Rdio due to miniscule royalty payments, UMG has the largest catalogue. This leads to the possibility for an extraordinary amount of royalties once a true leader is crowned in the on-demand digital music streaming sector.

Government

While increased market share can help UMG to lead online, that same leverage creates an intense amount of government scrutiny. In Roger Faxon's memos to his staff, he even mentions that "Universal will need to clear the necessary hurdles before they can take ownership. And that too will take time and effort." (http://www.billboard.biz/bbbiz/industry/record-labels/read-emi-ceo-roger-faxon-s-memo-to-staff-1005510952.story) UMG is already planning to divest $500 million in recorded music assets in order to clear regulatory hurdles in the U.S. and Europe. However, Europe's Independent Music Companies Association (IMPALA), expects the deal to be blocked outright, even with this divestment. IMPALA's argument is that the last time the European Commission looked at the company, it ordered UMG to sell off assets to cut itself down to an "acceptable" size. Since that time, UMG has grown substantially and has additional ties with concert giant LiveNation. This would make it less likely for the European Commission to approve UMG purchase of EMI's recording assets. (http://www.billboard.biz/bbbiz/industry/record-labels/impala-says-it-expects-emi-universal-deal-1005511552.story)

UMG's position is therefore quite tricky. It is purchasing EMI to create a bigger, bolder company, but will have to divest assets in order to make that happen. UMG can cut less valuable assets out of its catalogue, but still has to deal with the regulatory and restructuring process. Taking the time and money to jump through regulatory hoops takes valuable investment income away from the core corporate function of finding and developing new artists.

Present and Future

All of this legal hassle will affect the profitability of EMI until it is completely integrated under Vivendi/UMG umbrella. Faxon has said that EMI's continued obligation through the transition period is to continue to drive each of the businesses to the best of EMI's ability. Given the regulatory hurdles to overcome, business is likely to continue as usual until through the fiscal year. EMI will continue to make deals, invest in artists, release records and enter into licenses. There will be no layoffs throughout the transition, and interaction between EMI and UMG is strictly limited until the sale is approved. Therefore it is expected that present deals will not be affected. (http://www.billboard.biz/bbbiz/industry/record-labels/read-emi-ceo-roger-faxon-s-faq-to-staff-1005513552.story)

While it is business as usual for EMI during the transition, its future will likely be significantly altered by the sale. One can assume that UMG will want to consolidate and synergize EMI with existing operations in order to reduce overhead. This will mean layoffs and possible disruptions in the artist release cycles. However, this is not UMG's first rodeo.

Once past the regulatory hurdles and consolidation, UMG will have close to 40% of recorded music market share and be able to flex its muscles. UMG will be able to dictate licensing rates to the rest of the industry; if you want a UMG song, you will have to deal with a UMG price. Having almost 40% of the market cornered may make it difficult for music supervisors to find easy replacements for the plethora of music licensed, creating difficulties for many industries, such as television, movie and commercial ad placements. Music supervisors are under tight budgets and even tighter schedules. Increased rates could throw a big wrench into the way they do business. While there is other music available, UMG's giant market share will make it more difficult to find less expensive alternatives.

There is also the tricky issue of the on demand Internet streaming services. Most of these services survive off of the licensing deals made with the major labels, and if rates go up, profits may never be seen. However, UMG can flex its muscles in order to choose a winner in this space. Considering that most of these services pay based on market share, UMG stands to gain a significant advantage in terms of revenue streams and negotiating power.

Conclusion

As the Internet Age continues to eat away at recorded music revenues, UMG will need to lead the rest of the industry into the future. One thing is certain; UMG will be in a position to make or break the recording music industry. Although record labels were the technological leaders of the past, it now seems as though the major labels are technology followers. Having close to 40% of recorded music market share gives UMG the ability to choose winners and losers. UMG needs to flex its market share muscles for its artists, shareholders, and the future of the industry. Otherwise, UMG will be creating a bleak tomorrow for its own business and the businesses of its peers.

January 9, 2012

UMG v. Veoh Makes the DMCA Safe Harbor Even Safer. What Will the 2d Circuit Do in Viacom?

By Andrew Berger

The safe harbor created by Section 512(c) of the Digital Millennium Copyright Act (DMCA) may now be an Internet service provider's Bali Hai.

That's because on December 20, 2011, the Ninth Circuit held in UMG v. Veoh (www.ipinbrief.com/wp-content/uploads/2011/12/DecisionUMGvVeoh-ninth-circuit.pdf) that a webhost will only lose its safe harbor immunity under this section if it has specific knowledge of infringing content on its site and fails to take down that content. Because UMG failed to demonstrate that Veoh had specific knowledge, the Ninth Circuit affirmed the district court's grant of summary judgment dismissing the action against Veoh. (http://www.ipinbrief.com/wp-content/uploads/2011/12/veoh-district-court-pdf.txt)

Is this opinion a death knell for Viacom's pending appeal in the 2d Circuit? I don't think so. But first here is some background and analysis of Veoh.

The Safe Harbor at Issue in Veoh and Viacom

Section § 512 of the DMCA creates four statutory "safe harbors" to help Internet service providers ("ISPs") predict and manage their legal exposure to copyright infringement. The safe harbor at issue in Veoh and Viacom is at § 512(c), dealing with storage of content initiated by a user.

The section shields ISPs from monetary liability for hosting copyright infringing material on their sites if they either:
(a) have no "actual knowledge that the material or an activity using the material is infringing" and (b) have no "aware[ness] of facts or circumstances from which infringing activity is apparent" (17 U.S.C. § 512(c)(1)(A)(i) & (ii)) or
(c) expeditiously remove infringing material which they know or are aware of upon receipt of a DMCA-compliant take-down notice (17 U.S.C. § 512(c)(1)(A)(iii)).
Courts refer to the two knowledge standards as actual and red-flag knowledge. The Ninth Circuit held that Veoh lacked either actual or red-flag knowledge.

UMG Fails To Demonstrate that Veoh Had Actual Knowledge

UMG inexplicably chose to forgo what the Ninth Circuit labeled "as the most powerful evidence of a service provider's [actual] knowledge"--take down notices. UMG never advised Veoh of a single infringement before it filed its action and then failed to identify any infringing videos until Veoh moved to compel that information on the eve of the close of discovery. Veoh's motion is available at http://www.ipinbrief.com/wp-content/uploads/2011/12/veoh-motion-compel-list-infr4ing.pdf. UMG chose to rely on takedown notices sent by the Recording Industry Association of America ("RIAA"); but the notices referred only to the names of the songs and never mentioned UMG.

UMG instead argued before the Ninth Circuit that Veoh knew the music videos it hosted were infringing because Veoh never licensed any of them from the 4 major music companies. But the district court found, and the circuit court agreed, that Veoh had "arrangements" "with major copyright holders, such as Sony/BMG" to display their music videos.

UMG also argued that Veoh must have had actual knowledge of the presence of infringing videos on its system given its general knowledge that its service could be used to share unauthorized content. The Ninth Circuit again disagreed stating that, if merely hosting material that falls within a category of content capable of copyright protection, with the general knowledge that one's services could be used to share unauthorized copies of copyrighted material, was sufficient to impute knowledge to service providers, the § 512(c) safe harbor would be "a dead letter."

UMG Also Fails to Show that Veoh Had Red Flag Knowledge

UMG fared no better in its argument that Veoh had red flag knowledge. The circuit court rejected UMG's assertion that Veoh's purchase of Google adwords containing the names of some of UMG's artists demonstrated Veoh's knowledge of infringing activity. The Ninth Circuit stated that artists are not always in exclusive relationships with recording companies and "so just because UMG owns the copyright to some of Brittany Spears songs does not mean it owns the copyright for all" of them.

UMG also argued that Veoh should have used search and indexing tools to locate and remove any other content by the artists identified in the RIAA notices. But the Ninth Circuit stated that § 512(m) of the DMCA did not impose investigative obligations on ISP. UMG finally pointed to news articles exposing the availability of copyrighted materials on Veoh. The appellate court was not persuaded stating that, if Veoh's awareness of these news reports "was enough to remove a service provides from DMCA safe harbor eligibility, the notice and takedown procedures would make little sense and the safe harbors would be effectively nullified."

The Ninth Circuit did suggest that Veoh might have gained red flag knowledge if third party users had notified it of "specific particular infringing material" on the Veoh site. In that instance Veoh would then lose its safe harbor immunity if it failed to expeditiously take down the infringing material.

Webhosts May Remain Passive But Still Avoid Liability

The Ninth Circuit's opinion thus places the burden of policing copyright infringement on the owners of the copyrighted material. Content owners must constantly monitor the entire and ever-changing repertoire of every webhosting site on the Internet, in every file format, to locate infringing content. That is a burden that many individual authors cannot sustain.

Although webhosts are better able with advances in filtering technology to automatically identify and block materials as they are loaded, Veoh allows webhosts to remain passive and abstain from taking any affirmative measures to protect against infringement.

This result seems counter intuitive. If a mall owner knows from press and police reports of criminal activity on its property, would the owner still be immune from liability if it failed to investigate and at least attempted to work with law enforcement to end that criminal activity? Yet Veoh holds that ISPs need only quickly respond to takedown notices to avoid liability.

Should the Interests of Copyright Holders Be Policed by Third Parties?

Equally problematic is the Ninth Circuit's suggestion that a third party user's notice of infringement could act as a red flag under §512 (c)(1)(A)(ii). How will a third party user who clicks onto a webhost know that the music video she is enjoying contains infringing content? License agreements between webhosts and music companies are not public information. Even absent a license, the music may be protected by fair use. Will Veoh create a regime where the interests of copyright holders on websites are policed by third party trolls? The potential for third-party abuse (whether intentional or not) is substantial.

Viacom

Now let's turn to Viacom's pending appeal in the 2d Circuit raising identical issues of actual and red flag knowledge.

YouTube was quick to advise the 2d Circuit of Veoh's victory in the Ninth Circuit. YouTube's post-argument letter re Veoh is available at http://www.ipinbrief.com/wp-content/uploads/2011/12/youtube-post-argument-letter-re-Veoh-decision.pdf.

Some Reasons Why the 2d Circuit May Reverse

Nevertheless, I think there is a reasonable chance that Judge Stanton's thinly-reason decision in favor of YouTube will be reversed. First, Judge Cabranes during the oral argument in Viacom raised five questions of material fact that could have possibly defeated summary judgment. See the New York Law Journal's account of the oral argument at http://www.newyorklawjournal.com/PubArticleNY.jsp?id=1202519347558&slreturn=1.

Second, the appellate court following oral argument was apparently troubled by YouTube's argument that specific knowledge of infringement is all that is required for actual and red flag knowledge. The appellate court therefore ordered the parties to provide supplemental briefs on the issue "whether and how the red-flag knowledge provision would apply" if only specific knowledge of infringement triggers a red flag. (http://www.ipinbrief.com/wp-content/uploads/2011/12/viacom-order-from-2d-circuit-directing-letter-briefs-on-red-flag.pdf) The responses from YouTube and Viacom are located at http://www.ipinbrief.com/wp-content/uploads/2011/12/youtube-post-argument-letter-re-Veoh-decision1.pdf and http://www.ipinbrief.com/wp-content/uploads/2011/12/viacom-post-argument-letter-brief.pdf.

Here is what Viacom said:
Because awareness of "infringing activity" requires less specificity than "actual knowledge" of "infringing material," a website operator who "welcome[s]" and is aware of infringing activity on its site - here in the range of 75-80% of views according to YouTube's own analyses - clearly satisfies § 512(c)(1)(A)(ii) even if it avoids knowing most of the specifics. And though operators do not have an independent obligation to monitor their sites for infringement, once they have this kind of awareness of infringing activity they have a duty to act to address the problem under § 512(c)(1)(A)(iii).

I side here with Viacom. The district court, by holding that knowledge of specific infringing clips satisfies the actual and red flag standards, effectively jettisoned the red flag standard. When Congress enacted the two standards of knowledge it must have intended they be different and that the red flag standard be a separate basis for imposing liability on a service provider. Why else have two standards? Further, the legislative history and the face of § 512 (c)(1) indicate that the red flag standard requires something less than actual knowledge of infringement. But the district court in Viacom held both standards require the same specificity. Therefore, if a service provider has red flag knowledge, it also must have actual knowledge. As a result, Judge Stanton read the red flag standard out of the DMCA. The Second Circuit may not do the same.

A third reason why the Second Circuit may reverse is that the district court had determined that YouTube was "not only generally aware of, but welcomed copyright-infringing material being placed on their website," which "enhanced defendants' income."(http://www.ipinbrief.com/wp-content/uploads/2011/12/viacom-youtube-opinion-district-court.pdf) Isn't that enough to at least raise a triable question regarding red flag knowledge? In other words, as I told the Wall Street Journal in its fine article about the pending appeal (http://online.wsj.com/article/SB10001424052748703741004575651041817080912.html? - subscription required), "When you welcome a thief in your house, you probably know he's there."

The copyright industry now awaits the 2nd Circuit; your predictions on what may happen are welcome. My earlier posts on Viacom are on the Viacom litigation home page, located at http://news.viacom.com/.

************************************

This post was originally published on www.ipinbrief.com, an IP blog written by Andrew Berger. Links to the cases referred to above may be found at http://www.ipinbrief.com/umg-v-veoh-makes-the-dmca-safe-harbor-even-safer-what-will-the-2d-circuit-do-in-viacom/.

January 20, 2012

Weekly Issues in the News

By Geisa Balla

On January 18, 2012, more than 10,000 of the world's favorite websites, including then English Wikipedia, Reddit and Google, made their opposition to the Stop Online Piracy Act ("SOPA") and the Protect Intellectual Property Act ("PIPA"). The English Wikipedia blacked out entirely on January 18, 2012, in protest of SOPA and PIPA. As one of the largest and best-coordinated online protests, this media blackout had a lot of people talking, and did in fact seem to change the minds of some of the bill's sponsors. "Earlier this year, [the Protect IP Act] passed the Senate Judiciary Committee unanimously and without controversy," wrote Republican senator Marco Rubio of Florida, a co-sponsor of the bill, on his Facebook page. "Since then, we've heard legitimate concerns about the impact the bill could have on access to the Internet and about a potentially unreasonable expansion of the federal government's power to impact the Internet. Congress should listen and avoid rushing through a bill that could have many unintended consequences."
http://www.nytimes.com/2012/01/19/technology/web-protests-piracy-bill-and-2-key-senators-change-course.html?_r=1

On January 19, 2012, the United States Department of Justice shut down Megaupload.com, one of the most popular file-sharing services on the web. The Department of Justice charged seven individuals and two corporations, Megaupload Limited and Vestor Limited, with running an international organized criminal enterprise, and generating more than $175 million in criminal proceeds and causing more than half a billion dollars in damages to copyright owners. In its press release, the Department of Justice states "This action is among the largest criminal copyright cases ever brought by the United States and directly targets the misuse of a public content storage and distribution site to commit and facilitate intellectual property crime."

http://www.justice.gov/opa/pr/2012/January/12-crm-074.html

Five employees filed a class action lawsuit against Forever 21 in the San Francisco Superior Court on January 18, 2012. The employees allege that Forever 21 systematically failed to pay them for hours worked, and denied them meal breaks. Forever 21's loss prevention policy mandates bag searches before employees clock out, and plaintiffs here allege that Forever 21 routinely searched their bags after they clocked out, and failed to pay them for that time.

http://www.huffingtonpost.com/2012/01/18/forever-21-lawsuit-class-action_n_1214359.html?ref=style&ir=Style

Mike Sorrentino, Jersey Shore's "The Situation", has been sued by an apparel company, Serious Pimp, for breach of contract. Serious Pimp and Mr. Sorrentino entered into an agreement whereby Mr. Sorrentino would promote Serious Pimp's line of t-shirts in exchange for a $25,000 advance payment. Serious Pimp now claims that Mr. Sorrentino took the money and failed to comply with his contractual obligations.

http://www.tmz.com/2012/01/13/the-situation-serious-pimp-lawsuit-t-shirts-michael-sorrentino/

Kim Kardashian filed a lawsuit against The Gap in July of 2011, alleging that The Gap created confusion in the marketplace and violated her rights to her name and likeness when it used model Melissa Molinaro in a TV commercial. Ms. Kardashian claimed that The Gap violated her legal rights by using this particular model that looked strikingly similar to Ms. Kardashian. The Gap's defense strategy in its litigation against Kim Kardashian seems to hinge on the value of Ms. Kardashian's reputation and value to her various endorsement deals. The case is now in the discovery stage, and it appears that The Gap is seeking to unveil financial records to reveal Ms. Kardashian's true financial value from her various endorsement deals.

http://www.hollywoodreporter.com/thr-esq/kim-kardashian-gap-reputation-lawsuit-282648

Golan v Holder Supreme Court Decision

Held: Section 514 does not exceed Congress' authority under the Copyright Clause. (a) The text of the Copyright Clause does not exclude application of copyright protection to works in the public domain.

The Supreme Court opinion in Golan v Holder can be found at:

http://www.supremecourt.gov/opinions/11pdf/10-545.pdf

January 27, 2012

Golan v. Holder: A Victory for Copyright

By Christine A. Pepe

On the heels of Congress' shelving of the Stop Online Piracy Act (SOPA) and Protect IP Act (PIPA), the Supreme Court's January 18, 2012 Golan v. Holder decision represents a glimmer of hope that protection of copyright is not dead and can co-exist with the First Amendment.

In Golan v. Holder, the petitioners (conductors, musicians, publishers and others who exploited certain works that entered the public domain), challenged the constitutionality of Section 514 of the Uruguay Round Agreements Act (URAA) , which is now codified in the Copyright Act as 17 U.S.C. §§104A, 109. Section 514 offered restored copyright protection to certain categories of works that are protected in their countries of origin but lack protection in the U.S. Many of such works fell into the U.S. public domain due largely to a failure to comply with certain arcane formalities unique to American copyright law as it existed at the time. Section 514 contains some built-in protections to cushion the impact of the restoration on certain reliance parties, e.g., the parties that exploited the works thought to be in the public domain. In broad terms, these protections include a notice requirement, removing liability for use of foreign works prior to the notice of restoration, and allowing reliance parties to continue to use the restored works for one year following notice.

Importantly, Section 514 was enacted in response to a mandate by the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) that the U.S. fully comply with its obligations as a member of the Berne Convention. Initially, when the U.S. first became a member of Berne in 1989, Congress adopted a minimalist approach to compliance. For example, despite Berne's instruction that member countries protect foreign works under copyright in the country of origin, U.S. law provided no protection for foreign works that fell into the public domain in the U.S. but remained protected in their countries of origin. Beginning in 1994, however, TRIPS required compliance with Berne under penalty of World Trade Organization (WTO) enforcement. At this time, it became clear that many Berne member countries were outraged at the United States' refusal to grant protection to foreign works that remained protected in their countries of origin. On top of this, several countries balked at protecting U.S. works that remained under copyright in the U.S. but not abroad--until the U.S. reciprocated. It was against this backdrop that Congress passed Section 514.

The Supreme Court rejected petitioners' argument that in removing certain works from the public domain, Congress violated the Copyright Clause's confinement of copyright to a "limited time." Notably, the Court stated: "In aligning the United States with other nations bound by the Berne Convention and thereby according equitable treatment to once disfavored foreign authors, Congress can hardly be charged with a design to move stealthily toward a regime of perpetual copyrights." The Court relied heavily on its decision in Eldred v. Ashcroft, 537 U.S. 186 (2003), where it rejected a similar argument that the Copyright Term Extension Act (CTEA) was unconstitutional. The Court also dismissed petitioners' argument that the public domain was "inviolate," citing several historical examples where Congress protected works once freely available.

The Court also cast aside petitioners' claim that Section 514 fails to "promote the Progress of Science" as required by the Copyright Clause. Petitioners, and Justice Breyer in his dissent, urged that production of new works must always be a precondition to any grant of copyright; because Section 514, they argued, simply restricts the dissemination of old works, it does not promote the progress of science. As it did in Eldred, the Court refused to adopt such a singularly utilitarian view of copyright. The Court emphasized that Section 514 would expand the foreign markets available to U.S. authors, invigorate protection against piracy of U.S. works abroad, and as a result, ensure profitable international dissemination of existing and future U.S. works.

Finally, the Court declined to find that the restoration provisions of Section 514 trampled on the First Amendment. A content neutral statute, Section 514 must be upheld if "narrowly tailored to serve a significant government interest." Drawing again in large part from Eldred, the Court concluded that because copyright's built-in First Amendment protections, specifically the idea/expression dichotomy and the fair use doctrine, remained unscathed, there was no need for heightened review. Section 514's stated purposes of ensuring compliance with international treaty obligations, securing greater protection for U.S. authors abroad and remedying unequal treatment of foreign authors, clearly satisfied First Amendment scrutiny. Moreover, given the various protections to reliance parties discussed above, Section 514 implemented a calibrated transition from a national scheme to an international copyright regime. The Court also responded to Justice Breyer's concern over the potential difficulty in identifying or locating copyright owners, especially with regard to orphan works. The Court concluded that the orphan works issue is not peculiar to works restored under Section 514 and should be addressed through legislative not judicial methods.

In the end, the Court reiterated its powerful words from Harper & Row, 471 U.S. 539 (1985), that copyright protection is not simply a "limit on the manner in which expressive works may be used"--it is also "an engine of free expression: By establishing a marketable right to the use of one's expression, copyright supplies the economic incentive to create and disseminate ideas." Overall, this decision represents a significant victory for creators and one that hopefully will resonate with Americans as they continue to be bombarded with uninformed messages that any copyright law impinges on their First Amendment rights.

January 30, 2012

Kernochan Center Intellectual Property Fellowship

The Kernochan Center for Law, Media and the Arts at Columbia Law School (CLS) is accepting applications for a two-year fellowship opportunity for a future legal academic interested in researching and writing on intellectual property issues, particularly in the area of third-party liability and internet governance.

The fellowship will begin in September, 2012 and end in August, 2014. The fellow will have the opportunity to conduct his or her own research in the field of liability of internet intermediaries. The fellow will also be responsible for planning and implementing a conference, with the assistance of CLS faculty and staff of the Law School, on the topic of intellectual property and third-party liability, to take place at CLS in Fall 2013. The goal of the conference will be a discussion of current policy in the U.S. and abroad with an eye to proposing potential legislative solutions to current legal issues.

The fellow will receive a salary of $65,000 per year, and benefits, space to work in the law school, research facilities, and opportunities to interact with CLS faculty, staff and students.
Applicants should be 2-5 years out of law school and have a background in economics, technology, sociology or other, similar discipline which lends itself to a study of internet issues. To apply, applicants should send a cover letter, resume, writing sample, proposal for scholarly research on the topic of secondary liability (5-8 pages), two letters of recommendation, law school transcript and a list of additional references by April 15 to the address listed below.

June M. Besek
Executive Director
Kernochan Center for Law, Media and the Arts
Columbia Law School
435 West 116 th Street, Box A-17
New York , NY 10027
jbesek@law.columbia.edu

Columbia is an equal opportunity and affirmative action employer.

February 1, 2012

Use of Art Images in Gallery and Auction Catalogues: Copyright Minefield and Practical Advice

By Barry Werbin

A prominent NYC art gallery is preparing for a show highlighting a new exhibition of known and upcoming artists, some of whom are alive and others recently deceased. In preparing the show's catalogue, which will not be sold publicly, the gallery intends, as is long-standing custom, to include high-quality photographs of all the works in the exhibition. Most photos are obtained from the living artists themselves, or from the estates or trusts that control the underlying copyrights and reproduction rights of the deceased artists' works. In a few cases, however, the gallery will need to take its own photos. As a courtesy gesture, it intends to ask for approvals to do so from these few artists or their representatives.

A problem arises, however, when a deceased artist's administering trust questions the provenance of one of that artist's pieces in the exhibition and refuses to grant permission for the gallery to photograph any of the works for use in the catalogue or for any other purpose in connection with the exhibition. Can the gallery nevertheless take photos of these works and use them in its catalogue, which will not be sold or posted online but only given to attendees at the exhibition? Does it a make a difference if the catalogues will be sold or made available digitally on the gallery's website?

As the issue revolves around copying and displaying images of the original pieces of art, the answer should lie in several provisions of the U.S. Copyright Act of 1976 (the "Act"). But while providing critical guidance, the Act may not entirely provide a clear-cut answer.

Copyright Protection of Artworks

Copyright protects original works of authorship from the moment of their creation. In the case of an individual artist, the artist owns the copyrights of his or her original artworks, and the copyright term lasts for the life of the artist (the "author") plus another 70 years after his or her death. Section 106 of the Act reserves to the copyright owner specifically enumerated "exclusive" rights, which include (as relates to art) the rights of reproduction (copying), public display and distribution (by sale/assignment, rental, lease/license or lending), and the right to prepare derivative works based on the original. Notwithstanding these exclusive rights granted to the copyright owner, the Act carves out two important exceptions related to what is referred to as the "first sale doctrine" and, particularly germane to artworks, a limited display right granted to an "owner" of an original work. Before discussing these exceptions, however, it is important to recognize the significant difference between ownership of legal title and ownership of copyright.

Legal Title vs. Copyright

The purchaser of an original work of art only acquires legal title to that one original work; the underlying copyright is not transferred. Instead, copyright remains with the artist or his or her successor in interest. Thus, a consignor seller who owns an original work of art cannot grant to a gallery or auction house any rights greater than what that owner has (bare legal title) with no right to exercise any of the exclusive rights reserved to the copyright owner under Section 106 of the Act.

First Sale Doctrine

Without the statutory exceptions, there could never be a legal art exhibition or sale, as either would invoke the exclusively reserved "display" and "distribution" rights of the copyright holder. In its wisdom, however, Congress included two key exceptions in the Act that facilitate the resale of copyrighted works and grant a limited "display" right. These two exceptions are largely responsible for the legal existence of galleries, auction houses, and museums that display and sell works still under copyright.

First, Section 109, or the "first sale doctrine," provides that:

Notwithstanding the provisions of section 106(3) [the exclusive distribution right], the owner of a particular copy or phonorecord lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord.

Thus, someone who owns an original work of authorship protected by copyright (referred to as a "particular copy" in Section 109) is free to sell it. That particular single work may then be resold innumerable times, without limitation, including by a gallery or auction house that is "authorized" by that owner to conduct a sale. The first sale doctrine is responsible for all aftermarket sales of copyrighted materials, including art, used records, music CDs, and books.

But what about the display right that also is exclusive to the copyright owner? Section 101 of the Act defines "display" as follows: "To 'display' a work means to show a copy of it, either directly or by means of a film, slide, television image, or any other device or process...."

While Section 106 reserves to the copyright owner the exclusive right to display a work publicly and the right of reproduction, Section 109(c) carves out a special limited exception (tied to the first sale doctrine) for the display of a copy of a work rightfully owned:

(c) Notwithstanding the provisions of section 106(5) [the exclusive display right], the owner of a particular copy lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to display that copy publicly, either directly or by the projection of no more than one image at a time, to viewers present at the place where the copy is located."

This Section is responsible for permitting all "displays" of copyright-protected art by galleries, auction houses, and museums. But Section 109(c) does not on its face permit any copying of a "particular" work, including the taking of any photographs and publishing them in a catalogue or on a website. This exception is further limited to a display only to "viewers present at the place where the copy is located."

The limited scope of the Section 109(c) exception seems pretty clear on its face. Nothing in Section 109(c) expressly permits our hypothetical gallery to take its own photos and use them in a catalogue in connection with an exhibition. Thus, the gallery's legal fallback becomes the complex and frequently litigated concept of "fair use" under Section 107 of the Act.

Fair Use Doctrine

The "fair use doctrine" has a long, complex, and tumultuous history in the courts that is beyond the scope of this article. In brief, the doctrine is intended to permit certain uses of copyright-protected materials as exceptions to what otherwise would be infringing activity. Section 107, which codifies the doctrine, provides a non-exclusive list of such permissible uses that are then subject to a non-exhaustive list of four specific criteria courts are required to address to determine whether "fair use" exists. The relevant text of Section 107 is rather brief:

[T]he fair use of a copyrighted work, including such use by reproduction in copies ... for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use, the factors to be considered shall include--

(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;

(2) the nature of the copyrighted work;

(3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and

(4) the effect of the use upon the potential market for or value of the copyrighted work.


Taking photos of artworks for use in an exhibition or auction catalogue does not fall squarely within the above-enumerated fair use examples, as such copying and display do not facially qualify as criticism, comment, news, teaching, research, or parody. (Although catalogues ultimately may be used for reference and research that is typically not the original reason a catalogue is created.) Section 107 does not make express exception for making copies for "descriptive" or "display" uses (i.e., to simply describe and display images of what is in an exhibition). This contrasts with U.S. trademark law, which does accept a "descriptiveness" defense where a third party's trademark is used merely descriptively and not in a trademark sense. The delineated statutory examples, however, are just that--examples--as the statute's preamble refers to "the fair use of a copyrighted work, including such use by reproduction in copies ... for purposes such as...." Thus, there is room for courts to find that copying for other purposes that are consistent with the policies underlying Sections 107 and 109(c) also qualifies as fair use. Arguably, such use is also commercial in nature if the catalogue will be sold or otherwise used to market an exhibition or auction at which the art will be offered for sale; but the existence of some commercial aspect of a work has not precluded a fair use finding in all cases because it is just one of the primary factors to be considered by a court.

The fourth fair use factor is particularly significant because taking photos of art for use in a catalogue will likely not have any negative effect "upon the potential market for or value of the copyrighted work." But the four listed factors also must be balanced by the courts. Even where one factor might win the day, the others may be more weighted either against or in favor of fair use, and courts must not lose sight of the fundamental principles underlying the fair use doctrine.

To complicate matters, in recent years courts have also read into the fair use statute a requirement that under the first factor ("purpose and character of the use"), to be "fair" and thus not infringing, a use must also be "transformative." This concept has become controversial as courts have disagreed over what that term means. Essentially, the "transformative" concept looks at the use made of the copy and whether it is for a purpose different from that of the original work. As the U.S. Supreme Court noted in Campbell v. Acuff-Rose Music, Inc. (510 U.S. 569, 579 (1994)), a work is generally deemed "transformative" when the new work does not "merely supersede the objects of the original creation," but rather "adds something new, with a further purpose or different character, altering the first with new expression, meaning, or message." The non-exclusive permissible uses listed in Section 107, such as for commentary on or criticism of a copyrighted work (which includes parody), are themselves "transformative" uses.

As another example, Google has successfully defended its image search feature under a fair use argument. Google's image search results display digital thumbnail images, which are reduced, lower-resolution versions of full-sized images stored on third-party computers. The image search results are generated in response to end users' search queries for artwork, photos, and other graphical works on the Internet, thereby transforming the thumbnail copies displayed in the search results into a research tool. Google also generates advertising revenues by tying sponsored third-party ads to certain search results. The Ninth Circuit Court of Appeals ruled on this issue in a key 2007 decision, where it found that "the significantly transformative nature of Google's search engine, particularly in light of its public benefit, outweighs Google's superseding and commercial uses of the thumbnails in this case." (Perfect 10, Inc. v. Amazon.com and Google (amended opinion), 508 F.3d 1146 (9th Cir. 2007)).

Applying the Law

Back, then, to our hypothetical exhibition catalogue. Is photographing artwork to display in an exhibition or auction catalogue "transformative"? Does it satisfy the statutory fair use factors? Can an analogy be drawn to the Google image "search" service? Under a fair use paradigm, should the first sale doctrine and the "display" exception contained in Section 109 of the Act, by implication to carry out their intended purposes, permit a "descriptive" use of art photographs simply to describe the works in an auction or gallery exhibition catalogue? Denying such limited copying and display right arguably undermines the purpose of the display exception in Section 109(c), which facilitates auctions and exhibitions, because without it the ability to promote such sales and exhibitions is severely compromised. After all, this is visual art.

These are as of yet undecided legal questions, but there are cogent arguments that such use does not meet the fair use criteria under Section 107 as it is written, because such use is essentially "commercial," the entire image i s copied (photographed), and the copy is not being used for a "transformative" purpose. On the other hand, an enticing argument can be made that, while it may not truly be "transformative," when a photo is being used solely to identify the art in an auction or exhibition (where such display is authorized by Section 109(c) of the Act), the use of the photo in a catalogue for such limited purpose is merely incidental to a permissible use, and only improves the potential market for the work. It should therefore be considered fair use. But being the test case in the courts would be protracted and expensive.

Galleries and auction houses have always printed beautiful high-resolution catalogues with images of art not in the public domain. But the issue of seeking advance permissions rears its ugly head when an artist's representative objects to such photographic copying because, for example, the representative does not accept the provenance. Moreover, because the owner of an artwork seeking to sell it (unless it's the actual artist or his or her legal representative) owns only that "copy," and does not own the underlying copyright rights, the owner cannot legally grant a gallery or auction house permission to photograph the work from a copyright standpoint.

With all this in mind, the conservative approach would be to seek permission to photograph from the rights owner, his or her agent, or a clearinghouse, and to always do so if the image will be used on the cover of a catalogue or prominently in advertisements or marketing materials to promote an auction or exhibition. In most cases, this should not be an issue because, as a practical matter, most artists or their representatives are happy with this practice as it promotes the works and creates and maintains underlying markets for the art. But in the case of a deceased artist without an estate representative or non-U.S. works under copyright, for example, licensors or clearinghouses will need to be contacted for permission, which likely will require payment of some license fee tied to the notoriety of the artist, scope of use, and number of catalogues to be printed.

Real-World Examples

Gagosian Gallery, for example, always asks living artists for permission to photograph works going into its exhibitions for use in its catalogues. Andrea Crane, a Director at Gagosian Gallery in New York, says that doing shows with living artists requires a "close collaboration with the artists," who are pleased to cooperate. "The catalogues tend to benefit the artist by complementing the artwork," notes Alison McDonald, Gagosian's Director of Publications.
According to Ms. McDonald, Gagosian often deals with deceased artists' estates, which typically grant rights to photograph their artists' works for use in catalogues. In cases where estates cannot be contacted or don't exist, says Ms. McDonald, permissions are sought, typically for a fee, from artists' publishers and clearinghouses, such as Visual Artists and Galleries Association (VAGA), Artists Rights Society (ARS), and the Design and Artists Copyright Society (DACS). If consent cannot be obtained, an image of the artwork is not used.

Likewise, Christies auction house "always obtains permissions or licenses to use art images on the covers of its catalogues and in advertising collateral," says Karen Gray, Christies' General Counsel. Ms. Gray notes, however, that "there is a compelling fair use argument for using smaller photos of art tied to the applicable lot description within a particular catalogue, as this is consistent with the policy under Section 109(c), which permits display of the art without the copyright owner's permission, and principles of fair use." Catalogues retained for archival purposes (both in hard copy and digitally on Christies' website) serve a research and reference purpose, which falls more squarely within the traditional scope of fair use.

Conclusion

What guidance should gallery owners and auction house directors take away from all this? Apart from consulting with intellectual property legal counsel, prudence dictates taking a conservative and practical approach, especially in these litigious days in the art world. Some well-funded gallery or auction house may one day pick the fair use catalogue fight, but it will be expensive and protracted, and the outcome will be uncertain.

Barry Werbin is a partner and Chair of the Intellectual Property Practice at Herrick, Feinstein, LLP. This article was originally published in his firm's Art & Advocacy newsletter, Fall 2011, Vol.10.

Use of Art Images in Gallery and Auction Catalogues: Copyright Minefield and Practical Advice

By Barry Werbin

A prominent NYC art gallery is preparing for a show highlighting a new exhibition of known and upcoming artists, some of whom are alive and others recently deceased. In preparing the show's catalogue, which will not be sold publicly, the gallery intends, as is long-standing custom, to include high-quality photographs of all the works in the exhibition. Most photos are obtained from the living artists themselves, or from the estates or trusts that control the underlying copyrights and reproduction rights of the deceased artists' works. In a few cases, however, the gallery will need to take its own photos. As a courtesy gesture, it intends to ask for approvals to do so from these few artists or their representatives.

A problem arises, however, when a deceased artist's administering trust questions the provenance of one of that artist's pieces in the exhibition and refuses to grant permission for the gallery to photograph any of the works for use in the catalogue or for any other purpose in connection with the exhibition. Can the gallery nevertheless take photos of these works and use them in its catalogue, which will not be sold or posted online but only given to attendees at the exhibition? Does it a make a difference if the catalogues will be sold or made available digitally on the gallery's website?

As the issue revolves around copying and displaying images of the original pieces of art, the answer should lie in several provisions of the U.S. Copyright Act of 1976 (the "Act"). But while providing critical guidance, the Act may not entirely provide a clear-cut answer.

Copyright Protection of Artworks

Copyright protects original works of authorship from the moment of their creation. In the case of an individual artist, the artist owns the copyrights of his or her original artworks, and the copyright term lasts for the life of the artist (the "author") plus another 70 years after his or her death. Section 106 of the Act reserves to the copyright owner specifically enumerated "exclusive" rights, which include (as relates to art) the rights of reproduction (copying), public display and distribution (by sale/assignment, rental, lease/license or lending), and the right to prepare derivative works based on the original. Notwithstanding these exclusive rights granted to the copyright owner, the Act carves out two important exceptions related to what is referred to as the "first sale doctrine" and, particularly germane to artworks, a limited display right granted to an "owner" of an original work. Before discussing these exceptions, however, it is important to recognize the significant difference between ownership of legal title and ownership of copyright.

Legal Title vs. Copyright

The purchaser of an original work of art only acquires legal title to that one original work; the underlying copyright is not transferred. Instead, copyright remains with the artist or his or her successor in interest. Thus, a consignor seller who owns an original work of art cannot grant to a gallery or auction house any rights greater than what that owner has (bare legal title) with no right to exercise any of the exclusive rights reserved to the copyright owner under Section 106 of the Act.

First Sale Doctrine

Without the statutory exceptions, there could never be a legal art exhibition or sale, as either would invoke the exclusively reserved "display" and "distribution" rights of the copyright holder. In its wisdom, however, Congress included two key exceptions in the Act that facilitate the resale of copyrighted works and grant a limited "display" right. These two exceptions are largely responsible for the legal existence of galleries, auction houses, and museums that display and sell works still under copyright.

First, Section 109, or the "first sale doctrine," provides that:

Notwithstanding the provisions of section 106(3) [the exclusive distribution right], the owner of a particular copy or phonorecord lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord.

Thus, someone who owns an original work of authorship protected by copyright (referred to as a "particular copy" in Section 109) is free to sell it. That particular single work may then be resold innumerable times, without limitation, including by a gallery or auction house that is "authorized" by that owner to conduct a sale. The first sale doctrine is responsible for all aftermarket sales of copyrighted materials, including art, used records, music CDs, and books.

But what about the display right that also is exclusive to the copyright owner? Section 101 of the Act defines "display" as follows: "To 'display' a work means to show a copy of it, either directly or by means of a film, slide, television image, or any other device or process...."

While Section 106 reserves to the copyright owner the exclusive right to display a work publicly and the right of reproduction, Section 109(c) carves out a special limited exception (tied to the first sale doctrine) for the display of a copy of a work rightfully owned:

(c) Notwithstanding the provisions of section 106(5) [the exclusive display right], the owner of a particular copy lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to display that copy publicly, either directly or by the projection of no more than one image at a time, to viewers present at the place where the copy is located."

This Section is responsible for permitting all "displays" of copyright-protected art by galleries, auction houses, and museums. But Section 109(c) does not on its face permit any copying of a "particular" work, including the taking of any photographs and publishing them in a catalogue or on a website. This exception is further limited to a display only to "viewers present at the place where the copy is located."

The limited scope of the Section 109(c) exception seems pretty clear on its face. Nothing in Section 109(c) expressly permits our hypothetical gallery to take its own photos and use them in a catalogue in connection with an exhibition. Thus, the gallery's legal fallback becomes the complex and frequently litigated concept of "fair use" under Section 107 of the Act.

Fair Use Doctrine

The "fair use doctrine" has a long, complex, and tumultuous history in the courts that is beyond the scope of this article. In brief, the doctrine is intended to permit certain uses of copyright-protected materials as exceptions to what otherwise would be infringing activity. Section 107, which codifies the doctrine, provides a non-exclusive list of such permissible uses that are then subject to a non-exhaustive list of four specific criteria courts are required to address to determine whether "fair use" exists. The relevant text of Section 107 is rather brief:

[T]he fair use of a copyrighted work, including such use by reproduction in copies ... for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use, the factors to be considered shall include--

(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;

(2) the nature of the copyrighted work;

(3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and

(4) the effect of the use upon the potential market for or value of the copyrighted work.

Taking photos of artworks for use in an exhibition or auction catalogue does not fall squarely within the above-enumerated fair use examples, as such copying and display do not facially qualify as criticism, comment, news, teaching, research, or parody. (Although catalogues ultimately may be used for reference and research that is typically not the original reason a catalogue is created.) Section 107 does not make express exception for making copies for "descriptive" or "display" uses (i.e., to simply describe and display images of what is in an exhibition). This contrasts with U.S. trademark law, which does accept a "descriptiveness" defense where a third party's trademark is used merely descriptively and not in a trademark sense. The delineated statutory examples, however, are just that--examples--as the statute's preamble refers to "the fair use of a copyrighted work, including such use by reproduction in copies ... for purposes such as...." Thus, there is room for courts to find that copying for other purposes that are consistent with the policies underlying Sections 107 and 109(c) also qualifies as fair use. Arguably, such use is also commercial in nature if the catalogue will be sold or otherwise used to market an exhibition or auction at which the art will be offered for sale; but the existence of some commercial aspect of a work has not precluded a fair use finding in all cases because it is just one of the primary factors to be considered by a court.

The fourth fair use factor is particularly significant because taking photos of art for use in a catalogue will likely not have any negative effect "upon the potential market for or value of the copyrighted work." But the four listed factors also must be balanced by the courts. Even where one factor might win the day, the others may be more weighted either against or in favor of fair use, and courts must not lose sight of the fundamental principles underlying the fair use doctrine.

To complicate matters, in recent years courts have also read into the fair use statute a requirement that under the first factor ("purpose and character of the use"), to be "fair" and thus not infringing, a use must also be "transformative." This concept has become controversial as courts have disagreed over what that term means. Essentially, the "transformative" concept looks at the use made of the copy and whether it is for a purpose different from that of the original work. As the U.S. Supreme Court noted in Campbell v. Acuff-Rose Music, Inc. (510 U.S. 569, 579 (1994)), a work is generally deemed "transformative" when the new work does not "merely supersede the objects of the original creation," but rather "adds something new, with a further purpose or different character, altering the first with new expression, meaning, or message." The non-exclusive permissible uses listed in Section 107, such as for commentary on or criticism of a copyrighted work (which includes parody), are themselves "transformative" uses.

As another example, Google has successfully defended its image search feature under a fair use argument. Google's image search results display digital thumbnail images, which are reduced, lower-resolution versions of full-sized images stored on third-party computers. The image search results are generated in response to end users' search queries for artwork, photos, and other graphical works on the Internet, thereby transforming the thumbnail copies displayed in the search results into a research tool. Google also generates advertising revenues by tying sponsored third-party ads to certain search results. The Ninth Circuit Court of Appeals ruled on this issue in a key 2007 decision, where it found that "the significantly transformative nature of Google's search engine, particularly in light of its public benefit, outweighs Google's superseding and commercial uses of the thumbnails in this case." (Perfect 10, Inc. v. Amazon.com and Google (amended opinion), 508 F.3d 1146 (9th Cir. 2007)).

Applying the Law

Back, then, to our hypothetical exhibition catalogue. Is photographing artwork to display in an exhibition or auction catalogue "transformative"? Does it satisfy the statutory fair use factors? Can an analogy be drawn to the Google image "search" service? Under a fair use paradigm, should the first sale doctrine and the "display" exception contained in Section 109 of the Act, by implication to carry out their intended purposes, permit a "descriptive" use of art photographs simply to describe the works in an auction or gallery exhibition catalogue? Denying such limited copying and display right arguably undermines the purpose of the display exception in Section 109(c), which facilitates auctions and exhibitions, because without it the ability to promote such sales and exhibitions is severely compromised. After all, this is visual art.

These are as of yet undecided legal questions, but there are cogent arguments that such use does not meet the fair use criteria under Section 107 as it is written, because such use is essentially "commercial," the entire image i s copied (photographed), and the copy is not being used for a "transformative" purpose. On the other hand, an enticing argument can be made that, while it may not truly be "transformative," when a photo is being used solely to identify the art in an auction or exhibition (where such display is authorized by Section 109(c) of the Act), the use of the photo in a catalogue for such limited purpose is merely incidental to a permissible use, and only improves the potential market for the work. It should therefore be considered fair use. But being the test case in the courts would be protracted and expensive.

Galleries and auction houses have always printed beautiful high-resolution catalogues with images of art not in the public domain. But the issue of seeking advance permissions rears its ugly head when an artist's representative objects to such photographic copying because, for example, the representative does not accept the provenance. Moreover, because the owner of an artwork seeking to sell it (unless it's the actual artist or his or her legal representative) owns only that "copy," and does not own the underlying copyright rights, the owner cannot legally grant a gallery or auction house permission to photograph the work from a copyright standpoint.

With all this in mind, the conservative approach would be to seek permission to photograph from the rights owner, his or her agent, or a clearinghouse, and to always do so if the image will be used on the cover of a catalogue or prominently in advertisements or marketing materials to promote an auction or exhibition. In most cases, this should not be an issue because, as a practical matter, most artists or their representatives are happy with this practice as it promotes the works and creates and maintains underlying markets for the art. But in the case of a deceased artist without an estate representative or non-U.S. works under copyright, for example, licensors or clearinghouses will need to be contacted for permission, which likely will require payment of some license fee tied to the notoriety of the artist, scope of use, and number of catalogues to be printed.

Real-World Examples

Gagosian Gallery, for example, always asks living artists for permission to photograph works going into its exhibitions for use in its catalogues. Andrea Crane, a Director at Gagosian Gallery in New York, says that doing shows with living artists requires a "close collaboration with the artists," who are pleased to cooperate. "The catalogues tend to benefit the artist by complementing the artwork," notes Alison McDonald, Gagosian's Director of Publications.According to Ms. McDonald, Gagosian often deals with deceased artists' estates, which typically grant rights to photograph their artists' works for use in catalogues. In cases where estates cannot be contacted or don't exist, says Ms. McDonald, permissions are sought, typically for a fee, from artists' publishers and clearinghouses, such as Visual Artists and Galleries Association (VAGA), Artists Rights Society (ARS), and the Design and Artists Copyright Society (DACS). If consent cannot be obtained, an image of the artwork is not used.

Likewise, Christies auction house "always obtains permissions or licenses to use art images on the covers of its catalogues and in advertising collateral," says Karen Gray, Christies' General Counsel. Ms. Gray notes, however, that "there is a compelling fair use argument for using smaller photos of art tied to the applicable lot description within a particular catalogue, as this is consistent with the policy under Section 109(c), which permits display of the art without the copyright owner's permission, and principles of fair use." Catalogues retained for archival purposes (both in hard copy and digitally on Christies' website) serve a research and reference purpose, which falls more squarely within the traditional scope of fair use.

Conclusion

What guidance should gallery owners and auction house directors take away from all this? Apart from consulting with intellectual property legal counsel, prudence dictates taking a conservative and practical approach, especially in these litigious days in the art world. Some well-funded gallery or auction house may one day pick the fair use catalogue fight, but it will be expensive and protracted, and the outcome will be uncertain.

Barry Werbin is a partner and Chair of the Intellectual Property Practice at Herrick, Feinstein, LLP. This article was originally published in his firm's Art & Advocacy newsletter, Fall 2011, Vol.10.

February 16, 2012

Crowdfunding: Trends and Developments Impacting Entertainment Entrepreneurs

By Ronald Barabas

In 1913, a young man named Oscar Micheaux financed the printing of his autobiographical first novel with door-to-door advance sales of the still-unpublished work to his neighbors. He pitched them with a sample chapter and his considerable sales skills. Successful in this and a subsequent literary effort, Micheaux, a self-made African-American entrepreneur born to freed slaves, sought to produce the first feature length motion picture featuring African-American milieu and actors. Hollywood film studios would not undertake anything like this for many years to come. In order to accomplish this unprecedented, expensive adaptation of his first novel, Micheaux formed a corporation for film productions and sold shares of stock directly to the public. He drafted an investment brochure himself and personally solicited investments in company shares. Micheaux's initial capital-raise helped lead to some of the most groundbreaking cultural contributions in American history.

Micheaux was a pioneer of what we now call "crowdfunding". Yet if someone today were to solicit investments as he had, that person would likely be stopped by and face sanctions from the Securities and Exchange Commission.

Efforts to ease restrictions that limit artists' abilities to finance creative projects by raising small amounts of money from everyday investors online seem to be reaching a critical mass of support that could very likely lead to consequential near-term changes in securities law. At the present moment, three competing bills that address crowdfunding are in Congress (one of which, H.R. 2930 (http://thomas.loc.gov/cgi-bin/bdquery/z?d112:H.R.2930:@@@L), has passed the House). The SEC and the White House have also expressed their support.

Crowdfunding can be defined as a collective effort to pool money, popular today through the Internet, to support a project, cause or organization. It has become an increasingly common and effective way for entrepreneurs and artists to finance business and creative endeavors, making it easy to solicit financing from anyone with Internet access and available capital. Current US securities laws, however, limit the full possibilities of crowdfunding.

A security is an investment of money in a common enterprise with an expectation of profits arising from the efforts of others. When a security is offered to the public over the Internet or other means, the offering party is required to meet registration and ongoing disclosure requirements with the SEC. While this helps guard against potential fraud, the expense and time it takes make public offerings impractical for almost all start-ups and small businesses. There are several exemptions to the public registration requirement, but none that would apply to a crowdfunding equity model where a financial stake in a small business or project is promoted online to the general investing public.

Internet crowdfunding initiatives have thrived despite the prohibition of offerings in unregistered investment opportunities. Artists, entrepreneurs and non-profits successfully use four non-equity Internet crowdfunding models that circumvent securities regulation. They are: (1) the rewards model; (2) the pre-payment model; (3) the donation model; and (4) the loan model (see Bradford, C. Steven, Crowdfunding and the Federal Securities Laws (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1916184)).

The first three crowdfunding models can best be explained with a simple example. A musician wants to raise funds to finance the recording of an album. She sets up an account on a popular crowdfunding website like Kickstarter ((http://www.kickstarter.com/) and offers to send a copy of the finished album to anyone that has paid, in advance, $10 or more. This is the pre-payment model. In the same listing, she offers to write a song about anyone who pledges $500 or more (the rewards model) and also accepts donations in any amount (the donation model, where there is no expected return, is more commonly used for charitable causes). None of these is a situation in which the financial backer has an expectation of profit, and therefore no securities registration is needed.

The loan model has two importantly different variations. On sites like Kiva (http://www.kiva.org/about), lenders select a project to help finance and their loans are repaid to them without interest when the borrower makes repayments. Like the other non-equity models, offering individuals the opportunity to provide an interest-free loan does not trigger registration requirements since the lender has no expectation of profit. The SEC has, however, indicated that registration would be required for interest-bearing crowdfunding notes and loans, the other variety of the loan model (http://www.sec.gov/litigation/admin/2008/33-8984.pdf).

At a time when agreement between the major political parties is rare, a convincing group of economic factors have led policymakers to the popular consensus that action needs to be taken to open up the equity crowdfunding model. Among these is the increased difficulty of financing for seed-stage start-ups. Banks have altered their approaches to small business lending over the last five years and sophisticated investors are investing in later-stage emerging companies with greater regularity. Entrepreneurs need alternatives to traditional capital markets to fund their growth, and the weak job market needs the boost from small business hiring that access to new sources of capital could provide. This, combined with the proven success of other crowdfunding models, has helped this issue pick up steam.

The challenge for Congress and the SEC is to create a regulatory framework that unlocks the possibility of crowdfunding while mitigating the risk of fraud that comes with easing restrictions on the public solicitation of investment opportunities online. The current legislative proposals (H.R. 2930 (http://thomas.loc.gov/cgi-bin/bdquery/z?d112:H.R.2930:@@@L), S.1791 (http://thomas.loc.gov/cgi-bin/bdquery/z?d112:s.1791:), and S.1970 (http://thomas.loc.gov/cgi-bin/bdquery/z?d112:s.01970:)) each address this with some key common features, including:

• a cap on the amount of the offering;
• a cap on the amount each investor can contribute; and
• limited disclosure and ongoing reporting requirements.

Important differences in these bills include the amount of the offering and investor contribution cap and whether crowdfunding websites that act as intermediaries between a company and investors will be regulated as a broker-dealer or subject to other compliance guidelines.

Several outstanding issues will need to be considered as rulemaking progresses. When can an offering be grounds for a fraud claim if disclosure requirements are limited? If individual investments are limited to small amounts, will fraud victims have an incentive to seek legal redress? How can disparate small investors replicate the leverage and sophistication that enables an "angel investor" to receive offering terms that merit their capital risk?

While most politicians and commentators have focused on the expected increase in small business hiring that opening a crowdfunding exemption to the securities laws would have, it will have a particularly profound impact on the arts. Crowdfunding already has a special role in the creative community. Part of this is because first-time filmmakers and other less-established artists typically have even fewer financing options than other entrepreneurs. Angel investors and banks will rarely finance a creative project helmed by a novice. Friends, family, savings and credit cards are often the only way to fund such an independent endeavor.

Moreover, crowdfunded ideas get the unique benefit of public feedback before production begins. They go forward when enough people use their money to express interest and belief in a project, in contrast to hierarchical decision-making. Independent investors are also free from public relations and corporate conflict concerns that can hinder unorthodox works. Perhaps even more importantly, individuals that participate in funding a project are likely to be consumers of that project and promote it to others.

A crowdfunding exemption to the securities laws could have broad implications on the arts and development of artists. As Oscar Micheaux proved almost 100 years ago, crowdfunding can lead to great things.


Ronald Barabas is a Corporate and Entertainment Attorney at Di Santo LLP. He can be contacted at rbarabas@disantolaw.com.

An expanded version of this article will appear in the Spring 2012 issue of The Entertainment, Arts and Sports Law Journal.

May 11, 2012

CBS Broadcasting Inc. v. ABC, Inc.

By Kim Endelson

CBS filed a complaint today against ABC and several producers and staff in the U.S. District Court, Central District of California, alleging, among other claims, misappropriation of trade secrets, breach of contract, and copyright infringement. CBS contends that ABC's new show "Glass House" is a "carbon copy" of its show "Big Brother", and that 19 former "Big Brother" producers and staff now work on "Glass House."

"Glass House" is a reality show featuring 14 contestants who live in a large house and are filmed continuously. Viewer votes determine which contestants will remain in the house, with the final contestant receiving a six-figure cash award.

CBS is seeking an injunction to stop the airing of the show, scheduled for June 18th, as well as $500,000 for each violation of non-disclosure agreements signed by the former "Big Brother" employees.

CBS claims that the "imitation" is an "obvious attempt" to capitalize on the success of "Big Brother." ABC said the lawsuit has no merit. An ABC spokesperson commented, "The differences between 'Glass House' and 'Big Brother' are both fundamental and obvious, ranging from 'Glass House's' interactive elements and audience participation to its deployment of cutting edge technologies."

http://newsandinsight.thomsonreuters.com/Legal/News/2012/05_-_May/Report_--_CBS_sues_ABC,_says_new_show_copies__Big_Brother_/

http://www-deadline-com.vimg.net/wp-content/uploads/2012/05/CBS_v_ABC_et_al_Complaint_-_CV12-04073_MMM_JEMx__120510213528.pdf

November 5, 2012

Pole Dancing Not an Artistic Performance Under New York Law

By Marie-Andree Weiss

The New York Court of Appeals ruled on October 23th that a New York club is not exempt from paying sales taxes on pole and lap dances performed there. The case is interesting, as the judges had to question whether exotic dancing may indeed be considered a dramatic or musical arts performance by New York Tax Law and thus exempt from sales tax under Tax Law § 1105(f)(1).

Nite Moves is an adult club located in the Town of Colonie in Albany County. It is described on its own web site as an "Albany Strip Club" and "the hottest gentleman's club in the Capital District with many exotic dancers. It also boasts having "the largest staff of adult dancers in the Albany area" and being "the only gentleman's club in Albany with fully nude private dancers."

Customers have to pay an admission fee to enter the club, where they can see dancers performing on stage, using a pole. They may chose to pay an extra fee for a private lap dance performance in one of the club's private rooms. Dancers perform part of their acts dressed in costumes, which standards are set by the club, and part of their acts in the nude.

Nite Moves was audited in 2005 by the Division of Taxation, which found that both the door admission charges allowing patrons to see dancers on stage, and the sales of private dances were subject to sales tax, which Nite Moves had not paid. The club sought a redetermination, arguing that the dances performed both on stage and in the private rooms were "dramatic or musical arts performances" and thus are exempt from taxation under New York Tax Law § 1105 (f) (1). This law imposes a tax of four percent on admission charges above ten cents for "places of amusement," but provides an exception for "dramatic or musical arts performances."

The Administrative Law Judge agreed with the club's argument, and found that Nite Moves was not taxable under § 1105 (f) (1). The judge also rejected the Division of Taxation's argument that the club should be taxed under § 1105 (f) (3), which imposes a tax on cabaret charges, and under § 1105 (d) (1), which taxes the sale of drinks in restaurants, taverns and similar establishments.

However, that decision was reversed by the Tax Appeals Tribunal (the Tribunal), and the club commenced a CPLR Article 78 proceeding to challenge the Tribunal's determination. The Third Judicial Department of the Appellate Division of the New York Supreme Court affirmed the judgment of the Tribunal and the club appealed.

Are Pole and Lap Dancing... Well...Dancing?

Pole dancing is fast becoming a popular fitness activity in the U.S., and, as mentioned by the appellant's attorney when appearing in front of the Court of Appeals, may soon become an Olympic sport. As such, it is not a discipline which can be learned overnight. Dancers use the pole as a vertical beam to perform a variety of different moves and spins around the pole, and sometimes rather acrobatic inverted moves. However, a new dancer may learn a basic routine in an hour or two, especially if she had former training in other dances.

Under 1105 (f) (1), admission charges for places of amusement are taxable, and such places include carnivals, but also athletic exhibits, according to 20 NYCRR 527.10. Therefore, neither stating that pole dancing is a sport, nor that it is some 'Hoochie Coochie' dance performed at a fair, are efficient arguments for the petitioner.

New York Tax Law § 1101 (d) (5) defines an admission charge for purposes of the tax exemption of New York Tax Law § 1105 (f) (1) as "[a]ny admission charge paid for admission to a theatre, opera house, concert hall or other hall or place of assembly for a live dramatic, choreographic or musical performance."

Are Pole Dancing and Lap Dancing Choreographed?

For the Court of Appeals, in order to qualify for the exemption, petitioner had to prove that the fees paid by patrons to see the dancers "constituted admission charges for performances that were dance routines qualifying as choreographed performances" (Opinion p. 3).

New York Court of Appeals Judge Smith said during the debate that the New York Tax Law uses "dance" as a synonym for "choreographic" (Transcript p. 15).

Chief Judge Lippman asked during the argument in front of the Court of Appeals: "Is there a difference between the ballet dancer and these pole dancers in terms of their artistic value or their benefit to the world? And could that be the basis for what the tribunal found, or does it have nothing to do with that?"(Transcript p. 25).

Judge Smith asked the attorney of the Commissioner of Taxation and Finance during the argument: "I could imagine the possibility that something other than dance goes on in those rooms once in a while. But you're really saying they weren't dancing, or you're just saying it wasn't very high class dancing?" (Transcript p. 26)

He answered that dancing was only one component of the adult entertainment provided by the club, and, when dancers where not on stage, they also mingled with customers and performed lap dances, noting that the Tax Appeals Tribunal "reasonably concluded that just sitting and moving in a patron's lap is not a choreographed performance" (Transcript p. 27).

Counsel for the club argued that "the State of New York doesn't get to be a dance critic" and "has no business differentiating between the Bolshoi and what [the club] do[es]" (Transcript p. 30).

The petitioner had introduced as evidence in front of the Tribunal YouTube clips of pole dancing routines used as inspiration by its dancers, and stated that its dancers often used such resources available over the Internet to learn new techniques and new dance moves to be used in their pole routine.

Nite Moves had also presented as evidence the expert opinion of Dr. Judith Hanna, a professor at Maryland University who has extensively studied exotic dancing, and she "stated as her expert opinion that the video [of dancers performing at the club] represented choreography, or arrangement, of about 61 different moves with them and variation patterns with repetition. She identified the use of locomotion, gesture, pole, mirror and floor work at variable levels in response to music."

However, the Tribunal dismissed her interpretation of what constitutes choreographed performance as "sweeping," adding that if one accept her definition, "all one needs to do is to move in an aesthetically pleasing way to music, using unity, variety, repletion, contrast, transition."

All there is? One can argue that, to the contrary, that this is quite difficult, and that moving "in an aesthetically pleasing way to music" is quite difficult, especially if one wants to engage a paying audience, as anybody who ever danced on a public stage can attest.

The expert did not convince the Third Department either, which stated that "petitioner failed to meet its burden of establishing that the private dances offered at its club were choreographed performances." The Court of Appeals noted that the \Tribunal had articulated a rational basis for discriminating the expert, as she had stated that dances performed privately and publicly were the same, even though she had not observed what occurred in the private rooms (p. 4).

Indeed, one can regret that Dr. Hanna did not describe the dances performed at the Albany club, whether privately or publicly, using specific choreographic terms used in pole dance or jazz dancing. Pole dance uses a specific vocabulary, understood by all pole dancers, such as the "fireman spin," or the "inverted scorpio." Even lap dancing may be choreographed, using the chair, and the customer's lap as a prop, such as done, for example, in jazz dance.

Maybe a bona fide pole dancer and/or instructor would have been a more convincing witness, and would have been able to break down the video presented by the club using specific choreographic terms.

Is Improvised Dancing Art?

Judge Smith also asked the attorney for the Commissioner of Taxation and Finance during the debate whether in his opinion only choreographed dances were exempt, not improvised dance, and the representative said yes (transcript p. 22). However, improvisation of a dance is also choreographed, albeit done at the spur of the moment, and only dancers trained in their art are able to improvise and still capture the attention of the public. Chief Judge Lippman asked this question during the argument: "Wouldn't you say that the most creative performers are often ones who don't have every move choreographed before they start, and that creative artistic people, particularly in the dance mode, certainly there are many instances of that - - - are kind of creative? They're designing their moves as they go along, although they have a whole repertoire of different moves that they might have. Isn't that couldn't that be ... artistic or choreographic? (Transcript p. 23-24)

Judge Smith wrote in his dissent that it would be absurd to suggest that the Legislature meant to tax improvised dance, but not choreographed dance, noting, however, that this was not what the Court of Appeals' opinion had stated.

Pole Dancing May Very Well Be Dancing After All

The Court of Appeals ruled against the petitioner. However, it can be argued that whether pole dancing or lap dancing is carefully choreographed, or improvised on the spur of the moment, it is still dance. Judge Smith wrote in his dissent that "[i]t does not matter if the dance was artistic or crude, boring or erotic. Under New York Tax Law, a dance is a dance" and regretted that the majority have "implicitly defined the statutory words "choreographic... performance" to mean "highbrow dance"" (Dissent p. 2).

Judge Smith continued by stating that, while he himself found this particular form of dancing "distasteful," he nevertheless thought of it as a dance under New York Tax Law. Such dance should not be taxed based on its level, or lack thereof, of cultural and artistic value. Doing so would be, according to Judge Smith, like taxing Hustler magazine, but not the New Yorker. Indeed, dance is speech, and thus protected by the First Amendment. Even nude dancing was recognized by the Supreme Court in 1975 in Doran v. Salem Inn, Inc.

Taxing exotic dancing, while exempting other types of dance is discrimination according to Judge Smith and thus would "surely be unconstitutional."

Tax Appeals Tribunal Decision: http://www.nysdta.org/Decisions/821458.dec.htm

New York Appellate Decision: http://decisions.courts.state.ny.us/ad3/decisions/2011/509464.pdf

Appellant's brief: http://www.andrewmccullough.org/pdf/Nitemoves.br1A.pdf

Transcript of the argument in front of the Court of Appeals:

http://www.nycourts.gov/ctapps/arguments/2012/Sep12/Transcripts/090512-157.pdf

Opinion of the New York Court of Appeals Decision , and Judge Smith's dissent:

http://www.nycourts.gov/ctapps/Decisions/2012/Oct12/157mem12.pdf

November 28, 2012

NYC Dance Response Fund Grants

Greetings from Dance/NYC:

In response to Hurricane Sandy and to early field testimony collected by Dance/NYC and its colleagues in service and grantmaking, the Mertz Gilmore Foundation has established a NYC Dance Response Fund to be administered by Dance/NYC, a branch of Dance/USA, the national service organization for professional dance.

This first NYC dance-specific investment in our city's recovery is being launched with a leadership commitment of $200,000 from the Mertz Gilmore Foundation.

Through strategic, immediate granting of low-dollar relief funds, the NYC Dance Response Fund will help the field to meet emerging needs and keep moving and lifting the spirits of our city. Of special value to the smallest and most economically fragile dancemakers, the initiative will complement arts-wide and geography-specific recovery efforts.

As an arts responder, Dance/NYC has been collecting stories as they come in and working with the wider arts service community to direct NYC dance artists to tools and resources to rebuild. Thank you to those of you who have shared your stories with Dance/NYC and participated in other survey efforts to make the case for funding.

Selection Process

NYC Dance Response Fund grants, from $1,000 to $5,000, will be awarded to New York City-based nonprofit organizations and fiscally sponsored projects of The Field, Fractured Atlas, New York Foundation for the Arts, New York Live Arts, and Pentacle focused on the creation or performance of dance. Successful applicants will have incurred identifiable costs due to Hurricane Sandy not otherwise covered by insurance or other sources, including:

• Unpaid artist fees (e.g., performance, rehearsal, or teaching fees cancelled as a result of suspended
activity);

• Travel expenses (e.g., unplanned airfare, lodging);

• Lost sales (e.g., returned event tickets, class fees, uncollected rental fees); and

• Property damage (e.g., costumes, sets, equipment, space) not covered by insurance.

Applications will be accepted and processed by Dance/NYC, in partnership with the Mertz Gilmore Foundation, on a first-come first-served basis until all funds are expended. Priority will be given to those who articulate a clear need for reimbursement to rebuild. These are discrete funds and will not impact other Mertz Gilmore Foundation giving priorities.

All applications should be submitted electronically to MGFDanceResponse@dancenyc.org and include: a one-page statement of need; documentation of identifiable costs; and proof of nonprofit or fiscal sponsorship status. Questions may be addressed to Leigh Ross at lross@dancenyc.org. For more information, visit dancenyc.org/resources/news.php?id=322.

Join the conversation on Twitter at @DanceNYC #sandydance.

Our thoughts are with you. Be well, and keep dancing.
Home • Calendar • Donate • Place Free Listings and Ads

A branch of Dance/USA, the national service organization for professional dance

218 E. 18th Street, 4th Floor (btw 2nd and 3rd Ave.) New York, NY 10003-3694

May 13, 2013

Athletes Fined Over Tweets in the U.S. and in Europe

By Marie-Andree Weiss

A British soccer player playing for the French Olympique de Marseille team, Joey Barton, was suspended last week over tweets directed at Thiago Silva, a Brazilian player from rival team Paris Saint Germain. The sentence was handed down by the National Ethics Committee of the French Soccer League which found, rather surprisingly, that calling a player an "overweight ladyboy" and asking whether he was "Pre-Op or Post-Op" were inappropriate but not homophobic. Barton also called Thiago Silva a "pussy" and a "FatBoy". Inappropriate indeed, and completely devoid of any sportsmanship.

Joey Barton has often voiced negative comments about fellow players on Twitter, using the micro-blogging site as a platform to broadcast his opinions to his two-million plus followers, making him one of the most successful athletes on social media.

Many Athletes Have Twitter Accounts

It is now common for athletes to have a Twitter account, but not all of them are as prolific as Barton, nor, fortunately, as rude. In the U.S., many NFL, MLB, and NBA athletes have Twitter accounts, and social media use is even encouraged by their professional associations. Several baseball teams are organizing social media nights, inviting fans to live tweet from the stadium and showcasing their tweets on big screens. Following the Twitter account of a favorite player allows fans to gain some understanding of his or her personality or to learn more about his or her involvement in charities, which in turn, benefit the overall public image of the team.

However, Twitter is not a placid media, and firing a 140-character message while angry is easy.

Fast Pitched Tweets

The Cy Young winner and star pitcher of the Tampa Bay Rays, David Price, two of his teammates, and one MLB empire were all fined $1,000 after an incident that happened on April 28th during a game against the Chicago White Sox. According to David Price, MLB umpire Tom Hallion told him, after calling one of his pitches a ball, "Throw the ball over the [expletive] plate." The Rays dugout reacted to whatever was said and Rays pitcher Jeremy Hellickson was ejected from the bench by Hallion.

Tom Hallion reacted after the game, telling the press that David Price was a liar, and that he had only told him to throw the ball. David Price reacted to that statement on Twitter, tweeting: "Think our entire dugout would ERUPT cause an ump told me to throw the ball over the plate? No, I'm sorry that wouldn't happen #accountability."
David Price is an enthusiastic Twitter user and he regularly posts from his @DAVIDprice14 account to his over 155,000 followers. He also posted on April 28th: "Someone give me the definition of a coward please" and "1. I am not a liar 2. I would not make that stuff up 3. My own dad doesn't speak to me that way 4. Again I am not a liar #accountability" and tweeted that teammate Jeremy Hellickson was ejected because he "[h]ad my back after what everyone in dugout heard what the ump said."

Jeremy Hellickson tweeted the same day from his Twitter account: "There's only one person lying about all this and his name starts with a T and rhymes with pom." Pitcher Matt Moore also tweeted on April 28th his opinion about what happened: "Lies! lies i tell you! RT @TBTimes_Rays: Umpire Hallion said to Price: "I said, "Just throw the ball." That's all I said to him'" and "Unbelievable someone would mis remember so quickly. Stay in your lane. Nobody cares what you have to say. #tom."

Why were the Rays players fined?

Social Media Policies of Sports Organizations

It was because their tweets had breached the MLB social media policy, first published in March 2012. The policy prohibits players from "[d]isplaying or transmitting [c]ontent that questions the impartiality of or otherwise denigrates a Major League umpire." The social media policy is enforced, and a player violating it may be disciplined by his Club or the Commissioner in accordance with Article XII of the Basic Agreement, which recognizes that a player may be subjected to disciplinary action for just cause.

The NFL and the NHL both have social media policies which prohibit players from tweeting during a game. The social media NFL ban starts 90 minutes before a game, and ends once the media interviews are over. The NHL Social Media Policy for League and Club Personnel, first issued in 2011, bans social media posts two hours before the start of a game until the end of all post-game media obligations. Players are advised to exercise good judgments before posting.

Social Media is Just Another Media

Lack of sportsmanship is not illegal, but defamation and invasion of privacy are. In that regard, social media is just another media. This was acknowledged by the International Olympic Committee Social Media, Blogging and Internet Guidelines for participants and other accredited persons at the London 2012 Olympic Games. It stated that social media posts "should at all times conform to the Olympic spirit and fundamental principles of Olympism as contained in the Olympic Charter, be dignified and in good taste, and not contain vulgar or obscene words or images," and noted that social media users can also be personally liable for any defamatory, obscene, or proprietary commentary, or commentary intruding upon the privacy of another. (http://www.olympic.org/Documents/Games_London_2012/IOC_Social_Media_Blogging_and_Internet_Guidelines-London.pdf )

Indeed, posting on Twitter that somebody is a liar or implying that somebody else is a transvestite may have legal consequences, regardless of whether one's employer has a social media policy. In the Joey Barton case, Thiago Silva and his Club had stated that they reserved their right to take legal action. Being called a 'liar' on social media is a cause of action for defamation in the U.S.

If anything, social media policies may play an educational role for all players, but especially for younger ones who may not have the resource of family guidance as they suddenly become famous. Watching their older colleagues be fined or benched over tweets may be the learning experience needed for the next generation (a/k/a next season) of athletes to demure their tweets.

August 25, 2013

New Rules Allow Crowdfunding Campaigns to Offer Profit Participation

By Adam Beasley

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

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

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

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

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

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

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

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

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

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

September 16, 2013

Are Strip Club Entertainers Employees?

By Kim Swidler

Last week the news was filled with eye catching headlines declaring that "New York strippers now have labor rights".

The articles concerned a Southern District decision on cross-motions for summary judgment regarding a class action that had been commenced by several exotic dancers, also known as entertainers, who had performed at Rick's Cabaret International Inc. (Rick's), a strip club located in Manhattan (Matter of Sabrina Hart et al v. Rick's Cabaret International Inc., No. 09cv3043, U.S. District Court for the Southern District of New York 2013).

The dancers asserted that they were employees of Rick's, and alleged violations of the Fair Labor Standards Act (FLSA) as well as the New York Labor Law (NYLL) and regulations promulgated thereunder by the New York State Department of Labor. The requested damages included minimum wage payments.

Rick's countered, in part, that the plaintiffs had at all times worked as independent contractors and, therefore, fell outside the coverage of FLSA and NYLL. However, based upon the evidence presented, Judge Paul A. Engelmayer disagreed and found that the dancers had, in fact, been employees of that entity.

As in other New York labor related matters, a major factor in making this determination concerning the issue of employer-employee relationship was the degree of direction and control that Rick's exercised over the plaintiffs.
As an example, in those controversies where there is a request for worker's compensation benefits, the court has held that the relevant factors in finding an employer-employee relationship include the right to control the work, set the schedule, the method of payment, the furnishing of equipment, the right to discharge and the relative nature of the work (Matter of Bugaj v Great Am. Transp. Inc., 20 AD3d 612 [ 2005]). No single factor is deemed dispositive, and the decision may be based on any one or a combination of the relevant factors (Matter of Gregg v Randazzo, 216 AD2d 747 [1995]).

In this case, Judge Engelmayer found that Rick's club-imposed written guidelines carried numerous restrictions that helped demonstrate that an employer-employee relationship had existed. The entertainers were forbidden to chew gum, have a bad attitude, use cell phones while on the [dance floor] or use public restrooms. The Judge also noted that the guidelines addressed the hours at which dancers could be scheduled to work, restrictions concerning tattoos, procedures for checking in and checking out, the range of fees that dancers were required to pay, appearance and dress, and the method and manner in which dancers could dance.

A spokesperson for Rick's has stated that it will appeal this finding and that the subject guidelines are no longer in effect.

The court's decision may also create other consequences for the owners of establishments such as Rick's. The workers' compensation laws require employers to obtain proper workers' compensation coverage for those who are designated as their employees. Failure to do so might result in various negative ramifications, including a fine of $2,000 for every 10 days of noncompliance. The business may also be shut down pursuant to a Stop Work Order until proof of proper coverage has been obtained. Furthermore, an injured employee might expose the uninsured entity to liability for medical and compensation awards.

So should all exotic dancers now be considered employees within the definition of the NYLL? That decision will still be made on a case by case basis. The burden of proof is on the claimant to prove an employer-employee relationship, and not all exotic dancers have been as successful. In Matter of Gallagher's 2000, 2013 NY Wrk 0511882, the claimant, also an exotic dancer, sustained an injury when she was kicked in the face by another dancer during a performance. Using the above noted factors, the New York State Workers' Compensation Board (the Board) held that the dancer was not an employee and disallowed the claim. The Board considered, among other factors, the fact the claimant received no remuneration and that she retained the discretion to decide which days she would work.

The opinion, views, and statements set forth in this post do not represent the views of the NYS Workers' Compensation Board.

October 4, 2013

The Supreme Court's New Copyright Case Is Not a Copyright Case

By Adam Beasley

On Tuesday, the Supreme Court granted certiorari in a number of cases it has agreed to decide during this term. One such case, Petrella v. Metro-Goldwyn-Mayer, No. 12-1315, asks the Court to interpret the Copyright Act. SCOTUS rarely takes copyright cases, so it is understandable why copyright geeks, like myself, might become giddy at the possibility of a new groundbreaking decision. However, a closer look at the case itself reveals that Petrella, which comes to the Court on appeal from the Ninth Circuit, does not actually involve a copyright issue. Instead, the Court is being asked to resolve a Circuit split over the relationship of federal statutes of limitation to the common law laches defense -- a decision likely to require a meticulous interpretation of separation of powers issues rather than questions of creativity or authorship.

The plaintiff is Paula Petrella, the daughter of deceased author and screenwriter Frank Petrella a/k/a Peter Savage. In the 1960's, Frank Petrella wrote a book and several screenplays about former boxing champion and Petrella's childhood friend Jake LaMotta. The Petrella screenplays became the basis for the highly successful movie Raging Bull, starring Robert De Niro, who earned a Best Actor Oscar for his role playing LaMotta in 1981, and directed by Martin Scorsese, who received a Best Director nomination. The defendants claim to own the rights to Raging Bull.

The lawsuit asserts that because Mr. Petrella died in 1981, before the original term of the copyright grant expired, the rights to the screenplays reverted to his heirs. See Stewart v. Abend, 495 U.S. 207, 219 (1990). Paula Petrella, who claims to own her father's reversion rights, began contacting MGM about her potential claim in the mid-1990s. Unfortunately, she waited over a decade -- 18 years according to the defense -- before bringing her claim in 2009. The suit for copyright infringement, unjust enrichment and an accounting names MGM and it subsidiaries as well as United Artists and 20th Century Fox as defendants.

On August 29, 2012, the Ninth Circuit affirmed a decision of the District Court for the Central District of California granting summary judgment to the defendants, holding that Ms. Petrella's claims were barred by the "equitable doctrine of laches." http://cdn.ca9.uscourts.gov/datastore/opinions/2012/08/29/10-55834.pdf The Ninth Circuit opined that the laches defense could bar the lawsuit regardless of whether the claim is brought within the explicit three year statute of limitations contained in the Copyright Act.

The plaintiff argued in her petition for certiorari http://sblog.s3.amazonaws.com/wp-content/uploads/2013/08/Petrella-v-MGM-filed-cert-petn-w-app.pdf that there was a Circuit split concerning whether the laches defense could shorten a statute of limitations provision contained in a federal statute. Now, the Supreme Court is prepared to decide the issue.

The laches defense is a doctrine grounded in equity that bars a suit from proceeding if the plaintiff "sleeps on its rights" and waits too long before bringing a claim. Courts determining whether the defense applies consider the amount and reasonableness of the delay and whether the defendant has changed its position as a result.

Historically, laches has yielded to federal statutes of limitation. As Lord Redesdale wrote in the archaeological discovery Hovenden v. Annesley, 2 Sch. & Lef. 607, 629-30 (1806), "I think it is a mistake in point of language to say that Courts of Equity act merely by analogy to the statutes; they act in obedience to them. ... I think, therefore, courts of equity are bound to yield obedience to the statute of limitations upon all legal titles and legal demands, and cannot act contrary to the spirit of its provisions."

The Ninth Circuit, which has long been accused of broad "hostility to copyright plaintiffs -- specifically, creators filing suit against conglomerates within the entertainment industry," http://sblog.s3.amazonaws.com/wp-content/uploads/2013/08/CSEL-cert-amicus-brief.pdf disagreed, finding the claim barred without an analysis of the defense's relationship to the Copyright Act's three year statute of limitations. 17 U.S.C. § 507(b). Section 507(b) states that "No civil action shall be maintained under the provisions of this title unless it is commenced within three years after the claim accrued." Since the defendants continue to exploit the film, the statute of limitations has not expired.

The case may also give the Supreme Court the opportunity to revisit its 1990 decision Stewart v. Abend, 495 U.S. 207, which established the "Abend Rule", concerning the distribution of a derivative work during the copyright renewal period of the underlying work. The Abend court held that when an author dies before a renewal period begins, his or her statutory successors are entitled to renewal rights, even when the author has previously assigned those rights to another party. Abend, 495 U.S. at 219. As Ms. Petrella's father died in 1981 during the original 28 year term of his copyrights, his renewal rights in the screenplays to Raging Bull reverted to his heirs.

However, the Supreme Court is expected to focus on the separation of powers issues involved in the case, specifically whether the laches defense can bar a civil copyright lawsuit within the express three year statute of limitations provision in Section 507. A decision narrowly focused on this issue would have far reaching affect outside the copyright context to any federal statute with an express limitations period, making this copyright case hardly a case about copyright.

Adam Beasley is an entertainment and intellectual property attorney in New York City. He can be reached at www.adambeasleylaw.com. A previous version of this post can be found at http://adambeasleylaw.com/supreme-courts-new-copyright-case-copyright-case/.

November 2, 2013

2013 Entertainment Business Law Seminar Presented by CMJ & EASL

By David Jacob, Esq.
Marc Jacobson, P.C.

Collective Versus Direct Digital Licensing

The first panel of the day featured speakers with varying perspectives as to whether copyright owners are better off having the Performance Rights Organizations (PROs) collectively license their performance rights for new media or negotiate the deals directly themselves. Marc Jacobson of Marc Jacobson, PC led the discussion, which featured representatives from Spotify, Sound Exchange, music publishers and an economist.

James Duffet-Smith, Head of Licensing Business Affairs for Spotify, stated that from its point of view, direct licensing makes sense when dealing with recordings because of the way the transaction is handled. The labels deliver recordings, which Spotify is able to match in its system, and track and pay out directly based on the number of plays. However, in the context of music publishing, there is not any content actually changing hands. A publisher does not deliver any actual recordings, and it is more difficult for companies in Spotify's position to pay out the many songwriters or publishers that could be involved in a particular song in a particular territory. The problem is the lack of a central database upon which everyone can rely for intellectual property ownership information.

One thing that everyone seemed to agree on, which was also reiterated later in the day by keynote speaker David Israelite, CEO and President of the National Music Publishers Association, Inc., is that the PROs are doing as good a job as can be expected; although they are working in a broken system that needs to be updated in the digital age. The panel suggested that one way to do this is to adjust how the consent decree operates, or remove it altogether. The consent decree limits a PRO's ability to exploit the full value of its catalog, and is the main reason why publishers are attempting to withdraw their new media rights from the PROs. It was suggested that having the publishers involved in the rate court process could be one way to have all parties properly represented throughout the process.

Film Finance: It's To Your Credit: Getting the Full Use of Tax Credits for Film Production

This panel gave an overview of how New York State offers film tax credits. New York has made great strides over the last decade to get more talent and production into the State for various types of productions. As one of the speakers pointed out, there was once a time where most films would go to Toronto and Montreal to film "New York" scenes, simply because their tax credits were more attractive to the producers.

New York City's efforts to change this trend have been extremely successful, as 2012 was the busiest year yet, with 26 prime time episodic shows produced in NYC, along with 162 films and more than 160 TV shows. The entertainment industry now employs over 130,000 New Yorkers, and contributes $7.1 billion to the city's economy.

In addition to focusing on attracting film productions to New York, efforts have also been made to increase commercial productions and post-production services. Generally speaking, a producer can receive transferable tax credits of up to 30% for qualified film production or post-production costs, or 20% of qualified production costs for commercials.

Ethics: The Law of Anyplace: Ethical Considerations of Lawyering Without Borders (Virtual Practices, Outsourcing, Technology)

Professor Stephen Gillers, Elihu Root Professor of the New York University School of Law, led the ethics discussion for the day. His presentation focused primarily on the ability for an attorney to represent clients in other states and at what point does this amount to "practicing law" in a state in which one may not be licensed to practice. Technology has made it very easy for an attorney to provide legal services from almost anywhere in the world, and the lines are becoming blurred as to when one may commit malpractice.

The logic that one can represent a client in another state as long as the attorney stays at his or her computer in a state in which the attorney is licensed seems to be dated. If that same attorney goes to meet his or her client and offers legal services and advice directly in that state, then he or she may be committing malpractice by performing the unauthorized practice of law.

Professor Gillers also argued that the bar exam and general law school curriculum might be a poor approach to evaluate how fit an attorney is to practice law. Most attorneys are fairly specialized in the type of law in which they practice. Furthermore, while an attorney may be licensed to practice law in New York, it doesn't mean that he or she is fit to practice any type of law. As an ethics attorney in New York, Gillers is licensed to practice any type of law, but he would still be committing malpractice by representing a client in a specific field in which he is not familiar or competent. Alternatively, he questioned that as an attorney who specializes in copyright law, which is federal law and the same in every state, what is the point of requiring that the attorney be licensed in every state in which he or she actively practices?

Changing the Channel: Recent Cases and Developments Redefining the Television Landscape

Much of this panel focused on the ongoing controversy surrounding the Aereo lawsuits. The panel focused on Aereo's attempts to circumvent the copyright laws by claiming that its service does not constitute a public performance. Rather, Aereo claims that each transmission is a private performance, because each user has its own specific antenna that transmits a unique copy of specific content directly to an individual user. This argument comes from the Cablevision rulings, which the panel stressed, are being exploited in ways that can be very detrimental to the entire broadcasting industry and content owners.

As Rick Stone, partner at Jenner & Block, included in his presentation, Aereo threatens revenues from retransmission fees and has the potential to completely collapse the broadcast TV model as we know it. He went on to discuss two main mistakes made by the Cablevision ruling. First, the Cablevisioncourt ruled that a transmission is in itself a performance, and consequently, it becomes necessary to determine who is capable of receiving each particular transmission. Stone argued a public performance could consist of multiple transmissions to different places at different times, and that it was the court's focus on the individual transmission of a unique copy that was Cablevision's second mistake. Stone stated that Cablevision tried to distinguish each transmission and decide if any individual transmission would amount to a public performance. However, Stone clarified that the Transmit Clause in question makes no mention of "copies" or "master copies", but rather the statute simply focuses on whether a "work" is transmitted.

The panel was hopeful that the Supreme Court would hear this case in the near future and distinguish or overrule the Cablevision ruling to further protect the rights of distributors and content owners. If the courts uphold the Aereo business model, it essentially creates a roadmap for copyright infringement.

Sync or Swim: Licensing Music for Film/TV/Video Games in a Digital World

This panel focused on some of the basic factors to keep in mind when dealing with synchronization licensing. This segment of the music industry has become a reliable source of income as well as an important tool for breaking artists. TV shows, commercials, video games and movies all present different obstacles in placing and negotiating a song in such a project.

For TV shows, Jeff Brabec, Vice President Business Affairs at BMG Chrysalis/BMG Rights Mangagement, spoke about the different strategies that certain shows will take in order to negotiate the best deals. Some of the music-oriented shows, such as "American Idol" and "Dancing With the Stars", will employ a standard license that pays all songs the same rate based on the amount of time the song is used. These shows are essentially a "take it or leave it" license that allows no room for negotiation. The standard license for most TV shows includes media rights to the effect of "all media now known or hereafter devised" and a term of "in perpetuity." However, Brabec was quick to point out that as a publisher, he can only grant the rights to what he controls. As such, he will always cross out "in perpetuity" and simply write "for life of copyright."

The panel also focused on scoring and licensing music for video games. In this context, most people will think of games like Guitar Hero and NBA2k13 (music supervised by Jay-Z). However, in the grand scheme of video games, the music is normally one of the last things to be added. Very few games will provide for a large budget for music unless it is to be a major focus of the game. Even games like Grand Theft Auto that let users control a number of different radio stations throughout the game still have relatively small music budgets compared to the overall budget of the production. Most of the time, composers will be added at some point near the end of the game development and will use storyboards and screen shots to begin scoring a soundtrack that will be used in various scenes.

Chris Hajian, the lone composer on the panel, spoke about the different projects in which he has been involved and the types of work-for-hire contracts he has become accustomed to signing. However, he also shared some words of caution that there are still many artists and composers who are taken advantage of because they don't know the value of their own works and the long-term royalties that can be generated after the licenses. His advice for up-and-coming composers was to read the contracts and understand the rights that are being signed over. His one horror story was from a colleague of his from years ago that scored a nice little jingle and was convinced to sign it over as a work-for-hire for a new TV show. By doing so, this composer gave up any future royalties in the song and only received the fairly small upfront licensing fee. It just so happened that this song became the theme song for a fairly successful TV show that you might have heard of..."The Price Is Right".

Copyright 2013

The last panel of the day focused on recent developments surrounding intellectual property law. Notably, the panel touched on the Cablevision/Aereo controversy and the court's focus on the potential audience of a particular transmission, rather than the potential audiences, of the underlying work. While the Second Circuit has focused on this analysis, the Ninth Circuit has focused more on the transmission of the underlying work, which could lead to a Circuit split.

Another interesting topic of this panel was the discussion of the First Sale Doctrine and how it is applied in the digital context. The panel first touched on the conflict between the First Sale Doctrine and the limitations on the unauthorized importation of copyrighted material. The Supreme Court ruled earlier this year that the First Sale Doctrine trumps the importation limitation and does apply to foreign manufactured goods that are lawfully made (Kirtsaeng v John Wiley & Sons, Inc.).

The First Sale Doctrine discussion continued with a summary of the recent Capitol Records v ReDigi decision. ReDigi is an online marketplace for used digital music. Its software would analyze a user's music files and allow the upload and sale of such files. Upon each sale, the ReDigi software would erase the seller's copy of the music on the user's hard drive. The key factor that killed this service was the process of uploading a seller's music files to ReDigi's "cloud locker." This process created unauthorized reproductions of the works. Although ReDigi argued the First Sale Doctrine protected it, the courts disagreed because the service violated the copyright owner's exclusive reproduction right. Within this decision the court strongly rejected the expansion of the First Sale Doctrine to cover digital files.

December 1, 2013

Alls GoldieBlox, Inc. Really Wants is Fair Use? Or is it?

By Justin Joel

On November 21st, GoldieBlox, Inc. (GoldieBlox) filed a complaint (http://www.scribd.com/doc/186402972/Beastie) with the United States District Court for the Northern District of California seeking a declaratory judgment that its promotional video did not infringe the copyrights in the Beasties Boys' song "Girls" and was a fair use. The resulting transgressions have prompted an interesting discussion about fair use, each party's handling of the situation, and GoldieBlox's underlying motives for filing the complaint.

Background

GoldieBlox, a toy company, was "founded upon the principle of breaking down gender stereotypes, by offering engineering and construction toys specifically targeted to girls." In furtherance of this goal, the company utilizes a series of promotional videos depicting girls engaged in so-called "nontraditional" activities. GoldieBlox's most recent video depicts three girls who choose to construct a complex Rube Goldberg mechanism instead of dressing up as princesses. The video was set to the Beastie Boys' song "Girls" with modified lyrics. A portion of the pertinent lyrics in Beastie Boys' version of the song are: "Girls - to do the dishes / Girls - to clean up my room / Girls - to do the laundry / Girls - and in the bathroom / Girls, that's all I really want is girls." GoldieBlox's video replaced these lyrics with: "Girls - to build the spaceship / Girls - to code the new app / Girls - to grow up knowing / That they can engineer that / Girls. That's all we really need is girls."

GoldieBlox seeks Declaratory Judgment

GoldieBlox alleges in its complaint that the Beastie Boys acted first "by threaten[ing] GoldieBlox with copyright infringement." The Beastie Boys later claimed that they were "simply ask[ing] how and why [the Beastie Boys'] song 'Girls' had been used in [GoldieBlox's] ad without [the Beastie Boys'] permission."

In response to the alleged threats, GoldieBlox filed a complaint with the United States District Court for the Northern District of California seeking a declaratory judgment that its video did not infringe the copyrights in the Beastie Boys' song "Girls" and was a fair use. GoldieBlox also sought an injunction to prevent the defendants, Island Def Jam Music Group, Brooklyn Dust Music, the Beastie Boys, Sony/ATV Music Publishing Group LLC, Universal Music Publishing, Inc., Rick Rubin, and Adam Horovitz from "any efforts to enforce any copyright in Girls against the GoldieBlox Girls Parody Video, including through the use of DMCA takedown notices or otherwise."

Fair Use?

To determine whether GoldieBlox made a fair use of the Beastie Boys' song in its video, the court would consider at least the four factors contained in Section 107 of the Copyright Act: (i) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (ii) the nature of the copyrighted work; (iii) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (iv) the effect of the use upon the potential market for or value of the copyrighted work.

Most of the discussion surrounding the dispute has focused on the first fair use factor. It seems clear that despite its underlying social message, GoldieBlox's video has a commercial purpose. GoldieBlox is a toy company that uses its videos to promote and sell toys. In an open letter response to GoldieBlox's action, the surviving members of the Beastie Boys, Michael "Mike D" Diamond and Adam "Ad-Rock" Horovitz, stated that while they "were very impressed by the creativity and the message behind [the] ad . . . make no mistake, your video is an advertisement that is designed to sell a product, and long ago, we made a conscious decision not to permit our music and/or name to be used in product ads." In addition, the late Adam "MCA" Yauch's will prohibits use of his "image or name or any music or any artistic property created by me . . . for advertising purposes."

However, "the commercial or nonprofit educational purpose of a work is only one element of the first factor enquiry into its purpose and character." Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 584 (1994). The fact that the alleged infringing use is of a commercial character does not in itself prevent a fair use finding, nor is the use's commercial nature dispositive as to the first factor. Id. at 584-85.

Rather, "the central purpose of this investigation is to see . . . whether the new work merely 'supersede[s] the objects' of the original creation, or instead adds something new, with a further purpose or different character, altering the first with new expression, meaning, or message; it asks, in other words, whether and to what extent the new work is 'transformative.' Although such transformative use is not absolutely necessary for a finding of fair use, the goal of copyright, to promote science and the arts, is generally furthered by the creation of transformative works. Such works thus lie at the heart of the fair use doctrine's guarantee of breathing space within the confines of copyright, and the more transformative the new work, the less will be the significance of other factors, like commercialism, that may weigh against a finding of fair use." Id. at 579.

GoldieBlox's main argument in support of its fair use claim is that its video is a parody. The Supreme Court has recognized a distinction between parody and satire, and this distinction would likely weigh heavily in a court's decision as to whether or not GoldieBlox's video is a fair use. A parody, for purposes of copyright law, is "the use of some portion of a work in order to 'hold it up to ridicule,' or otherwise comment or shed light on it." Henley v. DeVore, 733 F.Supp.2d 1144, 1151 (C.D. Cal. 2010). Whereas the copyrighted work is the target in a parody, the copyrighted work is merely a vehicle to poke fun at another target in a satire. Dr. Seuss Enters. v. Penguin Books USA, Inc., 109 F.3d 1394, 1400 (9th Cir. 1997). The Supreme Court has recognized that parody has a stronger claim to fair use than satire. "If . . . the commentary has no critical bearing on the substance or style of the original composition, which the alleged infringer merely uses to get attention or to avoid the drudgery in working up something fresh, the claim to fairness in borrowing from another's work diminishes accordingly (if it does not vanish), and other factors, like the extent of its commerciality, loom larger. Parody needs to mimic an original to make its point, and so has some claim to use the creation of its victim's (or collective victims') imagination, whereas satire can stand on its own two feet and so requires justification for the very act of borrowing." Campbell, 510 U.S. at 580-81. However, the Supreme Court also stated that: "the use . . . of a copyrighted work to advertise a product, even in a parody, will be entitled to less indulgence under the first factor of the fair use enquiry than the sale of a parody for its own sake . . ." Id. at 585.

GoldieBlox argues that its video is a parody, "with specific goals to make fun of the Beastie Boys song, and to further the company's goal to break down gender stereotypes and to encourage young girls to engage in activities that challenge their intellect, particularly in the fields of science, technology, engineering and math." According to GoldieBlox, in "Girls'" lyrics, "girls are limited (at best) to household chores, and are presented as useful only to the extent they fulfill the wishes of the male singers." GoldieBlox claims that its video "takes direct aim at [Beastie Boys'] song both visually and with a revised set of lyrics celebrating the many capabilities of girls."

Most Recent Developments:

On November 27th, GoldieBlox removed the original version of its video that utilized the Beasties Boys' song with modified lyrics from its website. The company replaced the video with one with similar music, but no lyrics. GoldieBlox also issued a statement offering to withdraw its complaint if the Beastie Boys' lawyers made no further threats against the company. However, GoldieBlox reiterated that it still believed that the video was a parody and a fair use. As of this writing, the Beastie Boys have yet to issue a response. However, at least one commentator is speculating that the Beastie Boys will request a sincere apology and a charitable donation. Some have speculated that GoldieBlox only filed the complaint in order to bring attention to its company for the holiday shopping season. Stay tuned, as this situation is clearly still developing.


December 21, 2013

Daniel v. Goliath: Photographer Daniel Morel Awarded $1.2 Million for Copyright Infringement from Photo Agency Giants AFP and Getty

By Barry Werbin and Laura Tam, Herrick, Feinstein LLP

On November 22, 2013, a federal jury ordered Agence France-Presse (AFP) and Getty Images (Getty) to pay a whopping $1.2 million to Daniel Morel (Morel), a freelance photojournalist, for their unauthorized use and distribution of eight photographs Morel had posted to Twitter. The jury determined that AFP and Getty had willfully violated the Copyright Act and the Digital Millennium Copyright Act (DMCA) when they widely disseminated Morel's photographs of the devastation of the 2010 Haiti earthquake without his permission. Morel asserted that AFP and Getty had infringed on a number of exclusive rights granted by 17 U.S.C. § 106, including the rights of reproduction, public display and distribution.

On January, 12, 2010, hours after a devastating earthquake struck Haiti, Morel took photographs of the aftermath and posted them to Twitter through a TwitPic account. The photographs were reposted by Lisandra Suero (Suero) and were picked up by the AFP and uploaded to its database. The images, however, were wrongly credited to Suero. The AFP then transmitted the photos to Getty, since the stock agencies had a license agreement with reciprocal rights to license each other's images. From there, the photographs were published on Getty's website, and numerous clients, including The Washington Post, licensed and published the images. Soon thereafter, the agencies realized their mistake, issuing kill notices for Morel's photographs and alerting subscribers of the copyright issue. While Morel's images from the AFP's database were removed after the issuance of the kill notice, Morel's photographs that had been attributed to Suero remained on Getty's website until February 2, 2010, when they were finally removed.

The AFP initiated legal action by filing a lawsuit against Morel in March 2010, seeking a declaration that it had not infringed Morel's copyrights in the images. In response, Morel filed counterclaims against AFP, Getty and The Washington Post for willful infringement.

On January 14, 2013, the Southern District of New York granted Morel's motion for summary judgment, finding that AFP, Getty and The Washington Post were liable for direct copyright infringement. The Washington Post later settled with Morel for an undisclosed amount. The court rejected the stock agencies' affirmative defenses, including that (1) by posting the photos on Twitter, Morel had granted AFP a license to use his images, (2) Getty was entitled to the benefit of the DMCA safe harbor provision, and (3) Getty had not engaged in volitional conduct to impose liability.

First, the court determined that the Terms of Service of Twitter or TwitPic did not grant the AFP a license to sell and distribute Morel's photographs. Pointing to specific language in the Terms of Service, which provided that "[y]ou retain your rights to any Content you submit, post or display" and "what's yours is yours -- you own your own content," the court determined that the AFP was not a third party beneficiary to the Terms of Service and therefore not insulated from liability.

Second, the court rejected Getty's argument that it was protected by 17 U.S.C. § 512(c)(1), the safe harbor provision of the DMCA for service providers. The court noted that "an entity that is directly licensing copyrighted material online is not a 'service provider.'"

Finally, the court also rejected Getty's argument that it had not taken affirmative acts to violate Morel's copyrights. The court stated that there were genuine disputes of fact on this issue, since a jury could infer that Getty took volitional acts to distribute Morel's photographs in violation of his copyrights, including entering into a license agreement with AFP, setting a price for the photographs, and maintaining the website on which the images were displayed. After the court granted summary judgment to Morel, the case proceeded to trial on the sole determination of damages.

The jury awarded Morel $1.2 million, $150,000 for each of the eight photographs that were infringed, which is the maximum amount of statutory damages available under 17 U.S.C. § 504(c)(2). The jury also determined that AFP and Getty had violated the DMCA a total of 16 times under 17 U.S.C. §§ 1202(a) and 1202(b), and awarded Morel $20,000 in total for the 16 violations; however, that DMCA award is under dispute because the DMCA's statutory damages provisions provide for a minimum award of $2,500 per violation. Morel's attorneys thus argued in a letter to the court in early December 2013 that the minimum DMCA statutory award for Morel must be $40,000.

The landmark decision is one of the first cases to address the commercial use of content posted by individuals through social media, but it certainly won't be the last. A copy of the January 14, 2013 decision is available here: http://www.scribd.com/doc/120501947/AFP-v-Morel-10-Civ-02730-AJN-S-D-N-Y-Jan-14-2013.

January 8, 2014

Capitol Records, LLC et al. v. Vimeo LLC et al., case number 1:09-cv-10101, (SDNY)

Blurb adapted from a report by Andrea Calvaruso

On January 2nd, Judge Ronnie Abrams of the SDNY ruled to allow Vimeo LLC (Vimeo), a video-sharing service, to file an immediate appeal with the Second Circuit regarding whether the DMCA safe harbor for copyright infringement covers pre-1972 recordings covered by state copyright law. Vimeo's questions regarding what constitutes red flag knowledge were also certified.

The court rejected the right to appeal of the other questions regarding the DMCA safe harbor mid-case, including Vimeo's repeat infringer policy, whether it was willfully blind and "right and ability to control "the allegedly infringing activity, whether it acted with "willful blindness" and whether it had a repeat infringer policy in place.

The Judge Abrams also allowed the plaintiffs to amend the complaint to add more claims of infringement, finding the amendment timely.

January 11, 2014

Bad Lawyering On "The Good Wife": Setting The Record Straight On Music Publishing Law

By Eric S. Goldman
http://ericgoldmanesq.com/blog/

Even though I'm not usually a fan of shows featuring lawyers, I am a big fan of "The Good Wife". So when "The Good Wife" ran an episode entitled David And Goliath that delved deeply into my legal wheelhouse, I was excited. The show was all about copyright law and music publishing, and I've been an entertainment lawyer for 20ish years. Yet as the episode unfolded, I kept finding myself saying: "Wait a minute, that's not right. That's not how the law works."

Things started out well, because the fact pattern was pretty interesting. Two little known singer/ songwriters recorded a pop version of a rap song entitled THICKY TRICK. Basically, the pop version took the entire song lyric from the rap song, slowed down the tempo and added a bubble gum melody. The singer/ songwriters thought that the pop treatment highlighted how ridiculous the lyrics were. The pop treatment of the song was then performed on a "Glee"-style television show. After the show, the pop version of the song became a top seller on iTunes, generating millions of dollars in sales.

The issue was: could the singer/ songwriters sue the television show for copyright infringement over the misappropriation of a song they did not write?

Sadly, things rapidly went downhill. The episode touched on a number of copyright and music publishing issues, and pretty much got them all wrong.

1. Compulsory License. First, a little background. The U.S. Constitution laid the groundwork for modern copyright law in Article 1, Section 8, Clause 8, which reads "To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries". In other words, a copyright is a man-made bargain - authors give the public access to their work, and the authors get a state-mandated monopoly on the exploitation of that work.

In the music publishing world, a license of the right to record a song is called a mechanical license. The basic copyright bargain found in the Constitution has led to a compulsory mechanical licensing scheme. Artists can record and distribute their music, provided that anyone else can record and distribute new versions of that music by obtaining a government-mandated mechanical license. In other words, the government tells artists that the liberal licensing of their works is "compulsory."

In "The Good Wife", the manager for the singer/ songwriters obtained a compulsory mechanical license because he wanted to do the simplest thing. The problem is, no one in the music industry uses compulsory licenses because they are unduly burdensome. Insert joke about government-run programs here.

Compulsory licenses have vigorous accounting and record keeping requirements - the costs of complying with the terms of a compulsory license usually exceed the income generated by the use of the licensed song. So pretty much everyone in the industry obtains mechanical licenses for previously recorded songs from record labels and music publishers, who are in the business of granting those licenses and grant them pretty freely.

Mistake Number One: It would have been far easier and cheaper to get a mechanical license for the rap song from the music publisher or record label than it would have been to obtain and comply with a compulsory mechanical license.

2. Derivative Copyright. The lawyers on "The Good Wife" spent a fair amount of time running around trying to obtain a derivative copyright in the covered rap song. However, there is no such thing as a derivative copyright.

There is such a thing as a derivative work. A derivative work is a new work based on a pre-existing work. When someone produces a Broadway musical version of a film, the Broadway musical is a derivative work. There is also copyright in a derivative work. That Broadway musical qualifies for all of the protections available under copyright law as an original work of authorship. Yet there is no such thing as a derivative copyright.

The basic issue on the show was that the singer/ songwriters incorporated a new melody into the rap song. All of the lawyers on the show accepted without question the proposition that incorporating a new melody into the rap song made the cover version a derivative work. In order to create a legal derivative work, the singer/ songwriters would have had to obtain an underlying rights agreement giving them permission to create a new pop song based on the original rap song.

However, was the cover version a derivative work based on the rap version? Maybe not.

The singer/ songwriters obtained a compulsory mechanical license in the rap song. A mechanical license to record a previously recorded song, compulsory or otherwise, includes the right to make a new arrangement of that song to the extent necessary to conform it to the style or manner of interpretation of the performance involved. An arrangement can be defined as chord progression, harmonies, accompaniment rhythm and musical fill phrases which define the style and feel of a song.

It's not clear whether, by incorporating a new melody line, the singer/ songwriters created a derivative work, which was beyond the scope of their compulsory mechanical license, or merely created a new arrangement which would be within the scope of their license.

Mistake Number Two: There is no such thing as a derivative copyright. There is such a thing as copyright in a derivative work, and there is such a thing as an underlying rights agreement which grants permission to create a derivate work.

Mistake Number Three: It is not a foregone conclusion that incorporating new music into a song creates a derivative work. It is a question of fact whether the changes are merely a permitted new arrangement.

3. Satire. The lawyers for the singer/ songwriters, including The Good Wife herself, argued that the cover version was a satire of the rap version. Such assertion confused satire with parody, and then misapplied the parody defense to a copyright infringement claim.

A satire misappropriates material protected by copyright in order to comment on society as a whole. A parody misappropriates material protected by copyright in order to comment on the copied material. In Campbell v. Acuff-Rose Music, Inc., 510 US 569 (1994), the Supreme Court reasoned that, because of this distinction, it was much easier for a parody to qualify as a fair use than it is for a satire.

In this instance, the singer/ songwriters were intentionally making fun of the song they copied, as well as rap music in general. So, rather than arguing satire, the singer/ songwriters' lawyers should have been arguing parody, as parody was the stronger (and more accurate) defense.

That being said, this cover song took the entire lyric from the underlying rap song. While a parody may take enough from the original work in order to conjure up that original work in the minds of the audience, a parody may not take the entire original work.

Mistake Number Four: The best available defense was that the cover song was a parody, not that it was a satire.

Mistake Number Five: The parody cover song probably used too much of the original rap song to qualify as a fair use, since it took the entire lyric.

4. Master Recording Copyright. The dispute between the singer/ songwriters and the television show ultimately hinged on one thing. The TV show's version of the song included very specific background noise - bowling balls hitting pins. And the singer/ songwriters' version of the song was recorded in a bowling alley. Which proved that the television show actually broadcast the singer/ songwriters recording.

Lawyer Alicia Florrick noted: "That's just theft." Yes, but theft of what?

The lawyers had been arguing that the TV show stole the singer/ songwriters' song, violating the copyright in that song. Yet the case was resolved when it was demonstrated that the TV show stole the master recording of the singer/ songwriters' song, violating the copyright in the master recording.

This is a tricky concept. An MP3 recording of a song incorporates two copyrights. The first is the copyright in the song. The second is the copyright in the master recording of the song. If you want to make a new recording of the song itself, you get a mechanical license, compulsory or otherwise. If you want to use the specific master recording of the song incorporated into the .mp3 file, you have to get a master use license.

This distinction between the copyright in a work of art and the copyright in the physical copy of that work of art plays out in odd ways. For example, I own several original oil paintings. While I have the right to display the physical copies of those paintings in my possession, I do not have the right to make and sell copies of those paintings. The right to make and sell copies remains with the artists.

Why is this important in our episode? It is because while there was a lot of talk about whether or not the singer/ songwriters were entitled to a copyright in their cover version of the original rap song, there was absolutely no discussion about who owned the copyright in the master recording of the cover song. All parties concerned simply assumed that the singer/ songwriters owned the copyright in the masters.

The thing is, the artist almost never owns the copyright in master recordings. The label usually owns the copyright in the master recordings, because the label supplies the recording equipment and personnel necessary to create them. Here, the master recording was created in a bowling alley owned by an unidentified party, using recording equipment and people provided by an unidentified party. It's entirely possible that the singer/ songwriters don't own the copyright in the master recording of their cover song. Which means that the happy ending in the episode may be very, very short-lived.

Mistake Number Six. The lawyers did not distinguish between the copyright in the song and the copyright in the master recording of the song.

Mistake Number Seven. The lawyers assumed that the singer/ songwriters owned the copyright in the master recording of the songs.

Fortunately for all parties concerned, I don't think most people watch "The Good Wife" for its realistic portrayal of the legal profession. On the show, first year lawyers spend a lot of time in court; associates have reasonable expectations of making partner in their fourth year; litigators routinely handle both civil and criminal matters; and the current economy is the perfect time for a Chicago law firm to go national.

That being said, I can't help but feel a little disappointed. For a brief second, I felt validated by "The Good Wife", because what I do for a living was deemed interesting enough to supply the plot for an episode of a top-rated TV show. It's kind of like getting to sit at the cool kids' table at lunch, only to find out that it's because they want you to do their homework.

Maybe I just need to watch less television.

February 3, 2014

Swatch Your Back -- Copyrighted Corporate Earnings Calls Are Fair Game

By Barry Werbin and Sharon O'Shaughnessy
Herrick, Feinstein LLP

In The Swatch Group Management Services Ltd. v. Bloomberg L.P., 12-2412-cv (2d Cir. Jan. 27, 2014), a Second Circuit panel unanimously decided that Bloomberg L.P. (Bloomberg), the prominent financial news and data reporting service, did not infringe on The Swatch Group Management Services Ltd's (Swatch) copyright in an invitation-only recorded Swatch earnings call, by obtaining a copy of the recording without authorization and making it available to Bloomberg's paying subscribers. Despite the failure of Bloomberg to manifestly transform the recording in any way before publication, the Second Circuit nonetheless held that Bloomberg's use of the recording qualified as fair use under Section 107 of the Copyright Act. The court emphasized that American investors and analysts are entitled to receive newsworthy financial information and that Bloomberg's conduct is protected by the First Amendment.

On February 8, 2011, Swatch released its 2010 earnings report, which was subsequently made available to the public. Swatch then convened an earnings call with 132 analysts, who were informed that they were expressly prohibited from recording the call for publication or broadcast. Bloomberg, while not invited to the call, obtained a sound recording and written transcript of the call and made both available online, without alteration, to its subscribers. Swatch then sued for copyright infringement. In an opinion and order entered on May 17, 2012, Southern District Judge Alvin Hellerstein sua sponte granted summary judgment to Bloomberg, finding that Bloomberg's copying and dissemination of the recording qualified as fair use.

On appeal, the Second Circuit engaged in its own analysis of the fair use factors under 17 U.S.C. § 107 and affirmed the district court's grant of summary judgment in favor of Bloomberg, concluding that "the copyright law's goal of promoting the Progress of Science and useful Arts would be better served by allowing [Bloomberg's] use than by preventing it."

Turning to the first statutory fair use factor, "purpose and character of use," the court held that, although Bloomberg obtained the recording without authorization and put it to commercial use without transforming it, Bloomberg's use served an important public purpose of ensuring the wide dissemination of important financial information.

The court emphasized that "Bloomberg's overriding purpose here was not to 'scoop[]' Swatch or 'supplant the copyright holder's commercially valuable right of first publication," but rather simply to deliver newsworthy financial information to American investors and analysts. That kind of activity, whose protection lies at the core of the First Amendment, would be crippled if the news media and similar organizations were limited to authorized sources of information."

Moreover, after stressing that "transformative use" is not absolutely necessary for a finding of fair use, the court held that, in the context of news reporting and analogous activities, "the need to convey information to the public accurately may in some instances make it desirable and consonant with copyright law for a defendant to faithfully reproduce an original work rather than transform it."

With respect to the second statutory fair use factor, "the nature of the copyrighted work," the court determined that the balance tipped decidedly in Bloomberg's favor because, while the recording had not been "published" by Swatch as that term is applied under the Copyright Act, Swatch itself publicly disseminated the spoken performance embodied in the recording before Bloomberg's use and the earnings call was factual in nature. As the court noted, "the scope of fair use is greater with respect to factual than non-factual works."

Next, while the court declined to weigh the third "substantiality" factor in either party's favor, it did find that Bloomberg's use of the entire recording was nonetheless reasonable "in light of its purposes of disseminating important financial information to American investors and analysts."

Lastly, the court determined that the fourth statutory factor, "the effect of the use upon the potential market for or value of the copyrighted work," weighed in favor of fair use because Second Circuit case law limits the court's consideration to a use's "impact on potential licensing revenues for traditional, reasonable, or likely to be developed markets" and the possibility of receiving licensing royalties in no way factored into the creation of the earnings call. Furthermore, the court highlighted that the "value" of the copyrighted expression for Swatch rested in its capacity to convey important information about the company to interested investment analysts and that Bloomberg, "[b]y making the recording available to analysts who did not or could not participate in the call initially... simply widened the audience of that call, which is consistent with Swatch Group's initial purpose."

This decision continues what many see as a trend in the Second Circuit to expand the contours of the fair use doctrine. Interestingly, this is only the sixth time the Second Circuit has addressed the fair use doctrine in the past decade in a reported decision.

A copy of the Second Circuit decision is available here: http://caselaw.findlaw.com/us-2nd-circuit/1655777.html.

February 5, 2014

Quentin Tarantino Files Copyright Infringement Suit Against Gawker

By Shane Wax

On January 22nd, Gawker Media LLC (Gawker), the popular media and entertainment gossip and news website, published a blog entry about the unauthorized leak of the script for Quentin Tarantino's next film, "The Hateful Eight," and his exasperated response. Tarantino had decided that he would no longer proceed with the film. The next day, Gawker posted links to third party websites where anonymous individuals had uploaded a copy of the leaked a script. A week later, Tarantino's lawyers hastily filed a lawsuit against Gawker Media and 10 Doe defendants in U.S. District Court in Los Angeles. Gawker responded to the lawsuit in yet another blog entry, claiming that it shared the links to the leaked scripts "because it was news."

The complaint in Tarantino v. Gawker Media, No. 14-cv-00603 (C.D. Cal.) alleges that the Doe defendants infringed Tarantino's right to reproduction, distribution and display of the script by illegally uploading the script to one of two websites. It further alleges that Gawker contributed to this infringement of Tarantino's copyrights by encouraging or inducing the upload.

However, what did Gawker actually do? For one, it did not upload the script itself. Rather, Gawker learned that the script was uploaded by anonymous third parties to other websites, and then provided its readers with links to those webpages. Gawker's alleged contribution stems from a statement on the first blog entry telling readers, "if anyone would like to name names or leak the script to us, please do so." While the complaint tries to claim that Gawker acted as the "first source" to offer the links, Gawker never claimed to be the exclusive or first source in either blog entry. In fact, it offered two separate links where users could find the leaked script.

Tarantino's main challenge will be the binding legal precedent set by the Ninth Circuit in the Perfect 10 cases. Those cases adopted the "server test," a rule which requires that a website maintains the copyrighted content on its own server to be held liable for public display.

While Tarantino's lawyers, perhaps aware of this precedent, are not alleging that Gawker is directly infringing the copyright attached to the script, it is unclear to what impact that holding will have on the contributory infringement claim.

Another notable decision that may pose both a challenge and a boon to Tarantino's legal team is the Seventh Circuit's 2012 decision in Flava Works v. Gunter. There, Judge Posner implicitly adopted the server test to find that the website owner could not be held directly liable for the digital performance of copyrighted videos that were framed within the website, i.e., accessible through links. As may be relevant to Tarantino, Judge Posner concluded that linking to copyrighted content could not give rise to contributory liability because there was no evidence that this conduct had an "effect on the amount of infringement" occurring. In other words, a website that allows its members to link to copyrighted material does not necessarily cause people to unlawfully upload the copyrighted content in the first place.

Importantly, however, Judge Posner also wrote that if a website "invited people to post copyrighted videos on the Internet without authorization," it could be held liable for inducement. This is more or less what Tarantino alleges, and what the Seventh Circuit found noticeably absent in Flava Works. It is therefore plausible that the outcome of this case could depend upon whether the court finds that Gawker's passive invitation encouraged the infringement.

A copy of the Complaint can be found here: http://msnbcmedia.msn.com/i/TODAY/Entertainment/_ENT%20archive%20and%20storage/PDFs/TarantinoVGawker.pdf

The Gawker webpage that lead to the lawsuit can be found here:
http://defamer.gawker.com/here-are-plot-details-from-quentin-tarantinos-leaked-1507675261

Quentin Tarantino v Gawker Media

By Kara Buonanno

Edgy, Oscar winning filmmaker Quentin Tarantino is demanding real-life revenge from Gawker Media LLC (Gawker) for the latter's publishing of online links to a downloadable version of the script to his latest movie, "The Hateful Eight." On January 27th, Tarantino filed a lawsuit against Gawker in U.S. District Court in Los Angeles, alleging contributory copyright infringement. The lawsuit also names as a defendant AnonFiles.com, the file share website that made the actual script available for viewing.

The suit alleges that Gawker promoted and disseminated "unauthorized downloadable copies of the leaked unreleased complete screenplay". Additionally, court documents state that Gawker has "failed and expressly refused to remove their directions to and URL links to get the infringing materials". More specifically, on both January 23rd and 24th, Gawker received DMCA notice and takedown letters stating that links to access the screenplay appeared at URL locations on its website. Pursuant to these notices, the plaintiff demanded removal of the directions and URL links leading to the script.

According to court documents, Tarantino submitted a copyright registration application for "The Hateful Eight" on January 23, 2014, prior to the alleged infringements.

The director is seeking actual and statutory damages, along with Gawker's profits of at least $1 million for each count of copyright infringement.

Tarantino is represented by Los Angeles-based attorney Marty Singer of Lavely and Singer PC. Singer is commonly and endearingly referenced as the "Pit Bull Litigator" or "Guard Dog to the Stars" by the media. He has represented a multitude of celebrities in various litigation matters, including Charlie Sheen, John Travolta, Arnold Schwarzenegger and Scarlett Johansson. Gawker has dealt with Singer before. In 2009 and 2010 Singer represented Eric Dane and his wife Rebecca Gayheart in a copyright infringement suit against Gawker for the posting of a sexually explicit video. The case settled for an undisclosed six-figure sum, and Gawker pulled any traces of the video from its website.

Gawker Editor-In-Chief John Cook stated that Gawker planned to fight Tarantino's lawsuit and denied any allegations of copyright infringement in a post on Gawker.com, where he claimed that its role was only to provide users a link to the script. The post states: "Gawker received a tip from a reader informing us that the script was on the AnonFiles site, after which Gawker published a story reporting that the script had surfaced online."

As a result of the script leak, Tarantino has publicly claimed that he will no longer make "The Hateful Eight". According to IMDB.com, the project has been shelved.

March 2, 2014

Garcia v. Google, Inc.: Does An Actor Have A Copyright Interest In His Or Her Performance In A Film?

By, Ning Yu Wu

On February 26th, the United States Court of Appeals for the Ninth Circuit rendered the decision on Garcia v. Google, Inc., known as "the Innocence of Muslims "case. The opinion appears to surprise many legal experts and copyright lawyers because it innovatively concludes that in the absence of work made for hire, an actor could have an independent copyright interest in his or her performance in a film. (http://cdn.ca9.uscourts.gov/datastore/opinions/2014/02/26/12-57302.pdf)

The plaintiff-appellant Cindy Lee Garcia, who was cast in a low budget independent film with the working title "Desert Warrior" at the time, subsequently learned that her recorded performance was altered and used in another film titled "Innocence of Muslims." Garcia's voice in the film was partially dubbed. The final version of the film, which seemed to be extremely controversial and offensive, was uploaded to YouTube by the filmmaker Mark Youssef. Garcia, who appeared in the 13-minute film for approximately five seconds, among other individuals involved in making of the film, allegedly received threats because of such participation. Garcia had repeatedly requested YouTube, LLC. (YouTube), a subsidiary owned by Google, Inc. (Google), to remove the film. YouTube, however, denied her requests. Accordingly, Garcia filed a lawsuit against YouTube and Google, and claimed that the controversial film on YouTube had infringed the copyright in her performance. The district court denied the relief, and Garcia appealed.

Garcia could have pursued a case against the filmmaker in the state court to resolve the issues involving any privacy and tort related claims, and compel the filmmaker to direct YouTube to remove the videos. Perhaps for strategic reasons, Garcia decided to commence the case in the district court pursuing a copyright infringement claim against YouTube and Google directly. The Ninth Circuit addressed Garcia's independent copyright interest claim, the work for hire doctrine, and whether there was an implied license granted by the plaintiff to distribute the film via YouTube. Chief Judge Kozinski ruled that Garcia had an independent copyright interest in her performance in the film, in the absence of finding the work was made for hire.

Section 102(a) of the 1976 Copyright Act protects "original works of authorship fixed in a tangible medium of expression." Accordingly, the two essential elements for a valid copyright are (1) originality and (2) fixation in a tangible medium. Judge Kozinski noted that because an actor's performance embodied "body language, facial expression and reactions to other actors and elements of a scene," it equips at least some minimal degree of creativity. Accordingly, even the creative contribution is minor, it is still copyrightable when the performance is fixed in a tangible medium. Many legal experts are troubled by this novel position. As noted in the dissent written by Judge Smith, Garcia herself admitted that she had no creative control over the script of her performance. Since a script is written by a playwright, and directions are given by a director, an actor's creative endeavor is to perform or act on the materials given. It is unclear that whether such portrayal of a character falls into the purview of the protectable subject matter, especially as Section 102(b) of the 1976 Act specifies that: "In no case does copyright protection for an original work of authorship extend to any idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such work."

Assuming that an actor's portrayal of a character provides at least a modicum of creativity under the 1976 Act, a more significant issue is the fixation requirement. In the opinion, Judge Kozinski provides that when an actor's performance is fixed, his or her performance can be deemed a derivative work of the original. Accordingly, the actor may claim the copyright in his or her own contribution to the extent not exceeding the "preexisting material." Pursuant to Section 101 of the Act: "A work is "fixed" in a tangible medium of expression when its embodiment in a copy or phonorecord, by or under the authority of the author, is sufficiently permanent or stable to permit it to be perceived, reproduced, or otherwise communicated for a period of more than transitory duration."

Accordingly, the opinion acknowledges that a derivative work produced based on the result of infringing the original work would not be copyrightable. Here, the court ruled that because the filmmaker Youssef hired Garcia, gave her the script to act, and filmed her performance on camera, Youssef implicitly granted her a license to perform the screenplay. Therefore, the video recording of Garcia's performance was sufficiently fixed.

The ruling appears to surprise many practitioners. When publicly performing a copyrightable musical composition, for example, a license from the copyright owner/publisher or one of the performing rights organizations is required. Having secured a license for public performance does not automatically imply that a mechanical license is also attached to allow the music to be recorded during the performance for phonorecords. To record a musical composition, a separate mechanical license (namely, via The Harry Fox Agency, Inc., or directly from the publisher) must be sought. Here, even though Garcia was given an implied license to perform the screenplay; the scope of the implied license (if any) was limited to the performance of the script. She was never granted a license, express or implied, by the filmmaker Youssef to prepare a derivative work, even the performance was incidentally fixed in a recording. Without the authority of the author granting such license beyond the performance on camera, saying that Garcia has a copyright interest immediately attached to her performance perhaps is immaterial.

Garcia's position is certainly sympathetic. The court acknowledges that the case is troubling. Nevertheless, the ruling has created a precedent, at least in the Ninth Circuit and below, that under limited circumstances, an actor may have a copyright interest in his or her performance in a film. Google announced that it was going to appeal the decision. In the meantime, for filmmakers, it is always a good idea to have a comprehensive agreement and other evidence to support that the performance on camera was a work was made for hire.

March 24, 2014

Prince Settles with Cariou

After more than five years and a decision from the Second Circuit favoring appropriation artist Richard Prince, the parties settled last week. Cariou agreed to withdraw any claim he had to the works in Prince's "Canal Zone" series, which appropriated images from Cariou's Rastafarian photographs. It appears that each party will pay its own legal fees.

According to theartnewspaper.com:

Cariou's lawyer Dan Brooks confirmed the case had been settled but said he could not discuss the specifics or his client's feelings about the outcome. Prince's lawyer Josh Schiller said that the artist "is pleased to have this settlement and be able to focus on his work without further distraction". He added: "It is important that artists know they need not justify their new expressive work without first ensuring compliance with legally constructed statements of purposes of intent." A spokeswoman for Gagosian Gallery says, "Gagosian Gallery is very pleased by the Second Circuit's decision and that the matter has now been finally resolved."

April 4, 2014

Teller v Dogge

By Barry Werbin

The Teller (from Penn & Teller) case that raised the question of copyrightability of one of Teller's classic illusion acts (called "Shadows") as pantomime or a dramatic work, was decided March 20, 2014, by the District of Nevada, which held that such a performance qualified as a protectible dramatic work for copyright purposes.

"Shadows" had been registered as a dramatic work with the Copyright Office in 1983. The court viewed Teller's performance not just as an uncopyrightable magic act, as the defendant had urged, but as a performance akin to a pantomime or other dramatic work that the Copyright Act expressly protects, as also evidenced by the registration. The defendant had essentially copied Teller's entire performance by creating two YouTube videos "offering to sell the secret to one of Teller's signature illusions." As the court emphasized: "The mere fact that a dramatic work or pantomime includes a magic trick, or even that a particular illusion is its central feature does not render it devoid of copyright protection." The court also noted that "Teller's certificate of registration describes the action of 'Shadows' with meticulous detail, appearing as a series of stage directions acted out by a single performer."

Funny side bit is Teller only uses "Teller" as his full name - see the caption:
telle591.pdf

April 5, 2014

Psihoyos v. Wiley

On April 4th, the Second Circuit joined other circuits in deciding that the Discovery Rule applies to the statute of limitations in copyright infringement cases.

Here is the first paragraph of the decision:

Photographer Louis Psihoyos sued publisher John Wiley & Sons, Inc.("Wiley") for copyright infringement based on Wiley's publication of textbooks containing Psihoyos's photographs. The United States District Court for the Southern District of New York (Rakoff, J.) determined that the applicable three‐year statute of limitations barred none of Psihoyos's infringement claims because Psihoyos, exercising reasonable diligence, did not discover the infringements until fewer than three years prior to bringing suit. The District Court nonetheless granted Wiley's motion for summary judgment as to several of the infringement claims on the ground that Psihoyos had failed to register the relevant photographs with the Copyright Office prior to instituting suit as required 1 by 17 U.S.C. § 411(a). After a jury trial in which the jury awarded statutory damages concerning three of the remaining photographs, the District Court (Oetken, J.) denied Wiley's motion for remittitur or, in the alternative, for a new trial. We AFFIRM.

The opinion is available here:Wiley-Psihoyos_-_2d_Cir_Opinion_(00716964).pdf

April 16, 2014

Psihoyos v. Wiley: Second Circuit Joins Other Circuits in Holding that Discovery Rule Applies to Statute of Limitations in Copyright Infringement Claims

By Barry Werbin and Laura Tam, Herrick, Feinstein LLP

On April 4th, in Psihoyos v. John Wiley & Sons, Inc., the Second Circuit joined almost every other federal Courts of Appeals in holding that the discovery rule applies to the statutory three-year statute of limitations in copyright infringement claims. The case began in March 2011, when photographer Louis Psihoyos (Psihoyos) sued publisher John Wiley & Sons, Inc. (Wiley) for copyright infringement. Wiley had published eight of Psihoyos's unlicensed photographs in various textbooks from 2005 to 2009 and, in 2010, Wiley sought a retroactive licensing arrangement with Psihoyos, prompting Psihoyos to sue. After discovery was complete, Wiley moved for summary judgment, arguing that (1) the Copyright Act's statute of limitations barred Psihoyos' infringement claims since the infringements occurred more than three years prior to suit, and (2) Psihoyos had failed to register three of the photographs at issue with the Copyright Office prior to filing suit. More than a week after Wiley moved for summary judgment, Psihoyos submitted applications for copyright registration of the three photographs.

The district court rejected Wiley's first argument regarding the statute of limitations, holding that copyright infringement claims accrue upon actual or constructive discovery of infringement. Since Psihoyos did not discover Wiley's infringement until 2010 and filed suit shortly thereafter, the court determined that Psihoyos' claim was timely. With respect to Wiley's second argument, the district court held that pending copyright registration applications did not satisfy the Copyright Act's registration requirement under 17 U.S.C. § 411(a). Accordingly, the court granted partial summary judgment in Wiley's favor, leaving four of Psihoyos's infringement claims for trial. At trial, the jury found no infringement for one photo, awarded $750 in damages for non-willful infringement of one photo, and found willful infringement of the remaining two photos, resulting in an award of $300,000 and $100,000 in damages, respectively. Wiley moved for remittitur or, alternatively, for a new trial, but the district court denied the motion. Wiley then appealed the district court's partial denial of summary judgment and the denial of its motion for remittitur or a new trial, and Psihoyos cross-appealed the district court's partial grant of summary judgment in favor of Wiley on the photographs with pending copyright registration applications.

The Second Circuit affirmed the district court's decision that "an infringement claim does not 'accrue' until the copyright holder discovers, or with due diligence should have discovered, the infringement." In rejecting Wiley's argument that there should be "different accrual rules for ownership and infringement claims, both of which are governed by 17 U.S.C. §507(b)," the Court noted that "[i]n doing so, we join every Circuit to have considered the issue of claim accrual in the context of infringement claims," citing decisions from the First, Third, Fourth, Sixth, Seventh, Eighth, Ninth, and Tenth Circuits. The discovery rule conformed with Congress's intent and the text and structure of the Copyright Act, as well as policy considerations. Accordingly, the Court held that the Copyright Act's statute of limitations did not bar Psihoyos's claims of copyright infringement.

With respect to the Copyright Act's registration requirement, the Second Circuit acknowledged that the Courts of Appeal were divided as to whether a pending application satisfied Section 411(a)'s requirement of copyright registration as a prerequisite for litigation. Nonetheless, the Court determined that "[w]e need not resolve the dispute or otherwise embroil ourselves in this circuit split because . . . Psihoyos had not even filed the applications for registration of the relevant works prior to instituting the action claiming infringement of the copyright in these works, as required by the plain terms of the statute." Since Psihoyos did not apply for copyright registration until after the completion of discovery and Wiley's motion for summary judgment, "he failed to satisfy the preconditions to suit under § 411(a)."

Finally, in reviewing the district court's denial of Wiley's motion for remittitur or a new trial, the Second Circuit held that the district court did not err in denying Wiley's motion and did not abuse its discretion in refusing to alter the jury's award of statutory damages. Although Wiley argued that the district court erred in failing to consider whether the award of statutory damages was reasonably related to Psihoyos's actual loss, the Second Circuit soundly rejected this argument, nothing that "[a]lthough revenue lost is one factor to consider, we have not held that there must a direct correlation between statutory damages and actual damages." The Second Circuit recognized that the jury may have considered other relevant factors to determine the damages award, including evidence of Wiley's willfulness, the substantial profits it earned, and the need for deterrence.

With this significant decision, the Second Circuit now joins most other Circuits in applying a discovery rule to the three-year statute of limitations for copyright infringement actions.

The Authors Guild Appellate Brief

Here is a link to the Authors Guild's brief in the Google Books appeals:

http://www.medialaw.org/images/medialawdaily/authorsamicus.pdf

April 22, 2014

Capital Records v. Harrison

By Barry Werbin

A very interesting opinion (Capital Records v. Harrison.pdf) was issued by NY Supreme Court Judge Shirley Kornreich on April 14th. The decision addresses the proper statute of limitations under the CPLR for copyright infringements of pre-1972 sound recordings. Judge Kornreich sets up a possible split among the very few judges who have ruled on the issue in NY, as to whether it should be three years as under the federal Copyright Act, analogizing infringement to a tort or injury to property type claim, or the six-year residual limitations period for causes of action for which there is no specific statute of limitations. A case to be followed unless it settles.


April 23, 2014

Oral Argument in ABC et al v. Aereo

The U.S. Supreme Court Transcript of the oral argument in ABC et al v. Aereo has been provided courtesy of Barry Skidelsky, Esq. (Co-Chair NYSBA EASL's TV and Radio Committee), and is available at:

http://www.supremecourt.gov/oral_arguments/argument_transcripts/13-461_o7jp.pdf


For more information, you may contact Barry at: bskidelsky@mindspring.com or 212-832-4800.

May 20, 2014

Supreme Court Ensures Copyright Suit against MGM "Rages" On

By Barry Werbin and Sharon O'Shaughnessy
Herrick, Feinstein LLP

In Petrella v. Metro-Goldwyn-Mayer, Inc., the Supreme Court delivered a TKO to MGM when it decided, in a 6-3 decision on May 19, 2014, that the equitable defense of laches cannot be invoked as a defense to preclude claims brought within the Copyright Act's three-year statute of limitations for successive acts of copyright infringement. As a result, screenwriter Paula Petrella (Petrella) may continue to pursue more than $1 million in damages for MGM's continued distribution of the classic film Raging Bull. The decision likely sounds the death knell for laches as an affirmative defense in copyright infringement litigation and has the potential to expose Hollywood studios, music labels and media companies to an onslaught of cases brought by copyright holders' heirs and estates seeking a share of profits from classic films, TV shows, music recordings and other creative works that are re-released in various formats.

By way of background, Frank Petrella collaborated with renowned boxer Jake LaMotta on a screenplay about LaMotta's life, which inspired the Oscar-winning film Raging Bull. The screenplay was copyrighted in 1963. In 1976, Frank Petrella and LaMotta assigned their rights and renewal rights, which were later acquired by United Artists, then a subsidiary of MGM. In 1980, MGM released Raging Bull and registered a copyright in the film. MGM continued to market the film, including converting it into DVD and Blu-ray formats, which did not exist in 1980.

Frank Petrella died in 1981, during the initial copyright term, thereby vesting the copyright in the screenplay with his daughter, Paula, who renewed the copyright in 1991, thus becoming its sole owner. For works copyrighted under the 1909 Copyright Act (pre-1978), the Supreme Court had previously confirmed in Stewart v. Abend, 495 U.S. 207, 221 (1990) that when an author who has assigned her rights away "dies before the renewal period, . . . the assignee may continue to use the original work only if the author's successor transfers the renewal rights to the assignee."

In 1998, Petrella's counsel advised MGM that its exploitation of Raging Bull violated her copyright and threatened suit, repeating such threats over the next two years. Petrella, however, did not actually file suit until January 6, 2009, when she filed claims against MGM seeking (i) monetary damages due to acts of infringement resulting from MGM's continuing commercial use of the film (as a derivative work of the screenplay) after January 6, 2006 (including its continual release of the film on DVD and other digital formats); and (ii) injunctive relief prohibiting further distribution of the work without compensation.

Under Section 505(b) of the Copyright Act, copyright plaintiffs have three years to bring suit from the accrual date of a claim. However, if acts of infringement are repeated anew, the statute of limitations operates on a "rolling" basis that allows a plaintiff to collect damages going back three years before the claim accrues. In barring Petrella's action, however, the district court and the Ninth Circuit disregarded the Copyright Act's three-year look-back period for statute of limitations purposes and, instead, held that the equitable defense of laches precluded Petrella from bringing suit because she had unreasonably delayed suit by not filing until 2009. The Ninth Circuit affirmed and agreed with the studio's argument that Petrella's 18-year delay was unreasonable in light of Petrella having been aware of her potential claims many years earlier. The Supreme Court then granted certiorari to resolve a Circuit split concerning the application of laches to infringement claims brought within the three-year statute of limitations under the Act.

MGM argued that delayed copyright lawsuits could impact studios' investments made towards the distribution of works and also pointed to the challenges of trying a case on a delayed basis, such as difficulty in obtaining records and the fact that, as here, key witnesses may be deceased. The Court, however, was unpersuaded. Justice Ruth Bader Ginsburg, writing for the majority, held that the Copyright Act's bar on lawsuits initiated more than three years after a claim accrued did not bar Petrella's lawsuit because, in this instance, there was ongoing copyright infringement and Petrella only sought damages for the three years preceding the filing of her lawsuit. The Court explained that the concept of laches originally served as a guide when no statute of limitations controlled, but could not be invoked as a rule for interpreting a statutory prescription established by Congress. Put simply, laches does not trump the statute of limitations protections that the Copyright Act provides for copyright owners whose works are infringed on an ongoing basis, so long as the owners only seek relief for acts of infringement occurring during the limitations period.

In addressing MGM's claim that an open-ended period to file copyright claims makes it difficult for companies to make future business decisions, Justice Ginsburg emphasized that the "'sue soon or forever hold your peace' approach" advocated by MGM is imprudent because it would force copyright owners to initiate infringement litigation at a time when the value of the copyrighted work was not being undercut or there was no detrimental effect on the original work. Instead, Justice Ginsburg explained that the three-year limitations period "allows a copyright owner to defer suit until she can estimate whether litigation is worth the candle. She will miss out on damages for periods prior to the three-year look-back, but her right to prospective injunctive relief should, in most cases, remain unaltered." The Court observed that allowing Petrella's lawsuit to go forward would put at risk "only a fraction" of the income that MGM earned during that three-year period and would work no unjust hardship on consumers who have purchased copies of Raging Bull. To the extent key witnesses no longer are available, the Court noted that the plaintiffs would be affected equally because they have the burden of proving infringement.

Another equitable "out" was provided, however, by the Court's observation that where a copyright owner intentionally engages in misleading representations concerning his or her abstention from suit, and an alleged infringer detrimentally relies on such deception and would be harmed, reasonable reliance on such copyright owner's past actions could give rise to an estoppel defense. Unlike laches, estoppel does not undermine the Copyright Act's statute of limitations because it rests on misleading acts or omissions. Perhaps anticipating this issue being raised on remand, Justice Ginsburg noted that "Petrella notified MGM of her copyright claims before MGM invested millions of dollars in creating a new edition of Raging Bull" and that "[t]he circumstances here may or may not (we need not decide) warrant limiting relief at the remedial stage."

The decision only addresses the narrow, procedural issue of whether the Copyright Act's statute of limitations for ongoing infringement precludes the assertion of laches. On remand, Petrella must prove her case on the merits. While Petrella is now able to seek damages back to 2006, Justice Ginsburg indicated that laches may come back into play before the district court, where Petrella's delay in commencing action may properly be taken into account at the remedial stage in determining damages and the scope of any appropriate injunctive relief.

Lastly, all is not lost for a company that must defend against a "delayed" claim of continuing copyright infringement. Laches may still play into the remedial stage of an action. and, as the Court pointed out, a defendant may retain any "investment shown to be attributable to its own enterprise, as distinct from the value created by the infringed work."

In a dissenting opinion joined by Chief Justice Roberts and Justice Kennedy, Justice Breyer argued that the majority's opinion undercut basic principles of fairness and could encourage the type of gamesmanship resulting from a claimant sitting back for years until the economics of the exploitation of a copyrighted work make the timing of suit more valuable.

The decision can be accessed here: http://www.supremecourt.gov/opinions/13pdf/12-1315_ook3.pdf

July 3, 2014

Post-Aereo: Has The Supreme Court Clouded the Future?

By Barry Werbin
Herrick, Feinstein LLP

By now, everyone is probably tired of reading the myriad blogs and articles on the Supreme Court's June 25th decision in American Broadcasting Company, Inc. v. Aereo, Inc. Yet the real question raised by the decision -- which did not set any bright-line tests -- is what its impact will be on other existing and future technologies that permit consumer end-users to access subscribed content anywhere in the world and at any time over the Internet.

In the 6-3 decision, the majority took a fairly straightforward approach in going through the two primary issues presented: whether Aereo was engaging in a "performance" by using its system of dime sized antennas to deliver one-to-one content to its subscribers, and whether such performance was "public" so as to impose direct copyright liability on Aereo. The court answered both questions in the affirmative, pointing out that even a home user watching television "performs" a broadcast merely by turning on a television and flipping channels, and that Aereo essentially acted no differently than a cable system, even when it only enhanced its subscribers' ability to receive and view over-the-air broadcast programming.

The Court emphasized that Aereo was not merely an equipment provider and, while its system remained "inert" until a subscriber indicated what he or she wanted to watch, Aereo nevertheless was communicating the same content to multiple persons and was thus engaging in a public performance. Noting that in enacting the Transmit Clause in the 1976 Act, Congress had clearly overruled prior Supreme Court precedents that had permitted CATV systems to operate (no issue here), the majority interpreted the Transmit Clause as applying to any entity that acts like a CATV or more modern cable system (conjuring up the adage that "if it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck"). Despite Aereo's system remaining inert until a subscriber designates which programming he or she wants to watch, the Court nevertheless equated Aereo's system with the CATV systems outlawed under the 1976 Act.

Consistent with the "looks like a duck" analogy, the Court said that Aereo's "technological differences" only concern "behind-the-scenes" ways in which Aereo delivers television programming to its viewers' screens, and these differences did not render Aereo's commercial objective any different from that of cable companies. Nor did Aereo's system significantly alter the viewing experience of its subscribers.

Justice Scalia's dissent said that the majority analyzed "performance" wrong, because it focused on the overall purpose of the technological system rigged by Aereo as opposed to where the "volitional" conduct was taking place. To the dissenters, the focus should have been on the individual subscribers, who controlled what programming to watch and when the allocated mini antennae would be activated in response to subscribers' commands.

This is where it gets murky. If we were to ignore all technological interfacing between, say, a cloud service provider and its subscribers, and focus only on the "commercial objective" of the provider, then all one has to do is find a for-profit motive in the context of any form of online content delivery, thereby essentially rendering meaningless the volitional conduct requirement for finding direct infringement. The Court doesn't go quite that far. In fairness to the majority, Aereo really was not such a difficult case, because the Transmit Clause covers the transmission of content to individuals at the same place or in different places, and at the same time or in different times, and has always arguably been broad enough to encompass Aereo's system.

Another key distinguishing factor, of course, is that Aereo paid no licensing fees, unlike cable and satellite operators; in the latter case, once a home subscriber lawfully receives fully licensed broadcasts, the subscriber has a fair use right under Sony to record broadcast programming and "time-shift" at will when he or she views that programming. Merely transplanting that mechanism into the cloud (à la Dish Network's "Hopper"), using a technological system developed by a provider, arguably does nothing more than what the individual subscriber is lawfully entitled to do in his or her home.

The majority itself recognized this scenario and threw a comfort blanket to the tech sector by saying: "In other cases involving different kinds of service or technology providers, a user's involvement in the operation of the provider's equipment and selection of the content transmitted may well bear on whether the provider performs within the meaning of the Act." Therefore, volitional conduct on the subscriber end really is not dead. We just have no test for the "may well bear on" assessment. Maybe the duck knows.

Providing some small assistance, the majority made a clear distinction between the specific facts in Aereo and other situations where "subscribers receive performances in their capacities as owners or possessors of the underlying works." Justice Breyers' majority bloc noted that whether a transmission to "a set of people" constitutes a public performance "often depends on their relationship to the underlying work." Courts will continue to grapple with this general guidance in assessing what constitutes being an "owner" or "possessor" and what types of relationships between end users and underlying works remove a content delivery system from the realm of infringing conduct.

Surprisingly absent from the majority's decision was any discussion that the content at issue was free over-the-air broadcasts, which any citizen within reception range could lawfully receive with a digital antenna and a digital-ready TV. It seems that what really irked the Court was Aereo taking commercial advantage of what it viewed as a loophole in the language of the Transmit Clause. The venture capitalists who funded tens of millions of dollars into Aereo (primarily Barry Diller's IAC/InterActiveCorp) likely did not do so for some high altruistic purpose (despite some of the press releases to the contrary); they did it to make money and realize significant returns on their investments. Even the dissent said that it did not really like what Aereo was doing, but was bound to apply the provisions of the Act as written; and it was the job of Congress, not the Court, to correct any ill-phrased language in the Transmit Clause.

Absent also, albeit not surprisingly, from the majority's opinion, was any mention of the now infamous Cablevision case (The Cartoon Network LP, LLLP v. CSC Holdings, Inc., 536 F.3d 121(2d Cir. 2008), cert. denied), to which the dissent cited several times with approval. Cablevision involved a remote storage DVR system that was offered to paying subscribers, where the Second Circuit found no direct infringement of the public performance right by Cablevision because its DVR customers were the ones who made the copies carried out by the DVR system. Yet in keeping with its focus specifically on the facts of Aereo, the Court's majority tried to avoid making any overreaching statements or addressing matters that were not directly before the Court. Avoiding any discussion of Cablevision was therefore prudent.

Similarly, in the Dish Network litigation in California, involving Dish's "Hopper" technology called "Sling," the Ninth Circuit ruled last year against the broadcaster plaintiffs. (Fox Broadcasting Company, Inc. v. Dish Network L.L.C., 723 F.3d 1067 (9th Cir. 2013).) The Ninth Circuit specifically found that "operating a system used to make copies at the user's command does not mean that the system operator, rather than the user, caused copies to be made. Here, Dish's program creates the copy only in response to the user's command." Fox News immediately ran back to the Ninth Circuit last week for reconsideration after the Supreme Court decided Aereo.

Certainly, the Aereo Court's majority's opinion was circumspect and cautiously avoided any overreaching language that could impact new technologies, whether cloud based or otherwise. Indeed, with a nod to the warnings identified in various amicus briefs submitted by representatives of the technology industry and the United States government itself, the Court expressly stated that "we have not considered whether the public performance right is infringed when the user of a service pays primarily for something other than the transmission of copyrighted works, such as the remote storage of content." (Emphasis added)

Yet a clear bright-line test was not provided, and we are perhaps left with "if it looks like a duck" gut assessment, which does not make for good law. The decision will undoubtedly keep judges and copyright litigators busy for some years to come. That is, unless the media broadcast industry sits down with providers like Dish Network and others (as NBC is currently doing) to work out reasonable business models that compensate content owners fairly and yet permit the public to receive lawfully licensed content anywhere they want, and at any time, as this is the age we live in and there is no going back. Even the duck would agree.

January 27, 2015

Alliance of Artists and Recording Companies Continues to Pursue Class Action Suit Against Car Companies for Unpaid Music Royalties

By Brittany Pont

What is the Alliance of Artists and Recording Companies (AARC)?

AARC is a nonprofit organization that collects and distributes both hometaping/private copy and rental/lending royalties generated from the Audio Home Recording Act of 1992 (AHRA). Founded in 1993, AARC is the sole administrator of this type of royalty in the United States, and while it initially just administered domestic royalties, its mandate was later expanded to administer foreign royalties as well. http://wp.aarcroyalties.com/what-is-aarc/

What is the AHRA?

Prior to 1992, private copying of music was illegal, but the music industry had no recourse for the monetary loss it suffered due to its widespread practice. To balance the right to use and own a device with the ability to record or copy audio material and the music industry's loss of revenue due to such technology, the AHRA added Chapter 10, "Digital Audio Recording Devices and Media", to title 17 of the United States Copyright Law. The Act defines a "digital audio recording device" (DARD) as a "machine or device ...the digital recording function of which is designed or marketed for the primary purpose of, and that is capable of, making a digital audio copied recording for private us." Royalties are generated by "the sales of blank CDs and personal audio devices, media centers, satellite radio devices, and car audio systems that have recording capabilities." The royalty compensates featured recording artists and recording copyright owners for the loss of record sales due to the public's use of the aforementioned technology.

http://copyright.gov/title17/92chap10.html
http://wp.aarcroyalties.com/what-is-aarc/

The Lawsuit

On July 25, 2014, AARC filed a class action lawsuit for unpaid music royalties against automobile companies Ford and General Motors, as well as electronic manufacturers Denso and Clarion. On November 14, 2014 AARC expanded the suit by filing another complaint against Chrysler and two Mitsubishi Electric companies. The issue at hand is whether devices included in vehicles manufactured by these companies, such as the Ford "Jukebox" and the GM "Hard Drive Device", fall under the definition of a DARD and are subject to the requirements of the AHRA, which includes paying a royalty fee to the Register of Copyrights. AARC claims that these devices fit the definition of a DARD and are subject to the requirements of the AHRA, but since the companies have failed to identify them as such they have not adhered to the requirements of the AHRA and paid the mandatory royalty fees. The defendants argue that while these devices may have copying and recording capabilities, that is neither their primary purpose, nor are they marketed as recording and/or copying devices. Both of these items are requirements for a DARD under the AHRA.

If the court finds that these devices do not qualify as DARDs, their implantation can continue without adherence to the AHRA. If it is found that these devices are DARDs, AARC is seeking various forms of relief, including actual damages for unpaid royalties equivalent to the amount of royalties and a half, plus statutory damages of $2,5000 per DARD "manufactured, imported or distributed by any Defendant" all during the three years prior to the filing of this lawsuit.

In a statement made by the Executive Director of AARC, Linda R Bocchi, Esq., during AARC's latest update of the lawsuit, the organization remains firm in its support of the AHRA and its application to the disputed devices in this case. In reference to the defendants, Ms. Bocchi states that "AARC will not stand by while they refuse to hold up their end of the deal." Unable to reach a settlement, the litigation remains ongoing.

http://cblr.columbia.edu/archives/13231
http://wp.aarcroyalties.com/aarc-files-federal-class-action-lawsuit-press-release/
http://wp.aarcroyalties.com/2014/11/14/aarc/

https://aarcroyalties.files.wordpress.com/2014/07/aarc-class-action-complaint.pdf

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:
https://www.eventbrite.com/e/the-penn-law-sports-law-symposium-presented-by-the-heisman-trust-tickets-15388311855

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.

INTRODUCTION

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.

***************

1ST INSTALLMENT: MANAGEMENT AGREEMENTS

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.

PRO-MANAGER AGREEMENT WITH PRO-ARTIST COMMENTARY: Forms-management.comp2.16.pdf

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.

March 16, 2015

Artist Agreements Part 1: Artists With Production Companies

The Agreement From Hell That An Artist Should Never Sign & How To Make It Fair

By Steve Gordon

INTRODUCTION

Part 1 will focus on production companies and their contracts with artists. Part 2 will tackle deals between artists and indie labels.

Production Companies Are Not Labels

Production companies usually consist of one or two individuals with limited resources who would like to make a few demos for an artist in order to shop him/her to a real record company. Unfortunately, more than occasionally, such a company will present an agreement that locks the artist into a long term deal, makes the company the artist's music publisher, and takes a substantial cut of all the income that the artist may make in the entire entertainment business, as well as other horrors.

The first agreement we will examine in this installment is typical of a contract offered to an artist by a production company masquerading as a "label." Be warned: This agreement is a terrible deal for artists. It presents all the negative terms typically contained in an exclusive recording agreement offered by a major label, including multiple options for additional albums that could extend the duration of the agreement indefinitely, and 360 provisions designed to give the company a significant portion of the artist's income from any of his/her activities in the entertainment business. (See discussion of 360 deals below, and How to Avoid Getting Completely Screwed by a 360 Degree Deal, available at www.digitalmusicnews.com/permalink/2013/07/02/threesixty). Yet the first agreement offers none of the benefits that a major label deal contains, such as a recording budget and advance.

There are many differences between a production company and a real label, but they have at least the following in common: Both production companies and labels own or have access to recording studios and equipment, and they both have producers on payroll or relationships with indie producers who they can call on to make professional recordings. A real label, however, has the following additional assets:

• Staffers and/or freelancers who provide both traditional marketing and publicity as well as online social networking support;

• Staffers and/or freelancers who continually pitch records to terrestrial radio - still a crucial element in breaking in a new artist, especially in pop, R&B, hip hop, rock, and country;

• A video department to produce, oversee and pay for the production of promo videos and electronic press kits (EPKs);

• Relationships with popular TV shows, such as Saturday Night Live, The Tonight Show and Last Call to help the artist garner invaluable exposure;

• Relationships with leading digital services to promote an artist - for instance, by continually lobbying iTunes to feature the artist on its home page;

• Relationships with music supervisors and ad agencies to secure placements in TV shows, movies and ad campaigns;

• Distribution channels through all the big-box chains, such as Walmart, Best Buy and Target to sell physical copies of records;

• The ability to coordinate digital distribution to hundreds of digital music services throughout the world;

• The money necessary to pay staffers and freelancers to do the all the work above; and

• Perhaps most importantly, the financial capacity to pay the artist an advance on top of production costs so that he/she can quit his/her day gig.

First Agreement: Production Company Posing As Label

This form agreement came from an actual production company that presented an agreement that only a real label should offer. As we just discussed, a production company has almost none of the resources of a true record label. The production company should have offered a "shopping deal" under which it would have a limited time to find a suitable label deal for the artist. Instead, this agreement includes provisions that are completely unfair and unjustifiable. Here is an overview of the key provisions and why they should be changed:

Term

The term of this agreement is an initial period of 15 months followed by options for the "delivery" of four additional albums. Since delivery depends on when the company decides to record each album, the contract could continue indefinitely. The artist could hire a lawyer to try to get out of this contract, but at the end of the day, the production company could contend that the contract was valid, which could impede the artist from securing another deal.

If a company is merely a production company and not a real label, it should offer a shopping deal under which it has a limited amount of time to produce at least five or six tracks (sometimes referred to as "demos") that feature the artist's best work, and shop those tracks to real labels to help the artist get to the next level. Generally, a production company has nine months to shop the demos. If the production company cannot secure such a deal, the artist should be free to terminate the agreement.

Album Options

A production company does not have the resources to help the artist as a real label could, and therefore, it should not try to trap an artist in a multiple album deal. On the other hand, if the production company secures a good deal for the artist with a reputable label, it should share with the artist in monies the record label pays to the artist, including advances and royalties for the artist's exclusive recording services. A fair deal may provide that the company will share in such revenues for the first several albums released by the label.

Royalty

A reasonable royalty for producing demos and shoppingg demos andfor a deal with a label is 5% to 20%. The percentage should be based on what the label pays the artist, so if the artist's advance is $100,000, the production company would receive $5,000 to $20,000. If the artist's royalty is 15%, then the production company would get 5% to 20% of that royalty, that is, .75% to 3%. The lower royalty of 5% would be appropriate for shopping an artist who already has professionally produced recordings and the production company doesn't have to do anything but shop the artist. The higher royalty of 20% would be appropriate when the production company has to produce all new demos and perhaps even release tracks on social networks, and possibly iTunes. Yet many production companies will try take to advantage of a naive artist and demand 40% or 50%, or even more. The production company's royalty should also be limited to advances and royalties payable by the label for the artist; in a terrible deal for the artist, such as the first one analyzed in this installment, the company will also try to secure a percentage of any income the artist receives in the entertainment business, including live performance and publishing.

It is fair, though, that a production company be compensated for expenses if it secures a suitable label deal. However, the company expenses should be reasonable, documented, and approved by the artist. In addition, the amount should be deductible if a new artist, which means that if the company's expenses were $10,000 and a label is paying an advance of $100,000 for the artist's recording services, the $10,000 should be deducted from the $100,000, and the company should receive 20% of $90,000 ($18,000), and the artist should receive 80% of $90,000 ($72,000). If the expenses are not taken off the top, the company would receive 20% of $100,000 and the $10,000, that is, $30,000. The artist would only receive 80% of the balance of $70,000, that is, $56,000. If the expenses are not taken off the top, the company would receive its 20% of $100,000.00 or $20,000, leaving $80,000 remaining from which the $10,000 in expenses would be deducted, leaving $70,000 for the artist.

360 Provisions

Since income from recorded music has drastically declined in the last 15 years, labels have changed their standard deals to share in money from other income streams, including merchandise, endorsements, live performances and touring, and even appearances in TV programs or movies. As labels wish to share in all of the artist's income streams, these deals are known as "360." A major label that can provide the marketing muscle to make an artist a household name arguably deserves to share in those income streams, but a production company has not earned that. However, if the production company actually does something to help the artist make money from other activities than record sales, there is nothing wrong in rewarding it for that success. For instance, if the company finds a good paying gig playing at a private event, the company may deserve a percentage of the fee payable to the artist.

Further, if the major record label demands 360 payments from various income streams, the production company and artist may be able to negotiate separate advances against all those income streams. For example, if the record company wanted a percentage of the artist's touring revenue, the production company and the artist could demand a significant advance payment from the record company in exchange for that royalty. In that case, both the production company and the artist would benefit from the advance.

Second Agreement: A Fair Shopping Agreement

Unlike the first contract, this agreement is an example of a shopping deal that is fair to both sides. The second contract provides a 20% royalty to the production company, but it also provides significant protections for the artist. Unlike the first contract, the second contract (i) gives the artist the right to approve the choice of the "Distributor" (that is, the label), participate in the negotiation of the deal, and approve all the terms of that deal; (ii) limits the Term to nine months unless the company find a suitable deal; and (iii) limits the company's royalty to income flowing from the label, and not from any other income that the artist may earn in the entertainment business.

AGREEMENT THAT AN ARTIST SHOULD NEVER SIGN


_______ Records, Inc.
______
Los Angeles, CA

Dated as of: ________ __, 2015

Mr. [Artist]

_______________
Hoboken, NJ


Dear Mr. ___________,

This agreement shall confirm and memorialize our discussions with reference to you and Company entering into an exclusive artist recording agreement regarding your performances as a musical recording artist. (You and Company are sometimes referred to herein as the "parties".) Although the parties contemplate the execution of a more formal long form recording agreement (the "Long Form Agreement"), this Letter Agreement, when signed by both you and Company, shall constitute a binding and enforceable agreement regardless of whether the Long Form Agreement is ultimately executed.

Following are the major terms and conditions which the parties agree shall form the basis of our contractual arrangement and which shall be incorporated in the Long Form Agreement (it being understood that such Long Form Agreement shall not be limited to these terms):

1) Artist: _________

2) Territory: World

3) Term: The "Initial Contract Period" shall run for fifteen (15) months from the completion and satisfactory delivery of the Initial Album hereunder. Each subsequent Contract Period, if any as provided for below, shall run for the longer of (i) 15 months from the completion and satisfactory delivery of the Masters to be delivered to Company during such Contract Period and (ii) 18 months from the commencement date of such respective Contract Period. At all times during the Term, you shall render your exclusive recording services to Company for the purpose of making Masters (as hereinafter defined) and for all other purposes as provided for herein.

As discussed in the introduction, most production companies consist of one or two individuals with some experience in the record business who may or may not be producers, but own or have access to a professional recording studio. Their goal is to land a deal for the Artist with a real label that has resources to provide the money and staff to properly market, promote, and distribute records and take the Artist to the next level or to the top.

Generally, a production company has nine months to shop demos to secure a deal. An album is not necessary to shop an artist for a label deal. Note that under the language in Paragraph 3, since delivery does not occur unless the Company records the Artist, delivery may never occur. Therefore this Agreement could go on indefinitely.

This provision needs to be altered to give the Company a reasonable time to find a suitable label deal. If it does not find one within that time, the Artist should have the right to terminate.

4) Recording Commitment/Future Options: During the Initial Contract Period, you shall record up to three (3) previously unreleased "singles" (the "Initial Track(s)"), the first of such Initial Tracks to be commercially released not later than five (5) months after the satisfactory delivery thereof (unless otherwise agreed by you and Company). During the period ending not later than nine (9) months after the commercial release of the Initial Track, Company shall have the right and option, in its sole discretion, to require you to record a full-length album comprised of not less than 10 songs (the "Initial Album"). Thereafter, Company shall have an option(s), to be exercised by Company in its sole discretion, for up to four (4) consecutive additional Contract Periods, comprised of one (1) full-length album during each Contract Period, each such option to be exercised, if at all, not later than the expiration of the then current Contract Period, subject to a ninety (90) day written notice and cure period in the event Company fails to exercise any such option. (The Initial Album, all additional audio only masters recorded by you during the Term hereunder, all audio-visual products, and all other recordings or other formats now or hereafter known embodying your musical performances are sometimes referred to individually and collectively herein as the "Master(s)".) Selection of the Masters to be recorded hereunder shall be subject to the mutual cooperation and agreement of the parties, it being understood and agreed that Company shall have the final word with respect to selection of Masters and for all other creative matters, including, but not limited to, the selection of the songs to be recorded, producers of Masters and album artwork.

A good shopping deal for an artist makes a production company adhere to a firm deadline. If they do not find a deal within nine months, for instance, the Artist can walk away. On the other hand, the company should have the right to share in the Artist's success from a record deal that the production company helped the Artist secure. A typical provision to address this would read as follows:

"The term of this agreement ("Term") shall commence upon the date of this Deal Memorandum and continue until the commercial release by a Distributor in the United States of the fourth (4th) full-length, studio album containing Artist's featured performances and delivered to such Distributor in fulfillment the Artist's recording obligation to the Distributor. Notwithstanding the foregoing, if an agreement for Artist's exclusive recording services between the Company and a Distributor (a "Distribution Agreement") has not been executed within nine (9) months from the date of completion of production of the Initial Masters hereunder (the "Shopping Period"), the Artist may terminate the Agreement."

5) Recording Costs/Advances: Company shall administer and pay all pre-approved recording costs in connection with the production of the Masters. All master recording costs, video production costs, independent marketing and promotion costs, all other sums paid by Company to you or on your behalf, (whether related to Other Music Activities or otherwise) and all other typically recoupable costs and expenses incurred by Company hereunder shall constitute "Advances", fully recoupable by Company from any royalties or other sums to be paid to you (or on your behalf) by us or any third party (excluding mechanical royalties) under this Agreement or any other agreement between you and Company.

There are two things wrong with this provision. First, "all recording costs" should only be expenses that are reasonable, documented, and, if possible, approved by the Artist. Second, in a real recording agreement, the Artist should receive a real advance so he/she can quit his/her day gig and move out of his/her parent's house.

6) Royalties: As your sole and complete consideration of your services rendered hereunder, Company shall pay you a sum equal to thirty five (35%) percent of the net revenues received by or credited to Company in connection with the exploitation of the Masters, after recoupment by Company of all Advances, recording costs and expenses and all other chargeable costs related to the distribution and/or exploitation of the Masters, including, but not limited to manufacturing costs, third party distribution fees and charges, and marketing and promotional expenses, it being understood that there shall be no so-called "double-dipping" and such recoupable expenses shall only be charged to your royalty account once. It is understood and agreed that Company's otherwise standard policies would apply to the calculation and payment of all royalties (e.g., free goods, program discounts, reserves, reductions, etc.). You acknowledge and agree that no royalties of any kind nor any other compensation (other than mechanical royalties, if any) shall be due to you except as provided in this paragraph. Company shall account and pay you any sums due not semi-annually, within ninety days after the end of each semi-annual period ending on June 29th and December 31st. Company shall be entitled to withhold any and all taxes as required by law with respect to any sums payable to you hereunder.

If the Company were a real label, a 35% percent royalty payable to the Artist on record sales would not be unfair. However, because the Company is only a production company, the goal is not to sell records but rather to secure a suitable label deal. When the production company achieves that, it should share in the revenues generated by the major label, but not 65%. The following clause should be added to the Royalties section of the agreement:

"Notwithstanding anything to the contrary above, If Company enters into Distribution Agreement, with your prior approval, the Company shall receive [5% to 20%] (see introduction) of any advances or royalties payable by the Distributor for the recording services of the Artist. The Artist shall receive the balance, that is, 80% of such Advances or royalties for the first four (4) Albums. Notwithstanding anything to the contrary above, company shall have the right to deduct its actual documented approved recording costs that have not already been recouped by Company."

7) Name and Likeness Rights/Website: Company shall have the perpetual right, which such right shall be exclusive during the term and non-exclusive thereafter, without liability to any person, to use and to authorize other persons to use your name, likeness and biographical material for purposes of advertising, marketing, promotion and trade in connection with making and/or exploitation of Maters, recordings, audio-visual materials, and all other materials hereunder. You hereby grant to Company the exclusive right, during the Term (and the non-exclusive right thereafter, with respect to an alternate name), to establish and maintain all Artist-branded digital sites and social networking sites, including a website having the URL "_________.com" or any similar designation based on or containing your professional name. You shall make yourself available at Company's reasonable request and expense and upon reasonable notice to appear for photographs, posters, cover art, interviews with representatives of the media and publicity personnel and to perform other reasonable promotional functions.

This clause should be added:

"Notwithstanding, anything to the contrary above, (i) Artist shall have the right to continue his YouTube and Facebook pages; and (ii) all content in Artist branded sites shall be subject to Artist's approval."

8) Representation/Warranty/Indemnity: You warrant and represent that you have been, are and shall continue to be possessed of the full right to enter into this agreement and perform hereunder and that your entering into this agreement and performing hereunder shall not infringe upon the rights of any person or entity. Upon the expiration or other termination of this Agreement, you agree not to re-record any composition embodied on a Master hereunder until the date that is the later of i) three years after the end of the Term and iii) five years from the completion of recording of such Master hereunder. You indemnify us against any losses or damage (including reasonable attorneys' fees) arising out of any claims by any third parties which are inconsistent with any warranty made by you herein or any condition contained herein. You shall promptly pay us on demand any sums for which you are liable under the proceeding sentence and, alternatively, Company shall be entitled to withhold any such sums from monies otherwise payable to you hereunder.

9) Ownership: The Masters (including, but not limited to, any audio-visual recordings related thereto), all duplicates and derivatives thereof, all records made therefrom or duplicates or derivatives (including the copyright and renewal and/or extension of such copyright), and all artwork and other intellectual property created or obtained by Company, together with the performances embodied therein, all in any form, manner, or medium now or hereafter known, shall be exclusively and perpetually property of Company, free from any claim whatsoever by you or any person deriving any rights from you. The Masters shall be deemed a work made for hire within the meanings of the United States Copyright Act. If the Masters are determined not to be a work made for hire, they will be deemed transferred to Company by this agreement, together with all rights in it. Accordingly, the Masters, together with yours and all the performances embodied on them, shall be the sole property of Company, its assignees and successors in perpetuity and throughout the world, free from any claims by you or any other person; and Company shall have the exclusive right to copyright the Master in its name as the author and owner thereof and to secure any and all renewals and extensions of such copyright throughout the world. You will execute and deliver to Company such instruments of transfer and other documents regarding the rights of Company in the Master as Company may reasonably request to carry out the purposes of this Agreement, and Company may sign such documents in your name and make appropriate disposition of them.

This paragraph states that all "Masters shall be deemed work for hire" for the company. Work for hire means that all the copyrights in the recordings are owned by the company, and that the company will have the right to use them for any purpose after the termination of the agreement. In a pro-artist agreement, the copyrights in the master recordings would be owned jointly by the Artist and the Company. This means that if the Agreement terminates, neither the Artist nor the company would have the right to exploit the master recordings without mutual approval.

Without limiting the generality of the foregoing, Company, or any person authorized by Company shall have the perpetual unlimited, exclusive right, throughout the world: (i) to manufacture records, video-records, and any derivatives thereof derived from the Master in any form, in any medium, and/or by any method now or hereafter known; (ii) to sell, transfer or otherwise deal in the same under any trademarks, trade names and labels; (iii) to reproduce, adapt, transmit, distribute, broadcast, perform, communicate and otherwise use the Master in any medium or in any manner, including but not limited to use in physical, digital, electronic, mobile and internet formats; (iv) to cause or permit the public performance of the Master, or derivatives thereof, through any and all media; (v) to add to, delete from, edit, mix and otherwise alter the Master without restriction; and (vi) to exploit the Master and derivatives therefrom through any and all means, whether now or hereafter known, all without payment of any compensation to you except the royalties as described in this Agreement. In the alternative Company may, at its election, refrain from doing any or all of the foregoing.

10) Mechanical License: With respect to any musical compositions embodied on the Masters which are owned or controlled by you or your designees, you hereby grant to us and our designees the irrevocable non-exclusive right to reproduce the Song on records (including digitally delivered reproductions) and to distribute any of those records in the United States and Canada. Mechanical royalties shall be payable on a maximum of ten (10) songs on each album, on net sales of such records at the following rates: (i) on such records sold in the United States, the rate shall be the United States mechanical rate. The "United States mechanical rate" shall mean the amount equal to seventy-five percent (75%) of the minimum statutory royalty rate (without regard to playing time) provided for in the United States Copyright Act which is applicable to the reproduction of musical compositions as of the date of initial release of the Master concerned; and (ii) on such records sold in Canada, the rate shall be the Canadian mechanical rate. The "Canadian mechanical rate" shall mean the amount equal to seventy-five percent (75%) of the minimum statutory royalty rate (without regard to playing time) provided for in the Canadian Copyright Act which is applicable to the reproduction of musical compositions as of the date of initial release of the Master concerned; (iii) the mechanical royalty rate for a Song contained on a mid-price record or budget record shall be three-fourths (3/4ths) of the United States mechanical rate or the Canadian mechanical rate; as applicable; and no mechanical royalties shall be payable on any phonograph records for which no royalties are payable by Company. If the copyright in a musical composition is owned or controlled by a person, firm or corporation other than you, you shall cause that person, firm or corporation to grant to us and our designees the same rights as you are required to grant to us and our designees hereunder. You hereby grant to us and our designees at no fee, royalty or other cost to us or our designees, the irrevocable, non-exclusive, worldwide right to reproduce and publicly perform each Song on audio-visual recordings, to distribute audio-visual records embodying those audio-visual recordings, and otherwise to exploit in any manner and through any media those audio-visual recordings. You grant to us and our designees, or shall cause to be granted to us, the irrevocable right to print and reproduce, at our election, the title and lyrics to the Song on the packaging of phonograph records embodying Masters throughout the world in perpetuity, without payment to you or any other person, firm or corporation of any monies or other consideration in connection therewith. Any assignment, license or other agreement made with respect to the Song shall be subject to the terms hereof.

This paragraph is known as the Controlled Composition Clause. It means that the Artist who writes his own songs does receive mechanical royalties from record sales by the Company, but the Company pays only ¾ of the statutory rate of 9.1 cents per song instead of the full rate. It is a standard clause in any major label or major indie deal and usually cannot be negotiated away unless the Artist has tremendous bargaining power. However in the context of this Agreement, it is usually irrelevant as the Company will probably not sell records, or if it does, perhaps only one or two tracks in order to spark a real label's interest in the Artist.

11) Co-Publishing. The parties agree that you (or your affiliated publishing company) and Company's designated publishing affiliate shall be co-publishers with respect to music and lyrics of all compositions written, owned and/or controlled by you during the Term. Accordingly, you (or your affiliated publishing company) hereby irrevocably and absolutely assign, convey and set over to Company (or its designee), or will cause Company (or its designee) to receive an assignment, of fifty (50%) percent of all right, title and interest (including the worldwide copyright and all extensions and renewals thereof) in and to each and every controlled composition which is recorded hereunder. Upon request, you agree to execute and deliver to Company, or to cause to be executed and delivered to Company (or its designee) a separate Co-publishing Agreement with respect to each such controlled composition in accordance with standard forms of such agreements. If you shall fail to promptly execute such agreements, you hereby grant to Company the right to sign same on your behalf, though Company's failure to exercise the rights granted to use such authority shall not diminish Company's rights as set forth within this Agreement. Company shall be the exclusive administrator of 100% of all rights in and to such controlled compositions, and it (and/or its designees) shall be entitled to exercise any and all rights with respect to the control, exploitation and administration of such compositions including, without limitation, the sole right to grant licenses, collect all income and to use the name, likeness and biographical material of each composer, lyricist and songwriter hereunder in connection with such composition for the full term of copyright (including all renewals and extensions thereof) in and to such Composition. From all sums actually earned and received by Company in the United States of America from the exploitation of such Composition throughout the world (the "Gross Receipts"), Company shall: (i) deduct and/or retain all out-of-pocket costs incurred by Company in connection with the exploitation and protection of such Composition; (ii) deduct and pay royalties payable to the writers (including you) of the Composition (which you warrant and represent shall not exceed fifty (50%) percent of the Gross Receipts); and (iii) pay to you an amount equal to fifty (50%) percent of the balance remaining after deducting the aggregate sums set forth in subparagraphs (i), (ii) and (iii) above, and the remaining fifty (50%) percent thereof shall be retained by Company for its sole use and benefit. Accountings for such royalties shall be rendered semi-annually subject to all the terms and provisions of Paragraph 11 hereof.

The Artist should delete this paragraph 11 completely. Since a production company is not a music publishing company, which is equipped to exploit songs and collect income from them all around the world, the Company should not become the Artist's music publishing company.

12) Other Music Activities. You shall pay to Company a sum equal to thirty (30%) percent of all OMA Income ("the OMA Payment", provided that the OMA Payment in connection with your touring and other live musical performances shall be deemed to be twenty (20%) percent). You authorize Company to collect all OMA Income on your behalf but to the extent such is not collected by Company, within fifteen (15) days of the end of each calendar quarter of the Term, you will send Company a detailed written account of all OMA Income received by you or on your behalf during such accounting period and the amount of the OMA Payment accordingly payable to Company. On receipt of each such accounting statement, Company will elect either to deduct the OMA Payment from monies (including royalties) due to you hereunder or to receive payment, in which case you shall pay the amounts shown to be due in each accounting statement within ten (10) days of the date of such statement. You agree to maintain complete and accurate books and records relating to OMA Income. At any time within two (2) years after any accounting statement is rendered to Company hereunder, Company shall have the right to inspect such books and records on reasonable notice but not more than once during each year. As used herein, "Other Music Activities" shall mean all of your professional activities connected to the entertainment industry including, without limitation, merchandising, advertising, sponsorship, endorsements and tie-ins, touring and all other live performances, and TV or film appearances (but specifically excluding music publishing, any fees or royalties you receive for acting as a "producer" of records for others, record royalties hereunder, and any other income payable to you which Company is otherwise participating in (i.e., there shall be no "double dipping" with respect to OMA Income). "OMA Income" shall mean all gross sums paid or payable to you with respect to your "Other Music Activities" during the Term or with respect to any and all agreements related thereto entered into during the Term and for a period of three months thereafter (whether received during the term or thereafter), after deduction of third party out-of-pocket expenses or deductions reasonably incurred in connection with the Other Music Activities, including booking agent commissions, monies payable to third party co-publishers and co-writers of musical compositions written by you and reimbursement for actual out-of-pocket expenses incurred by you in connection therewith (but which such deduction shall not apply to production, travel, musician, or other show related costs for your live performance activities or management commissions). Upon request by Company, you hereby agree to execute standard Letters of Direction authorizing and directing any third parties to pay any such OMA Payments directly to Company.

The Artist should delete this paragraph completely for the reasons discussed in the introduction to this installment (see 360 Provisions). Yet in fairness to the Company, if it does something to deserve ancillary revenues, there is nothing wrong with compensating it for its efforts. Here is an alternative to harsh 360 clauses compensating the Company if it actually helps the Artist make money:

Ancillary Rights.

(a) Company may, from time to time, secure and coordinate "synch" placements of any of the Artist's Songs in motion pictures, TV program, ad campaigns, video games etc. ("Company Synchs"). It is understood that Company is not a music publisher and shall not be required to procure any synchs for Artist. If Company does secure and coordinate any live personal appearance for the Artist, Company shall be entitled to collect all gross revenue from the Company Synchs. Company shall pay Artist seventy-five percent (75%) of gross revenue derived from such Company Synchs. Company shall make such payment to Artist within three (3) days of Company's receipt of such monies together with a comprehensive accounting statement. Notwithstanding anything to the contrary above, (i) Artist shall have the right to approve Company Synchs and the synch fee; (ii) Artist has no obligation to Company for any synch placement not secured by Company. Company shall have no other rights in Artist's songs except as set forth in this Subparagraph.

(b) Company may, from time to time, secure and coordinate live personal appearances for Artist and shall negotiate the Artist's compensation in connection therewith for concerts or live performances ("Company Shows"). It is understood that Company is not an employment agency or a talent agent and shall not be required to procure any employment for Artist, and that Company has not represented that it will procure employment for Artist. Any live personal appearance that Company does secure and coordinate for the Artist shall be incidental to its role as a record company. Company shall pay Artist seventy-five percent (75%) of Net Revenue derived from such Company Show. "Net Revenue" as used in this paragraph shall mean all gross revenue actually received by Company less documented reasonable expenses incurred by Company in connection with such Company Show such as lighting and sound. Company shall make such payment to Artist within three (3) days of Company's receipt of such Net Revenues together with a comprehensive accounting statement. Notwithstanding anything to the contrary above, (i) Artist shall have the right to pre-approve each Company show and her performance fee; (ii) Artist has no obligation to Company in connection with any live performance not secured by Company.


13) Miscellaneous. This agreement is the entire agreement between the parties with respect to the contents hereof, supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, of the parties, and shall not be modified, except by an instrument in writing, signed by each of the parties duly authorized to execute such modification. Company may assign its rights under this Agreement in whole or in part.

There is a great deal of boilerplate language here that may be legally necessary, but is not more favorable to one party than the other. Here is one truly insidious sentence: "Company may assign its rights under this Agreement in whole or in part."

This would mean that the Company could assign the agreement (together with the five albums that the Company is entitled to) to any other company or individual. The Company could thereby literally sell the Agreement. This sentence should be modified to allow the Artist to approve any assignment of the Agreement to a third party.

You may not assign this agreement or your rights or responsibilities hereunder without the prior approval of Company, such approval not to unreasonably withheld with respect to a so-called "furnishing company" owned or controlled by you which is exclusively entitled to your recording services. A waiver by either party of any term or condition of this agreement shall not be deemed or construed as a waiver of such term or condition for the future, or of any subsequent breach thereof. All remedies, rights, undertakings, obligations, and agreements contained herein shall be cumulative and none of them shall be in limitation of any other remedy, right, undertaking, obligation or agreement of either party. No breach of this agreement by either party shall be deemed material, unless the non-breaching party shall have given the other party notice of such breach and such breaching party shall fail to cure such breach within 30 days after receipt of such notice. If any part of this agreement shall be determined to be invalid or unenforceable, the remainder of this agreement shall remain in full force and effect. This Agreement has been entered into in the State of California and the validity, interpretation and legal effect of this Agreement shall be governed by the laws of California applicable to contracts entered into and performed entirely within California, with respect to the determination of any claim, dispute or disagreement which may arise out of the interpretation, performance or breach of this Agreement. All claims, disputes or disagreements which may arise out of the interpretation, performance or breach of this Agreement shall be submitted exclusively to the jurisdiction of the appropriate court in California. You acknowledge that Company has given you the right and opportunity to have this Agreement reviewed by an attorney of your choice having competence in the music industry, and you have done so. You further acknowledge that said attorney has reviewed with you the terms of this Agreement and that he/she has advised you as to all legal ramifications and consequences of your entering into this Agreement. You acknowledge that your services hereunder are of a special, unique, unusual, extraordinary and intellectual character and in the event of a breach by you of any material term, condition, representation, warranty or covenant herein, Company will be caused irreparable injury and damage. You expressly agree that Company shall be entitled to the remedies of injunction and other equitable relief to prevent or remedy a breach, which relief shall be in addition to any other rights or remedies, for damages or otherwise, which Company may have.

Under the last sentence above, the Company could seek a court to enjoin the Artist for recording for another record label.

If because of: an Act of God, inevitable accident; fire; lockout; strike or other labor dispute; riot or civil commotion; act of public enemy; enactment, rule, order or act of any government or governmental instrumentality (whether federal, state, local or foreign); failure or delay of transportation facilities; or other cause of a similar or different nature not reasonably within Company's control, Company is materially hampered in the recording, manufacture, distribution or sale of records, then, without limiting Company's rights, Company shall have the option by giving you notice to suspend the running of the then current Contract Period for the duration of any such contingency plus such additional time as is necessary so that Company shall have no less then sixty (60) days after the cessation of such contingency in which to exercise its option, if any, to extend the Term of this Agreement for the next following Option Period.

The parties agree that, upon both of our signatures below, this letter shall constitute a valid and binding agreement regarding the exclusive rights to your services. Notwithstanding the contemplation of the Long Form Agreement, all legal and equitable rights, obligations and remedies of both parties attach hereto with no limitation.

ACCEPTED AND AGREED TO:

__________ Records Inc. Artist


_____________________ ___________________
An Authorized Signatory SS#:


FAIR SHOPPING DEAL

___________ Productions, Inc.
c/o__________, Esq.
f/s/o _______ [Producer]
__________
New York, NY
As of ______, 2015

__________ Music, LLC
f/so __________ [Artist]
c/o __________, Esq. [Attorney]
Los Angeles, CA

Note that the Artist was represented by experienced counsel.

Re: Deal Memorandum

Ladies and Gentlemen:

The following sets forth the terms on which (i) ____________ Inc. ("Company") f/s/o _______ and ___________Music LLC ("you") furnishing the services of _______ ("Artist") agree to form a California limited liability company (the "Venture") to furnish the exclusive services of Artist to a Distributor (as defined herein), (ii) Artist will furnish her exclusive recording services to the Venture, and (iii) Company will furnish the services of _______ ("Producer") to the Venture to produce the Venture Masters (defined below).

This agreement was essentially between two individuals: an artist and a producer who owned a production company. "Company" is the name of the producer's corporation. The Artist entered into this agreement through a "furnishing" company as well. By entering into the deal as companies rather than individuals, both parties secured "limited liability" and certain tax advantages. Limited liability means that even if a company consists of only one individual, the personal assets of that individual (such as his/her personal bank account, house and car) are not be subject to liability.

As used herein, the term "Distributor" shall mean Sony Music, Universal Music and Warner Music, their wholly owned affiliated labels (collectively "Major Label"); a major independent record company, or an indie record label that is regularly distributed by a Major Label.

This Agreement uses the word "Distributor" to refer to the record company with which the Company is trying to secure a deal. The definition of "Distributor" will vary, but it is in the interest of the Artist to narrow this definition to the three major labels --- Warner, Sony, and Universal, and their wholly owned label affiliates, such as Atlantic, Epic, Columbia, Republic, and Interscope, or a major independent, such as Beggars Banquet (the Strokes), Big Machine (Taylor Swift), or Glassnotes (Mumford and Sons). Yet the Company may want a broader definition embracing companies with national distribution, such as RED, ADA, and Caroline, which are owned by the majors but are essentially distributors who seldom provide advances or marketing support.

The definition of "Distributor" is not as important in this Agreement as it could otherwise be because, as set forth in Para. 2, distribution shall be subject to the prior written approval" of the Artist.

1. Organization of the Venture. Contemporaneously with the execution of this Deal Memorandum, Company and you will cause to be filed Articles of Organization in the State of New Jersey organizing a limited liability company called "_______ LLC", such name deemed approved by both Company and you hereunder (or, if such name is not available, another name mutually agreed upon by Company and Artist). The Venture shall be owned 20% by Company and 80% by you.

Note that the Artist will receive 80% of any income; the Company's royalty is limited to 20% -- compared to 65% for the production company in the first agreement discussed above.

2. Artist Obligations. The term of this agreement ("Term") shall commence upon the date of this Deal Memorandum and continue until the commercial release by a Distributor in the United States of the fourth (4th) full-length, studio album containing Artist's featured performances and delivered to such Distributor in fulfillment the Venture's recording obligation to the Distributor. Notwithstanding the foregoing, if an agreement for Artist's exclusive recording services between the Venture and a Distributor (a "Distribution Agreement") has not been executed, or substantially negotiated, within nine (9) months from the date of completion of production of the Initial Masters hereunder (the "Shopping Period"), upon written notice, via registered mail, return receipt requested, by Artist given to Company, the parties' obligations hereunder shall terminate and Artist shall be released from any further obligations to the Venture.

The maximum duration of this Agreement is for four albums. Note that unless the Artist has approved a Distribution Agreement within nine months from the date of completion of production of the Initial Masters (six tracks), the Artist has the right to terminate the deal with the Company.

In such event, neither Company nor you shall have any right to exploit the Venture Masters without the express written permission of Company and you. All master recordings containing Artist's featured performances that are recorded during the Term, including without limitation the Initial Masters (defined below), shall be referred to as "Venture Masters" and shall be deemed "works made for hire" specially commissioned by the Venture.

If the contract terminates, neither the Company nor the Artist has the right to exploit the Initial Masters without mutual approval. Again, this is very favorable for the Artist. In a pro-company agreement, the Company would exclusively own the copyrights in the recordings and be able to exploit and/or license any masters made during the term. In this agreement the Venture (that is the Company and the Artist) jointly own the copyrights.

Notwithstanding the foregoing, if during the Shopping Period Venture receives a bona fide written offer from a Distributor to enter into a Distribution Agreement and the Distribution Agreement is not fully executed prior to the expiration of the Shopping Period, then Shopping Period shall automatically be extended for an additional ninety (90) days.

Company needs this provision in order to wrap up any negotiation that are ongoing as of the end of the nine month shopping period.

Further, notwithstanding anything to the contrary expressed in or implied by this Agreement, it is understood and agreed that the choice of the Distributor, as well as the terms and provisions of the Distribution Agreement, shall be subject to the prior written approval of Company and you, such approval not to be unreasonably withheld or delayed; further, Company and you agree that if you choose not to enter into a Distribution Agreement with a Distributor during the Shopping Period then you shall not directly or indirectly deal with such Distributor (or its affiliates) for a period of twelve (12) months following the expiration of the Shopping Period.

Here it is made clear that the Artist has the right to approve the terms of the Distribution Agreement as well as the Distributor. This is absolutely key. Without the right to approve the Distribution Agreement, the Company could enter into a deal that is bad for the Artist, and the Artist would be powerless to prevent it. The Company may argue that the Distributor will not finalize the deal if the Artist does not sign an "inducement" letter confirming his assent to the agreement. However, without the right to approve the deal, if the Artist did not sign the inducement letter, the Artist would arguably be in breach of the Agreement with the Company. The Artist should at least have approval of the major deal points including duration, number of options for additional albums, recording budget, advances, and royalties.

3. Company Obligations. Company agrees as follows:

a. Engagement. Promptly after the execution of this Deal memorandum, Company will cause Producer to record and deliver to the Venture six (6) Masters (the "Initial Masters"). In addition, provided that a Distribution Agreement is entered into or substantially negotiated during the Shopping Period, the Venture shall engage Company to, and Company will cause Producer to produce and deliver three (3) Venture Masters per album for potential inclusion on each of the first four (4) "commitment" albums to be delivered to the Distributor pursuant to the Distribution Agreement. For the purposes hereof, the Initial Masters and all other Venture Masters produced by Producer shall be referred to as "Produced Masters". The first four (4) "commitment" albums to be delivered to the Distributor pursuant to the Distribution Agreement are sometimes referred to as "First Album", "Second Album", "Third Album" and "Fourth Album", respectively.

In this Agreement, the Company was furnishing the services of a top notch producer. In addition to shopping the Artist to labels, the Agreement contemplates that the producer would also have a role in producing tracks for the Artist after he/she got signed.

b. Producer Advance; Costs. In respect of the Initial Masters and any other Produced Masters on the First Album, the Venture shall pay, or cause the Distributor to pay, to Company, as advances, recoupable against the Producer's Royalty (the "Producer Advances"), $15,000.00 per Master payable as follows: (1) $7,500.00 payable promptly upon execution of the Distribution Agreement, and (2) the balance promptly following delivery and acceptance by the Distributor of technically satisfactory Masters. In addition, use of Company's studio in recording, edition and/or mixing any Produced Masters shall be billed in accordance with a budget that has been approved by both you and Company, which budget is attached hereto as Exhibit "A" (the "Approved Budget").

This provision and the next does not require the label to use the producer's tracks, but does guarantee that the producer would receive advances and a royalty (also referred to as "points") on the first four albums.

c. Producer Royalty. The Venture shall pay Company (or cause the Distributor to pay to Company) a producer's royalty (the "Producer's Royalty") of three percent (3%) of SRLP in respect of net sales of full-priced records through normal retail channels in the United States ("USNRC") embodying solely the Produced Masters. Notwithstanding the foregoing, in no event shall the Producer Royalty hereunder be lower than the royalty equivalent of three produced tracks per album, through the fourth album. Producer's Royalty on all other sales and exploitations shall be reduced, adjusted, calculated and paid in the same proportion, and at the same times, as is the Venture's basic "all in" royalty. As to records not consisting entirely of the Produced Masters, the royalty rat shall be prorated by multiplying such royalty rate by a fraction, the numerator of which is the number of Produced Masters embodied thereon and the denominator of which is the total number of royalty bearing masters (including the Produced Masters) embodied thereon. Producer's Royalty shall be paid retroactive to the first record sold or other exploitation after recoupment of the recoupable portion of all recording costs incurred in connection with the Album on which they are embodied at the net artist rate (i.e., the "all in" royalty payable to the Venture less the Producer's Royalty payable to Company and the royalties payable to all other producers, mixers and engineers of such Masters), subject, however, to recoupment of the unrecouped portion of the Producer Advance. There shall be no reduction in the Producer's Royalty due to; (i) amounts payable to mixers or executive producers, or (ii) after delivery and acceptance of any Master, amounts payable to any third party producer. In calculating "recording costs" for recoupment purposes, "recording costs" shall not include any "in pocket" advances payable to the Venture or Artist. Producer's Royalty shall be paid directly to Company by the Distributor pursuant to an irrevocable letter of direction.

3% to 5% is a normal producer royalty.

d. Credit. The Venture shall instruct, and use reasonable efforts to cause, Distributor to accord Producer the following credit in all trade and consumer advertisements relating to any Produced Master of ½ page or larger, and in and on the outer packaging, label copy, liner notes and labels of all records embodying the Produced Master:

"Produced by ______"

The Venture shall instruct, and use its best efforts to cause, Distributor to include Company's logo (the "Company Logo") and Artist's Logo (the "Artist Logo") in all trade and consumer advertisements relating to any record embodying any Venture Master of ¼ page or larger, and in and on the outer packaging, label copy, liner notes and labels of all records (including promotional and commercial singles) embodying any Venture Master. Each such logo shall be no less prominent, and no smaller in size, than any other logos (including the other party's logo) included on such records or in such advertisements, including, without limitation, Distributor's logo. In the event that any Distributor will not agree to include both the Artist Logo and the Company Logo on such terms, Company and Artist shall negotiate in good faith to determine which logos, if any, will be so included.

e. Controlled Compositions. Producer's interest in any compositions embodied on any Produced Masters shall be subject to any so-called "controlled composition" provisions contained in the Distribution Agreement between the Venture and Distributor.

See comments for paragraph 10 in the first agreement.

4. Management, Voting and Control.

a. The business and affairs of the Venture shall be managed by Company and you. Company and you will have joint decision making authority and all decisions made regarding the business and affairs of the Venture must be mutually approved by you and the Company, in writing, including, without limitation, those decisions relating to: (i) determining which Distributor(s) with which to enter into Distribution Agreement(s), and (ii) the release and/or exploitation of any Master(s). For the avoidance of doubt, the Venture shall not enter into any agreements or other undertakings regarding any Venture Master prior to the execution of a Distribution Agreement, including, without limitation, any license agreement or otherwise, without unanimous written consent of you and Company.

b. Artist and Company further agree as follows: (i) Company's counsel and Artist's counsel and Artist shall jointly represent the Venture in connection with any Distribution Agreement(s) to be entered into by the Venture, and (ii) Artist's counsel shall represent Artist's interests in connection with any additional obligations that Artist may have to any Distributor (such as an obligation to deliver additional commitment albums). Company's counsel and Artist's counsel shall split any legal fees paid or reimbursed by any Distributor in connection with the Distribution Agreement and the Venture shall be responsible for paying, or shall make appropriate arrangements for discharging, all reasonable legal fees of Artist's counsel and Company's counsel in connection with any Distribution Agreement(s) that are not paid or reimbursed by the Distributor.

This is a very favorable provision for the Artist, as it not only gives him/her approval, but lets his/her attorney actively engage in negotiations with the label.

5. Allocations and Distributions.

a. All advances and royalties (including audit settlements) received by the Venture, or credited to the Venture against an advance previously paid to the Venture, shall be distributed as follows:

i. First, to the reimbursement of any actual out-of-pocket expenses incurred by the Venture, or by Artist or Company with the Venture's prior written approval, in connection with the Initial Masters, including the Approved Budget, and in soliciting or negotiating any Distribution Agreement (including, without limitation, legal fees incurred by the Venture pursuant to paragraph 4(b) above); and

ii. Then, after payment of any Producer Advances, Producing Royalty (subject always to recoupment of recording costs and/or the Producer Advances on the terms set forth above) and/or the Approved Budget amount due to Company, 80% to you and 20% to Company.

b. Company and Artist agree to require, as a condition of any Distribution Agreement, any Distributor to agree to account directly to: (i) Company for any Producer Royalties that may become payable, (ii) you for 80% of all royalties that may be payable to the Venture under any Distribution Agreement (net only of the Producer Royalties payable to Company, if any); and (iii) Company for 20% of all royalties that may be payable to Venture under any Distribution Agreement (net only of the Producer Royalties payable to Company, if any). For the avoidance of doubt, as between Company and Artist, subject to the payment of the Producer Advances due to Company pursuant to paragraph 3(b) above, 80% of all "in pocket" advances payable under any Distribution Agreement shall be payable to you.

Note that the Company's compensation is limited to monies payable by the label, not to any monies that the Artist may earn in the entertainment business. This is not a 360 deal, which is a good thing for the Artist.

c. Except as expressly otherwise provided herein, each of you and Company shall be responsible for payment of its own attorney's fees, personal management commissions and/or business management commissions out of its share of distributions and/or payments by the Venture. Under no circumstances shall the Venture be responsible for payment of commissions in respect of personal managers, business managers or other advisors engaged by Artist, Producer or Company unless such person was retained expressly to represent the Venture with the prior written consent of both Artist and Company.

6. Other.

a. The Venture shall maintain accurate books and records of all monies paid to or collected by the Venture pursuant to any Distribution Agreement(s). The Venture's books and records relating thereto may be inspected during regular business hours by a certified public accountant or attorney at law designated by Company or you and at the inspecting party's expense, at the place where same are regularly, maintained, upon thirty (30) days' written notice to the Venture; provided, however, that such examination shall not be permitted more than once a calendar year.

b. Neither party may assign, convey, sell, transfer, give, liquidate, encumber, or in any way alienate ("Transfer") all or any part of his or its respective membership interest in the Venture without the prior written consent of the non-transferring party, which consent may be given or withheld in the sole discretion of such non-transferring party. Any attempted Transfer of all or any part of a membership interest without the necessary consent, or as otherwise permitted hereunder, shall be null and void and shall have no effect whatsoever.

Unlike the first agreement, the Company is not trying to give itself the right to sell the contract.

7. Definitive Agreement. You and Company hereby acknowledge that it is the parties' mutual intent to enter into a more formal operating agreement (the "Operating Agreement"), as well as a long-form producer agreement (the "Producer Agreement") and a Furnishing Agreement, at a later date. You and Company hereby agree to negotiate in good faith the terms of such agreements, provided that such agreements shall not contain any provision contrary to any material provision set forth herein, unless mutually agreed in writing by both parties. Until such time, this Deal Memorandum shall serve as the operating agreement between the parties regarding the Venture.


ACCEPTED AND AGREED TO:

____________ PRODUCTIONS, INC.

____________


____________ MUSIC, LLC


_____________

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. He 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.

March 27, 2015

Hau5 of Mau5: Deadmau5 and Disney in a Trademark Battle

By James West

The electronic dance music (EDM) artist's attempt to trademark his "Mau5head" sparked a legal battle with Disney in September. Deadmau5 (pronounced "Dead Mouse", a.k.a. Joel Zimmerman) attempted to register his logo, which is a replication of the mouse head mask he wears on stage during his performances. This logo is essentially three circles connected together, forming a head and two ears - similar to the famed Mickey Mouse logo used by the Walt Disney Company. Similar enough, in fact, for the latter to file an opposition to the registration. According to Zimmerman, Disney alleges that the trademark would be confusingly similar to its own Mickey Mouse logo.

Legal Background for Disney's Claim Against Deadmau5

The primary federal statute regulating trademarks is the Lanham Act, which states, in regards to trademark infringement, that any person who uses in commerce any word, term, name, symbol, or device, or any combination thereof which is likely to cause confusion shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such an act. 15 U.S.C.A. § 1125. In a series of tweets on the artists' Twitter page, Zimmerman complains that "Disney thinks [consumers] might confuse an established electronic musician/performer with a cartoon mouse." Zimmerman is oversimplifying here, as consumer confusion, while a factor, is not determinative when deciding if a trademark is confusingly similar to a preexisting trademark. This "likely to cause confusion" standard has been further extrapolated on by the courts. However, there is no bright-line rule. Even Judge Friendly, when establishing a list of factors to be weighed when determining the strength of the prior owner's chance of success when claiming infringement, wrote that the court may still take other variables into account. Polaroid Corp. v. Polarad Elecs. Corp., 287 F.2d 495. Friendly's factors included the strength of the mark, the degree of similarity between the two marks, and the sophistication of the buyers. Id.

Disney's Likelihood of Success in its Claim Against Deadmau5

While Zimmerman's mark does have its differences from the traditional Mickey Mouse logo, such as a large smile on the face of the mark, ultimately the factors appear to weigh in Disney's favor. Disney's mouse logo is exorbitantly strong. It would not be remiss to say that it is one of, if not the most, recognized and popular symbols in modern culture, and has been so since the 1930s. It appears everywhere, on every type of merchandise available - from toys, to t-shirts, to pancakes, to car decals, to kitchen appliances. The Walt Disney Company is the second largest broadcasting company in the world, and its use of the mouse head logo is international household knowledge.

The marks are somewhat similar. Both contain three circles forming a head, with two ears and a face. However, Deadmau5's logo is distinct in that it has a large, toothy grin spread across the face, with two eyes with "X's" as pupils. Disney's mouse head logo contains either Mickey's face or no features at all. In this element they are distinguishable, however, they may be similar enough to affect the weight of other factors. While there seems to be no evidence of actual confusion, at least there has not been any presented yet, the sophistication of the buyers is a crucial factor to consider. Deadmau5 is by no means a household name, gaining his popularity in the realm of the EDM subculture. It is unlikely that unless someone is involved with the industry, or is a young adult who is aware of the subculture or partakes in it, has heard of Deadmau5. Even less likely is someone able to identify a piece of music created by him. On the other hand, even young children (and their parents) know the distinct Disney logo. There is a possibility that these buyers, not being aware of EDM or Deadmau5, could confuse the logo as being related to Disney in some way. The Deadmau5 logo does bear the distinct three circles that have been closely associated with Disney for so long. A child or parent, two groups likely to buy Disney products, could falsely presume something that bears the Deadmau5 logo is related to Disney in some way. While whatever type of product might bear both logos may be questionable, the possibility nevertheless exists.

In short, the possibility of Zimmerman prevailing is there. Of course, the court may consider other pre-established factors, or even factors that have not previously been considered. The analysis would then, of course, change; possibly even in favor of Zimmerman. However, the sheer strength and popularity of the Disney logo, combined with the similarity of the two products, weighs in favor of Disney.



April 4, 2015

Distributor Hits Drake With Libel Lawsuit After Denouncing Upcoming Concert Film

By Adam Freedman

On March 19th, the distributor of the concert movie Drake's Homecoming: The Lost Footage, reportedly served Drake with a libel lawsuit after the multi-platinum artist took to social media to publicly denounce the film only a few days before its release. (Kennedy, John. "Distributor Sues Drake for Disavowing Concert Film." Global News Distributor Sues Drake for Disavowing Concert Film. March 19, 2015. http://globalnews.ca/news/1891438/distributor-sues-drake-for-disavowing-concert-film/.) The film's distributor, Specticast, is seeking damages and a declaration from the court confirming that the film's release was authorized.

The film depicts a 2009 sold-out concert performance in Toronto. Shortly after the show, Drake was signed to Lil Wayne's Young Money label and became a global superstar. However, the issue arose on March 16th, 2015, when Drake publicly disavowed any connection with the film by tweeting: "The Drake Homecoming film is not something OVO or Drake have any part in. I feel it is my responsibility to inform and protect my fans." (Id.) Drake continued to post further tweets using the hashtag #ProtectTheFans. (Id.) Specticast alleges that Drake's statements are false, and the rapper has harmed the value of the movie by encouraging his 21 million Twitter followers to boycott its release.

According to documents obtained by the Los Angeles Times, Drake signed a contract with Serious Entertainment, the promoters of the concert detailed in movie, in which he agreed to the concert's filming alongside a $15,000 cash fee and a 15% royalty on the film's profits. (Kennedy, Gerrick. "Drake, Producers Battling over 'Homecoming' Film Days before Release." Los Angeles Times. March 16, 2015. http://www.latimes.com/entertainment/music/posts/la-et-ms-drake-producers-disputing-homecoming-concert-film-20150316-story.html.) The contract also stipulated that, should Drake's 2009 concert sell out, he would be required to play another show for $5,000. (Id.) This second show has yet to take place. (Id.)

Under this set of facts, if Specticast can produce an enforceable contract, the distributor will have a strong case for libel. New York courts have explained that, "Under New York law, the elements of a defamation claim are a false statement, published without privilege or authorization to a third party, constituting fault . . . and it must neither cause special harm or constitute defamation per se." (Peters v. Baldwin Union Free Sch. Dist., 320 F.3d 164, 169 (2d Cir. 2003).)

A statement is defamatory "if it tends so to harm the reputation of another as to lower him in the estimation of the community or to deter third persons from associating with him." (Restatement (Second) of Torts § 566.) Furthermore, a statement can only be defamatory if it includes a statement of fact, rather than opinion. (Id.) Drake's statements here allege facts -- that he never authorized the movie -- and Specticast's actions should deter third parties from associating with the company professionally.

Secondly, publication generally requires the written communication of a libel to a person other than the one defamed. <(em>Stella v. James J. Farley Assn., 122 N.Y.S.2d 322, 204 Misc. 998 (N.Y. Sup. Ct., 1953).) New York courts have already held that social media posts satisfy the publication requirement. (Angelotti, Ellyn. "How Courtney Love and U.S.'s First Twitter Libel Trial Could Impact Journalists." Poynter. January 14, 2014.) Here, Drake's tweets communicated the relevant facts to his fans, in a matter that they understood, making them analogous to other forms of written publication.

Third, Specticast's general theory is that Drake acted recklessly in publishing these tweets; Drake had a disregard for their truthfulness. Through public statements by representatives of Specticast, the company has already speculated that Drake knows that he is wrong, and he's simply trying to strong-arm them to prevent them from showing the film. (Kennedy, John. "Distributor Sues Drake for Disavowing Concert Film." Global News Distributor Sues Drake for Disavowing Concert Film. March 19, 2015. http://globalnews.ca/news/1891438/distributor-sues-drake-for-disavowing-concert-film/.)

The biggest issue will be for the plaintiffs to actually establish a concrete amount of damages that were caused by Drake's tweets. There is no set formula for valuing one's social media followers, and it will be a difficult task to determine whether Drake's statements proximately caused anyone to avoid seeing the movie as well. However, if the statement is found to be libel per se, then they will not have to prove damages, and may be awarded general damages.

A publication is libelous per se if it tends to subject one to hatred, distrust, ridicule, contempt or disgrace, or tends to injure one in his trade or profession, or if it imputes to another conduct, characteristics, or a condition incompatible with proper exercise of his lawful business, trade, profession or office. (Iiuffine v. South Shore Press, 2012 NY Slip Op 30169 (N.Y. Sup. Ct., 2012).)

In the case of Rinaldi v. Holt, Rinehart & Winston, Inc., a New York judge sued the Village Voice and its advertising agency for libel, after a Village Voice writer included Judge Rinaldi in its article entitled "The 10 Worst Judges in New York." (Rinaldi v. Holt, Rinehart & Winston, Inc., 42 N.Y.2d 369 (N.Y., 1977).) The court explained that the plaintiff had a strong case for libel per se, however, judges are considered public figures under New York law, therefore he must prove the additional element that the defamatory statement was published with actual malice. (Id.) Judge Rinaldi could not prove actual malice because the court determined that the article at issue was either opinion or a reasonable conclusion drawn from facts. (Id.)

Just as the statements in Rinaldi alleged that Judge Rinaldi could not serve reputably in his position, Drake's statements imply that Specticast is an unscrupulous business entity, presumably injuring Specticast in its business. Most likely, Specticast will not be found to be a public figure, nor will this be considered a matter of public concern, thereby not implicating the "actual malice" requirement. The issue of whether Drake authorized the film has no effect on the public.

The movie already premiered, so Specticast will likely pursue a negligence per se theory, due to the apparent difficulty in calculating damages. However, the case between Specticast and Drake will most likely settle, even though Drake presumably has greater financial means to survive a long drawn-out legal battle. However, the key elements of libel cases have yet to fully evolve to meet the realities of Twitter and social media, raising a host of additional questions, including:

- How will the courts determine status (who is a public figure) in the context of Twitter? What role does the number of followers play in determining this?

- What is "a matter of public concern" in the context of Twitter?

- What do the remedies for defamation look like in the age of Twitter? How can free speech be encouraged while deterring defamatory speech on Twitter?

Given that Specticast claims it can produce the original, enforceable contract, this only brings up more questions about Drake's motivation behind attacking the film. Does Drake really believe the film was unauthorized? Interestingly, Drake announced his OVO Music Festival on March 20th, and critics have speculated that this entire incident was simply intended to draw more attention around the festival.

May 11, 2015

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
REGISTER NOW

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
www.nycbar.org/cle

June 1, 2015

Flo & Eddie Class Certification

Here is the decision of the California federal court certifying a class of owners of pre-1972 recordings that have been performed without authorization since August 2009 by Sirius XM. Flo&EddieCaliforniaClassActiondec.pdf

The court has already granted Flo & Eddie's summary judgment motion and found Sirius XM liable. The class is being certified for damages.

The parallel state court litigation has been certified for appeal, but the federal case has not.

August 20, 2015

"Sample" Clearance Issues

By Wallace E.J. Collins III

Wallace E.J. Collins III is an entertainment and intellectual property lawyer with more than 30 years of experience based in New York. He was a recording artist for Epic Records before receiving his law degree from Fordham Law School. Tel: (212) 661-3656; www.wallacecollins.com.

Many clients ask about whether or not they can "sample" from an existing sound recording and how much is permissible to use, and whether or not they need permission to embody a sample in their new sound recording.

Sampling occurs when a portion of a prior sound recording or fixation of sound is incorporated into a new sound recording. When such a use occurs, two copyrights are involved: the copyright in the sound recording and in the underlying musical composition embodied in such recording. If sampling occurs without permission, copyright infringement of both the sound recording (usually owned by the record company and/or artist) and the song (usually owned by the publishing company and/or songwriter) have occurred.

In order to legally use a sample, one needs to contact both the owner of the sound recording and the copyright owner of the underlying musical work for permission. License fees for sampling vary greatly and depend on how much of the sample will likely be used, the perceived value of the recording from which the intended sample originates, and the intended use of the sample in the song. Although licenses can be granted "gratis", usually there is a fee, which is either a percentage of the record royalties and/or the mechanical royalties or for a flat fee paid upon execution of the sample license agreement (or a combination of both). There are no statutorily mandated rates for samples, so the copyright owner can charge whatever the copyright owner wants to charge, and does not have to grant permission to use the work at all.

Using samples without permission can lead to litigation where an infringer may be forced to pay damages to the copyright owner, which could amount to hundreds of thousands of dollars per infringement. A court can also order the user of the sample to recall and destroy all of the infringing copies and, in certain cases, can award the costs and legal fees incurred by the prevailing party in such a lawsuit.

Although the "2 Live Crew"/"Pretty Woman" infringement case turned on the issue of "fair use", I do not recommend to clients that they try to rely on that copyright law doctrine when they want to use samples in their works. Further, the idea that one can use a certain number of notes or seconds of someone's song without penalty is a myth.

The only proper way to use a sample of a prior recording in a recording is to get permission.

September 18, 2015

The 11 Contracts Every Artist, Songwriter and Producer Should Know -- Music and the Movies


By Steve Gordon and Robert Seigel

Steven R. Gordon, Esq. (steve@stevegordonlaw.com, www.stevegordonlaw.com) is an entertainment attorney specializing in music, television, film and video. His clients include artists, songwriters, producers, managers, indie labels, music publishers as well as TV and film producers, and digital music entrepreneurs. He provides music and sample clearance services for producers of any kind of project involving music. Mr. Gordon is also the author of The Future of the Music Business (Hal Leonard 4th ed. 2015).

Robert L. Seigel, Esq. (rlsentlaw@aol.com, www.rlsentlaw.com) has more than twenty years experience in the counseling and representation of producers, writers, directors, distribution companies and foreign sales agents concerning development, production, marketing, distribution and exploitation of fiction and non-fiction film, television, publishing and new media projects. His clients' projects have appeared theatrically and on network, syndicated, public and cable television and have earned Academy Award and Emmy nominations and awards as well as prizes at major film festivals.

The authors gratefully acknowledge the assistance of Ryanne Perio, Esq. in the preparation of this article. Ryanne is an associate at Manatt, Phelps & Phillips, LLP where she focuses on intellectual property litigation. They would also like to thank Clémence Barbet-Gros, a graduate law student at Lyon University, France, and Sonia Hanson, a recent graduate of the University of Minnesota Law School.

The sixth installment of this 11-part series on basic music industry agreements focuses on music and the movies. We will discuss two different forms of agreement: composer deals for the creation of music to be used throughout a movie, and an agreement for the recording and licensing of a previously written but unreleased single song for a film. If you are a filmmaker seeking previously recorded and commercially released music, you may be interested in reading Part II of Steve Gordon's book The Future of the Music Business, which includes a comprehensive discussion on how to clear music for movies. Producers should be aware of at least one fact: licensing popular prerecorded music can be very expensive. For instance, one of the authors of this article recently received a quote of $50,000 for a Tom Petty song for a feature film, even though the movie was a low budget Dutch language production with extremely limited commercial potential. This quote was just for the song, or underlying musical composition (see the last installment in this series, Now You Know Everything about Music Publishing, for a discussion of the difference between musical works and sound recordings.) The client would have had to pay another $50,000 to use Petty's recording. This article is aimed at benefiting musicians who have been offered the opportunity to write new music for a film. But for filmmakers who read this article, know that hiring a composer to create music for your movie can save you a great deal of money.

COMPOSER AGREEMENTS

The key terms of a contract between a film producer and a composer are: (i) Whether the composer will be responsible for recording as well as writing the music; (ii) the fee payable to the composer; (iii) the time schedule for the delivery of the music; (iv) the composer's credit; (v) how a composer would be compensated if there is a soundtrack album; and importantly, (vi) the permitted use and ownership of the music itself.

Fees

In a conventional composer agreement, the composer is responsible for producing or supervising the production of the music as well as composing it. The composer is paid a fee for those services, and the filmmaker sometimes pays for costs associated with rendering those services, including studio time, compensation to engineers, mixers, arrangers and the rental of recording equipment. Alternatively, these costs may be built into the composer's fee. (See the discussion of the Package Deal below.) The composer's fee is generally paid in installments. Part of the fee may be payable upon the signing of the agreement or the commencement of "spotting" - i.e., when the production team and the composer screen the movie to determine where and what type of music should be used in the movie's score. Another portion of the fee may be payable upon the commencement of the recording of the score. A third installment of the fee may be payable upon completion of all services, including delivery of the master recording in a format specified in the contract, and the producer's acceptance (see below) of the master recording.

The Package Deal

With low budget movies, a producer and a composer often enter into a "package deal." The producer pays the composer a fee designed to compensate the composer, as well as cover costs associated with the recording of the score. The composer assumes responsibility for payments to musicians, arrangers, studio time, and instrument rentals, and retains any monies remaining after he or she pays these costs. However, if the composer incurs expenses in excess of the package fee deal, the composer assumes such costs.

There are, however, usually certain excluded costs in the "package deal", which the producer assumes. These costs include the licensing of any music not written by the composer, or if the producer hires another composer to re-write the score, and any re-scoring or re-recording costs required solely for creative reasons. The composer should try to limit the right of the producer to demand changes after delivery and to negotiate a "kill fee" in case the producer is dissatisfied with the score. (See Producer's Acceptance below and Paragraph 2(b) of the second contract analyzed in this blog.) Package deals often work well when a composer is using few instruments and relies on synthesizers and his or her own equipment and recording facilities.

Work for Hire vs. Exclusive License

A key provision in any composer agreement is the section that addresses the ownership rights in the music. In a typical composer agreement, the producer and the composer agree in a signed writing that the music created and recorded by the composer is deemed to be a "work for hire", and that the producer owns all rights in such, including both the underlying music and the recording. This provision also states that, if for any reason the music created and recorded by the composer is not deemed a "work for hire" under federal copyright law, the parties agree that the composer has transferred all rights in and to the music, as well as the recordings of the music, to the producer.

A work for hire contract gives the producer total control of the music and the recordings. The producer can use or modify the music in any manner, and include the music in the trailers, marketing materials, advertisements and any other form of promotion for the movie. In addition, the producer can act as a music publisher and label by licensing the music and the recordings to any third parties, whether or not such third parties have any connection to the movie. For instance, the producer could license the music and/or the recordings to a person or entity that may want to use it in a commercial or advertising campaign. Although the composer has no say in how the music is used and will not share in the income from licensing of the music to third parties, the composer may be entitled to compensation from at least one income stream, i.e., public performance.

A writer subject to a work for hire agreement usually gets paid for the public performance right. As discussed in previously in this series, the publisher's and songwriter's shares are generally divided on a 50/50 basis. Although the filmmaker receives the publisher's share for the music license, the composer retains the songwriter's share regardless, of who owns the rights in and to the music. In the U.S., there is no public performance income from performances of the movie in a theater, and there is no performance income from distribution of DVDs or permanent downloads. However, there are public performance royalties from broadcasting the movie on television and from Internet video on demand (VOD, e.g., Netflix). The composer should be very careful, however, that proper cue sheets are prepared and presented to his or her performance rights organization (PRO) to ensure that he or she will be credited by the PRO. As discussed in "A Simple Guide to Signing the Best Sync Deal Possible" in this series, a cue sheet is a log of all the music used in a production. (See http://www.bmi.com/creators/detail/what_is_a_cue_sheet, for an example.) Cue sheets are the primary means by which performing rights organizations track the use of music in films and TV. The composer will not be compensated by the PRO without first filing the cue sheet.

Work for hire agreements are standard and usually non-negotiable when a major studio engages composers, but majors generally pay significant fees. A composer who is approached by an independent producer whose offer is more financially modest may be able to retain the rights in his or music, or at least share in additional income streams aside from the writer's share of public performance royalties. In addition, if a producer cannot afford to pay a composer his or her customary fee, the composer may agree to a reduced fee, provided that the composer is permitted to share in the publishing rights (the underlying musical composition). For example, if the composer's music from the movie is licensed, the composer could negotiate to receive the full 50% (songwriter's fee) and perhaps one-half of the publisher's share, or 25%. In this scenario, the producer would retain the remaining 1/2 of the publisher's share (i.e, 25%).

Since producers are generally not music publishers, and may not have an interest in engaging music publishers to exploit the music rights on their behalves, a producer may offer a reduced fee to a composer and permit the composer to retain the publishing rights. In this scenario, the composer usually grants an exclusive license for use of the music in the movie as well as in any trailers, advertisements or other promotional materials for or related to the movie, but retains the copyright in his or her music and recordings, and the right to use them in other projects. In this case, the producer may also negotiate to secure the right to create and distribute a soundtrack album in connection with the movie. The composer agreement can go into extensive detail in calculating how a composer will be compensated for the use of his or her music and recorded performances on the soundtrack album, or the parties can agree to negotiate such terms in good faith at a later time if and when the possibility of a soundtrack album is more certain, such as when a distributor agrees to commercially release the movie.

If the producer agrees that the composer will retain rights in his or her music and recordings, the producer will usually require the composer to agree that he or she cannot use or cause others to use the music in any other movie, television program or other audio-visual project for a certain period of time, except with the producer's prior written consent. This period may be several years, either from the date of the initial commercial release of the movie, or from the signing of the composer agreement. After the agreed-upon period, the composer can place the music in any other movie, television program or audio-visual project, such as a video game.

The composer's agreement may also have a provision in which there is a limit to the amount of the movie's music that may be used in an album. This is to prevent an album containing the composer's music from becoming potentially competitive with the movie's soundtrack album, thereby undercutting the marketability and value of the actual soundtrack album. If a composer creates his or her own album and uses any portion of the movie's music, there will generally also be a requirement to credit the movie as the source of the music.

Producer's Acceptance

Prior to accepting the final score, the producer usually will retain the right to request certain changes, omissions or additions to the movie's music. In addition, the producer generally has the right to not use the composer's score in the final version of the movie provided that the composer has been fully compensated for creating and/or recording the score. This is known as a "play or pay" clause, and it is used in a wide variety of different forms of entertainment business agreements such an agreement for an actor's services. Play or pay provisions are usually non-negotiable because (i) they are inherently fair because they pre-suppose that the producer has paid one hundred percent of composer's fee, and (ii) it is overreaching to demand that the producer use the composer's score if the producer does not think it works for the movie.

To increase the likelihood that a composer and producer are on the same page regarding the movie's music, the two can agree that the composer will provide scoring and recording services for a portion of the score, at which point the producer can decide whether or not to continue to work with the composer on the remainder of the score. If the producer chooses to terminate the relationship, the composer would receive some agreed upon "kill fee," but the producer will generally retain the right to use the composer's music and recordings rendered during the trial period.

Credit

Composers should negotiate their credits carefully, because a good credit can be vital to getting higher fees for future work. A composer may request "single card" credit in the main credit sequence of the movie, whether the main credit sequence is at the beginning or the end of the movie. This means that his or her name and credit is the only one to appear on screen at a given time. The producer will usually only promise to provide a credit if it actually uses the music in the movie.

SINGLE SONG AGREEMENTS

Acquiring music for movies can take all kinds of forms. The last agreement that we analyze in this piece is for a single song that was previously written but unreleased. The filmmaker wanted the composer, who was also a record producer, to record the song so that he could put the recording in a music video that would be shown with the end credits. As the producer and composer both knew that the producer wanted to use the composer's pre-existing song, the composer had a great deal of leverage. As a consequence, the composer was able to negotiate a license rather than a work for hire. You could imagine a situation where the filmmaker wanted the composer to create and record an entirely original song. In that case the contract would look more like a work for hire.

THE CONTRACTS

The first contract analyzed below is a standard pro-film producer form of agreement. It makes all the music a composer creates and records a work for hire for the filmmaker. It also gives the filmmaker the right to demand that the composer make an unlimited number of changes and revisions in the music without obligating the film producer to pay any additional compensation to the composer.
The second agreement is much more composer-friendly. It is not a work for hire agreement. Instead, the composer merely grants the filmmaker the right to use the music in his movie and retains all other rights, except that the composer agrees not to license the music for another full length film for a period of time. In addition, the second contract limits the time that the filmmaker can make the composer make changes to two days after the composer delivers the final mix. It also provides for a "kill fee" if the filmmaker decides that the music delivered by the composer is unacceptable.
The last agreement is for the recording of a single song that the composer previously wrote but never recorded. Similar to the second agreement, the composer grants a non-exclusive license to the filmmaker and retains all other rights in the song and the recording. In this case, though, the composer also grants the filmmaker the right to use the recording in a promo video for the movie.

*******************************************************************************************************************************

FIRST AGREEMENT
[PRODUCTION COMPANY NAME] [PRODUCTION COMPANY ADDRESS] Dated as of August ___, 2015 [NAME OF COMPOSER] [COMPOSER ADDRESS]


Re: "[TITLE OF FILM]"/Composer Agreement

Dear ____________:

This letter, when executed by you and [PRODUCTION COMPANY NAME] (referred to as "Company" or "us"), will set forth the material terms of the agreement between you and us relating to your creation and delivery to us of musical score for the motion picture tentatively titled "[TITLE OF PICTURE]" (the "Picture").

All of Company's obligations herein are expressly conditioned upon Company's receipt of fully executed copies of this Agreement and the Certificate of Authorship attached hereto and incorporated herein.

1. Services. You will compose, conduct, perform, record, arrange, produce, and mix the score (hereinafter, the "Compositions" or the "Score") for the Picture in accordance with the schedule set forth below. Company hereby engages the services of Composer to write, compose, arrange, adapt, interpolate, orchestrate and conduct the recording of the Score for the Picture and to supervise the music editing, dubbing and so-called "sweetening" of the recording of the entire Score and to deliver a fully recorded and edited digital audio file or DAT or such form as Company requires for all original and duplicate master recordings embodying the Score (the "Master" or the "Masters") all for and as directed by Company. The Master shall be suitable for synchronization with the Picture and with audio-visual discs, cassettes and other audio-visual devices embodying the Picture or substantially all of the Picture ("AV devices") and, upon Company's request, for manufacture of audio products embodying the Score, upon and subject to the terms and conditions herein set forth. Without limiting the generality of the foregoing, but subject to the specific terms of this Agreement, Composer shall perform all services or duties customarily performed in the motion picture industry by a composer, scorer, conductor, arranger and adapter with respect to the Picture. Company shall have the right to require Composer to make such reasonable changes, modifications or additions to the Score, and to any and all musical compositions, production numbers, or special material composed by Composer hereunder as may be reasonably required by Company.

In this agreement, the composer is not only responsible for writing the score, he or she must deliver the recording of the music.

2. Term of Engagement: The term of Composer's engagement ("Term") hereof shall commence upon the date set forth above and shall continue until complete and satisfactory delivery of the Score. Composer shall deliver the Master in accordance with a schedule to be provided by Company and, subject to the terms herein, perform any re-writes, if any, requested by Company until a Score commercially and technically satisfactory to Company shall have been delivered.

This provision is very favorable to the filmmaker. It would allow him or her to order the composer to make an unlimited number of changes. An alternative is to limit the filmmaker to demand the composer make one round of changes with a payment schedule for additional changes. Further, see the next contract and the comments for Paragraph 3 for another alternative for the composer.

3. Compensation. In full and complete consideration for Composer's full and faithful performance of all services hereunder and for all rights granted to Company hereunder (including, without limitation, all right, title and interest in and to the results and proceeds of Composer's services rendered hereunder), provided Composer is not in material breach hereof and subject to Company's rights of suspension and/or termination in the event of force majeure, disability or default, Composer shall be entitled to be paid an "all-in" fee of ___________ Thousand Dollars ($___,000), payable in the following manner: (i) _______________ Thousand Dollars ($__, 000) upon signature of this Agreement by Composer and commencement of Composer's services; and (ii) ______________ Thousand Dollars ($___, 000) promptly following the satisfactory delivery of the Score as set forth herein.(Notwithstanding the foregoing, no synchronization fees, royalties or other consideration (excluding only mechanical royalties and any public performance fees, if applicable) shall be payable to Composer for the use of the Score, Master or the Compositions (collectively the "Work"), or any part thereof in the Picture or in connection with any advertising, publicizing or exploitation thereof, regardless of the method, media or types of devices utilized for the exhibition or exploitation thereof.

As confirmed in the next paragraph, this agreement is "all-in" meaning (i) the composer is responsible for any expenses such as studio time and musicians' fees; and (ii) the composer will make no more money than the fees in Paragraph 4 except for the "writer's share" of public performance royalties and use of some excerpts of the score in an album.

4. Recording Costs. You will be responsible for all recording costs incurred in connection with the Score and your services hereunder. You agree that you will be solely responsible for, and warrant that you pay, all such recording costs, even in the event such costs exceed the compensation payable to you pursuant to paragraph 4 above.

The composer must be careful not to accept a fee that is not adequate to compensate him or her for his or her time, plus paying for recording costs.

5. Ownership. Subject to the terms and conditions hereof, you hereby acknowledge and confirm that we shall own all right, title and interest in and to the Compositions of the Score (including, without limitation, the worldwide copyrights therein including any extensions and/or renewals thereof) and your performances thereon, throughout the universe and in perpetuity, and that we shall have the right to secure registration of copyright in the Score and the Masters (i.e., the individual master recordings comprising said Score) and the individual compositions comprising the Score (the "Compositions") and your performances thereon in our name, pursuant to the United States copyright laws, as "work made for hire." We shall have the exclusive right, insofar as you are concerned, to use and to authorize others to use the Score and any and all portions thereof throughout the world or any part thereof in any manner we see fit, and to refrain from any or all of the foregoing. If for any reason the results and proceeds of your services hereunder are not deemed to be a work made for hire, you shall and hereby do assign such results and proceeds and all rights therein and thereto to us, for use in any and all media (whether now known or hereafter devised), throughout the world, irrevocably and in perpetuity. The payments made by Company or its assignees under this Agreement are deemed to include sufficient remuneration for all so-called rental and lending rights pursuant to any directive, enabling or implementing legislation, laws and regulations enacted by any nation throughout the world, including the member nations of the European Union. You hereby waive all rights of "Droit Moral" or "Moral Rights of Authors" or any similar rights or principles of law which you may now or later have in the Work.

This is the "work for hire" clause that was discussed in the Introduction. If the composer cannot get a license deal instead, in which he or she gets to keep his or her copyright in the music, the composer can at least try to get more money for giving up his or her rights in the music.

6. Credit. Provided you fulfill your material obligations hereunder and further provided that the majority of the total background musical score embodied in the Picture as released in the United States consists of the Score, we will accord you the following credit: "Original Music by [NAME OF COMPOSER]." The foregoing credit shall appear in the main credit roll in the Movie. All other aspects of such credit, including size and placement, shall be determined by Licensee.

Credit is often a highly negotiated provision. In this agreement however, the obligation to provide any credit at all only applies if the "total background music" in the movie consists of the score. If another composer is brought in to contribute even incidental passages of music, the filmmaker is not obligated to credit the composer. Composers should seek a credit provision more like the one in Paragraph 12 of the next agreement.

7. Soundtrack Album.

(a) Should Company enter into an agreement with a record distributor ("Distributor") for the exploitation of the soundtrack album ("Soundtrack Album"), if any, and should the Soundtrack Album or any audio product embody any of the Score as performed by and/or conducted by Composer and/or the Compositions, then Company shall negotiate in good faith with Composer for a royalty with respect to such audio products manufactured and sold hereunder. Any "Artist's royalty" (as such term is customarily known in the music industry) payable to Composer for use of Composer's recorded performance of any composition on the soundtrack album for the Picture shall be computed, reduced and determined in a no less favorable manner as Company's basic royalty under its agreement with any recording company.

As indicated in the Introduction, instead of the composer agreement going into extensive detail in calculating how a composer shall be compensated for the use of his or her music and recorded performances on the soundtrack album, the parties agree to negotiate such terms in good faith at a later time if and when the possibility of a soundtrack album is more certain, such as when a distributor agrees to commercially release the movie.

(b) The parties acknowledge and agree that Composer shall have the right to include selections from the Score on any record album featuring Composer's solo work (with Company's prior written approval which shall not be unreasonably withheld by Company) provided that the following credit be placed by any of such composition's title: "Music from the motion picture feature [TITLE OF PICTURE]."

Although this is generally a pro-producer form, this provision is a big concession to the composer because, under a work for hire agreement, the composer generally has no rights in the music after delivering it to the producer.

8. Publishing. You acknowledge that we will be the sole owner of all right, title and interest to the Compositions, including (a) the worldwide copyrights therein and any renewals or extensions thereof, and (b) the sole, exclusive, perpetual worldwide rights of administration, exploitation and promotion associated therewith. Nothing in this agreement shall limit Composer's right to receive Composer's performing rights income derived from the exploitation of the Score, whether in whole or in part. Composer shall be entitled to receive the "writer's" share in and to the Compositions.

As discussed in the Introduction, this is the one form of income, aside from the inclusion of some of the music in a composer's own album, that the composer is entitled to under a work for hire agreement.

9. Use of Name, Likeness, Etc.: Company may use, and permit others to use, Composer's name, likeness, voice and biographical material in and in connection with the Picture, the Work, any project or product derived from the Picture, if any, and the sale, distribution, promotion and advertising thereof. Company and its assignees shall have the sole and exclusive right to issue publicity concerning the Picture and concerning Composer's services with respect thereto except for Composer's own publicity provided that there shall be no derogatory statements or references concerning the Picture or any party or entity associated with the Picture.

10. Music Cue Sheets: The music cue sheets for the Picture shall be filed with the proper performance rights societies by Company accurately reflecting Composer's ownership of all Compositions. The cue sheets shall be prepared in consultation with Composer, and Company shall promptly provide Composer with a copy upon its availability. Company will be responsible for submitting cue sheets to distributors (including non-US) and to broadcasters.

The composer should make sure the producer complies with this provision and files a proper cue sheet before the release of the movie on television or on Internet VOD.

11. No Obligation to Exploit: Company or its assigns shall not be obligated or required to print, publish, promote or otherwise exploit the Work or the Picture, or any part of them, in any manner or to exercise any of the rights granted to Company or its assigns hereunder.

12. Notices: All notices which either party is required or may desire to serve hereunder shall be in writing and shall be served to the addresses specified herein. A courtesy copy of such notices shall be sent to: ____________, Esq., ______________________; Tel: (_____) _____-______; E-Mail:_______________.

13. Federal Communications Act: Reference is made to Section 507 of the Federal Communications Act which makes it a criminal offense for any person in connection with the production or preparation of a picture or program intended for broadcasting to accept or pay, or agree to accept or pay, money, service or other valuable consideration for the inclusion of any matter or thing as a part of such picture or program, without disclosing the same to Company thereof prior to the telecast of such picture or program. Composer warrants and agrees that Composer has not and will not accept or pay any money, service, or other valuable consideration for the inclusion of any plug, reference, product identification, or other matter in any material prepared or performed by Composer hereunder.

14. Independent Contractor: Composer warrants that he or she is an independent contractor and is not an employee of Company. As an independent contractor, Composer is responsible and liable for any income tax, unemployment insurance, FICA (Social Security), or any other payment normally associated with an employee relationship.

15. Assignment: Company shall have the right to assign this Agreement at any time to any person or entity. Neither this Agreement nor any rights hereunder are assignable by Composer at any time to any person or entity. This Agreement inures to the benefit of Company's successors, assigns, licensees, grantees, and associated, affiliated and subsidiary companies.

16. Additional Covenants of Composer: Composer agrees that Composer shall:

(a) Not disclose to any party information relating to the subject matter of this Agreement or to the activities of Company with respect to the Picture or otherwise except: (i) to Composer's financial and legal advisors; and (ii) regarding any incidental and non-derogatory references by Composer to third parties concerning Composer's Score in connection with the Picture.

(b) Not incur any liability or expense on Company's account without Company's prior written approval (except as otherwise stated herein), and if such approval is given, Composer will provide Company with any information necessary to satisfy such obligation, including copies of any necessary agreements.

17. Governing Law; Dispute Resolution: This Agreement will in all respects be governed by and interpreted, construed and enforced in accordance with the laws of the State of New York. Any dispute or controversy arising under this Agreement (including, without limitation, the validity and enforce ability of this Agreement) shall be subject to arbitration in the State of New York in accordance with the Rules of the American Arbitration Association as decided by One (1) arbiter mutually approved by the parties and whose decision shall be binding, final and non-appealable and may be entered in a court of competent jurisdiction. The prevailing party shall be entitled to reasonable outside attorneys' fees and costs. For the purpose of enforcing such arbitrator's decision, any action arising out of or relating to this Agreement and its enforcement will have jurisdiction and venue in a state or federal court situated within the State of New York, and the parties consent and submit themselves to the personal jurisdiction of said courts for all such purposes.

18. Remedies: The parties acknowledge and agree that Composer's remedy for any breach of a term of this Agreement by Company shall be limited to monetary damages at law. Composer shall not have the right to rescind this Agreement or to any equitable or injunctive relief or otherwise in which there would be an interference or prevention of Company's right to finance, produce, market, distribute or otherwise exploit any and all rights in and to the Picture.

19. DVD/Blu-Ray and Soundtrack Album: Provided that Composer has rendered services as stated herein and Composer is not in breach of any material term stated herein, Company shall provide Composer with one (1) DVD or Blu-Ray copy and (1) soundtrack album CD (if and when available) of the Picture in its completed form which shall be used by Composer solely for private, non-commercial or resume reel use.

20. Entire Agreement; Modifications: This instrument constitutes the entire agreement of the parties hereto relating to the subject matter specified herein. This Agreement can be modified or terminated only by a written instrument executed by both Composer and Company or Company's successors and assigns. The parties acknowledge and agree that signatures may be by hand, facsimile, electronic or optically scanned (e.g., pdf) and any of these methods shall be deemed as binding on the parties.

21. Miscellaneous. You warrant and represent that neither the Score, the Masters or the Compositions shall infringe the rights of any third party, and that you are not under any disability, restriction or prohibition, whether contractual or otherwise, with respect to the performance of your services hereunder. Without limiting the foregoing, you specifically warrant and represent that (a) you have the full right, power, and authority to enter into this agreement, (b) you have obtained all requisite rights, clearances and permission to enter into this agreement from all applicable third parties, including, without limitation, [record company], [publishing company], and each of their respective affiliates, and (c) we shall not be required to make any payments of any nature for, or in connection with, the rendition of your services or the acquisition, exercise or exploitation of rights by us pursuant to this agreement, except as specifically provided herein (it being understood, for the avoidance of doubt, that you shall be solely responsible for any artist and other third party royalties or other sums payable arising out of our exploitation of the Masters, Compositions and other rights granted hereunder). You further warrant and represent that you have consulted with counsel with respect to the execution of this agreement. You agree to and do hereby indemnify, save and hold us harmless of and from any and all liability, loss, damage, cost or expense (including reasonable attorneys' fees) arising out of or connected with any breach or alleged breach of this letter agreement or any claim which is inconsistent with any of the warranties or representations made by you in this letter agreement.

If the foregoing terms are acceptable, kindly sign on the signature line set forth below and fax this letter to our attention for countersignature. This letter with the Certificate of Authorship, attached hereto, shall constitute the entire agreement between the parties and can only be modified in writing.

Very truly yours,
[PRODUCTION COMPANY NAME]

____________________________
An Authorized Signatory

ACCEPTED AND AGREED IN
ALL RESPECTS:

___________________________
COMPOSER S.S. No.: ________________


This bit of boilerplate drives home that the composer is indeed transferring the copyright in both the recording and music to the producer. The composer also waives "moral rights," which means that the producer can make any changes to the score that it wishes, regardless of whether the composer approves.

EXHIBIT "A"
CERTIFICATE OF AUTHORSHIP

For One Dollar ($1.00) and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the undersigned hereby certifies that the undersigned will write or has written an original musical score (the "Score"), and will produce and record or has produced and recorded master recordings embodying the Score, each intended for initial use in the theatrical motion picture currently entitled "[TITLE OF PICTURE]" (the "Picture"), at the request of [PRODUCTION COMPANY NAME] ("Company") pursuant to a contract of employment between Company and the undersigned dated as of ____________, 2015 (the "Agreement") (the Score, the Masters and all other results and proceeds of the undersigned's services hereunder and under the Agreement are hereinafter referred to as the "Work"). The undersigned hereby acknowledges that the Work has been specially ordered or commissioned by Company for use as part of a contribution to a collective work or as part of the Picture or other audio-visual work, that the Work constitutes and shall constitute a work-made-for-hire as defined in the United States Copyright Act of 1976, as amended, that Company is and shall be the author of said work-made-for-hire and the owner of all rights in and to the Work, including, without limitation, the copyright therein and thereto throughout the universe for the initial term and any and all extensions and renewals thereof, and that Company has and shall have the right to make such changes therein and such uses thereof as it may deem necessary or desirable including but not limited, to the right to include the Work in the Picture in all media now and hereafter devised and on phonorecords and trailers, advertisements, promotions and co-promotions with respect thereto. To the extent that the Work is not deemed a work-made-for-hire, and to the extent that Company is not deemed to be the author thereof in any territory of the universe, the undersigned hereby irrevocably assigns the Work to Company (including the entire copyright therein and any extensions and/or renewals thereof), and grants to Company all rights therein, including, without limitation, any so-called "Rental and Lending Rights" and "Neighbouring Rights" pursuant to any European Economic Community directives and/or enabling or implementing legislation, laws or regulations (collectively, "EEC Rights"), throughout the universe in perpetuity, but in no event shall the period of the assignment of rights being granted to Company hereunder be less than the period of copyright and any renewals and extensions thereof.

Company's rights hereunder shall include, without limitation, the rights to authorize, prohibit and/or control the renting, lending, fixation, reproduction, performance and/or other exploitation of the Work in any and all media and by any and all means now known or hereafter devised, as such rights may be conferred upon the undersigned under any applicable laws, regulations or directives, including, without limitation, all so-called EEC Rights. The undersigned hereby acknowledges that the compensation paid hereunder and under the Agreement includes adequate and equitable remuneration for the EEC Rights and constitutes a complete buy-out of all EEC Rights. In connection with the foregoing, the undersigned hereby irrevocably grants to Company, throughout the universe, in perpetuity, the right to collect and retain for Company's own account any and all amounts payable to the undersigned with respect to EEC Rights and hereby irrevocably direct any collecting societies or other persons or entities receiving such amounts to pay such amounts to Company.

The undersigned hereby waives all rights of droit moral or "moral right of authors" or any similar rights or principles of law which the undersigned may now or later have in the Work. The undersigned warrants and represents that the undersigned has the right to execute this Certificate, that the Work is and shall be new and original with the undersigned and not an imitation or copy of any other material and that the Work is and shall be capable of copyright protection throughout the universe, does not and shall not, (i) violate the trademark, servicemark, or copyright of any third party; and (ii) to the best of undersigned's knowledge, violate or infringe upon any common law or statutory right of any party including, without limitation, contractual rights, and rights of privacy, or constitute unfair competition and is not and shall not be the subject of any litigation or of any claim that might give rise to litigation, including, without limitation, any claim by any copyright proprietor of any so-called "sampled" material contained in the Work. The undersigned further warrants and represents that the undersigned has attained the legal age of majority in the United States, and is at least eighteen (18) years of age. The undersigned further warrants and represents that, to the best of undersigned's knowledge, the undersigned will not utilize any persons who have not attained the legal age of majority and will not utilize the services of any undocumented alien in rendering services hereunder. The undersigned shall indemnify and hold Company, the corporations comprising Company, and its and their employees, officers, agents, assignees and licensees, harmless from and against any losses, costs, liabilities, claims, damages or expenses (including, without limitation, court costs and attorneys' fees, whether or not in connection with litigation) arising out of any claim or action by a third party which arises from a breach of any warranty or representation made by the undersigned in this Certificate or in the Agreement. The undersigned agrees to execute any documents consistent herewith and do any other acts consistent with this Agreement which may reasonably be required by Company or its assignees or licensees to further evidence or effectuate Company's rights as set forth in this Certificate or in the Agreement. Upon the undersigned's failure to do so after ten (10) business days of Company's written request, the undersigned hereby appoints Company as the undersigned's attorney-in-fact for such purposes (it being acknowledged by the undersigned that such appointment is irrevocable and shall be deemed a power coupled with an interest), with full power of substitution and delegation. Company shall promptly provide the undersigned with any documents exercised pursuant to the foregoing power of attorney.

The undersigned further acknowledges that in the event of any breach by Company of this Certificate, the undersigned will be limited to the undersigned's remedy at law for damages (if any) and will not have the right to terminate or rescind this Certificate or to enjoin the distribution, exploitation or advertising of the Picture or any materials in connection therewith, that nothing herein shall obligate Company to use the undersigned's services or the Work in the Picture or to produce, distribute or advertise the Picture, and that this Certificate shall be governed by the laws of the State of New York.

Company's rights with respect to the Work may be freely assigned and licensed and its rights shall be binding upon the undersigned and inure to the benefit of any such assignee or licensee.

The undersigned affirms and acknowledges that the undersigned has been advised and counseled with respect to the negotiation and execution of this document by an attorney of the undersigned's own choice or acknowledges waiver of such advice and counsel.

IN WITNESS WHEREOF, the undersigned has signed this Certificate as of ________________, 2015.

Signature
Printed Name: [NAME OF COMPOSER]
Social Security No.

AGREED AND ACCEPTED:

[PRODUCTION COMPANY NAME]

By: _____________________________
An Authorized Signatory


August ____, 2015

*******************************************************************************************************************************

SECOND AGREEMENT

[PRODUCTION COMPANY NAME]
[PRODUCTION COMPANY ADDRESS]

Dated as of _____ __, 2015
[NAME OF COMPOSER]
[COMPOSER ADDRESS]

RE: Original Music for the motion picture feature, currently entitled [TITLE OF PICTURE]

Dear Colleagues,

This letter shall confirm the agreement (the "Agreement") by and between [PRODUCTION COMPANY NAME] located at [ADDRESS] ("Company") at ____________________________, and [COMPOSER], at ___________________________ ("Composer") in connection with the motion picture feature presently entitled [TITLE OF PICTURE] (which together with all trailers, promotion, publicity, advertising and DVD supplemental material therefrom, is collectively referred to as the "Picture"). All of Company's obligations herein are expressly conditioned upon Company's receipt of fully executed copies of this Agreement.

1. Company hereby engages Composer to compose, arrange and produce original musical compositions (the "Compositions"), as further described in the attached Schedule A, for the score of the Picture, and to record and produce master recordings embodying the Compositions (the "Masters") used in the Picture. The music composed hereunder and all other results and proceeds of Composer's services are referred to herein as the "Work."

Similar to the first agreement, this deal requires the composer to produce as well as write the score.

2. Composer will render your services hereunder during the Term, as defined below, on a first priority basis. You will deliver to us the final mix of the Score no later than ______________, 2015.

This provision is favorable to the composer, as it does not require him or her to turn down other jobs while he or she is working on this movie.

3. Composer shall deliver the Work to Company pursuant to the following schedule (the
"Delivery Schedule"):

(a) Composer shall begin the production of the Work on approximately __________________, 2015; (or upon signing of the agreement and first payment, whichever comes first.)

(b) Composer shall essentially complete the work by ________________, 2015. Company shall be entitled to hear the Work prior to the final mix, which shall be subject to final approval by an individual designated by Company (or Company's designee) for such final approval. Composer agrees to be available for up to two (2) days of consultation, and shall make such revisions during that time in the Work as Company may reasonably require, provided that if after such revisions are made, Company does not accept the Work as acceptable, then Company shall pay Composer a "kill fee" of 25% of the total compensation otherwise payable under Paragraph 5 below in addition to the initial fee and Composer shall retain all rights in the Work and Company shall have no right to use the Work for any purpose.

This is far better than the first agreement in which the composer agrees to keep changing the music at the producer's request without limitation on the number of times the producer can demand changes.

(c) Upon Company's approval of final mixes of the fully produced Work, company shall make delivery ("Delivery") of the Work to ____________________ ("Company's Designee") via disc(s), DAT(s) or computer files (at Company's discretion). Simultaneously with Deliver of the Work or proper to Deliver, Composer shall submit a properly completed music cue sheet for the Picture, provided Composer shall not be responsible for procuring or providing information needed to complete the cue sheets related to third party licensed music. Company shall be responsible for filing final cue sheets to Composer's performance rights organization prior to the initial release of the Picture.

See the Introduction for explanation of a cue sheet and its importance.

(d) Composer shall deliver all Materials to Company's Designee, pursuant to the Delivery Schedule defined herein, to the following address and contact: _________________________

4. Composer shall be responsible for the production of the Work, the payment for all expenses related to the production of the Work, including, but not limited to, the hiring of musicians, the booking of recording sessions, the programmer and engineer. Composer shall not be responsible for a music editor. Company shall have approval over all stages of production of the Work and all constituent elements thereof including the final composition and orchestration. In addition, Composer shall consult with Company throughout the production of the Work.

As with the first agreement, this composer deal is "all-in," that is, the composer is responsible for expenses.

5. The term of this Agreement (the "Term") shall commence upon delivery of first payment and the signing of this agreement. The Term shall end upon delivery to Company of final Work (i.e., final mixes of the Masters), delivery of all documentation necessary for the full exercise of all rights granted hereunder and completion of all services required by Company hereunder but shall not extend past ___________, 2015. Time and full compliance of all delivery requirements are of the essence of this Agreement. During the Term, Composer shall not, without prior written consent of Company and/or Company's Designee, render or agree to render any services of any kind for any other person or entity which would or might conflict with, interfere with or prevent the complete rendition of the services required to be rendered by Composer hereunder. Notwithstanding the foregoing, the Work shall be delivered in accordance with Company's production schedule.

6. In consideration of the rights granted by Composer hereunder, Composer's services and the use by Company of the results and proceeds thereof, Company shall pay to Composer an aggregate amount of ______________ Thousand Dollars ($_____,000.00) (the "Fee"), which shall be inclusive of any and all expenses incurred by Composer in the production and delivery of the Work to Company, payable as follows: (i) $____,000.00 after (A) commencement of Composers' services hereunder and (B) receipt of an executed copy of the Agreement; (ii) the final $___,000 upon delivery to Company of the Materials. But Composer has agreed to defer the money due in ______________, 2015 until a mutually agreeable time not to exceed six months (________________, 2015). All payments made by Company and/or Company's Designee to Composer hereunder shall be inclusive of any sales tax or use taxes required to be paid by Composer to any governmental authority.

7. (a) It is expressly agreed that Composer is performing services hereunder as an Independent Contractor. Composer retains the copyright to the supplied Work but irrevocably grants Company, all synchronization, performance rights and licenses, the rights to secure copyrights throughout the world, the absolute and unrestricted right and permission to reproduce, adapt, edit, copyright, televise, exhibit, distribute, license, disseminate, display and otherwise exploit in any or all markets and media (collectively "use") the Compositions and Masters that Composer supplies to the production in the context of this film. This grant of rights is made without limitation upon time, circumstance, location, market or medium or use of this material in and related to the motion picture feature tentatively entitled "[TITLE OF PICTURE]."

Unlike the first agreement, here the composer retains his or her copyright in the music - both the underlying music and the recordings. This is a huge difference, as it allows the composer to re-use the music and make additional money from its exploitation.

(b) Notwithstanding the foregoing, Company acknowledges that Composer is a member of ASCAP and the worldwide non-dramatic public performance royalties in the Work shall be licensed through ASCAP. Company hereby acknowledges Composer's one hundred percent (100%) of the writer's share of the worldwide non-dramatic public performance royalties in the Work; and one hundred percent (100%) of the publisher's share of the worldwide non-dramatic public performance royalties in the Work with Composer's music publishing designee, _____________ (ASCAP).

Unlike the first agreement, the composer will collect 100% of the public performance royalties.

(c) Composer shall own and separately administrate one hundred percent (100%) of the publishing and one hundred percent (100%) of the so-called writer's share of the publishing rights in and to the Compositions. Composer shall own any and all rights in and to the Masters prepared in connection with the Picture subject to the terms stated herein.

(d) Company and its assigns, licensees, successors and designees shall have the unrestricted right of access to use the Compositions composed by Composer and the masters recorded by Composer in all media, now known or hereafter devised ,throughout the universe, in perpetuity in connection with the Picture.

(e) Without limiting the generality of the foregoing, Composer hereby acknowledges that Company shall have the right to synchronize, perform, and use the Work in the soundtrack of the Picture, and uses ancillary to the Picture, including, without limitation, in trailers, promotions and co-promotions, and advertisements for any or all of the foregoing, and in connection therewith, the parties acknowledge and agree that Company shall have the perpetual right, throughout the universe, to exploit the Work in or related to the Picture in all media including, but not limited to, theatrical release, subscription, satellite, pay/cable and free TV, audio-visual devices (including but not limited to video-cassettes and discs), trailers, advertisements and publicity therefore, any computer-assisted media including but not limited to CD-ROM, CD-I and similar disc systems, interactive cable and in all other uses associated with any new technology and media, whether now known or hereafter devised. Subject to the terms stated in this Agreement, any and all rights to the Work are owned by Composer.

(f) Company shall be free, at its sole discretion, to make any further use, recording, exploitation, publishing, and distribution of the Work and every arrangement, version, orchestration and adaptation thereof, and of recordings thereof as Company may desire in the Picture and any promotion or advertising for the Picture, free and clear of any and all claims by, or asserted, and all claims by, or asserted on behalf of, Composer or any third parties (including, without limitation, any and all composers, musicians and other persons who provide services, performances or materials in connection with the performance of the Work).

(g) Composer agrees to look solely to such society and/or Composer's music publishing designee for such royalties and waive any claim against Company for its publisher's share of such royalties received by Company. Notwithstanding the foregoing, if Company shall receive monies due to Composer, Composer's performing rights society or its publishing designee, then Company shall remit such monies promptly to Composer, Composer's performing rights society or its publishing designee.

(h) Composer shall have the right but not the obligation to exploit the Work in any other form or manner within Composer's sole discretion, throughout the universe and in perpetuity for any purpose except (i) in another feature length motion picture including documentary or "feature" motion picture for a period of three (3) years from the commercial release of the Picture, except with the prior written consent of Company; and (ii) use the Work in an album subject to subparagraph (i) below).

This pro-composer provision allows the composer to exploit the compositions and the masters for any other purpose except in another movie or full length album. For instance, the composer can license the compositions and masters for advertising campaigns or video games and collect 100% of the revenues.

(i) The parties acknowledge and agree that Composer shall have the right to include selections from the Work on any record album featuring Composer's solo work (with Company's prior written approval which shall not be unreasonably withheld by Company) provided that the following credit be placed by any of such composition's title: "Music from [Title of Picture]"

(j) Company, its successors and assigns shall have the right to make, distribute, or sell or authorize others to do the same, any phonorecords, including, without limitation, discs, tapes and devices of any speed or size of type, whether now known or hereafter devised, for the recording of the music material in any soundtrack album(s) for the Picture (the "Soundtrack Album"). The parties shall enter into negotiations in good faith terms for Composer's participation in such Soundtrack Album subject to record company's approval.

8. Company agrees not to exploit or use the Work other than as embodied in the soundtrack of Picture or in advertisements and promotional materials for the Picture. In connection with any other use or exploitation of the Work not set forth herein, Company shall consult with Composer in connection therewith; which such consent shall not be unreasonably withheld. In the case of a soundtrack album, Company shall consult with Composer whereby an agreement shall be negotiated in good faith.

9. The parties acknowledge and agree that Company is not and shall not be a signatory to any union, guild or collective bargaining organization concerning any musicians or performers who have rendered or shall render services in connection with the Work.

10. Composer hereby warrants, represents and covenants to Company as follows:

(a) Composer hereby represents and warrants to Company that Composer has the right to enter into this Agreement and perform all of its obligations pursuant to this Agreement.

(b) Composer shall be the sole author of all material contained in the Work; and that the Work shall be completely original with Composer and shall not infringe upon or violate any copyright, common law right or any other right, of any person, firm or corporation;

(c) That neither the Work nor any element of, or material contained in, the Work will infringe upon or violate the right of privacy of, or right of publicity of, or constitute a libel or slander against, or defame, or violate any copyright, trademark or service mark, common law or other right, of any person, firm or corporation or violate any other applicable law;

(d) Composer has acquired all rights necessary to its grant of rights to Company hereunder, including without limitation, all copyrights, music synchronization and music performance rights licenses;

(e) That no part of the rights herein granted to Company have been transferred to any third party and that said rights are free of any liens, claims and encumbrances whatsoever in favor of any other party, and that said rights and the full right to exercise the same, have not been in any way limited, diminished, or impaired; and that there are no claims, litigation or other proceedings pending, outstanding or threatened adversely affecting or that would or might in any way prejudice Company's rights hereunder.

11. (a) Composer assumes liability for, and hereby agrees to indemnify, defend, protect, save and hold harmless Company, its partners, divisions, subsidiary and affiliates, divisions and companies, distributors, assigns, licensees and the respective shareholders, directors, officers, employees and agents of the foregoing (the "Company's Indemnified Parties") from and against any and all claims, actions, suits, costs, liabilities, judgments, obligations, losses, penalties, expenses or damages (including, without limitation, reasonable legal fees and expenses) of whatsoever kind and nature imposed on, incurred by or asserted against any of Company's Indemnified Parties, arising out of any breach of any representation or warranty made by Composer herein or out of any other breach by Composer of this Agreement.

(b) Company assumes liability for, and shall indemnify, defend, protect, save and hold harmless Composer from and against any and all claims, actions, suits, costs, liabilities, judgments, obligations, losses, penalties, expenses or damages (including, without limitation, legal fees and expenses) of whatsoever kind and nature imposed on, incurred by or asserted against Composer arising out of any breach or alleged breach by Company of any representation, warranty or covenant made, or obligation assumed, by Company pursuant to this Agreement.

(c) In order to seek or receive indemnification hereunder:

(i) the party seeking indemnification must have promptly notified the other of any claim or litigation to which the indemnification relates; and

(ii) the party seeking indemnification must have afforded the other the opportunity to participate in any compromise, settlement, litigation or other resolution or disposition of such claim or litigation.

12. Provided that Composer fully performs all of her material obligations hereunder and is not in material breach of any of Composer's representations, warranties, obligations or agreements hereunder and the Work is synchronized to the Picture's visuals, Company shall accord Composer a credit substantially in the following form: "Original Music by [NAME OF COMPOSER]".

These credit provisions are much more favorable to the composer than the first agreement, and composers should seek to include these terms into any agreement they sign. A good credit can be essential in advancing a composer's career and securing higher fees in future projects.

(a) Such credit shall be on a separate card, in the main credit roll in the Picture.

(b) Credit in the same form as set forth herein shall be provided in any paid advertising and posters for the Picture, wherever the full billing block for the Picture appears.

The "billing block" is the list of names on the bottom portion of the official movie poster. In the layout of film posters and other film advertising, the billing block is usually set in a highly condensed typeface. A successful composer can negotiate for a larger size name.

(c) Except as set forth above, any and all other characteristics of Composer's credit shall be at Company's sole discretion. No casual or inadvertent failure to comply with the provisions of this Paragraph 11 nor any failure by third parties to comply with the credit provision shall constitute a breach of this agreement by Company. In the event of any failure by Company to comply with the foregoing credit provisions, and upon written notice from Composer thereof, Company shall take reasonable steps to prospectively cure any such failure which is economically practicable to cure (i.e., no recall of copies).

An established composer can negotiate for a credit in advertising any time the director or principal actors receive credit.

13. Composer and Company are independent contractors with respect to each other, and nothing herein shall create any association, partnership, joint venture or agency relationship between them. Composer shall be fully responsible for all persons employed by it, in connection with its performance hereunder, whether as independent contractors or as employees, and shall be fully responsible for them, for all compensation and/or withholding taxes, worker's compensation insurance or other required payments in connection with such persons, except as otherwise specifically and explicitly provided herein.

14. Company may use, and permit others to use, Composer's name, approved likeness, voice and approved biographical material (which shall not be unreasonably withheld or delayed by Composer) in and in connection with the Picture, the Work, any project or product derived from the Picture, if any, and the sale, distribution, promotion and advertising thereof. Except as otherwise stated under this Agreement, Company and its assignees shall have the sole and exclusive right to issue publicity concerning the Picture and concerning Composer's services with respect thereto except for Composer's own publicity provided that there shall be no derogatory statements or references concerning the Picture or any party or entity associated with the Picture

15. (a) All notices and other communications from either party to the other hereunder shall be in writing and shall be deemed received when delivered in person or five (5) days after deposited in the United States Mails, postage prepaid, certified or registered mail addressed to the other party at the address specified at the beginning of the Agreement, or at such other address as such other party may supply by written notice.

(b) Composer shall execute any and all further documents that Company may deem necessary and proper to carry out the purposes of this Agreement.

(c) This Agreement contains the full and complete understanding among the parties hereto, supersedes all prior agreements and understandings, whether written or oral pertaining thereto and cannot be modified except by a written instrument signed by each party hereto.

(d) This Agreement is to be governed by and construed in accordance with the laws of the State of New York, applicable to contracts entered into and to be fully performed therein. Any litigation, action or proceeding ensuing out of or relating to this agreement shall be instituted in a court of competent jurisdiction (whether state or federal) in New York.

(e) Composer shall not assign any of its rights or obligations hereunder without the prior written consent of Company, and any purported assignment without such prior written consent, shall be null and void and of no force and effect. Company shall have the right to assign this Agreement at any time to any person or entity, provided that person or entity which assumes Company's obligations in a writing signed by such assignee's duly authorized signatory.

(f) The parties acknowledge and agree that Composer's remedy for any breach of a term of this Agreement by Company shall be limited to monetary damages at law. Composer shall not have the right to rescind this Agreement or to any equitable or injunctive relief or otherwise in which there would be an interference or prevention of Company's right to finance, produce, market, distribute or otherwise exploit any and all rights in and to the Picture.

(g) Provided that Composer has rendered services as stated herein and Composer is not in breach of any material term stated herein, Company agrees to provide a DVD of the Picture in its completed form in a professional format (preferably mini-DV or Video DVD) for use solely as a sample of Composer's professional work, not for any commercial use or distribution.

(h) All representations and warranties contained herein or made in writing by Composer in connection herewith shall survive the execution, delivery, suspension and termination of this Agreement and any provision herein.

(i) No waiver by either party hereto, or any failure by any party hereto to keep or perform any covenant or condition of this Agreement, shall be deemed to be a waiver or breach of any preceding or succeeding covenant or condition.

(j) If any part of this Agreement shall be held to be void, invalid or unenforceable, it shall not affect the validity of the balance of this Agreement.

(k) The parties acknowledge and agree that this Agreement may be signed in counterparts (with the counterparts deemed to be one fully executed document) either manually, by facsimile or optical image scanner (e.g., pdf) and such signatures shall be deemed as binding upon the parties.

Kindly indicate your agreement to and acceptance of the foregoing by signing the enclosed copy of this Agreement where indicated below.

Company: [PRODUCTION COMPANY NAME]

By: __________________________________

Print Name: ___________________________

Its: __________________________________

Composer: ____________________

By: __________________________________

Print Name: ___________________________

Its: __________________________________ 


***************************************************************************************************************************
THIRD AGREEMENT

PRODUCTION, MUSIC SYNC, MASTER USE & VIDEO LICENSE AGREEMENT

This agreement (the "Agreement") is entered into as of May 11, 2015 (the "Effective Date") by _________ LLC (the "Licensee") with principal offices at ______________, and ______ ________ (the "Composer/Producer") with an address at ____________.

Licensee and Composer/Producer shall each be referred to as a "Party" or collectively be referred to as the "Parties".

For good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the Parties agree as follows:

1. Production: The Composer/Producer shall produce a recording of a pre-exisint musical composition titled "__________" (the "Song") written by Composer/Producer. That recording shall be hereafter referred to as the "Recording" and shall be includive of the Song.The Recording will feature the vocal performance of Ms. __________ ("Artist") who is featured in the movie titled "____________" (the "Movie"). The recording shall take place on a date and time and at a location approved by Licensee.

Since the Composer/Producer is retaining rights in the Recording, he or she needs to have a separate agreement with the Artist so the Composer/Producer and the Artist know their respective rights and obligations with regard to the use of the Recording outside the movie.

2. Non-exclusive License.

(a) Composer/Producer hereby grants to Licensee a non-exclusive license to use the Recording, including the Song, in the Movie in any manner determined exclusively by Licensee, and to distribute the Movie in all media now known or hereby developed, throughout the world (the "Territory") for the duration of the Term (as defined below), as well as in advertising, publicity, and promotion of the Movie.

Since this is a non-exclusive license, the Composer/Producer retains the right to use the Recording, including the Song, outside the movie and retain all of the income. In this case, the Composer/Producer even retained the right to license the Song and Recording for use in another movie.

(b) Licensee shall be permitted to edit or modify the Recording or perform post-production mastering alterations to the Recording without the prior written consent of Composer/Producer. Nothing in this Agreement requires the Licensee to use the Recording in the Movie and the Licensee may use the Recording in whole or in part in Licensee's sole discretion. All rights in and to the Movie shall be owned solely by Licensee, and Composer/Producer shall have no rights therein.

3. Video.
Composer/Producer hereby grants to Licensee the non-exclusive right to use the Recording, inclusive of the Song, in a video to promote the Movie (the "Video"), and to distribute the Video in all media now known or hereby developed, throughout the world (the "Territory") for the duration of the Term (as defined below).

In this case, the Licensee movie producer wanted to make a video including the Recording to promote the Movie.

4. Publicity.

Licensee shall have the right to publish, advertise, announce and use the Composer/Producer's name, approved likeness and bio in connection with Licensee's exploitation of the Movie or the Video.

5. Consideration.

As complete and exclusive consideration for the services rendered and the rights granted to Licensee hereunder, Licensee is obligated to pay Composer/Producer the sum of __________ ($____) (the "Composer/Producer Fee"). The Composer/Producer Fee includes her travel to and accommodations in New York City. Composer/Producer hereby acknowledges that Licensee has paid the Composer/Producer Fee in full.

In this case the Composer/Producer had traveled from L.A. to New York and recorded the Song for the Licensee filmmaker and the Licensee had already paid her fee by the time I was asked to do the paperwork.

6. Term.

All licenses and rights granted in this Agreement shall commence on the Effective Date and extend for the duration of the copyrights in the Recording, the Song and the Video.

7. Limitations.

Composer/Producer reserves all of its right title and interest in the Recording and the Song not expressly granted herein.

8. Credit.

Licensee shall accord Composer/Producer screen credit in the Movie, substantially as set forth below, with respect to the Recording and the Song:

"[Name of Song]"
Words and Music by ________
Performed by [Artist]
Copyright (P) © 2015
Produced and arranged by ________

The foregoing credit shall appear in the main credit roll in the Movie. All other aspects of such credit, including size and placement, shall be determined by Licensee.

9. Cue Sheet.

Licensee agrees to prepare an accurate music cue sheet for the Movie and the Video and file the cue sheet with ASCAP, with a copy provided to Composer/Producer, within 30 days after completion of the Movie.

In this case, ASCAP was the Producer/Composer's PRO.

10. Notices.

Notice in regard to this Agreement shall be delivered by certified mail at to each Party at the addresses listed above or to a new address provided by either Party.

11. Representation and Warranty.

Composer/Producer and the Composer/Producer represent and warrant that Composer/Producer is the sole author of the Song, that the Song is completely original and contains no samples or other third party created content; that there are no liens or encumbrances on the Song and that Composer/Producer and the Composer/Producer have the full right, power and authority to enter into this Agreement and to grant the rights agreed to be granted hereunder.

12. Indemnity.

Composer/Producer and the Composer/Producer shall at all times indemnify and hold harmless Licensee from and against any and all third party claims, damages, liabilities, costs and expenses, including legal expenses and reasonable counsel fees, arising out of breach by Composer/Producer or the Composer/Producer of any warranty, representation or agreement made by them herein.

13. Miscellaneous.

Notwithstanding any provision of this Agreement to the contrary, nothing herein shall be construed to create a partnership or joint venture between the Parties, to authorize either Party to act as agent for the other, to permit either Party to undertake any agreement for the other, or to use the name or identifying mark of the other, all except as it is specifically provided herein. Neither Party shall be construed for any purpose to be an employee subject to the control or direction of the other. This Agreement is binding upon and shall inure to the benefit of the Parties' respective successors and assigns. Licensee may not assign any rights or obligations under this Agreement without the express written consent of Composer/Producer, which shall not be unreasonably withheld or delayed. This Agreement contains the entire understanding of the Parties relating to the subject matter hereof and supersedes any prior understanding or agreements. This Agreement may not be modified or amended except in writing signed by each of the Parties. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to its principles of conflicts of laws. This Agreement can be signed in counterparts.

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the day and year first written above


Composer/Producer _______________ LLC


___________________ ___________________________
Authorized Signatory

Name: ______________________

Title: _______________________


September 30, 2015

Freedom to Engage in Cultural Activities and Other Legal Issues in Busking



By David Ma

Busking has gained popularity in Hong Kong, which has yet to implement a licensing scheme for such solicitation. This blog examines various laws that impact the right of buskers.

Playing Musical Instrument and Obstruction

The Summary Offences Ordinance (Cap 228) (SOO) creates the below offences punishable by a fine of $500 or to imprisonment for 3 months:

• Under §4(15), it is an offence for any person to without lawful authority or excuse play any musical instrument in any public street or road save under and in accordance with the conditions of any such general or special permit as the Commissioner of Police in his absolute discretion may issue. (emphasis added)

• Under §4(28), it is an offence for any person to without lawful authority or excuse do any act whereby injury or obstruction, whether directly or consequentially, may accrue to a public place. (emphasis added)

Under Article 34 of the Basic Law, Hong Kong residents have the freedom to engage in academic research, literary and artistic creation, and other cultural activities. The courts have held that the restrictions of such freedom under the SOO are rational and proportional for the purpose of public safety.

While §4(15) mentions that a permit to play musical instrument in public street may be secured from the Commissioner of Police, no information is available on the Hong Kong Police Force website. In Wong Chung Sing (HCMA 92/2015), Judge Li criticized the obscurity of the permit application process and the lack of appeal mechanism. It was held that playing an instrument without a police permit would not constitute an offence if there was a "lawful excuse" to do so.

In relation to "lawful excuse", the Court of Final Appeal held in Yeung May Wan ((2005) 8 HKCFAR 137) that the prosecution must show that the defendant had no lawful excuse to obstruct before there could be a conviction under §4(28). A person who obstructs a place "cannot be said to be acting without lawful excuse if his conduct involves a reasonable use of the...public place". ((2005) 8 HKCFAR 137 at paragraph 42) When assessing whether the obstruction is reasonable, the protection given by the Basic Law, such as the freedom to demonstrate under Article 27, must bear substantial weight.

It follows that when considering whether there is lawful excuse in playing an instrument in a public place under §4(15), the court must consider the reasonableness of the act with reference to the freedom to engage in cultural activities under Article 34. The prosecution would only succeed if it could show that the busker acted outside the scope of the lawful excuse by causing excessive obstruction or annoyance. Unfortunately, it appears that not all police and prosecution are mindful of this balancing exercise in performing their duties:

• Wong Chung Sing, a busking musician, was convicted under §4(15) on three individual occasions in 2008, 2009 and 2015. (HCMA 357/2008, HCMA161/2009 and HCMA 92/2015) He appealed each time by referring to his rights under Article 34, but only succeeded in the most recent case in which Judge Li quashed the conviction on the basis that the Magistrate erred in imposing the prosecution's burden of proof onto Wong and did not give substantially weight in considering Wong's freedom to engage in cultural activities under Article 34 (HCMA 92/2015);

• So Chun Chau, a busking acrobat, was charged by the police under section 4(28) and appeared in the Magistrate's Court in 2010. The magistrate held that So's act of tossing a diabolo high up in the air was reasonable when considered in light of Article 34 and did not constitute obstruction under §4(28) (ESS19669/2010);

• In Yeung May Wan, the Court of Appeal doubted whether the police officers, prosecution and magistrate appreciated that unreasonable impediment must be shown before conviction of the obstruction charge under §4(28). The Court of Appeal endorsed such view and quashed the convictions of the defendants. (This was not a busker case, but was about a Falun Gong demonstration.)

Place of Public Entertainment Licence

Section 4 of the Places of Public Entertainment Ordinance (Cap 172) (PPEO) sets out that it is an offence for a person to keep or use any place of public entertainment without a licence granted under the PPEO. Under §2 of the PPEO, a "place of public entertainment" is defined as "any place...capable of accommodating the public...in or on which a public entertainment is presented or carried on", and "public entertainment" is defined as any entertainment to which the general public is admitted with or without payment.

The case of T v Commissioner of Police(CACV 244/2012) involved a participant in the International Day Against Homophobia Demonstration (IDAHO) performance, which included recital and chanting of slogans and dance to pre-recorded music. The performance took place on a temporary stage and the open space in front of it on a Causeway Bay street which was designated as a pedestrian precinct at the relevant time. The performance was stopped after police intervention on the basis that the performers were using a place of public entertainment without a licence. In the appeal to the judicial review sought by T, the Court of Appeal referred to the UK case of R v Bow Street Magistrates' Court ex p McDonald ((1996) 93(15) L.S.G. 30), which involved a busking guitarist in Leicester Square. In that case, the UK Court of Appeal held that a guitarist did not require a licence under the London Government Act 1963, as it was the City Council, instead of the busker, which had control over Leicester Square to which the public had free access. In T, the Court of Appeal found that as the IDAHO organizers did not have the ability to control admission to the dance performance. Therefore, the location where the performance took place was not a "place of public entertainment", and T was not required to apply for a PPEO licence.

It would appear that a busker does not require a PPEO licence to perform in public unless the busker undertakes control and admission to the area of his or her performance, which is unlikely and probably impossible in most circumstances.

Begging

Section 26A of the SOO makes it an offence for a person to beg or gather alms in any public place or street. There are other laws against begging in relation to specific locations, for example section 14 of the Bathing Beaches Regulations (Cap 132E) and the §27 of the Pleasure Grounds Regulations (Cap 132BC).

The UK case of Gray v Chief Constable of Greater Manchester ([1983] Crim LR 45) held that a busking guitarist in a passageway who received tips from passersby was not guilty of the offence of begging under the Vagrancy Act 1824. This was because the busker gave value for money, and passersby were not forced to deal with the busker. This suggests that buskers should be safe from prosecution under laws against begging.

Other Laws

There are other laws which impact the right of a busker to perform. For example,

• Section 5 of the Noise Control Ordinance (Cap 400) makes it an offence for a person in any public place to play any musical or other instrument or uses any loudspeaker or other instrument which produces noise which is a source of annoyance to any person.

• Section 25 of the Pleasure Grounds Regulations (Cap132 BC) prohibits a person to play an instrument or sing in any public pleasure ground (as specified in the Fourth Schedule of the Public Health and Municipal Services Ordinance (Cap 132) excluding bathing beaches) to the annoyance of others unless a written permit is obtained from the Director of Leisure and Cultural Services. No details on such a licence are available on the website of the Leisure and Cultural Services Department. It is unclear as to how "annoyance" will be interpreted, but the protection given by Article 34 of the Basic Law should be taken into the assessment.

• By-laws, such as §26 of the Mass Transit Railway By-laws (Cap 556B), §24 of the Mass Transit Railway (North-West Railway) Bylaw (Cap 556H), and §31 of the Tung Chung Cable Car Bylaw (Cap 577A) prohibit the singing, dancing and playing of musical instruments on any part of the premises of these transportations.

Conclusion

The introduction of a proper busker licensing scheme by the Government and public transit operators would bring Hong Kong into line with other international cities that promote this art form. Until then, buskers should tread carefully so that they do not end up on the wrong side of the law.

November 9, 2015

Second Circuit Court Holds That Director Does Not Own Separate Copyright for His Contribution

By Robert L. Seigel

Over the years, there has been a metaphorical dance in which a media project's attorney often has to chase down cast or crew members to sign agreements that include the customary "work for hire" language. Some cast and crew members (and their respective representatives) have been less than helpful in this manner. Sometimes it is forgetfulness; however, sometimes these personnel and their representatives believe that if they do not sign their agreements, there will be a resulting problem with the "chain of title" for the production company. They often think that by not signing, they may hinder or prevent the production company from signing a sales or distribution agreement and completing delivery of the required elements of a media project to the sales company, distributor or licensee.

Then the case of 16 Casa Duse v. Merkin, No. 13-3865 (2d Cir. 2015) arrived on the legal landscape.

Robert Krakovski, the principal of the film production company 16 Casa Duse, LLC (Casa Duse), purchased the rights to a screenplay titled "Heads Up" from a third party, and asked Alex Merkin to direct the film. As part of standard operating procedure, Krakovski then hired a cast and crew for the film, and each cast and crew member (other than Merkin) signed an Independent Contractor Agreement with Casa Duse, which was a work-for-hire agreement providing that Casa Duse would own all rights in the film.

Everyone signed the agreement except for Merkin, despite Krakovski's repeated attempts requesting Merkin to sign the agreement. Despite Krakovski not receiving a signed agreement from Merkin, the film's production commenced and principal photography as well as post production occurred.

Compounding matters, Krakovski gave Merkin a hard drive that included the film's raw footage, so that Merkin could prepare an initial, or "rough cut" of the film. Although Merkin would not sign his director's agreement, he did sign a media agreement, which permitted him to edit the raw footage, but he could license, sell or copy the footage without the production company's permission.

However, a problem arose when Krakovski began submitting the film to film festivals, and scheduled a screening at the New York Film Academy (NYFA) with a reception to follow the screening. Krakovski placed a deposit of $1,956.58 for the reception. On the date of the screening, the NYFA canceled the screening because Merkin's attorney, Maurice Reichman, had sent it a cease-and-desist notice. This cancellation resulted in Krakovski losing his restaurant deposit.

To refute Merkin's claims that the production company was liable to Merkin for copyright infringement and that Merkin had a copyright interest in the film, the production company brought a declaratory action to address such issues, not only against Merkin, but also his attorney.

The district court granted a temporary restraining order and preliminary injunction enjoining Merkin from interfering with Casa Duse's use of the film. Casa Duse also moved for summary judgment on its claims and its requests for fees and sanctions. Merkin cross-moved for summary judgment, requesting that the district court vacate the preliminary injunction and dismiss the production company's request for fees and sanctions.

The district court declined to vacate the injunction and granted summary judgment to the production company on all claims, along with fees against Merkin and sanctions against Reichman. It also dismissed all of Merkin's counterclaims, except for his claim for breach of contract, which Merkin agreed to voluntarily dismiss without prejudice. The district court entered final judgment, awarding Casa Duse (1) $1,956.58 in damages resulting from Merkin's interference with the NYFA screening event; and (2) $185,579.65 in attorneys' fees and costs, of which Merkin and Reichman would be jointly and severally liable for $175,634 and Reichman would be solely liable for the remaining $9,945.65. Merkin and Reichman appealed to the Second Circuit.

The Second Circuit noted that the case presented a question of first impression in the Circuit: Can a contributor to a creative work whose contributions are inseparable from and integrated into the work maintain a copyright interest in his or her contributions alone? The question was answered in the negative.

The Court first addressed the competing copyright claims. Merkin argued that the district court erred in concluding that he could not copyright his creative contributions to the film, and that he lacked a copyright ownership interest in the "raw film footage." The production company countered that the individual contributions to a film, such as direction, are not themselves subject to copyright protection, and that the production company retained sole copyright ownership of the final film and the film's raw footage. The parties agreed that Merkin was not a "joint author" or "co-author" of the film under the Copyright Act, and that Merkin's efforts could not be deemed a "work made for hire," which would have precluded Merkin's copyright infringement claims.

The Second Circuit concluded that copyright protection does not subsist in creative contributions to a work that are inseparable from the work itself. The Copyright Act's definitional terms and legislative history supported the conclusion that Merkin's contributions to the film did not themselves constitute a "work of authorship" sufficient on its own to be provided copyright protection. Although the Copyright Act does not define "works of authorship," it does list examples of categories of "works of authorship," which do not include integral, non "stand alone" constituent parts of a work. The Second Circuit also relied upon the Ninth Circuit's decision in Garcia v. Google, Inc., which held that an actor did not own a copyright interest in her performance in a completed film, because such a theory of copyright law would result in a "legal morass" making "Swiss cheese of copyrights." According to the Second Circuit, filmmaking is a collaborative process that typically involves artistic contributions from large numbers of people, including producers, directors, screenwriters, actors, designers and cinematographers. Although these various contributors can contribute original artistic expressions that are arguably fixed in the medium of film footage, this alone is not sufficient. Authors are not entitled to copyright protection except for the "works of authorship" they create and fix, which does not include non-freestanding contributions to an integrated work.

The Second Circuit next considered the parties' competing copyright claims with respect to the raw film footage. It agreed with the district court that the production company was the "dominant author" of the film, based on the production company's decision-making authority over production of the film, its purchase of the underlying screenplay, and its work-for-hire agreements with the cast and crew. The record did not reflect any developments that occurred between the creation of the raw film footage and the production company's attempts to create a finished product that would alter the analysis as to the raw footage. Therefore, the production company, not Merkin, owned the copyright to the finished film and its prior versions.

Addressing the production company's claim for tortious interference with business relations under New York law, the Second Circuit disagreed with the district court, concluding that the undisputed material facts required judgment in Merkin's favor. To support its claim, the production company was required to show that Merkin's conduct rose to the level of a crime or a tort, or that Merkin engaged in the conduct solely for the purpose of inflicting intentional harm. The Court maintained that the production company failed to show that Merkin acted for a wrongful purpose, or used dishonest, unfair or improper means. It also rejected as insufficient the production company's argument that Merkin acted with a willful blindness to the factual and legal realities of his position. Finally, the Second Circuit held that the district court did not err in awarding fees and costs to the production company and imposing sanctions against Reichman.

On a practical level, does this decision mean that producers should not secure "work for hire" or assignment of rights agreements? Obviously not. The Second Circuit's decision leaves certain issues unaddressed, such as whether such contributions and a screenplay or a music score could be deemed an independent contribution. The licensees and purchasers of audio-visual media works, such as a motion picture feature, will still require such documentation for chain of title purposes to enter into such agreements, as well as secure Errors and Omissions (E & O) insurance. This decision, however (hopefully extended in such circuits as the Ninth), shall permit production counsel to take a collective breath when those that work on a media project (or their representatives) attempt to engage in what be called unfair and "strong-arm" tactics in negotiations.

November 21, 2015

The 11 Contracts Every Artist, Songwriter & Producer Should Know - Live Performance & Touring

By Steve Gordon

Steven R. Gordon, Esq. (steve@stevegordonlaw.com) is an entertainment attorney specializing in music, television, film and video. His clients include artists, songwriters, producers, managers, indie labels, music publishers as well as TV and film producers, and digital music entrepreneurs. He also provides music and sample clearance services for producers of any kind of project involving music. Mr. Gordon is the author of The Future of the Music Business (Hal Leonard 4th ed. 2015, futureofthemusicbusiness.com/)

The author gratefully acknowledges the assistance of Ryanne Perio, Esq. in the preparation of this blog. Ryanne is a litigation associate at WilmerHale law firm. He would also like to thank his intern Jena Terlip, 2L at Benjamin N. Cardozo School of Law, for her research and editing assistance.

The seventh installment of this 11-part series on basic music industry agreements focuses on the business of live music performances. We will focus on what an indie musician faces when starting out, as well as artists who are more advanced in their careers. We will discuss how it really works in the trenches, and how to navigate over that rough terrain for the best outcomes.

When an indie musician is just starting, playing for no money can be good exposure. Eventually, however, you will want to make money from your music so you can quit your day gig. Live performance is one of the income streams that can support indie musicians, in addition to other streams such as record sales, merchandising, synchronization placements and public performance royalties.

Part I of this blog is for artists just starting out, as well as those emerging as successful live bands or singer-songwriters. Part II discusses artists who are successful enough to work with booking agents, and includes an agreement from a booking agency's standard-form contract with a venue that is designed to be good for the artist and the agent. I add comments showing the changes that the venue would probably request. Part III deals with the way the Internet has converged with live performance to generate new revenue streams for both artists and venues, and includes a new "Revenue Share" program at Smalls nightclub in Manhattan, which offers artists the opportunity to make money by allowing off-site fans to listen to their live performances on demand.

PART I: NEW AND EMERGING ARTISTS

Passing the Hat - Tip Jar

There are many venues--such as small clubs and restaurants--that will allow musicians to book sets and entertain diners or drinkers for free, and then "pass the hat" after their sessions. For tips from Nashville based singer songwriter Jennifer Sullivan (www.facebook.com/jennifersullivanmusic/) on maximizing contributions to the "tip jar," see her comments in italics below. Performing in public places for gratuities, such as on the street or in subways, or "busking," is another way to make money from live performance. In fact, New York City has a special program that allows musicians to busk legally. Performers can audition for "Music Under New York (MUNY)" (blog.sonicbids.com/taking-it-to-the-streets-nyc-busking-basics), an official program that sets up schedules of performances and locations for MUNY members.

Jennifer's thoughts on the tip jar:

"I make an average of $50/hour in tips at these kinds of gigs. (I've never busked, so this only applies to live club performances.) The longer the gig (4 hours is typical for me now) and more frequent (I perform about 5 gigs a week) the better! Here's a few ways I maximize my tips.

1. You can't expect people to come up and give you a tip. Don't be afraid to ask for it! For example, "Thank you guys so much for being such a great audience! I'm going to come around and shake hands, see if you guys have any requests, and pass around this tip jug. This is how I/we make a living on Broadway, so if you like what you're hearing, please show your support and leave a tip, and if you don't like what you're hearing, put some love in the jug anyway and I'll take some lessons!" Usually makes people laugh.

2. Be funny and sincere. If people are being rude/awkward, just make them give you a high five at least and maybe you'll at least brighten their day. People remember things like that, and don't take it personally. Move on to your next fan. Which brings me to...

3. It's important when starting out to use these unpaid gigs as opportunities to make fans. Have an email list, have business cards ready, and make demos of your music. If you have CDs, always take them with you when you pass the hat. People are more likely to buy things they can touch and see. I sell mine for $5, and I notice people end up buying a couple extra to share with their friends. I definitely make extra income at gigs by selling CDs, and people have something to take away with them.

4. Having a CLEAR tip jar is key! Make your own with a gourd or a huge champagne glass or regular old bucket, decorate it, write TIPS on it. Make sure your tip jar is very clear and right in front of the stage, maybe on a stool. THERE IS NOTHING WRONG WITH WORKING FOR TIPS. I even ask for tips at my paid gigs, why not? It helps you make a lot more money, and as indie musicians, we need as much as we can get! But don't be desperate. Be charming, funny, and confident.

5. Last but not least, the MORE songs you know, the better chance you will make good tips. Be humble - if you're starting out and want people to hear your songs, that's great and all; but if you want to be a professional musician, you MUST be a good entertainer. And that means playing cover songs and requests. Know your audience and play to THEM in order to make the most tips. I ask for $20 per request. Know what songs work well with your original repertoire, and know your venue. Cover songs and sing-alongs are a great way to make fans AND tips!"

Dealing with Venues Directly

Beyond passing the hat, there are thousands upon thousands of small clubs in every city (and most towns) that actually charge admission to listen to live music. Some small jazz and singer-songwriter oriented clubs will pay non-established musicians a fistful of cash to show up for an evening (think $50 - $100 for a single musician and $100 to $250 for two or three, plus often a bar tab, and perhaps a free or discount for meals.). Other clubs offer a split at the door (i.e., money from fans who pay to see particular artists). Often they offer 40% to 60% in favor of the artist, and the venue keeps 100% of the revenue from the bar. Some clubs require 100% of ticket sales from the first certain number of people who come to see the band. Other clubs will deduct expenses for such things as sound and amps, in-house production staff, and even refreshments in the green room. If it sounds like this presents opportunities for clubs to be less transparent in paying artists, you would be correct. And if dealing with clubs directly sounds like a tough way to make a living, you would be right. Moreover, some clubs are worse than most, and others are total nightmares for artists. For instance, certain clubs will take a band's credit card at the beginning of the night -- unless a certain number of people pay at an inflated ticket price determined by the venue, the club will charge the band's card to make up the difference. For the details of good, bad, and very bad club deals, read "Should You Pay To Play? The Worst to Best Club Deals In the World" by Ari Herstand (www.digitalmusicnews.com/2014/04/16/should-you-pay-to-play) \. The article is based on a wealth of experience.

Jennifer's comments on clubs that require the artist to sell a minimum number of tickets:

"Okay, fuck this. I hate this style of promoting, it's such bullshit. Unless you are a highly established act, these kinds of performances make no money. Or unless you are with a legitimately good agency, but they don't usually sign you unless you have a proven track record of high profile live performances already under your belt. So getting started, usually how this works:
You want to play at "Darlene's Grocery." Darlene's has a 3rd party booker that books their Friday and Saturday nights, so you contact them. The booker agrees to book you, and your deal is they get the first 10 covers ($10/cover = $100) which they split 50/50 with Darlene's. You make 100% after that, which if you're a new artist just starting out, means you'll probably bring 8 people to pay $10 and you'll make zero money. And you might get one free drink at the bar, if you're lucky. And you'll do this so many times and keep failing and realize that this kind of deal is a waste of time."

Jennifer's comments on whether an artist should ever play for free:

"KNOW YOUR WORTH!!! If you are truly talented, driven, confident, humble, professional, and friendly, you can get paid gigs. Especially if you provide your own little PA / sound system, many dinner places and private events will hire you $300+ to provide your own sound and play for a few hours. Know your CRAFT! You need to be able to play 4 hours worth of original and cover music to be a full time, independent (unsigned) working musician. Until that big break comes along and you get signed and get to just play your music for stadiums of adoring fans, this is how you get started. Working your butt off at gigs. It ain't easy! But don't short yourself on what you can do. If you play an unpaid gig, agree to at least a bar tab and MAKE SURE that the venue has a built-in audience. If they expect you to bring all the people AND not pay you, there's a problem. One way to get around these annoying 3rd party promoters is to find the direct contact to the club and offer them a better deal. Instead of them splitting 50/50 with a booker and the venue only making $50, offer them a 70/30 deal, where at least if you bring $100, instead of seeing 0 you get $25!"

Promoters

One way a musician can enhance his or her chances of actually making some money--or increasing the amount of money he or she is likely to make--is working with a promoter rather than booking a club directly. This is due to the following:

Promoters know the ropes, meaning they often make better deals for artists because of their knowledge and experience. Venues are more likely to book artists represented by promoters because they trust the promoter's musical tastes from prior dealings and know that the promoters would not waste their time with artists who cannot draw a crowd; most importantly, promoters promote shows -- they use all of their skills and experience to bring the largest possible crowd to their artists' shows.

However, some promoters should be avoided. As Ari discussed with me in correspondence about this blog, there is an "entire new wave of 'promoters' who actually don't promote at all except upload one post on Facebook and rely on the artists to sell all their tickets." Ari also warned about "pay to play" promoters. These promoters require bands to pre-purchase tickets and then they split the money with the venues without guaranteeing any money for the artist. Since the promoter has already made money, there is little incentive for it to do much to promote the show.

Below are two interviews with legit promoters who work with both new as well as emerging artists. Before reading, a word about booking agents: like promoters, they book shows for their musician clients. However, booking agents usually only work with artists who have established followings, whereas promoters such as those interviewed for this blog can help you now.

We start out with an interview with a staffer at an indie promotion company who preferred to remain anonymous in order to provide full disclosure. The second interview is with seasoned promoter (and publicist) Fiona Bloom.

Interview with an Indie Rock Promoter

1SG: Tell us briefly about you and what you do.

I work for a small concert promotion company based in New York City. The company originated due to a growing need for a promoter in the local scene who would work solely on the agenda of nurturing rising talent. Although we work primarily with local talent, we also pride ourselves on having worked with talent both nationally and internationally, including bands from Japan and Sweden.

2SG: In general, what does a promoter do? And how is it different than a booking agency?

A promoter brings a show to the attention of the public and gets people to come by through a variety of means including social media, hand-outs, posters and flyers, and gets media attention and press for the event. A booking agent's main function is to book venues for an artist.

3SG: As a promoter, what unique things do you do for the artists you work with?

My promotion company serves as a platform for local bands to gain greater exposure, and to help those bands play bigger and better shows as long as they are talented and hardworking. The company primarily exposes bands to the music industry, to media, to new fans, and to other great acts in the New York region. In addition to the above, we work with prestigious mid-size venues in Manhattan, such as Gramercy Theatre and Irving Hall, and also promote shows at more intimate venues in Manhattan and Brooklyn.

I am the primary booker and promoter for my company. My role ranges from discovering new talent to serving as the liaison between the venue and the artist. If I decide to organize a show, I am responsible for setting dates with the venue, negotiating financial terms, and making sure the talent shows up on time--whether it's one band or six. I am also responsible for promoting the show on my company's website, on social media platforms, and at the venue. I make sure that all bands are made aware of their responsibilities before the show, including draw requirements (how many tickets they must sell before receiving a portion of the proceeds) and backline provisions (fees that the venue charges for equipment such as a microphone, sound amplification, instruments and security). In addition, I am also responsible for the show running smoothly, which includes handling any problems that may arise during load-in, show time, and load-out. I also "settle up" with the venue--meaning I pay for any expenses incurred, which are always agreed upon prior to the show--and pay remaining monies to my company, as well as to the artists after the show.

4SG: What kind of artists do you work with?

My company strictly books and promotes rock and metal bands. We feel that over the years, a void has grown in the rock and metal genres--at least in New York. So, we strive to support the talented bands pursuing a career in this genre. Our goal is to bring rock and metal back to New York City. My company also mainly works with "baby bands," which usually means they are not yet signed to a label. However, the range of experience these bands possess can vary from the recently-formed to the very experienced. We offer the more experienced bands great opportunities, such as getting them opening-act positions for nationally well-known bands.

5SG: Does your company have contracts with the artists? If not, do you confirm terms by email, or is everything done on a handshake basis?

We do not have formal contracts between the company and our artists. That being said, all of our communications with the artists are confirmed in writing; there are no oral agreements. Issues are avoided by simply making the bands aware of everything in writing ahead of time.

For example, if I were hosting a show, I would secure the talent for that show after securing the venue. This ensures that I will be able to convey, in writing, the requirements to the artists--I let the artists know, in writing, what the venue charges for room rental (if applicable), for sound, for lighting, and for security. I transmit, in writing, all of the expenses up front. That way, I can give the artists a presale arrangement--a ticket amount that the artist should sell prior to the show to ensure expenses are accounted for and to ensure the artist also gets paid. The number of tickets that must be sold presale will naturally vary depending on the price per ticket and the venue. And, for some local venues, the expenses are low enough that presale is not necessary. But in any event, everything will be in writing.

The most important concept to understand is that we maintain close relationships with the bands we work with. My company is not a "one-and-done" promotion company; we often have a continuing relationship with our artists. There are many artists we work with over and over again because they are hardworking, talented, and we have a mutually beneficial relationship with them. A certain level of trust is built so that a formal contract becomes unnecessary. While the same cannot be said for a band we are working with for the first time, we are still able to avoid misunderstandings by having everything in writing.

I think it's important to point out that we never require bands to work with us exclusively. In fact, we encourage bands to work with multiple local promotion companies. This will give the bands greater exposure. The only requirement we have regarding exclusivity is we ask that the band have at least three weeks of down time in between shows. For example, if Band X plays a show in NYC with another promoter on Week 1, we will not book Band X to play one of our shows in NYC until Week 4.

6SG: Same question regarding venues.

We usually do not have formal contracts with the venues, but, similar to when we work with artists, there are almost always emails confirming all terms. When working with smaller venues, all expenses are laid out when we secure the venue for the show date. This usually occurs two to three months before the show for a smaller venue, and four to five months in advance of a larger show. All communication with the venue is in writing, and we determine how much it will cost to rent the venue and how much it will cost for venue staff (i.e., lighting, security, door person). During these communications, we also negotiate whether or not there is a bar guarantee for the venue, meaning the minimum amount of money the bar has to make for the night. This is important because we often host shows on weekend nights, which can often result in a high bar guarantee ($1,500 to $3,500 for the evening). If we are not prepared for this, it is very easy to fall into a situation where the bar guarantee is not met by audience consumption and we end up having to pay the remainder out of pocket.

This leads me to discuss the reason local bands feel it is useful to have a promotion company running the show. Promoters are the cost-bearers. Anything and everything that could go wrong with a show and result in costs incurred gets placed directly on the shoulders of the promoters. Therefore, if bands decide to organize a show without a promoter, the bands can often incur these expenses and make very little money, if any, by failing to ask the venue the right questions. For example, there are many local bands who have fallen prey to excessive bar guarantees because they just didn't think to discuss with the venue whether or not a bar guarantee exists and who bears the cost of paying off the remainder if the minimum is not met. The promoter is the advocate for the artist by knowing the right questions to ask and negotiating a fair deal.

7SG: Can you tell us about the money--what the venue gets, what the artist gets and what the promoters take?

We typically make 40% of sales at the door, after expenses. The artist gets the other 60%. If the show is a flop, we ensure the bands get paid or at least don't wind up owing money to the club, and we bite the cost and pay the club the unrecouped expenses.
Our larger shows work in a similar manner--the company will only get paid after the venue's expenses are paid. Typically, we retain a 40% profit for these shows as well, and the artists receive 60%.

What the artist will actually make varies depending on the show. At a small local show (think "dive bar") expenses for the venue range from $250 to $350. Let's assume the expenses are $250, at $10 per ticket; thus, a band has to sell more than 25 tickets to break even. If they don't, neither the band nor the promoter gets paid. A band in the headlining slot(s) will generally sell around 35 tickets, and that may generate $400. But due to expenses there is no guarantee they will actually make money, and this is always conveyed to the bands before they agree to play a show.

At a larger show at a mid-size venue, the payouts are better because ticket prices are higher and more tickets are sold. Presale requirements for this type of show range from 75 to 200 depending on the band's slot in the show. At this type of show, the opening and closing bands will usually make $300 to $400 for the night, direct support bands will make $400 to $600 for the night, and the headliner will make $800 to $1,000 for the night.

When there is a promoter on the show, the venue does not pay the artist. The promoter(s) receive the payment for the show, then must distribute the payment to the artists, and then finally gets to pay itself.

8SG: Tell us about Sponsorships. Can an artist make more money if you get a sponsor?

Everyone makes more money with sponsors, but they are very hard to secure and my company has not been able to work with them in a long time.

I do know that securing a sponsor for the show results in a huge increase in pay to the bands. The amount of the sponsorship will depend on (1) the size of the venue, (2) whether the venue has an existing arrangement with the sponsor's brand, and (3) whether there is a requirement for a certain amount of product to sell at a show, along with varying other factors. Nevertheless, a sponsorship can really make or break a show. For example, most music festivals are only able to exist because of arrangement with one or more sponsors.

9SG: If you do get sponsorships, do you do contracts or just an email correspondence confirming terms?

As I said the company hasn't worked with sponsors in a long time so I don't have personal knowledge whether there were any contracts.

Interview with Fiona Bloom

1SG: Tell us briefly about you and what you do.

I own a branding/PR agency called The Bloom Effect--we offer a plethora of services including social media, publicity both traditional and digital, international consulting, event promo, product launches and shopping artists to record companies and publishers. Our specialty is looking after international acts in the U.S, and also giving them a platform for their debuts and performances.

2SG: In general, what does a promoter do?

A promoter should wear many hats. We work to secure talent, which initially involves researching and being "up" on all the hottest bands, as well as knowing the competition and what's happening in the music scene during the timeframe we're looking to bring in an act. We also publicize and promote talent via the usual methods of general publicity--print, digital, radio, local tv and social media--as well as create some visuals for the show or tour.

Promoters should also do text campaigns, email blasts and newsletters to their network or following to promote the show. In addition to this, my company offers ticket giveaways to radio stations and blogs, and allows for guest lists for VIP's and industry personnel where applicable. Furthermore, we work with other organizations to insure more ticket sales and the overall promotion of the venue and of the show.

A good promoter should have access to all venues and contacts in the various markets where they work. They should also have great relationships with artist managers, agents, and other live promotions companies. Great communication skills and the ability to follow-up with and maintain relationships are also key.

Personally, I work with all kinds of artists and in all genres of music. In fact I always like to say there are two genres--Good and Bad, and I work with the Good! Promoting has made my life more colorful, and there's variety to everything I do; I never treat any two projects the same. There is a set template of doing things, but the formula and ingredients change.

3SG: When you act as a promoter, what unique things do you do for the artists you work with?

Let's just say that in #2 I answered that because probably most promoters don't go all out like I do.

4SG: What kind of artists do you work with?

I try to work with great artists. The artists I work with must be very original, and they have to be pretty amazing live! Everything from DJ's to R&B, Hip Hop, Soul, Rock, Reggae, Folk, and Jazz--I've done it all, and I love all genres and all styles.

5SG: Does your company have contracts with the artists? If not, do you do email correspondence confirming terms or is everything done on a handshake basis?

It depends on the work. If I'm producing several shows with an artist then yes, we have contracts with the artists. If it's a one-off then we generally have an invoice for my services or an email confirming all of the terms for my services.

6SG: Same question regarding venues.

With the venue I have an offer sheet with all of the terms completely laid out with backline, tech riders, comps, guarantee versus door, bonus after X amount of revenue reached, the merchandising agreement, and anything else discussed.

7SG: Can you tell us about the money. Do you put up money to rent venues? Do you pay for any expenses such as travel or equipment rental? Do you work on a flat fee basis or a percentage? How much money does the artist make - if it's a percentage, what is the percentage? And what is it a percentage of? For instance, is it a percentage of ticket sales? How much does the venue make?

I try not to put up my own money. If there's costs involved, I work with vendors or sponsors who will pay for them, or an investor who takes it off the back-end. Sometimes we pay for hotels, MC's to host the show, and some equipment--although I like to get the equipment donated by the brand.

Depending on the specific deal and its outcome, I work on either flat fee or a percentage. However, I prefer the former.

The Artist either makes their guarantee, which can be anything you worked out beforehand that makes sense with the size and capacity of venue, or a percentage, which is usually anywhere from 60% to 75%, or on rare occasions, 80% of door. This percentage is compiled from ticket sales minus any venue expenses such as sound and/or security and backline costs. It all depends on what kind of deal and the sorts of terms you have.

The venue generally doesn't survive off of door sales, which are generally considered "extra" for them. Rather, the venue makes their money from the liquor, bar, and food costs for the night. Promoters and artists do not share in these costs.

8SG: Do you ever get sponsorships for shows? And if so how do you find them, what do they want from the artist or the show, and what are they willing to pay?

Yes, I love having sponsors. They help with financial costs and expenses as well as promoting the show, creating fliers and posters for the show, and the like.

I find sponsors by contacting like-minded brands. By "like-minded," I mean brands that attract the same demographic as the artist I am working with, have a "hipness factor" with said demographic, and who have worked in the area where the show will be held. By doing this, we can capitalize off of the good will, history, and interests of the brand.

I find these brands by researching them online (namely their Twitter, Facebook, or LinkedIn profiles), or through industry contacts, conferences, and referrals. Usually the brands want the artist to promote their shows hard, shout out the brand's name a few times, and, if the brand is clothing, shoes, or liquor, to wear the brand. Brands and sponsors can pay up to $5,000 or more a show; it depends on the market, the show's date, and how big the audience will be.

9SG: If you do get sponsorships do you do contracts or just email correspondence confirming terms?

Any work I do with sponsors will definitely be contractual. These are professional businesses we're dealing with who are a lot more conservative than the music industry. Thus, the agreements are always formal.

10SG: How can potential clients get in touch with you?

I'm always open to receiving new clients and it's very easy to get in touch. Find me on www.thebloomeffect.com. I can also be contacted directly at fiona@thebloomeffect.com
I'm open to phone, and potential clients can get in touch with me at 646-764-0004. Finally, I'm all over social media @fionabloom.

PART II : ARTISTS WORKING WITH BOOKING AGENTS

As noted above, booking agents work almost exclusively for artists with established followings. To do this, they usually negotiate with in-house "talent brokers" at the venues. Generally, booking agents negotiate a guaranteed amount of money for their artists, and the artist will occasionally earn more if they sell more than a certain number of tickets. Pasted below is a booker's standard agreement with venues. The italicized comments explain how the agreement is favorable to the artist and the changes that a venue will usually request.

PERFORMANCE ENGAGEMENT AGREEMENT

Date: October 1st, 2015
THIS CONTRACT for the personal services of the entertainer(s) on the engagement described below is made between the undersigned Promoter of Entertainment (herein called "Promoter") and the Artists' Representative (herein called "Agent"), designated below.

Promoter: ________, Hong Kong

Agent : _____ , NY, NY USA

The Artist is engaged in accordance with the terms and conditions on the face hereof. The Artist, by its undersigned leader, represents that the Artist has agreed to be bound by said terms and conditions. Each member of the Artist may enforce this agreement.

1. Artists, Place and Dates of Engagement:
[Name of Artist]
Place: TBD-¬‐
Date: December 19th, 2015 4:30 pm and 8:00 pm (two shows)
* Hours of Engagement: 100 minutes.
The venue would probably want to clarify that each show will be 100 minutes.

2. Compensation and Payment terms: The total compensation for services of the Artist
and flight travel expenses for the above is USD$35,000 (this is the net amount, free of taxes)

The initial deposit of US $17,500 is due upon signing the contract (non-¬‐refundable), No later than October 10th, 2015 to purchase air tickets to and from Hong Kong.
And the Balance of $17,500.-¬‐ is due on December 1st, 2015.
The Promoter will insist that the second payment will be contingent upon the Artist actually showing up and playing the gigs. So they will insist on changing December 1st to December 19th and specify that the second payment will be paid upon completion of the second show.

Payment must be made in cash or certified funds. If payment is not made as provided herein, Promoter is responsible for all costs and expenses, including, but not limited to, attorneys' fees and legal expenses incurred by the Artist in collecting the amount owed, whether or not suit is commenced. Said costs, expenses and attorneys' fees shall also include without limitation any such costs, expenses and fees in any proceeding under any present or future bankruptcy act or state receivership.

The Promoter would probably request an additional provision along the following lines: "If, for any reason, Artists cannot or does not perform due to no fault of Promoter, Artists shall refund the initial payment to Promoter no later than December 20, 2015."

DIRECT DEPOSIT BANK WIRE Instruction.

Please wire transfer the Deposits to the following account.

Account Name: ______
Bank Name: ______
Account Number: ________

3. Additional Terms and Conditions:

Promoter Agrees to Pay and Artists Rep. Agrees to ACCEPT the Guarantees set forth in this contract, plus, Artists Rep. also agrees to pay AIRFARES for all its members and crews of the ARTISTS.
The Promoter will want to clarify the exact additional amount that it will have to pay for the Artist's band, and it will want to know exactly what "crew" are coming and the reason for them coming at all.

Promoter agrees to provide First Class HOTEL accommodations, plus INTERNAL Ground. Hotel requirement details will be provided later.
The contract should make clear that this is for two nights. That clarification would be for the benefit of both parties, as it would avoid misunderstanding and a possible dispute.

Promoter shall provide and pay for First Class Sound and Lights, First Class Backline, and Any and All Rider Equipment.
Artists shall arrive in Hong Kong, no later than December 18th 2015. (Detailed Travel itinerary will be available on a later date)

4. Cancellation: Except as provided herein, this agreement may not be canceled for any reason or at any time by Promoter. Payment is due according to the payment schedule set forth above even if the event for which the Artist was retained is canceled for any reason. Promoter understands that this is a personal services contract and the Artist will not be offering its services to anyone else for the hours on the date of the engagement set forth above in reliance on this agreement to perform for the Promoter.
The venue will insist that the Artist cannot cancel the performance, and that if the Artist fails to perform for any reason, he or she will not be paid the second payment.

5. It is agreed and understood that the Promoter shall be responsible for the safety and security of the Artist and the Artist's representatives, crew, guests, their baggage and equipment for the duration of the engagement.
The venue will insist that the Promoter is not responsible for the actions or omissions of 3rd parties. So if a cabdriver gets the Artist into an accident, the Promoter can be held responsible

6. All artwork and/or use of the Artist's name/likeness is to be approved by the Artist.
The Promoter may want to insert a clause that if it provides artwork for the Artist's approval and the Artist does not notify the Promoter of disapproval within a certain number of days, approval may be assumed.

7. It is agreed and understood that this contract is only binding for a live performance. The ARTIST reserves the right for his/her merchandise and any other rights outside the field of live entertainment including without limitation any so-¬‐called audio records (in whatsoever formats) and/or audio visual devices (in whatsoever formats) embodying the Artist's performance whether in whole and/or in part.

8. It is agreed and understood that the Promoter shall provide and pay for all catering requirements for the band and crew. Artist/Artist's Tour Manager will advise Promoter of these requirements.

9. The Promoter agrees to provide, pay and be responsible for all visas, work permits, driving permits and other documentation, including payment of visa consulate fees that are necessary for the Artist to undertake the engagements herein. Any payments due are to be paid directly to the Artist or as advised by the Artist's Tour Manager. Once all the documents are prepared by the Promoter. It is is the Artist's responsibility to apply and obtain the visa stamps at the consulate in his/her own country of domicile.

10. Relationship: The Artist is retained by the Promoter only for the purposes and to the extent set forth in this agreement, and the Artist's relationship to the Promoter during the period of their engagement shall be that of independent contractors and not that of Employees of Promoter for any purpose whatsoever.

11. Jurisdiction: In accordance with the laws of the State of New York, the parties will submit every claim dispute, controversy or difference involving the entertainment services arising out of or connected with this contract and the engagement covered hereby for a determination and said determination shall be conclusive, final and binding upon the parties. In connection with the foregoing, the parties do hereby consent to the jurisdiction of the courts of the County of Manhattan, State of New York, USA.
In this case, the Promoter is in Hong Kong, and will probably argue that the jurisdiction and governing law should be changed to Hong Kong, as it is putting up the money for the Artist.

12. Recording: No performance or engagement shall be recorded, reproduced or transmitted from the place of performance in any manner or by any means whatsoever, in the absence of a specific written agreement with the Artist relating to and permitting such recording, reproduction or transmission.

13. Force Majeure: If a performance is prevented, rendered impossible or infeasible, by sickness, inability to perform, any act or regulation of any public authority or bureau, civil tumult, strike, epidemic, interruption in or delay of transportation services, weather, war conditions or emergencies, or any cause beyond the control of Artist, it is understood and agreed that there shall be no claim for damages by either party to this Agreement and Artist's obligation as to such performance shall be deemed waived. Provided, however, if such inability is caused or contributed to by Promoter, Promoter's obligation to make payment as provided in paragraph 6 above shall not be waived and Promoter shall be liable for the amount due and owing Artist.

14. Indemnity: Promoter agrees to indemnify, defend and hold the Artist harmless from and against any and all claims, costs or liability for damage, injury to any person or property during Artist's engagement, including time of set up and take down.
The Promoter will want the indemnity to be mutual.

WHERE AS, the AGENT, in signing this contract himself, or having same signed by a representative, acknowledges full authority and responsibility to do so and thereby assumes liability for the amount stated herein. and NO deposits will be returned.

WHERE AS, the Promoter shall conduct all its official communication to the Artist through the AGENT.

AS WITNESSED HEREOF THE PARTIES HERETO HAVE HEREUNTO SET THEIR HANDS THE DAY AND YEAR FIRST ABOVE WRITTEN.


PROMOTER: ______

___________________
Authorized signatory


AGENT ______

____________________
Authorized signatory

III: INTERNET'S IMPACT ON LIVE PERFORMANCE

Part III deals with the way the Internet has converged with live performance to generate new revenue streams for both artists and venues. As an example, we will focus on the new "Revenue Share" program at Smalls nightclub in Manhattan, which offers artists the opportunity to make money by allowing off-site fans to listen to their live performances both simultaneously and on demand.

Immediately below is my interview with owner Spike Wilner. The interview took place in 2014 and originally appears in the fourth edition of my book, The Future of the Music Business (Hal Leonard 2015, www.amazon.com/The-Future-Music-Business-Technologies/dp/1480360651\). In fall 2015, Spike launched the Revenue Share program. Following the interview is the actual contract that we drafted to implement the Revenue Share program.

Interview With Spike Wilner, Jazz Pianist And Co-Owner Of Smalls Jazz Club In NYC

Spike Wilner is an accomplished jazz pianist and the co-owner of SMALLS Jazz Club in New York City's Greenwich Village. He also has been using the Internet to expose the artists who play at SMALLS and their music to a worldwide audience by simulcasting live shows every night (click on "live video" at www.smallsjazzclub.com/). In addition, over seven years ago, he started creating an archive of recordings of the live music performed at the club. This interview provides Spike's experience with expanding SMALLS' audience by using the Internet, at he plans to do next, and his vision of the future.

SG: Give us a brief description of what happens at SMALLS, that is, the music and the artists featured there and what folks can expect if they visit the club.

SW: Smalls Jazz Club is generally open from 4:00 PM to 4:00 AM, with some exceptions. Normally we have 3 bands per night. We do two, two-set shows and then an "afterhours" set and then a jam session at the very end. Jam sessions are an important part of Smalls and there's traditionally a jam every night of the week quite late (sometimes not even starting until 2:00 AM). We also have afternoon jam sessions on Friday and Saturday. On Wednesday in the afternoon we host a tap dance jam session and the tap community comes out for that. On Wednesday and Thursdays we do a 9:30 PM "main show" which usually feature an important or famous musician or band. The same on the weekend but it starts at 10:30 PM. Our "afterhours" shows start either around midnight or 1 AM and are all seasoned veteran players hosting. Sundays we are open all day with a vocal workshop at 1PM, a showcase show at 4PM, a duet show at 7:30 PM and then at 10PM we have the legendary Johnny O'Neal who is in a permanent residence with his trio.

Smalls has a "no reservation" policy, first come first serve. Our cover is $20 until afterhours and then it's $10. We have a one-drink minimum for those seated or at the bar but standers in the back don't have to buy a drink. It gets crowded and the vibe changes as it gets later. The afterhours is the coolest vibe and not for everyone. But the music is always great at Smalls, from the beginning of the day to the end.

SG: You have been experimenting for some time now with harnessing the power of the Internet to create a broader audience for the music and artists who play at SMALLS. You are now simulcasting every show at SMALLS on the Web. Tell us more about your live simulcast including how you implement it, how many people are tuning in and the feedback you have been getting from fans and the artists themselves.

SW: I remember in my Jazz history that John Hammond, the great record producer, was driving to Chicago when he picked up a radio broadcast live from a Jazz club in Kansas City. The music blew his mind and he turned his car around and drove to Kansas City to sign whomever the artist was. It turned out to be Count Basie and the rest is history. What fascinates me about that story is the idea of a club putting a radio wire to transmit to the world. I wanted to do this and used the Internet. We started live streaming about seven years ago with a very simple system. As the years progressed, the technology for live streaming has grown in leaps and bounds. Now it's possible for anyone to very inexpensively create their own "television studio". We began to generate an enormous audience world wide, with Jazz fans checking in from literally all parts of the globe. I was in Italy last year and it shocked me how famous Smalls has become internationally. I attribute this to the Internet and doing a live broadcast every night of the week. The other thing is, I'm an archivist and firmly believe that the music being played nightly at Smalls will be of historic importance to future generations. Therefore my mission has been to record every single show and have it organized by a date, who the leader was and who was on the date. First thing I did was to install a recording device and began recording. This has evolved over the last seven years but we are currently up to about 8000 recordings in our library, which now includes our HD video.

SG: Recently you had a crowd funding campaign. What were your goals, did you succeed and what challenges did you face?

SW: Our goal with the crowd funding campaign was to raise money for new equipment for our live streaming (ie computers and cameras) as well as to buy a new piano. We were successful in this and hit our goal. We did buy a new Steinway for the club and installed an entirely new and up to date streaming system and in-house recording studio.

As far as the crowd funding experience - my thoughts are that it is a terrible way to fund a business. For one thing, you tap the good will of everyone that likes or supports you. Secondly, you can't do it again - it's a one-time shot. The other thing that nobody talks about is that if you do get your money there this huge tax liability at the end of the year in the form of a 1099. If you don't properly prepare for that and spend all the money then you're going to get hit. Furthermore, Indiegogo took a big chunk in fees. I don't like crowdfunding and hope it's just a passing fad.

SG: I understand that you would like to use the Internet to monetize your archive of recordings of the shows performed at the club in the last 7 years and share revenues with the artists.

SW: My idea is to build a website platform where we can disseminate our huge library of recordings and videos. This has proved more complex and expensive than I had planned. The plan is to do a full revenue share with all of the artists that are in our archive. We want to charge a small subscription rate for fans to access our ever-growing library. The revenue from the subscriptions is pooled and distributed to artists based on how much their work gets listened to. The more popular an artist is, the more they make - law of the jungle economics. This is a big system and what I realized I had to do and have since done is taken on partners to make SmallsLIVE LLC real. I've since partnered with two guys, one is a man who is a programmer and has his own successful website development company. The other partner is an investor to finance the building of this site. Once the site is up and launched we will be able to use it to accommodate an entire range of related media projects including our live stream and video library, as well as educational videos, downloads and merchandise.

SG: You now have over 4000 subscribers on your YouTube channel, and over 34,000 Facebook fans. What other social networks do you use? How much work does it take to maintain engagement with your fans through them, and is it worth it?

SW: We were, at first, excited about YouTube. It seemed amazing that you could have a CDN [Content Delivery Network] host your live stream for free. Well, it's not really free in the sense that you don't have real control over the content that you stream. YouTube screens your video and scans for illicit use of copyrighted material. In our case, when we play our iPod on breaks, we get flagged even though we are paying for the right to publicly perform that music to the appropriate music collection societies. But if you get flagged, YouTube will not allow you to stream any music including our live performances. It's was a headache. On the other hand, it's very affordable to rent time on a good CDN such as Bit Gravity. Then you have full control of your stream and the content that you're creating.

We have a large fan base on Facebook and also Twitter. We also have a rapidly growing email list and regularly do a newsletter and post to our social media. Facebook is great because it's very affordable to use and reaches a lot of people who you know are already interested in what you're doing.

THE SMALLSLIVE
ARTISTS REVENUE SHARE AGREEMENT

This Agreement (the "Agreement") is between SmallsLIVE LLC ("SmallsLIVE") and you in regard to the SmallsLIVE Archive and the Artist Revenue Share Project.

TERMS OF USE:

By accepting this Agreement, you also agree to SmallsLIVE's Terms of Use as they appear in the Site (as defined below). Should you have any questions concerning these Terms of Use or need technical support, you may contact us at info@smallslive.com.

PARTICIPATION IN THE ARCHIVE AND DOWNLOADING:

The Archive:

The SmallsLIVE Archive (the "Archive") consists of audio and audiovisual recordings (videos) produced by SmallsLIVE at the Smalls Jazz Club in the past (since 2007), now, or in the future.

Users of the SmallsLIVE's website ("Site") can access the Archive as subscribers ("Subscribers") and play (stream) the individual sets of multiple, combined musical performances ("Dates") by an individual artist and/or group ("Artist"). The Date may be audio only and/or audiovisual, and the embodiment of the Date in an audio or audiovisual medium shall hereafter be called the "Recording." Subscribers will pay SmallsLIVE a monthly subscription fee (the "Subscription Fee"), to be determined by SmallsLIVE. Subscribers will also have the option of downloading individual, artist approved, tracks embodied in the Recordings of each Date ("Tracks") for an additional fee to be determined by SmallsLIVE and sold as SmallsLIVE TRACKS.

Subscription fees will be placed in a revenue pool to be distributed to the Artists as specified in Paragraph 4 below ("Revenue Share"). Monies received by SmallsLIVE TRACKS from downloads of Tracks shall also be subject to the Revenue Share set forth in Paragraph 4 below.

Your approval of this Agreement applies to any Date past, present, or future in which you participated or will participate as a Leader or as a Side Musician as those terms are defined below.

ARTISTS' RIGHTS:

LEADERS & SIDE MUSICIANS: Each Date must have a designated leader ("Leader"), provided that in the event of a collective band, each member may be designated as a Leader. Any musician who plays on a Date who is not a Leader shall be deemed to be a "Side Musician."
PERFORMANCE FEE: The Leader is paid a performance fee for the Date at Smalls Jazz Club, under a separate booking agreement.
COPYRIGHT IN THE RECORDINGS: Except for SmallsLIVE's right, subject to paragraph 2(g) below, to include the Recording of each Date in the Archive as set forth herein the Leader of each Date shall retain all right, title and interest in and to each Recording including the copyright in the "sound recording" (as defined in the Copyright Act) in the Recording, and all renewals and extensions thereof, worldwide and for the full duration of the copyright. To effectuate this intent, SmallsLIVE and each Side Musician hereby transfer their interest in the copyright in each Recording to the Leader, including without limitation the authority to distribute or otherwise exploit each Recording as set forth in more detail in subparagraph 2(d) below. For avoidance of doubt, nothing in this Agreement will transfer the ownership or copyright in any underlying musical composition embedded in any Recording.

LEADER'S RIGHT TO EXPLOIT THE RECORDINGS: The Leader may use the Recording for any commercial or promotional purpose, including without limitation the right to sell, license or otherwise exploit the Recording or any portion thereof. The Leader shall have the exclusive obligation to make any payment required to the Side Musicians or any third parties, including any third party writers or owners of musical compositions. For the avoidance of doubt, SmallsLIVE shall not be responsible for any payments to or permission from any Side Musicians or any third parties.

ARTIST ACCOUNT: Every Leader and Side Musician will have an account (accessible by password) on the SmallsLIVE Site. From this account page, Leaders will be able to download their Recording(s) for personal use or commercial exploitation in accordance with Subparagraph d. above. Leaders may also use their account to "tag," i.e. add, the name of any Side Musician in regard to a Date for which SmallsLIVE inadvertently omits that Side Musician's name. Leaders and Side Musicians may also use the account to update personal info such as address, telephone, email, etc. Leaders and Side Musicians will also be able to set up their banking information to receive royalty payments from Subscription Fees and paid downloads and to see SmallsLIVE's metrics on usage and payout dates.

LEADER'S RIGHT TO KEEP DATES PRIVATE: Every Leader shall have the right to use his/her account to control which Recordings of Dates can be public, that is, accessed by Subscribers, and which Recordings of Dates shall remain private.

EDITING: Leaders shall have the right to "edit" their Recording(s) provided that any such edits shall be at their sole expense. SmallsLIVE is not responsible for editing, mixing and mastering of any Recording unless it is previously determined by SmallsLIVE and the Artist that the Date shall be a special project ("Special Project"). Special Projects are outside the terms of this Agreement and shall be subject to terms to be negotiated separately.

EDITED DATES: Leaders may "resubmit" their edited Recording for active use in the Archive, provided that the edited Recording must be a minimum of 20 minutes in length and must consist of at least two songs.

PAST DATES: You hereby agree to all the terms and conditions in this Agreement with regard to Recordings of Dates occurring prior to the date that you enter into this Agreement.

AUTHORIZED PAYEES: You shall have the right to assign your right to receive any income to you under this Agreement to any third party such as a business manager. Such authorization must be made in a writing signed by you and delivered to SmallsLIVE by certified mail. In case of your death or disability, monies earned under this Agreement shall be paid to your duly authorized representative after that representative has adduced any required legal documents confirming their authority.

SMALLSLIVE'S RIGHTS:

SmallsLIVE is hereby granted the non-exclusive perpetual right to include in the Archive any Recording of any Date in which the Leader or Side Musician participated or will participate in the future subject to the Leader's right to keep the Recording of any Date private in accordance with Subparagraph 2(g) above.

SmallsLIVE is hereby granted the right to live broadcast ("Webcast") each Date on the Site or any third party website or digital platform one time live and once as a rebroadcast. After that, a Recording of the Date, in Video/Audio will be added to the Archive for Leader's approval and use. SmallsLIVE shall have the right to make the Webcasts available for no charge to viewers or Subscribers, and to include advertising and accept sponsorship in conjunction with the Webcasts and the Videos.

No Leader or Side Musician may use "Smalls," "SmallsLIVE" or any logo or other mark associated with SmallsLIVE or Smalls Jazz Nightclub, in connection with the promotion, sale or license of any Recording, without the express prior written permission of SmallsLIVE.

You hereby give SmallsLIVE the right to use your name, image, likeness, and approved bio in the Site in connection with your Recordings, Webcasts and Videos, and in any advertising, promotion or marketing of such Recordings, Webcasts, Videos, the Site or the Archive.

Subscription revenue share & SmallsLIVE Tracks

Subscription Fees

All Subscription Fees collected from Subscribers for access to stream (but not download) the Archive shall be shared on a 50-50 basis between SmallsLIVE, on the one hand, and the Musicians (whether Leader or Side Musicians), on the other hand, after the deduction of operational Expenses (as defined below). All fees will be placed in a Revenue Pool.

The Musicians' share of the Revenue Pool will be determined by the number of minutes that the Recording of each Date is streamed within a pay period (either bi-annually or quarterly, to be determined by SmallLIVE). Each Musician who plays on any Date, whether as a Leader or as a Side Musician, will be credited the number of minutes that Subscribers listen to the Date(s). Musicians must be "Tagged" on the date to be credited with the Minutes. It is the responsibility of the Leader to tag all the Side Musicians on a date and the Side Musicians' responsibility to see that he or she does so.

The formula for determining a Musician's share of the Revenue Pool is:

Total Individual Musicians Minutes divided by the Total Archive usage minutes.
If, for Example in one three month period (pay period):
Peter gets 350 minutes listened to for all his dates in the Archive as Leader or Side Musician
Stacy gets 5000 minutes listened to for all of his date in the Archive as Leader or Side Musician
Grant gets 700 minutes listened to for all of his dates in the Archive as Leader or Side Musician
Tuomo gets 950 minutes listened to for all of his dates in the Archive as Leader or Side Musician
Miki gets 1200 minutes listened to for all of his dates in the Archive as Leader or Side Musician
Spike gets 30 minutes listened to for all of his dates in the Archive as Leader or Side Musician
Adding all these minutes together yields the Total Archive Usage, which in this example equals 8230 minutes.

To calculate the pay percentage attributable to each Musician ("Pay Percentage"), you must divide the individual minutes by the total usage.
Peter = .0425 (350/8230)
Stacy = .6075 (5000/8230)
Grant = .0851 (700/8230)
Tuomo = .1154 (950/8230)
Miki = .1458 (1200/8230)
Spike = .0036 (30/8230)
Payout = Revenue Pool Total X Individual Pay Percentage
Each Musician is paid an amount equal to the total amount collected from Subscription Fees (Revenue Pool) multiplied by his or her Pay Percentage.
If, by example, the Revenue Pool for the pay period is $500 then the payments would be:
Peter = $21.25 (500 X .0425)
Stacy = $303.75 (500 X .6075)
Grant = $42.55 (500 X .0851)
Tuomo = $57.70 (500 X .1154)
Miki = $72.90 (500 X .1458)
Spike = $1.80 (500 X .0036)
Use of the Archive will be measured in minutes rounded downward. For example, if a Subscriber listens to a Date for ten (10) minutes and thirty (30) seconds then Artist would be credited with 10 minutes.

Paid Downloads (SmallsLIVE TRACKS):

SmallsLIVE TRACKS is an Artist Curated Store for licensing and selling for download any Track(s) Leaders designate from their Archive recording. Any Leader of any Date may choose individual Tracks embodying one song to make available for paid download to Subscribers. Artist may edit the track themselves or ask SmallsLIVE to do so. Artist must provide Title, Composer and Publishing information. The MP3 will be offered to Subscribers at a price to be determined by SmallsLIVE in consultation with the Leader. The area of the site where such downloads will be available shall be called "SmallsLIVE TRACKS," although this name is subject to change in the discretion of SmallsLIVE.

SmallsLIVE shall share any monies it receives from such downloads with the Leader on a 50-50 basis after deducting any transaction costs.

The Leader shall be responsible for making any required payments to the Side Musicians, for mechanical royalties, or to any other necessary third parties.

The Revenue Share set forth in Subparagraphs 4.a and 4.b above, shall be the total compensation payable by SmallsLIVE for the rights granted under this Agreement.

SmallsLIVE retains the right to not publish a track for any reason and maintains the final decision on tracks placed in the SmallsLIVE TRACKS store.

EXPENSES:

SmallsLIVE will be allowed to deduct the following expenses from Subscription Fees:

Transaction costs (for examples, PayPal or credit card fees);
Licensing fees payable to performance rights organizations;
Hosting and bandwidth fees; and
Sales and local taxes, and other applicable taxes, levies or fees.
Other fees that may in the future become required for the continued operation of the streaming and download services set forth in this Agreement, including without limitation any fees to third party rights-holders.

TAXES:

Each Artist who receives any monies under the Agreement shall be solely responsible for paying any applicable taxes.

ACCOUNTING:

SmallsLIVE shall make payments to each Artist on a calendar quarterly basis 30 days after each quarter. Such payments shall be made by check or automatic deposit at the election of the Artist.
Notwithstanding anything to the contrary above, SmallsLIVE shall have no obligation to make a payment to an Artist if the amount due is less than ten dollars ($10) provided that when such monies exceed ten dollars ($10) any monies withheld will be paid after any pay period in which the total amount due to the Artist exceeds ten dollars ($10).

Every Musician will have access to on-line accounting pages by using a password to be assigned by SmallsLIVE. The accounting pages will set forth the amounts that have accrued for the Musician.

AUDIT:

At any time within two (2) years after any payment is received by any Leader or Side Musician hereunder, that Leader or Side Musician shall have the right to give SmallsLIVE written notice of their intention to examine SmallsLIVE's books and records with respect to such statement. Such examination shall be commenced within one (1) month after the date of such notice, at the sole expense of such Leader or Side Musician, by any certified public accountant or attorney designated by such Leader or Side Musician, provided he or she is not then engaged in an outstanding examination of SmallsLIVE's books and records on behalf of a person other than such Leader or Side Musician. Such examination shall be made during SmallsLIVE's usual business hours at the place where SmallsLIVE maintains the books and records which relate to such Leader or Side Musician and which are necessary to verify the accuracy of the statement or statements specified in the notice to SmallsLIVE and the examination shall be limited to the foregoing. A Leader or Side Musician's right to inspect SmallsLIVE's books and records shall be only as set forth in this subparagraph and SmallsLIVE shall have no obligation to produce such books and records more than once with respect to each statement.

Unless notice shall have been given to SmallsLIVE in accordance with subparagraph above, each payment rendered to Artist shall be final, conclusive and binding the Artist and shall constitute an account stated. Artist shall be foreclosed from maintaining any action, claim or proceeding against SmallsLIVE in any forum or tribunal with respect to any payment or accounting rendered hereunder unless such action, claim or proceeding is commenced against SmallsLIVE in a court of competent jurisdiction within three (3) years after the date such payment is received by Artist.

Artist acknowledges that SmallsLIVE's books and records contain confidential trade information. Neither Artist nor Artist's representatives will communicate to others or use on behalf of any other person any facts or information obtained as a result of such examination of SmallsLIVE's books and records, except as may be required by law or judicial decree.

TERM, TERRITORY, AND TERMINATION:

SmallsLIVE's non-exclusive rights as set forth herein shall be perpetual and shall extend throughout the world. You shall have a right to terminate this Agreement in regard to your grant of such non-exclusive rights upon notice of three months (3) months for future Dates only provided that SmallsLIVE reserves the right not to book you for future Dates. SmallsLIVE reserves the right to take down any Date from the Archive.

WARRANTIES AND INDEMNITIES:

You warrant and represent that:

You are under no disability, restriction or prohibition, whether contractual or otherwise, with respect to (A) your right to enter into this Agreement, and (B) convey the rights granted to SmallsLIVE hereunder, to perform each and every material term and provision hereof, and to record each and every musical composition hereunder;

To the extent of your contributions hereunder, SmallsLIVE shall not be required to make any payments of any nature for, or in connection with, the acquisition, exercise or exploitation of rights granted to SmallsLIVE by you pursuant to this Agreement, except as specifically provided in this Agreement;

To the extent of your contributions hereunder, neither the Materials (as defined immediately below) nor any use of the Materials by SmallsLIVE will violate or infringe upon the rights of any person. "Materials" as used in this subparagraph means any musical, artistic and literary materials, ideas and other intellectual properties furnished by you, including any copyright, trademarks or rights of publicity contained in or used in connection with any Recordings made hereunder, which have not been supplied by the SmallsLIVE. Among other obligations, you shall not sample any third party work without the express written approval of SmallsLIVE;

All of your representations and warranties shall be true and correct upon execution hereof, and shall remain in effect in perpetuity. SmallsLIVE's use of Recordings or Materials hereunder shall not constitute a waiver of any of your representations, warranties or agreements in respect thereof.

You shall at all times indemnify and hold harmless SmallsLIVE and any licensee of SmallsLIVE from and against any and all third party claims, damages, liabilities, costs and expenses, including legal expenses and reasonable counsel fees, arising out of breach by you of any warranty, representation or agreement made by you herein.

SmallsLIVE warrants and represents that:

SmallsLIVE is under no disability, restriction or prohibition, whether contractual or otherwise, with respect to its right to enter into this Agreement, and to perform each and every term and provision hereof;
All of SmallsLIVE's representations and warranties shall be true and correct upon execution hereof, and shall remain in effect in perpetuity.

ASSIGNMENT AND RIGHT TO EXPLOIT ARCHIVE:

SmallsLIVE shall only stream (in terms of the Archive) and sell downloads (in terms of SmallsLIVE TRACKS) exclusively from the SmallsLIVE website (www.smallslive.com). SmallsLIVE shall have no right to assign, transfer, sell or license this Agreement or any of its rights or obligations under this Agreement to any third party without consent of the Artist(s) and under a separate agreement.

AGREEMENT:

This Agreement shall be fully valid and enforceable by the Leader or Side Musicians by clicking the "Accept" button in the Site and providing all the information required by SmallsLIVE in the Site.

ESCROW:

If SmallsLIVE cannot locate any Leader or Side Musician at any time, it shall put any amount due to such Leader or Side Musician in escrow until the time that SmallsLIVE can find such person or he or she provides accurate information to SmallsLIVE.

NOTICE:
SmallsLIVE may provide notifications, whether such notifications are required by law or are for marketing or other business related purposes, to you via email, mobile text message, written or hard copy notice, or through conspicuous posting of such notice on Site, as determined by SmallsLIVE in its sole discretion. SmallsLIVE reserves the right to determine the form and means of providing notifications to you.

JURISDICTION:
This Agreement will be governed by the laws of the State of New York applying to contracts made and to be performed in New York. The exclusive jurisdiction for any claim, action or dispute with SmallsLIVE or relating in any way to your use of the Site will be in the state and federal courts of the State of New York.

MISCELLANEOUS:
Should you have any questions concerning this Agreement or need technical support, you may contact SmallsLIVE at the following email address:info@smallslive.com

YOU ACKNOWLEDGE THAT YOU HAVE READ THIS AGREEMENT, UNDERSTAND IT AND WILL BE BOUND BY ITS TERMS AND CONDITIONS. YOU FURTHER ACKNOWLEDGE THAT THIS AGREEMENT, IN ADDITION TO THE SMALLSLIVE TERMS AND CONDITIONS, REPRESENTS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US AND THAT IT SUPERSEDES ANY PROPOSAL OR PRIOR AGREEMENT ORAL OR WRITTEN, AND ANY OTHER COMMUNICATIONS BETWEEN US RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT.

December 15, 2015

Understanding the Option Agreement for a Screenplay

By Wallace Collins

Many writers dream that some day their stories or scripts will garner interest and develop into feature films or TV projects. Usually, the first step is taken when a producer or a production company, or even a movie studio, offers the writer a contract known as an option agreement. As with all such matters where art meets commerce, I always advise that if one is asked to sign anything - other than an autograph - one's lawyer should review it first. Every writer should have a literary agent and a lawyer advising him or her about his or her business dealings once this stage of the process arrives, where artistic creation spills over into the business world.

An option agreement at its most basic is a contract whereby the writer grants someone, for a period of time and for a payment, the right to make a film of the writer's screenplay. The three material issues that usually arise in negotiating such a deal are: 1) the length of the option period, 2) the amount of the option payment and 3) the purchase price if the project comes to fruition. How each of these issues will be resolved will vary depending on the negotiating leverage of the respective parties (i.e., whether the writer is a beginner or has had prior success in the industry, and whether the producer is an experienced player or just a fledgling production company trying to get traction).

An option agreement will designate an "option period", or length of time granted to a producer or studio to commence production of the project. It can range from six months to two years, or longer, depending on the negotiations. Such agreements frequently include additional periods of time for the producer to extend the length of the agreement in consideration of additional payments to the writer.

The option agreement will also set forth an "option payment", which is the amount to be paid to the writer as consideration for allowing the producer the privilege of utilizing the writer's screenplay for development purposes. Again, depending on the negotiating strength of each side, this could range from a very small amount (e.g., a few hundred dollars or even one dollar) to a larger payment (tens of thousands of dollars). Then, if the other party wants to extend the option period for an additional length of time, there should be additional payments to the writer. In most cases, these additional payments will be negotiated to be substantial even if the first payment is small. The amount of the option payments will vary, depending on the negotiation process and other factors, such as the writer's track record in the industry and the potential budget of the film or TV project. Some industry experts have said that as a rule of thumb, option payments are frequently equivalent to 10% of the purchase price, but these amounts are always negotiable, and writers need to be careful not to allow themselves to be taken advantage of in the rush of excitement that surrounds interest in their screenplays.

Another material term in an option agreement is the "purchase price", which is the amount of money that the writer will receive in the event the screenplay is made into a feature film or TV project. The purchase price is often calculated on a sliding scale as a percentage of the budget, so as the budget of the film project grows, so will the purchase price, although as with all negotiated terms this too can vary greatly.

When properly negotiated, an option agreement can be a win-win situation for both the writer and the producer. The writer is paid to lease his or her screenplays for a limited period of time, while the producer attempts to get the project green-lighted by a studio or production company. If this happens, the writer will receive a nice purchase price for the screenplay. If it does not happen during the option period, then the writer keeps the option payment or payments paid to date, and all rights to the screenplay revert back to the writer. The writer could then decide to option the script again to another producer. From the producer's perspective, an option agreement gives the producer an opportunity to hold on to a screenplay exclusively for a period of time, without having to lay out a lot of money up front while trying to get the project off the ground.

December 27, 2015

Congress Gave Certain Entertainment Industry Investors A Christmas Present for 2015 and 2016! Section 181 is Back for Film & TV Projects and Now Theatrical Projects, Too

By Marc Jacobson

Now, certain investors in film and theatrical projects that begin production in 2015 or 2016 may deduct their investments in the year in which the entity that receives the money actually spends the money. While tax on the profits will always have to be paid and the tax benefit of the deduction, once recouped, also creates taxable income, certain investors will get a current deduction, which is always welcome, because it reduces the investor's current tax liability.

Not every investor is eligible for the benefit of this deduction. Some prominent bloggers gloss over this requirement. (See, "The Producers Perspective," By Ken Davenport, http://bit.ly/KD181blog) Only investors who (a) have qualifying passive income, generally from real estate rents and income are eligible for this benefit, and then only up to the amount of their passive incomes in that year, or (b) are producers who pursue producing as an active trade or business, can reap this benefit. A doctor or dentist, successful stockbroker, and the like, who does not have passive rental income and who may be the traditional source of film, TV and theater investment, is not able reap the benefit of this deduction.

Revised §181 of the Internal Revenue Code (the Code) provides that investors in Film and TV Productions, and now, thankfully, Theatrical Productions, may deduct their investments in the year incurred, provided that certain steps are taken and rules are followed. When we read the Consolidated Appropriations Act of 2016 and the Protecting Americans from Tax Hikes Act of 2015 (http://bit.ly/Sec169HR2029) that President Obama signed into law on December 18, 2015, we don't see any mention of the passive activity rules. We also don't see it in the text of the old or new §181 of the Code, but we do see it in the accompanying regulations. (http://bit.ly/IRSregsForSec181)

However, any tax preparer worth his or her salt will tell you that while §181 is clear on its face and makes no mention of the passive activity rules, the taxpayer and his or her preparer must consider the entire Code when preparing a tax return. That includes things like the Alternative Minimum Tax, (http://bit.ly/AltMinTax) as well as §469 of the Code, (http://bit.ly/Sec469PassiveActivityLimited) entitled "Passive Activity Losses and Credits Limited" and its accompanying regulations.

The Code limits the benefit of deductions for Passive Activity. (Id.) Most investors in Film, TV and Theatrical Productions invest their money, watch carefully what happens with the "show," then sit back and wait for a return of capital and hopefully a profit, paid out ideally over the life of copyright. That is passive activity, completely legitimate and welcomed by the producers of and the investors in the show. Yet the Code says that if an investor does that, and does it in Film, TV and now, thankfully, Theatrical Productions, the investor can only deduct that investment against passive income received that year from real estate investments, and only up to the amount of that real estate passive income.

Therefore, if the investor had passive rental income of $50,000, but invested $75,000 in the qualifying Film, TV or Theatrical Production, only $50,000 would be deductible. If the investment were $35,000, then the full amount of the investment would be deductible, because the passive income exceeded that amount. All of this, of course, assumes that the entity that receives the investment owns the property, spends the money, makes the proper election in a timely fashion, and otherwise complies with the law. (This blog is only to alert people to the overall limitations on the benefit of the investment, and not to discuss all the steps necessary to qualify for the deduction.)

The only other method by which the investment can be deducted is if a person who is already active in the trade or business of the production makes the investment. The Tax Court in Storey v. Commissioner (http://bit.ly/Storey-v-Commissioner) outlined how a documentary filmmaker was found to be a producer and thus eligible to reap the benefit of the Code §181. It is instructive for the rest of us about what constitutes being active in a trade or business sufficient to qualify as a producer eligible for the current deduction.

The following assumptions show how this works on a film production with a cost of $2 million, received and spent entirely in one calendar year, where the traditional model applies where the investors recoup their money in full, first, before any "profit participation" is distributed to talent or other contributors to a film:

• The production follows the steps necessary to qualify under §181 when filing its tax return for the year in question.

• The investors all have passive rental income in excess of their individual investments.

• All of the investors are in a tax bracket of 50%

• The production then receives license income of $1.5 million, significantly less than the cost of production.

In this example, the investors in the aggregate had a net after-tax risk of $1 million, since the deduction "saves" them 50% of the actual cost of the investment. When the production receives $1.5 million as license income, the investors will receive cash of $1.5 million, an amount in excess of their tax-advantaged investments, thus creating taxable income. Although the production's license income is less than the cost of production, the investors are "in profit" before the picture itself reaps a cash on cash profit. This surely will continue to be an incentive for such investors to invest again with that producer, and with other producers as well.

The reinstatement of §181 for 2015 and 2016 is a welcome incentive for producers and will likely help create more films, TV shows, and live theatrical events. It is only for a certain few, however. Further, its effect is to only accelerate the deductibility of the investment, which is only meaningful for as long as the show does not return the investment or a profit. Tax will always need to be paid on income in excess of the tax-advantaged investment. It is important to consult with a tax advisor for more information.

January 20, 2016

The 11 Contracts Every Artist, Songwriter & Producer Should Know: Video Production

By Steven R. Gordon

Steven R. Gordon (steve@stevegordonlaw.com, www.stevegordonlaw.com) is an entertainment attorney specializing in music, television, film and video. His clients include artists, songwriters, producers, managers, indie labels and music publishers as well as TV and film producers and digital music entrepreneurs. He also provides music and sample clearance services for producers of any kind of project involving music. Mr. Gordon is the author of The Future of the Music Business [www.futureofthemusicbusiness.com/] (Hal Leonard 4th ed. 2015).

The author gratefully acknowledges the assistance of Ryanne Perio, Esq. in the preparation of this article. Ryanne is a litigation associate at the WilmerHale law firm. He would also like to thank his intern Jena Terlip, 2L at Benjamin N. Cardozo School of Law, for her research and editing assistance.

DISCLAIMER
This series of articles and the forms included in them have been created for informational purposes only and do not constitute legal advice. This article and other articles in 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.

The eighth installment of this 11-part series on basic music industry agreements focuses on the business of producing music videos. This article contains a form agreement that can be used to hire a video producer, as well as releases for people and locations appearing in videos. Although MTV does not play many anymore, music videos have become more important in breaking new artists than ever before. Before making your own video, though, it's important to know the legal ins and outs of producing them.

INTRODUCTION

In the first part of this Introduction, I give a brief history of music video followed by a survey of how successful artists have used and continue to use them to launch their careers. The second part of the Introduction offers a summary of business considerations in producing videos.

PART I: HISTORY & CONTINUING IMPORTANCE OF MUSIC VIDEOS

1. Before Music Videos
Audiovisual presentations of music have existed since the first motion pictures containing sound. In fact, the first Hollywood "talkie," released in 1927, was a musical featuring Al Jolson called "The Jazz Singer." Before the invention of the video cameras, there were many musical short films featuring the performance of single songs, such as Frank Sinatra's patriotic "The House I Live In (That's America To Me.)" (https://www.youtube.com/watch?v=EWxW2Z5znWQ) These films were sometimes shown before main features at movie theatres. In the 1960s, artists like the Rolling Stones and the Beatles started to make short form films of individual songs to promote their albums. The dawn of what we think of as music videos began in the 1970s. For example, in 1975, Queen commissioned the production of a video for its new single, "Bohemian Rhapsody," to show on Top of the Pops, a popular British TV show showcasing the week's top hit songs. In the U.S., Video Concert Hall was launched on November 1, 1979 as the first nationwide video music program on American television, predating MTV by almost three years.

2. MTV and the Birth of the Era of Music Videos on Television
In 1981, MTV launched by airing "Video Killed the Radio Star," and began an era of 24-hour-a-day music videos on television.

The founders of MTV, including Robert Pitman (current chairman and CEO of iHeartMedia, Inc. (formerly Clear Channel)), convinced record labels to produce more videos and give them to MTV for free, just as they gave free records to radio stations. The pitch was that the videos would promote the labels' records and increase sales. The only money MTV paid to the labels was a relatively small fee to secure exclusive rights to play select videos for a limited period of time. For instance, MTV paid Sony Music $4 million a year for such rights.

By the mid-1980s, MTV grew to play a central role in marketing pop and rock music. Many important acts of this period-- most notably Madonna, Aerosmith, The Who, Phil Collins, John Mellencamp, Phil Collins and Billy Idol-- owe a great deal of their successes to the seductive appeal of their videos. After years of controversy regarding the lack of diversity among artists on the network, MTV aired Michael Jackson's "Billie Jean," "Thriller" and other videos, which helped Jackson become the best-selling pop artist of all time.

However, by the late 1990s, MTV sharply decreased the number of videos it showed on its airways. Former MTV president Van Toeffler explained: "Clearly, the novelty of just showing music videos has worn off. It's required us to reinvent ourselves to a contemporary audience." A decade later, MTV was playing an average of just three hours of music videos per day, preferring cartoons such Beavis and Butt-Head and, later, unscripted reality shows, such as Jersey Shore. MTV continued to play some music videos instead of relegating them exclusively to its sister channels (such as MTV Hits), but around this time, the channel began to air music videos only in the early morning hours and in Total Request Live , which aired the 10 most requested music videos of the day. As a result of these programming changes, Justin Timberlake implored MTV to "play more damn videos!" while giving an acceptance speech at the 2007 Video Music Awards. Despite the challenge from Timberlake, MTV continued to decrease its total rotation time for music videos in 2007 and shut down TRL in 2008.

3. YouTube and the Rise of Cover Videos
YouTube was created by three former PayPal employees in February 2005. In November 2006, it was bought by Google for $1.65 billion. The online video sharing site is this generation's MTV. Artists like Beyoncé and Taylor Swift regularly have hundreds of millions of views for new videos, and their record companies and music publishers monetize them by allowing ads. YouTube keeps approximately 40% of the ad income, although the details of its formulas for arriving at the exact amount is not public record, and the balance is paid to the copyright owners.

YouTube allows you to share your videos with a worldwide audience. However, the thing that makes YouTube great for new artists--that it's so easy to upload and reach a huge audience--also makes it incredibly competitive. YouTube reports that hundreds of hours of video content are uploaded to its servers each minute. Unfortunately, therefore, although you have a potential audience of millions who you can directly reach with your video, standing out in the sea of other content is a huge challenge.

One way new artists have used YouTube to attract attention is to "cover," that is, re-record hit songs. A good example of an artist who was discovered from making covers is Justin Bieber. Before he was the erratic "bad boy" that many love to hate, Justin Bieber was just a kid from Stratford, Ontario. At age 12 Bieber began to regularly post covers of hit R&B songs on his YouTube channel under the username "kidrauhl."

As his videos got more and more views, he was eventually discovered by talent manager Scooter Braun. After tracking Bieber down, Braun flew the then-13 year old to Atlanta to record some demo tapes. Braun introduced Bieber to Usher, who reportedly beat out Justin Timberlake in a bidding war to sign the young YouTube star. After being signed by Usher, Bieber recorded his first album, released the single "One Time," and proceeded to have his face put up on tween bedroom walls everywhere. He's had three multi-platinum albums that have all reached number one on the charts, and continues to play to sold-out arenas all across the world.

Another example of how cover videos have launched careers is Vazquez Sound, a musical trio known for its covers of hits, including Adele's "Rolling in the Deep," which has garnered over 172 million views. In September 2014, Vazquez Sounds released its first original album, which was an instant hit that earned a nomination at the 2015 Latin GRAMMYs for "Best New Artist." Another example is the pop duo, Karmin. Karmin broke a couple of years ago with a string of clever, sassy covers of hits by acts such as Lil Wayne, Nicki Minaj, and Katy Perry. Alessia Cara, a 19 year old Canadian singer and songwriter, is another example. She is currently signed to Def Jam and is best known for hit single "Here," which reached the Top 20 in the United States. Before her original album was released, though, Cara was known for her acoustic song covers on YouTube.

4. YouTube Musical Celebrities
Other artists have made careers by producing original content for their YouTube channels. A prime example is Lindsey Stirling. She plays the violin, dances and then does them both at the same time. Stirling began posting videos of herself performing in 2007 after failing to be signed by a major record label. Now, she claims they are begging to sign her, but it's too late--she doesn't need them anymore. Explains Stirling: "It's a very loyal fan base that wants you to succeed because they found you. It wasn't some big radio station or record label that shoved art down someone's throat." Coming in fourth in Forbes' round-up of the most financially successful YouTube personalities, Stirling raked in $6 million in earnings last year. She has also released two albums, "Shatter Me" and "Lindsey Stirling", scored a book deal, and developed a lucrative touring career.

5. YouTube's New Subscription Service
YouTube recently unveiled its long-discussed paid subscription service, "YouTube Red." The new service offers ad-free versions of all current YouTube videos and additional exclusive content from some of the site's top creators, including PewDiePie and Lilly Singh, both of whom perform music as well as comedy. It launched on October 28, 2015 and costs $9.99 per month. YouTube Red will have a big emphasis on music, providing access to music streaming service Google Play Music and a new app called YouTube Music, which offers a Pandora-like personalized playlist based on a selected song or artist. Both music apps also have ad-supported versions that non-Red users can access.

6. Self-Made Indie Videos Launching Careers On Social Media Such As Vine & Instagram
Over the past several years, with the advent of smart phones with video capability, as well as greater connectivity across social platforms, an entirely new phenomenon has occurred with singer songwriters as well as rappers catapulting themselves to recognition and commercial success. They use self-contained performances on social media in addition to, or other than, YouTube. One example is Shawn Mendes. In 2013, when he was 15, Shawn Mendes began posting cover videos on Vine and picked up millions of views. The next year he was signed to Island Records and became the youngest artist to debut in the Top 25 with a song on the Billboard Hot 100.

PART II: LEGAL AND BUSINESS ISSUES

1. Cover Videos
It is legally necessary to get a license from the owner of the song before making a cover video. However, YouTube has developed a system Content ID that deals with this issue. The system recognizes the identity of the cover song and then notifies the publisher. The publisher can then choose to order YouTube to take down the video, or let the video continue to play and "monetize" it. If the latter is chosen, YouTube splits the advertising revenue with the publisher. It is important to note that if the publisher chooses the second option, the artist performing the cover will not receive any of the fees generated by advertising. This, however, is to be weighed against the possibility of worldwide recognition discussed above.

Although Vine and Instagram do not employ Content ID, the music publishers have not, so far, cracked down on covers on these social networks. An argument could be made that the snippets played in these services are "de minimis," i.e., too trivial to amount to copyright infringement. It can also be argued in a litigation defense that these brief videos are "fair use." The argument would be that, under the doctrine of fair use, a person can use a brief excerpt of a copyrighted work if the new work is "transformative" of the original.

2. Work For Hire Production Contract
I was the Director of Business Affairs for TV & Video at Sony Music from 1991 to 2001. We produced over 250 videos each year that I worked there, and every video that Sony commissioned was a "work for hire." Under the copyright law, a work for hire is defined as follows:

(1) a work prepared by an employee within the scope of his or her employment; or
(2) a work specially ordered or commissioned for use as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, as an instructional text, as a test, as answer material for a test, or as an atlas, if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire.

In the case of works made for hire, "the employer or other person for whom the work was prepared is considered the author ...[and] owns all of the rights comprised in the copyright."

Recently I worked with a small book publishing company that wished to produce a series of music videos to promote the new edition on one of its religious text books. The videos will feature songs by 12 different Christian rock acts. The agreement that we used to commission the videos was basically the same as Sony's work for hire agreement. I recommend to my artist clients the same business format for the production of their music videos. Re-published below is sample work for hire contract for producing a music video.

3. Releases
If you are either a new artist or a small label, and you wish to create a music video, in addition to using a work for hire agreement, you should also make sure that you will not have legal problems associated later on with any person or location depicted in your video. Although you should always have every side artist, model, dancer or actor in your video sign a release, some judgment is required when determining whether to secure a location release.

Personal Releases: If a label is commissioning a video, the artist's appearance in the video will generally be covered by the recording agreement between the artist and the label, which usually includes a provision specifically addressing music videos and giving the label the right to use the video for any promotional or commercial purpose. If an indie artist is appearing in a video, obviously he or she will not need a release for his or her own performance. Regardless of whether the commissioning party is a label or an artist, it will want to have any other person appearing or performing in the video sign a personal release giving the label or the artist, as the case may be, the right to use the video, including that person's appearance and/or performance in any and all media. Usually, the production company will handle this responsibility.

An example of a personal release is included below. Personal releases do not vary very much, although some contain more legalese than others. The basic point of any personal release, however, is that the person signing the release grants the artist or label all rights to use his or her appearance and/or performance in the video.

Note that the person signing such a release may have recorded the audio performance as a background vocalist or musician. A separate contract usually covers that audio recording, but the release contained below would cover that audio performance as well. Please also note that the release usually does not include financial remuneration; but if a musician, dancer or actor contributed a performance in the underlying audio track, there may be a separate agreement in which that person is compensated.

A cautionary tale about failing to secure proper releases: The producer of a video for an artist at a major record label used a picture of an old girlfriend from her Facebook profile in a spilt second of a still titled "Missing Persons" in a video featuring the artist singing about a romantic break-up. The ex-girlfriend noticed and was not pleased. She retained a lawyer who was able to negotiate a significant settlement.

Crowds and Audiences: If you are shooting in a public place, releases should be given to anyone wandering into the scene if anyone is are recognizable. If a person doesn't want to sign the release, you should avoid using that footage. If you are shooting in front of a live audience, you can use one or more signs at the entrance to the performance area informing the audience members that, by entering, they consent to appearing in the video. The sign (or signs) should be large enough and displayed in a place prominent enough that anyone entering will notice. However, if a person from the audience is featured, or especially if he or she appears on stage, a personal release should be signed.

Location Release: The location release at the end of this article is for a venue that agrees to let you shoot your video at the location without a fee. It is particularly useful if there is a sign or logo that people would recognize. The release will make it clear that no consideration was expected for the use of the location. Of course, sometimes a location, such as a restaurant or bar, will require a fee. In that case, the amount to be paid can be inserted in the release.

Public Places: Generally, if public venues and landmarks, such as the Empire State Building appear in the video, you do not need a release if the location is incidental to the action in the video. If, however, you are shooting in front of a well-known place, such as Nathan's hotdog restaurant in Coney Island, and its name appears prominently in the video, it would be wise to have the manager sign a location release.

4. Trademarks
The use of a trademark in a music video is generally protected by the First Amendment, but not always.

Likelihood of Confusion Test: The limited purpose of trademark protection set forth in the Lanham Trademark Act (15 U.S.C. § 1051 et. seq.) is to avoid confusion in the marketplace by allowing a trademark owner to prevent others from duping consumers into buying a product or using a service they mistakenly believe is sponsored by the trademark owner. Trademark law aims to protect trademark owners from a false perception that they are associated with or endorse a product or service. Generally, to assess whether a defendant has infringed upon a plaintiff's trademark, the courts apply a "likelihood of confusion" test that asks whether use of the plaintiff's trademark by the defendant is likely to cause confusion or mistake, or to deceive as to the affiliation, connection, or association of plaintiff's brand with defendant's product or service.

Applying these principles to music videos, the bottom line is that if a trademark is used in such a way that it is not likely to confuse a viewer into thinking that the brand sponsored the video, the producer may have a First Amendment right to use the mark (notwithstanding any licensing issues). The classic example is a rapper wearing a baseball cap or t-shirt. Just because the singer may be wearing a Yankees cap or Baltimore Orioles t-shirt doesn't mean that a reasonable person would think that the Yankees or Orioles sponsored or produced the video.

On the other hand, where a trademark is prominently featured, it may be reasonable to think that a brand is sponsoring the video. For instance, a number of brands are featured in the video for "Telephone" featuring Beyoncé and Lady Gaga. Yet in that case, the brands were actually sponsoring the video by paying for product placement. In fact, these days, many indie artists use brands to help pay for or at least defray the costs of their videos. However, if you have not received approval or received a sponsorship from a brand, it is important not to lead your viewers to believe that you have by drawing too much attention to the brand in your video.

Product Disparagement: This is also called product defamation, trade libel, or slander of goods; product disparagement is any statement about a brand that is false and likely to adversely affect its profits. Product disparagement includes negative statements about a product or service, false comparisons of competing consumer products or services, and statements harming the reputation of an artist.

When applying these principals to a music video, it is important to note that showing a brand's name or logo in a negative context could prompt a demand that the video be changed or not shown at all. Consider this real world example: A record label made a video in the early 1990s, when MTV was still playing videos, of a toy train running off the track and smashing into small models of people made of clay. During the video, close-ups of the artist as the conductor of the wayward train would appear. The video was lighthearted, and no one would think that the artist/conductor was actually running over real people. However, the name of the well-known U.S. railroad appeared on the toy train, and its representatives were less than amused. In fact, they sent a letter to MTV demanding that it stop playing the video. The label agreed to take the name off the toy train by blurring it, but the railroad still insisted that the video be banned because the color of the toy train--a particular shade of yellow--was the same color as its actual trains. The label reacted by changing the entire color of the video to sepia, which made the toy trains a different shade of yellow. Yet the railroad still had a problem because the cars were still yellow. The label defiantly re-released the video. However, the railroad company initiated a lawsuit against the label and was able to persuade a federal judge to permanently enjoin the further exhibition of the video on MTV and any other outlet. Later, the label settled the suit by paying damages to the railroad, in addition to agreeing to never use the video for any purpose again.

5. Artwork and Other Copyrighted Works
A best practice is to avoid using material protected by copyright. This will save you a lot of headaches, and possibly money. The case of Ringgold v. Black Entertainment Television is an important case in this regard. In the late 1990s, Faith Ringgold, a successful contemporary artist, sued BET for airing an episode of a television series called ROC in which a poster containing her artwork appeared. In the scene, at least a portion of the poster was shown a total of nine times. In some of those instances, the poster was at the center of the screen, although nothing in the dialogue, action, or camera work particularly called the viewer's attention to it. The nine sequences in which a portion of the poster was visible ranged in duration from a little more than one to four seconds. The aggregate duration of all nine sequences was approximately 27 seconds.

The case was decided by a federal appeals court in New York. The court found BET liable, rejecting the de minimis defense. As already noted in the section on "Cover Videos" above, if the amount of a work copied is so trivial as to fall below the quantitative threshold of substantial similarity, the copying is de minimis, and does not constitute copyright infringement. However, the court found that in addition to its appearance in the scene, there was also a qualitative connection between the poster and the show. The poster included a painting depicting a Sunday school picnic held by the Freedom Baptist Church in Atlanta, Georgia in 1909, and was intended to convey "aspects of the African-American experience in the early 1900s." ROC was a television sitcom series about a middle-class African-American family living in Baltimore, and the scene in question was of a gathering in a church hall with a minister.

In contrast to Ringgold, the case of Sandoval vs. New Line Cinema Corp stands for the proposition that use of copyrighted artwork in the background of a scene may be de minimis.

In Sandoval, the same court that decided the Ringgold case, found that the use of the plaintiff's copyrighted photographs in the motion picture "Seven" was de minimis and therefore not actionable. The photographs appeared in the film for a total of 35.6 seconds, but they were always in the background and never in focus. The court found that the "photographs as used in the movie [were] not displayed with sufficient detail for the average lay observer to identify even the subject matter of the photographs, much less the style used in creating them." The court distinguished the facts from Ringgold because there was no substantive connection between the appearance of the photos and the subject matter of the scene.  

---------------------------------------------------------------------------------------------------------------------------------

The agreement below contemplates that an artist is hiring a production company to produce a promotional video. The same form of agreement may be used by a record company. An artist may consider forming a corporate entity (i.e., C corporation, Subchapter S or LLC) in order to avoid any personal liability in regard to any agreement including a video production agreement. In addition, an artist would be wise to consult with an accountant or attorney about forming an LLC or S corporation for tax purposes including eligibility to deduct video expenses from his or her personal income.

DISCLAIMER
This form has been created for informational purposes only and does not constitute legal advice. You should consult an attorney before making any such legal agreements.


VIDEO PRODUCTION AGREEMENT


This agreement ("Agreement"), effective as of _____, 2016, is between __________ ("Artist") with an address of __________________, and _____________ ("Producer"), with an address at _____________________________.

WITNESSETH:

WHEREAS, Producer has recognized expertise in video production; and

WHEREAS, Artist wishes to engage Producer to record a music video featuring Artist performing a song titled "_____________" (the "Video").

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties hereto agree as follows:

1. PRODUCTION SERVICES

1.1. Producer shall provide Artist with the video recording and production services (hereinafter "Production Services") described within this Agreement.

1.2. Principal photography shall begin on ____________, 2016. Producer shall make Delivery, as defined herein, of the Video to Artist no later than _________, 2016. "Delivery" shall consist of delivery of (i) a fully edited sound synchronized video master, and (ii) all other recorded elements created during production, including but not limited to all audio tracks, video footage and outtakes. Delivery will not be deemed to have occurred until Artist accepts the Video as suitable for commercial exploitation.

1.3. Producer shall provide the Production Services to Artist promptly with the degree of skill, attention and due care that is standard practice within the professional Production Services industry.

1.4. Producer and Artist agree that the budget attached in Schedule A shall represent 100% of the funds required to produce the Video (hereinafter "Budget"). This amount represents the Producer's total anticipated costs and profit.

The Budget should include all costs for producing the video including producer and director fees as well as post production editing costs. For examples of music video budgets ranging from "shoestring" to "commercial/studio" budgets, see http://garrettgibbons.com/music-video-budgets.


1.5. If the Producer hires a director (hereinafter "Director"), the Director shall be an employee of the Producer for purposes of the production and Delivery of the Video.

1.6. All employees and representatives of Producer providing the Production Services hereunder to Artist during the Term of this Agreement shall be deemed for all purposes (including all compensation, taxes and employee benefits) to be employees or representatives solely of Producer, and not to be employees or representatives of Artist or to be independent contractors of Artist.

1.7. The Video shall depict content to be included in a treatment or script to be approved by Artist prior to principal photography.

2. GRANT OF RIGHT: WORK MADE FOR HIRE

This clause transfers all rights to the person (or company as the case may be) commissioning the Video.


2.1. Production Services provided by the Producer and any other person providing such Services shall be deemed to be provided on a "work made for hire" basis as that term is defined under the U.S. copyright law. The Video and all other materials created or contributed by the Producer including all footage, outtakes and audio tracks (the "Materials"), shall be the sole property of Artist throughout the universe, free from any claims whatsoever by Producer; and Artist shall have the exclusive right to register the copyright(s) in such Materials in her name as the owner and author thereof and to secure any and all renewals and extensions of such copyright(s).

2.2. Without limiting the generality of the foregoing, Artist and any person authorized by Artist shall have the unlimited exclusive right, throughout the universe, to manufacture or create copies of the Video or any other Materials by any method now or hereafter known, or any work derived from the Video or the Materials and to sell, market, transfer or otherwise deal in same under any trademarks, trade names and labels, or to refrain from such manufacture, sale and dealing.

2.3 Artist or any Person authorized by Artist shall have the right throughout the universe, and may grant to others the right, to reproduce, print, publish, or disseminate in any medium the name, portraits, pictures, likenesses and biographical material concerning Producer and Director any other person providing Production Services, as news or information, or for the purposes of trade, or for advertising purposes, in connection with promotion marketing and sale of the Video. As used in this Agreement, "name" shall include, without limitation, any professional names.

3. COMPENSATION

3.1. The Parties agree that the Effective Date of this Agreement shall be as set forth at the beginning of this Agreement (hereinafter "Effective Date"). The parties acknowledge that the total amount of the attached Budget is___________ Dollars ($_____). Within five (5) days of the Effective Date, Artist shall pay Producer 50% of the Budget, that is, _________ Dollars ($_____). The second payment of 25%, that is, _________ Dollars ($_____), shall be due upon completion of principal photography. The third and last 25% payment of ________ Dollars ($_____) shall be due upon Delivery of the Video and other Materials to Artist.

3.2. Overages. In regard to overages to the Budget, Producer shall not charge Artist any monies in addition to the approved Budget without Artist's prior written approval.

4. NOTICES

Notices, reports, accountings or other communication which Producer or Artist may require or desire to send to the other must be delivered either by:

Certified mail, return receipt requested to the parties at the addresses first written above or other address to be designated by Producer or Artist as the case may be; or

Electronic mail at the following addresses:

(i) for Artist: _________@___.com
(ii) for Producer: ___________@___.com

5. ASSIGNMENT

Producer may not assign this Agreement or any right or obligations under this Agreement. Artist may assign this Agreement or any of her rights or obligations hereunder to any person, firm, or corporation including a corporation in which Artist is a principal, provided that (i) Artist shall remain responsible for any payments required to be made under this Agreement, and (ii) the assignee has the necessary cash on hand to make any payments required under this Agreement.

6. WARRANTIES AND INDEMNIFICATION

6.1. Producer warrants and represents that he has the legal right to enter into this Agreement including the legal right to sign on behalf of the Director. Producer further warrants and represents that (a) all content contributed by the Producer shall be original and not interfere with or violate any rights of any third party; and (b) no content appearing in the Video, including artwork or photography, will interfere with or violate any rights of any third party.

6.2 Producer warrants and represents that he shall provide valid signed releases from any third party performing or appearing in the video, and that he shall, if legally required, secure valid signed location releases from any location appearing in the video. Acceptable forms of release are attached hereto as Schedule "A" and "B" respectively.

The attached releases may be used as Schedules A and B. Note that the releases allow the Producer to assign the rights secured in the releases to the Artist.

6.3. Producer and each of his representatives, employees, contractors, agents and representatives hereby release, indemnify and agree to hold harmless Artist and her agents and representatives from and against any and all losses and/or damages which arise out of the Production Services.

7. TERMINATION

Artist may terminate this Agreement upon written notice in the event of a material breach by Producer, including late delivery of the Video, if such breach is not cured within __ days of notice thereof. If such breach is not cured within that time, Producer shall not be entitled to any additional payments and, upon notice by Artist, Producer shall refund to Artist any monies previously paid.

8. MISCELLANEOUS

8.1. Governing Law. This Agreement shall be interpreted under the laws of the state of ________ without regard to its choice-of-law rules, and the parties shall submit to the exclusive jurisdiction of the courts of that state.

Since the Artist is the party paying money in this Agreement, the Artist should have the right to decide in which state any dispute arising from the Agreement should be litigated.

8.2. Relationship of Parties. Producer and Artist shall have the relationship of independent contractors. Nothing herein shall be construed to place Producer and Artist in the relationship of principal and agent, employer and employee, master and servant, partners, or joint venturers, and neither party shall, either expressly or by implication, have represented themselves as having any authority to make contracts in the name of, or binding on, each other, or to obligate the other in any manner.

8.3. Complete Agreement. Producer and Artist acknowledge that this Agreement represents the complete and exclusive statement of the agreement between the Producer and Artist with regard to the subject matter herein, and that it supersedes any proposal or prior agreement, whether oral or written, and any other communications between the Parties relating to the subject matter of this agreement.

8.4. Enforcement. If any provision of this Agreement shall be found invalid or unenforceable, then such provision shall not invalidate or in any way affect the enforceability of the remainder of this Agreement.

UNDERSTOOD AND AGREED:

[ARTIST's NAME]

_______________________________


[NAME OF PRODUCER]

_______________________________

SS #____________________________


If the Producer is a production company or LLC ("Production Company"), the president or managing partner should sign the personal guarantee below:


In order to induce Artist to enter into this Agreement, I hereby agree and acknowledge that (a) I have read all of the terms and conditions set forth in this Agreement; and (b) I shall be personally bound by all the terms and conditions in this Agreement applying to the Production Company, and that I shall be personally liable for any breach of this Agreement by Production Company.

PRESIDENT OR MANAGING PARTNER

_______________________________
Print Name: _____________________
Position: ________________________

PERSONAL RELEASE

To ______________ ("Producer")
Address

I understand that Producer is producing a video containing the performance of a song titled "_____________" (the "Video").

For good and valuable consideration, including my desire to appear in the Video, I irrevocably grant to Producer, his licensees and assigns the right to film, videotape, portray and photograph me, my likeness and my performance, and to record my voice and other sound effects, and the right to use them or any portion thereof, and my name and any biographical facts which may have been provided to Producer, in connection with the production of the Video and the advertising, promotion and publicity therefor, and all rights of every nature whatsoever in and to all films, video, portrayals, photographs, performances and recordings produced hereunder ("Material"), including without limitation all copyrights therein and renewals and extensions thereof, and the exclusive right to reproduce, exhibit, distribute and otherwise exploit the Material in whole or in part in perpetuity throughout the universe in all languages, in any and all versions (including digitized versions) and forms, and in any and all media now known or hereafter devised. Independently and apart from any consideration accruing to me hereunder, I hereby release Producer and Producer's authorized designees from, and covenant not to sue Producer and Producer's authorized designees for any claim or cause of action, whether known or unknown, for libel, slander, invasion of right of privacy, publicity or personality, or any other claim or cause of action, based upon or relating to the exercise of any of the rights referred to herein. I understand that nothing herein will require Producer or Producer's designees actually to produce or utilize any Material hereunder.

This grant is irrevocable so that Producer may proceed in reliance thereon. This instrument contains the entire understanding of the parties, may not be changed or terminated except by an instrument by Producer and me and will be construed in accordance with the laws of the State of ______, provided that the courts of the state of __________ shall have exclusive jurisdiction to resolve any disputes arising from this Release.


Dated:______________________

Authorized Signature

______________________________
[Print name]


LOCATION RELEASE

Property Owner: [Name]
Address: ___________________________ _
Phone: ____________________________ Fax: _______________________________
Email: _____________________________ Contact: ____________________________

Producer: [Name]
Address: _____________________________
Phone: _____________________________ Fax: ______________________________
Email: ______________________________ Contact: _____________________________

Your signature in the space provided below as owner or agent, will confirm the following agreement ("Agreement") between you as the Property Owner ("Owner") and Producer regarding filming of your property (the "Premises") described below in connection with a video containing the performance of a song titled "_____________" (the "Video").

1. For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Owner hereby grants to Producer the right during the Term (as defined below) hereof to photograph and record at, the Premises (including, without limitation, the right to photograph and record both the real and personal property, all of the signs, displays, exteriors, and the like appearing therein, if any) for the period specified below.

2. As used herein, the term "Premises" refers to the premises located at: __________________________________________________________________

3. The term hereof (the "Term") shall commence from __________am/pm to ____________ am/pm on or about ____________________________ and shall continue until _________________________, unless modified by the parties. The Term shall be subject to modification due to changes in production schedules. Owner agrees to consult closely with Producer's representatives to ensure scheduling is arranged which will allow for completion of the scenes planned to be included in the Video using the Premises. Owner acknowledges that Producer is incurring significant expenses in reliance on Owner's cooperation and participation in connection with this Agreement and that Owner may be held responsible for the actual and/or consequential damages incurred by any breach of this agreement.

4. Owner represents and warrants that: (a) Owner has the right and authority to make and enter into this Agreement and to grant Producer the rights set forth herein, without obtaining any consents or permissions from any third party; and (b) Owner shall take no action, nor allow or authorize any third party to take any action which might interfere with Producer's authorized use of the Premises. Owner hereby waives all rights of privacy or other rights of a similar nature with respect to Producer's use of the Premises. Owner shall indemnify Producer, his licensees and assigns, and their parent, affiliate, and related entities, shareholders, directors, officers and employees from and against any breach or claim of breach by Owner of any representation, warranty, agreement or obligation herein.

5. Producer shall leave the Property in as good condition as when received, reasonable wear and tear to be expected. Producer shall remove all of his material, equipment and personnel from the Property.

6. Producer agrees to indemnify and hold Owner harmless from damage to the Premises and property located thereon and for personal injury occurring on the Premises during the Term and from any liability and loss which Owner may incur by reason of any accidents, injuries, death or other damage to the Premises directly caused by Producer's negligence in connection with his use of the Premises. In connection therewith Owner must submit to Producer, within three (3) days after Producer vacates the Premises, a detailed list of any property damage or personal injuries which Owner feels Producer is responsible, failing which Owner will be deemed to have acknowledged that there is no property damage or personal injuries for which Producer is responsible. Owner shall permit Producer's representatives to inspect any damaged property and to verify any claims for damages by Owner.

7. Nothing shall obligate Producer to photograph, to use such photography, or to otherwise use the Premises. Producer shall have the right to photograph, record and depict the Premises and/or any part or parts thereof, accurately or otherwise, as Producer may choose, using and/or reproducing the actual name, signs, logos, trademarks and other identifying features thereof and/or without regard to the actual appearance or name of the Premises or any part or parts thereof, in connection with the Video.

8. a. Owner acknowledges that, as between Owner and Producer, Producer is the copyright owner of the photography and/or recordings of the Premises, and that Producer, his successors and assigns have the irrevocable and perpetual right, throughout the universe, in any matter and in any media to use and exploit the films, photographs, and recordings made of or on the Premises in such manner and to such extent as Producer desires in his sole discretion without payment of additional compensation to Owner. Producer and his licensees, assigns and successors shall be the sole and exclusive owner of all rights of whatever nature, including all copyrights, in and to all films, programs, products (including interactive and multimedia products), photographs, and recordings made on or of the Premises, and in the advertising and publicity thereof, in perpetuity throughout the universe.

b. The Owner hereby gives to Producer, his assigns, agents, licensees, affiliates, clients, principals, and representatives the absolute right to use any names associated with the Property in the Video, or to promote the Video, all without inspection or further consent or approval by the Owner.

9. Producer may assign or transfer this Agreement or all or any part of his rights hereunder to any person, film or corporation; Owner agrees that Owner shall not have the right to assign or transfer this Agreement.

10. From the date of execution of this Agreement, through and including the date this Agreement may be terminated, Producer shall keep or cause to be kept in force the following insurance:
Commercial General Liability Insurance, including public liability, contractual liability, bodily injury, and property damage insurance, each policy with a combined single limit of bodily injury and property damage liability of $1,000,000.00 per accident or occurrence. Owner shall be an additional insured. The policies shall provide that they cannot be canceled or reduced without thirty (30) days prior written notice to Owner.

All insurance policies required hereunder shall be with companies having at least a Best A+10 rating as of the date of issuance of the policy, and shall contain language to the extent obtainable, to the effect that (i) any loss shall be payable notwithstanding any act or negligence of Owner that might otherwise result in a forfeiture of the insurance, (ii) that the insurer waives the right to subrogation against Owner and against Owner's agents and representatives, including Owner's insurers, (iii) that the policies are primary and non-contributing with any insurance that may be carried by Owner. Producer shall furnish Owner with certificates evidencing the insurance on or before ______________________. All certificates of insurance required herein, and exclusions from coverage in all policies, and the actual liability policies are subject to the approval of Owner's counsel.

Insurance should be obtained if shooting is to occur inside a location such as a store or someone's house. The cost of the insurance should be included in the Budget for the Video.

11. This Agreement constitutes a binding agreement and is the entire agreement among Producer and Owner and supersedes all prior negotiations and communications, whether written or oral; representations and warranties, whether written or oral; and documents and writings, whether signed or unsigned, with respect to the subject matter hereof.

APPROVED AND ACCEPTED:

Owner or Owner Representative
Signature: _________________________
Print Name: _________________________

Producer or Producer Representative
Signature: _________________________
Print Name: _________________________

February 12, 2016

Darlene Love v. Google Are Publicity Rights Needed in Addition to Master & Synchronization Licenses?

By David Jacob
Marc Jacobson, P.C.
http://www.marcjacobson.com/team/

A recent lawsuit filed on behalf of Darlene Love against Google and its ad agency, 72 & Sunny, may have far-reaching implications on long-standing music licensing practices. When ad agencies or brands want to use a song in a commercial, U.S. copyright law requires them to obtain a master use license (from the label) and a synchronization license (from the publisher). These licenses allow the reproduction of the master recording and musical composition. However, in Love's lawsuit, there is no copyright infringement claim. She does not allege that Google or its ad agency failed to obtain these licenses (it should be noted that 72 & Sunny claims that it was not involved in the production or licensing of the advertisement that is the basis of the lawsuit). Instead, she claims a violation of her right of publicity under California law. Therefore the issue arises as to whether ad agencies and brands need additional consent from artists, even if they already have master use and licenses from the applicable label and publisher.

Love's lawsuit alleges that the defendants infringed on her right of publicity under California common law. The California courts have developed the following four-step test (White v. Samsung, 971 F.2d 1395, 1397 (9th Cir. 1992)), in which Love must allege:

1. The defendant used plaintiff's "identity";
2. Defendant appropriated plaintiff's name or likeness to defendant's advantage, commercially or otherwise;
3. Lack of consent; and
4. Resulting injury.

For the sake of discussion, let's assume the use of the licensed song satisfies step 1 & 2, and that Love was injured by not having an approval right or not being paid a fee for her right of publicity. If that is the case, then the issue may come down to whether the master use license was sufficient to grant this permission. This may be a question of fact that is dependent on the terms of Love's original recording agreement.

The recording at the center of the dispute is "It's a Marshmallow World" recorded by Love in 1963 for the album, A Christmas Gift for You From Phil Spector. Most major recording agreements will include some clause clarifying that the label has the right to use the artist's name and likeness in connection with the promotion and sale of the works created under such agreement. Therefore, the question may come down to whether Love's original recording agreement included a broad enough provision to cover the use of the artist's voice for commercial purposes in connection with the work. If so, then its reasonable to assume that the record label can provide the necessary consent, and the artist's permission is not needed to further exploit the work. If the recording agreement is silent on the matter, Love may have a stronger argument.

Another wrinkle in this dispute is Love's statement that she "and virtually every successful recording artist records with labels which are signatories to the AFTRA collective bargaining agreement..." Perhaps Love's main complaint may be that the AFTRA Phono Code did not require the label to get artist approval right before it can license the work for a commercial. Most modern publishing agreements and recording agreements will require the artist's written approval for certain commercial uses. If an artist approves such a use with its label or publisher, or if the recording agreement explicitly grants the label the artist's right of publicity in connection with sales or licenses of the Work, it would be very difficult for that artist to claim there was an infringement on his or her right of publicity. Similarly, the decision may rest on whether the AFTRA Phono Code includes any provisions regarding the use of any artist's name or likeness in connection with the promotion or sale of a work.

Another complicated issue briefly mentioned in an article by Eriq Gardner in The Hollywood Reporter (http://www.hollywoodreporter.com/thr-esq/darlene-love-sues-google-using-857220) is whether federal law should preempt the state law claim. In most circumstances, federal copyright law will preempt a right of publicity claim if the allegedly infringing use is based on the use of a sound recording. The use of a sound recording alone, without appropriating any other aspect of that individual's identity, should be a claim based in copyright law. However, in Gardner's article, Love's attorney argue: "This is a pre-1972 recording and under 17 USC § 301(c), there is no preemption of state law until 2067." This argument may limit the scope of the issue only to the use of pre-1972 recordings. If the claim were based on the use of a properly licensed recording from 1972 or after, the claim would certainly fail and be preempted by federal copyright laws.

Regardless of how this lawsuit shakes out, labels would be wise to ensure that their contracts include the right to use the artist's name, voice and likeness in connection with all sales or licenses of the work. Similarly, ad agencies and brands should ensure that these rights are included in their master use licenses, along with an indemnification provision against any third party claims, including but not limited to copyright infringement and right of publicity claims.

March 7, 2016

Urgent Warning: Beware Of NBC/Universal's "SONGLAND" Submission Form

By Wallace Collins
www.wallacecollins.com

The NBC/Universal submission agreement for the "Songland" TV show states that NBC will own all rights to use and exploit all of your songs involved in the show including the songs you submit in the initial application. You would also purportedly be giving up your song even if you do not get selected to be on the Songland TV show (so whatever songs you use to audition would arguably become theirs to use and exploit even if they do not choose you). It also states that you waive your rights to claim any royalties from the songs whatsoever. On top of that, it states that you waive your right to sue NBC Songland (e.g., in case you didn't read the contract upon signing).

There is no way to know if NBC/Universal would actually pursue such a course of action and claim to be able to use and exploit all of the submitted songs without paying songwriters - the only thing I am addressing here is the language in the submission agreement. This is by far one of the most onerous such television contest submission agreements I have encountered. There is no warning of what the contract entails until the final part of the submission application, and what they are offering is crippling for songwriters. Most songwriters make their life's savings off of just a few big hits, and to be required to give away your best work like this for free is quite extreme.

Below are some relevant portions of the Songland submission contract:

- "I further agree that the Released Parties exclusively own all right, title, and interest (including, without limitation, all copyrights) in and to any and all recordings made by them and in and to any and all video that I have provided in connection with my application and any other materials that I have provided or may provide in connection with my application or the Program"

- "Without in any way limiting the waivers and releases set forth herein, I waive any claims to royalties of any kind, whether accruing now or in the future, from Producer and NBCUniversal for the use of any such Music or any other music, including, without limitation, any applicable copyright, public performance, mechanical and synchronization royalties."

- "I grant the rights hereunder whether or not I am selected to participate in the Program in any manner whatsoever. "

- "The term "Released Parties" shall mean and refer to Producer, NBCUniversal Media, LLC ("Network"), all entities and platforms of Network, Comcast Corporation, any other licensees or assignees of the Program or the Materials, the other participants in the Program, all other persons and entities connected with the Program, all parent, subsidiary, related and affiliated entities, licensees, successors, assigns, sponsors and advertisers of each of the foregoing, all of the respective directors, officers, principals, executives, on-air talent, employees, agents, contractors, partners, shareholders, representatives and members of each of the foregoing, and the respective heirs, next of kin, spouses, guardians, representatives, executors, administrators, successors, licensees and assigns of each of the foregoing."

Now, to be impartial, maybe the NBC/Universal lawyers did not mean for it to be so onerous and were merely drafting broad language to cover all contingencies and protect their client. Normally, one side's lawyers might draft a contract like this and the other side's lawyer would review it and clean up the most egregious language in order to protect the client. Here, however, there is no negotiation - this is technically known as a "contract of adhesion" in legal terminology.

So be warned that you should always read all of the language in such agreements and decide if the risk is worth the reward. Although it might be deemed overreaching vis-a-vis an adhesion contract if NBC were to try to enforce this against all songwriters who submit, it is better not to go down that road.

March 8, 2016

NBC Universal Changes Language in Songland Submission Form

By Wallace Collins

After my statements went viral and there was a big outcry from songwriters, NBC announced that it would change the language:

http://www.thewrap.com/nbc-changes-contract-to-adam-levines-songland-after-claim-of-rights-overreach/

It started with just one voice, but then tens of thousands of songwriters and musicians joined in, and it made a difference!

May 3, 2016

The 11 Contracts Every Artist, Songwriter & Producer Should Know: Band Agreements and Business Decisions a Band Can and Should Take Without an Attorney

By Steven R. Gordon
www.stevegordonlaw.com

Steve Gordon is an entertainment attorney specializing in music, television, film and video. His clients include artists, songwriters, producers, managers, indie labels and music publishers as well as TV and film producers and digital music entrepreneurs. He also provides music and sample clearance services for producers of any kind of project involving music. Mr. Gordon is the author of The Future of the Music Business (www.futureofthemusicbusiness.com (Hal Leonard 4th ed. 2015)).

The author would like to thank attorney Wallace Collins for contributing a model band agreement contained in this article. He also gratefully acknowledges the assistance of Ryanne Perio, Esq. in the preparation of this article.

DISCLAIMER

This series of articles and the forms included in them have been created for informational purposes only and do not constitute legal advice. This article and other articles in 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.

INTRODUCTION

This is the ninth installment of an 11-part series on basic music industry agreements. It includes two different, though related, discussions. The first part of the article discusses business actions a band should take, and can take at no or little cost, without the services of an attorney. The second part of the article examines the elements and benefits of an agreement between members of a band or musical group pertaining to important issues, such as decision making, division of money (including performance and recording revenues), treatment of departing members, and ownership of band property (such as the band's name, songs, and masters).

Band agreements usually require the services of an experienced music attorney to draft a legally enforceable contract. A sample band agreement provided by my friend and colleague, veteran music attorney Wallace Collins, is included in this article. If you take just a brief glimpse at it, you will see it takes a lot of thought and work. Many experts, especially lawyers, advise clients to prepare and enter into a band agreement as soon as possible after the band's formation. The reason, they argue, is that's the time when everyone in the band is getting along well, whereas it would be difficult to complete an agreement if there is already a dispute among the members. On the other hand, the vast majority of bands and music groups rehearse and perform at clubs and other venues on a part-time basis, and make little if any money at the beginning of their careers. It may not be worthwhile (i) to spend the time needed to discuss and reach consensus on all the complicated issues usually covered by a band agreement, and (ii) spend the money on an experienced lawyer to draft an enforceable agreement.

The bottom line is, if there comes a time when a band starts making good money and it looks as if it has a real future, then that is the right time to consider taking the time and spending the money to create an enforceable band agreement. In the meantime, any band or musical group can and should take these basic business actions discussed in Section I below.

I. ESSENTIAL BUSINESS ACTIONS ANY BAND OR MUSICAL GROUP SHOULD & CAN DO WITHOUT INCURRING LEGAL FEES:

These are the actions a band can do without using a lawyer:

• Sign a "split sheet" for every song written by more than one individual;
• Register all songs and masters with the U.S. Copyright Office;
• Register every song with the appropriate Performing Rights Organization (PRO);
• Upload the set list of any live performance containing original songs for payment by its PRO;
• Write up a simple agreement that no departing member can use the name of the band without permission.

DO A SPLIT SHEET FOR EVERY SONG

What is a Split Sheet?

A split sheet is a document that states who owns what percentage of a song and sets forth the credit each person should have. A sample split sheet is provided at the end of this section. A split sheet should be created for each and every song that was created by more than one person, and should be filled out and signed by all the writers before ever shopping it to a third party or trying to license it for placements. Every day around the world, songwriters collaborate on songs and never clarify who wrote what. If a songwriter is ever fortunate enough to license a song for a commercial, movie, or TV show, the writer may find him or herself fighting over who owns what percentage of the revenues generated from the song.

Most songwriters and artists just want to create great music, and it may feel uncomfortable to introduce a split sheet and start dividing up shares of publishing when trying to be creative. Yet it's a necessary part of the songwriting process. It's important to have a meeting about split sheets prior to hitting the studio; this way everyone understands that it's not personal, it's just business. Doing this makes everyone feel as though their interests are protected, which can enhance creativity rather than inhibiting it.

How to Complete a Split Sheet

Split sheets should contain the following information:

- The name of each writer.
- Percent of ownership. This is key. If the song makes money, this will determine how much each writer will receive.
- Credit for each writer, including who wrote the lyrics and who composed the underlying music.
- Everyone's signature.

Below is a sample split sheet:

Single Song Writers' Split Letter


Date: _______________

This is to confirm that we, the sole writers of the composition listed below, hereby agree among ourselves to the following writers' divisions:

Song Title: "_____________________"

Writers & % Ownership:

Writer Name: ________________ Ownership % _____________

Writer Name: ________________ Ownership % _____________

Writer Name: ________________ Ownership % _____________

Writer Name: ________________ Ownership % _____________

Credits:

Lyrics by: __________, ___________

Music by: __________, ___________

Produced by: __________, ___________


If any samples are contained on this song for which the sampled writer(s)/ publisher(s) are to receive a copyright interest in and to the Composition and/ or payment of monies attributable to the Composition, then we agree that our own shares in the copyright and/or monies attributable to the Composition shall be reduced proportionately.

The following list of samples represents all of those samples embodied in the above composition:

Name of Song by Name of Writer
________________________________
________________________________
________________________________

This Agreement contains the entire understanding of the parties hereto relating to the subject matter hereof and cannot be changed or terminated except by an instrument signed by all of the parties hereunder. The validity, interpretation and legal effect of this Agreement shall be governed by the laws of the State of _____ applicable to contracts wholly entered into and performed entirely within the State of _____.

Signature below will indicate agreement of the above.

Read and Agreed: Read and Agreed:

Read and Agreed: Read and Agreed:

REGISTER SONGS & MASTERS WITH THE U.S. COPYRIGHT OFFICE

Why Register?

Registration is not a prerequisite for copyright protection. Under the Copyright Act of 1976, a copyright comes into existence as soon as a work is fixed in a tangible medium of expression, and registration is not a condition of protection. However, registration provides crucial benefits to copyright owners. Those benefits, which are set forth in the U.S. Copyright Office's website at www.copyright.gov/circs/circ01.pdf, include the following:

1. Registration establishes a public record of the copyright claim.

2. Before an infringement suit may be filed in court, registration is necessary for works of U.S. origin.

3. If made before or within five years of publication, registration will establish prima facie evidence in court of the validity of the copyright and of the facts stated in the certificate.

4. If registration is made within three months after publication of the work or prior to an infringement of the work, statutory damages and attorney's fees will be available to the copyright owner in court actions. Otherwise, only an award of actual damages and profits is available to the copyright owner.

5. Registration allows the owner of the copyright to record the registration with the U.S. Customs Service for protection against the importation of infringing copies.

Of the reasons to register set forth above, the most important are that a copyright owner (i) cannot start a lawsuit for copyright infringement before registering, and (ii) cannot secure statutory damages or attorneys' fees without registering. With respect to (ii), the Copyright Act provides for statutory damages of up to $150,000 per infringement and attorneys fees. It is crucial that if the work has been published, the registration occurs prior to any infringement. Otherwise, the plaintiff must prove actual damages, which can be difficult to quantify, or may equal a negligible amount unless the defendant earned a lot of money from the infringing work. Further, attorneys fees are only available for published works that are registered prior to the infringement. Similar to other litigation, a lawsuit for copyright infringement can take a great deal of work and time on the part of the attorney. That is why attorney fees can add up. It would be difficult or impossible to retain the services of an experienced copyright litigator without the potential for recovering fees.

Note that the only way to secure the benefits of copyright registration is to register with the U.S. Copyright Office. These benefits, contrary to a popular myth, cannot be obtained by sending a copy of one's song or master to oneself (even by certified or registered mail).

How to Register

To register a work, including a song or a master, a completed application form, a nonrefundable filing fee, and a nonreturnable copy of the work. must be submitted Here are answers to the most important questions regarding registration:

Where to apply? Find and complete the copyright registration application online at http://www.copyright.gov/eco (eco is an acronym for Electronic Copyright Office).

How much will it cost? The basic fee for registering any work, including a song or master, was raised from $35 to $55 in May 2014. However, the fee is still $35 for registering a single work by a single author.

What else needs to be done? It is also necessary to provide a "deposit" of the work. This can be done by uploading an MP3, or print out a "shipping slip" to be enclosed with a CD and mail it to the Copyright Office within 30 days of applying for the registration.

Is it possible to register a sound recording and a song in one application? Yes. To register a master and a song in one application, click on "Sound Recording" in the drop down menu in the part of the application asking for the type of work to be registered. Later in the application, there will be a page allowing you to claim music and lyrics as well as the sound recording.

The U.S. Copyright Office's website (www.copyright.gov) is an invaluable source of information not only on registration, but also on how copyright law protects songs and masters.

Multiple Writers and/or Producers

Any signatory to the split sheet can register the copyright in a song and/or master. All the other signatories to the spreadsheet should be included as joint "authors" in the application.

REGISTER WITH A PRO & UPLOAD SET LISTS FROM LIVE SHOWS TO MAKE SOME MONEY

What is a PRO?

Any user of music that publicly performs a song must secure a license and pay a royalty to do so. Songwriters and their music publishers use PROs to collect these royalties. In the U.S. there are three: ASCAP, BMI, and SESAC. A fourth PRO, recently launched by music industry mogul Irving Azoff, is Global Music Rights (GMR).

The PROs collect public performance royalties from radio, television, the Internet, as well as physical venues, such as bars, nightclubs, concert halls, arenas, and other places where live or recorded music is played.

In order to collect public performance monies, one must be a member of a PRO. Anyone can join ASCAP or BMI. SESAC, the smallest of the three, is selective.

When a song is registered with one of the PROs, the PRO will require the person registering the song to indicate the percent ownership of each writer. If the band has a manager, he or she can perform this function. The registration should reflect the breakdown of ownership in the split sheet. Even if no split sheet was ever signed, the registration will itself be a record of the percent ownership of each member in the band. That's why each member with an interest in a song should check to see if the information supplied to the PRO is accurate.

Live Performance Payments

Each of the PROs pays its writer and publisher affiliates for live performances at venues across the U.S. Basically, all the songwriter, who may also be an artist, has to do is submit a set list of songs performed at any venue showing which songs were written by him or her. Generally, he or she must also provide the venue name, address, size of venue and the dates of the performance. The songs must be registered first in order to complete this process. More information on each of the PROs' live performance programs is available at

- www.sesac.com/WritersPublishers/HowWePay/liveperformances.aspx
- www.bmi.com/creators/royalty/live_concert_royalties
- www.ascap.com/members/onstage.aspx

Anecdotally, I know a singer/songwriter in New York City who played shows at bars and restaurants and made about $200 a gig from passing the hat. She made $1,250 from SESAC by reporting her set lists for a single calendar quarter.

PROTECTING THE BAND NAME

Make Everyone Agree That Departing Members Will Not Be Able To Use the Band Name

Even in the absence of a full band agreement, a band or musical group can handle the issue of who owns the name by using a form such as this:

Band Name Agreement

Date: _______________

Re "__________" [Name of band]

This is to confirm that we, the sole members the above referenced band, hereby agree among ourselves that each member of the band is a joint owner of the name of the band, provided that no leaving member, whether that member leaves voluntarily or not, shall be able to use the name of the band in connection with the entertainment industry including the music business.

This Agreement contains the entire understanding of the parties hereto relating to the subject matter hereof and cannot be changed or terminated except by an instrument signed by all of the parties hereunder. The validity, interpretation and legal effect of this Agreement shall be governed by the laws of the State of _____ applicable to contracts wholly entered into and performed entirely within the State of _____. [Use the state where the band members reside]

Signature below will indicate agreement of the above.

Signature below will indicate agreement of the above.

Read and Agreed: Read and Agreed:

Read and Agreed: Read and Agreed:



Note that sometimes a band will want to handle ownership of the band's name in a different manner than in the sample agreement. For instance, where two of the members founded the band and then added a third or more members later, the founders may want to exclusively own the rights in the name, or they may wish to allow departing members the right to use the band's name, provided that the leaving member uses the words "formally of". For a band that wishes to treat the ownership or use of the band's name in a different manner than the sample agreement, it may be wise to hire a lawyer.

Consider Registration of the Band Name with the U.S. Trademark Office

A band should also consider registering its name as a trademark with the U.S. Patent and Trademark Office (PTO, www.uspto.gov/trademark). In the U.S., it isn't necessary to register a mark to obtain protectable rights. You can establish "common law" rights in a mark based solely on use of the mark in commerce without a registration. However, owning a federal trademark registration provides a number of significant advantages over common law rights alone, including:

1. A legal presumption of ownership of the mark and exclusive right to use the mark nationwide.

2. The ability to bring an action concerning the mark in federal court.

3. The use of the U.S. registration as a basis to obtain registration in foreign countries.

Registration fees depend on the kind of form used and the number of International Classes listed in the application. International Classes refer to good and services for which the mark is used. A band would always want to file under International Class 41, which includes entertainment services. Another possibility may be to consider filing for International Class 25, which includes clothing, such as t-shirts and hats. The cheapest form is called "Trademark Electronic Application System (TEAS) Plus" and costs $225 per class. However, this form requires somewhat more information and is slightly more difficult to complete than two other possible forms: TEAS Reduced Fee (which costs $275 per class), and TEAS Regular Filing (which has the least number of requirements, and costs $325 per class). Of course, these fees only apply to marks in use in commerce. Additional fees apply if one is filing an Intent to Use.

Unlike the other recommended business actions previously discussed in this article, it is advisable to use an attorney in this situation. Filing a trademark application, or even deciding on the right form to use, is a bit tricky, and experience in filling out the appropriate application and dealing with the PTO is important. For instance, a failure to correctly list the goods/services with which the mark is used, or intended to be used, may prevent one from registration, and no refund of any fees paid is possible.

II. BAND AGREEMENTS

WHY BOTHER?

When two or more people associate for the purpose doing business, arguably they create a partnership in the eyes of the law. General partnership law applies to the association unless a written agreement states otherwise. General partnership law provides, among other things, that all partners equally own partnership property and share in profits and losses, that any partner can bind the partnership, and that each partner is fully liable for the debts of the partnership. In the case of most musical groups, a written agreement setting forth the arrangement between the group members as partners is preferable to general partnership law.

For instance, if one person creates a band and comes up with the band's name, he or she may want exclusive rights to make the band's decisions and the right to fire any new band member. That person may also want a bigger percentage of band profits, especially if he or she pays more money than other band members for touring or studio time. As an example, I represent one person who started a band in China. He created the name and moved to the U.S., where he selected all new band members. He's the lead singer and writes all the songs. In this situation, it may be better to simply employ the other band members as freelancers and pay them a certain percentage of money from live gigs, but stipulate that he can replace them at will.

WHEN TO DO IT?

When a time comes that a band is beginning to make decent money and it's clear that it actually has a future, that may be a good time to take the plunge. It will involve considering the issues discussed below, coming to a consensus among all the members of the band, and then hiring an attorney to draft an enforceable agreement.

BASIC ELEMENTS

A band agreement is an agreement between/among the members of a band that covers basic business issues. The most important issues are:

- Decision making
- Hiring and firing
- Profits and Losses
- Treatment of Leaving Members
- Band name
- Ownership of Songs and Masters


Decision Making

The issue of control is very important. In most cases, each member will have an equal vote and a majority will rule. However, as set forth in the sample agreement provided by Wallace Collins below, a particular member may have two votes, and the manager may have a tie-breaking vote. The agreement may also provide that certain matters, such as requiring financial contributions from group members or incurring debts on behalf of the band, require a unanimous vote. Again, there are endless variations, including situations where a particular member makes all of the decisions, or where new members do not have a vote on band business. For instance, a band could agree on what might be called a "reverse democracy"; each member has one vote, but if any member votes against doing something, then the band would not do it. In other words, this arrangement requires unanimous consent to proceed with an activity.

Hiring and Firing of Band Members

Another issue of control that must be decided concerns the hiring and firing of band members: How votes are calculated (e.g., will each member get one vote or will a particular member's vote count double or more) and how many votes are needed (e.g., a majority or a unanimous vote) to fire a group member and/or hire a new member. In most cases, a new member voted into the group will then be required to sign the band agreement. It must also be decided how to vote on any amendments to the band agreement, since this may materially affect the relationship between/among the members after the group has started. In most cases, a majority vote will be deemed determinative, but some members may prefer a unanimous vote on such things as amending the agreement (as well as hiring or firing). This will have to be decided between and among the members of the group.

Profits and Losses

The band agreement should contain provisions regarding the sharing of profits and losses. One provision may pertain to revenues earned during the term while each member is in the group, and another may pertain to after the departure of a member or the break-up of the group. In most cases, a new group will have a provision that all profits from the group are shared equally between all members with an exclusion for songwriting monies (which each of the respective songwriter members would keep). Where an established group adds new members, the provision may provide that a new member gets a smaller percentage than the founding members.

Treatment of Departing Members

The more complicated problem of revenue division arises after a member departs. The agreement may provide that the leaving member is entitled to his or her full partnership share of profits earned during his or her tenure, with a reduced percentage (or no percentage) of profits derived from activities after the departure; or the agreement may provide for a reduced percentage for a short period of time after departure (e.g., 90 days), and then nothing thereafter. This is an easier issue to deal with regarding live performances than record royalties. In most cases, bands will agree that leaving members should receive their shares of live performance during the time when the members were in the band, even if the shares are received after a departure. The group also needs to determine what happens, for example, when a member performs on three albums, but leaves before the fourth album is recorded. Although it might be acceptable to refuse to pay the departing member any royalties on the fourth and future albums recorded by the group under a record contract the leaving member signed as part of the group, it might not be fair to refuse to pay that individual his or her share of royalties from the three albums that were recorded with the band. Of course, this might vary depending on whether the leaving member quit or was fired.

Another important financial issue is the question of the departing member's share of partnership property, such as band recording equipment or a sound system. Again, the agreement might specify a monetary payout to the leaving member if he or she is terminated, but a forfeiture if the leaving member quits. If merchandise with the departing member's name and likeness is in inventory and sold after the member leaves, a decision will have to be made about whether and how much the departed member might receive for the use of his or her name and likeness.

Buy-out/Pay-out Provisions

A band contract should contain a comprehensive Buy-out/Pay-out provision that deals with departing members. Whether the leaving member quits or is fired, the agreement may provide that that individual waives all rights in the intangible assets of the partnership (e.g., the group name, the group contracts, etc.). If the member quits, he or she may waive any right to and benefit derived from the hard assets, such as band sound equipment. If the leaving member is fired, the agreement might provide that he or she is entitled to the pro rata percentage of the current value of the hard assets. With respect to this payout, the band contract may provide that if the valuation exceeds a certain amount or would put the partnership in financial distress, the payout would be in a certain number of equal monthly installments.

Again, this Buy-out/Pay-out provision can be as simple or as complicated as the band members deem necessary. There are as many variations in this as there are differences in personalities between the members of a group. Each member and each group, with the help of an attorney, has to find its own solutions.

Band Name

As previously discussed, an important issue is who owns the group name if one member leaves or if a group disbands. Under partnership law, the partners would be the owners of the name, and any member would arguably be permitted to use the name. Trademark rights are determined based on the 'use' of a mark, not on who thought of it, so each of the members of the group would be an equal co-owner of the group name under trademark law (this of course depends on how the application was completed; whether the band members were listed as co-owners, or whether the partnership or other business entity owned the mark). The end result could be chaos, with several bands all with the same name but different players.

One solution would be to use the brief agreement previously discussed. The matter can also be handled in the context of a full scale band agreement. In most cases, the band agreement will state, as the short form agreement previously discussed, that if a particular member leaves the band, either because he or she quits or is fired, that person will not be entitled to use the band name. The band agreement could fine tune this provision by stating that the leaving member may describe him or herself as a "former member" of the band.

However, if one member thought up the group name, then the band agreement may state that only a group including that member can use the name. This will apply whether one other member leaves or if the group disbands and only the founding member creates a new band.

Rights in the group name may also concern revenues in addition to the use rights, specifically as they concern merchandise, such as t-shirts, caps, buttons, and posters. The band agreement may deal with how much each member of the band will receive from sales of such merchandise.

Ownership of Songs and Masters

It was previously discussed how important it is to confirm who are the writers of a band's songs, and that a split sheet can be used to confirm ownership. The band agreement could include a provision incorporating split sheets, or provide that any song created by any member of the band would be jointly owned by all the band members. This last example would only make sense where the band operates as a collective, and every member is invited to and makes contributions to the creation of each song.

The band agreement could also confirm that every member of the band is a joint owner of any recordings made during the life of the band. This makes sense if each member of the band is performing on recorded tracks.

Advantages of Forming a Limited Liability Company and entering into an "Operating Agreement instead of a Band Agreement

An alternative to a traditional band agreement would be forming a limited liability company (LLC) and then drafting an Operating Agreement that would look pretty much the same as a band agreement, except that each member of the band would be a Member. The advantage to this approach is that when the band enters into agreements with third parties, such as investors, the personal assets of the band members would not be at risk.

Role of the Lawyer

If each member of a band or music group could afford his or her own lawyer, then the lawyers could work out an arrangement on behalf of their clients, which doesn't often occur. Instead, after a band decides on the issues discussed above, it should engage an attorney to review its decisions and write up a legally enforceable agreement. An attorney cannot represent each member of the band. That would create a conflict of interest; however, an attorney can be a "scribe" who enforces the decisions of the band by preparing an agreement that is legally enforceable. Fees can range from a $1,000 to $5,000 or more, depending on the lawyer and the complexity of the deal.

The below model band agreement has been graciously provided by Wallace Collins, Esq. (www.wallacecollins.com). Wallace is an entertainment and intellectual property lawyer. He was a recording artist for Epic Records before attending Fordham law school.

BAND PARTNERSHIP AGREEMENT

This agreement is made and entered into this ___ day of April, 2015, by and among the following persons:

[name/address]

The foregoing individuals are hereinafter each individually referred to as "Partner" and in the plural as "Partners".
With respect to any gender reference in this Agreement, wherever required in this Agreement, the singular shall include the plural, and the masculine gender shall include the feminine and neuter.

1. THE PARTNERSHIP.

The Partners hereby constitute themselves as a general partnership (the "Partnership") to be known as "_____" (the "Group") under the laws of the State of_______________ for the purposes of live performances, creating sound recordings for use and commercial exploitation in all mediums and by any means whether now or hereafter devised of recording musical performances for reproduction ("Recordings"), exploiting and merchandising the names (both legal and professional) and likenesses of the Group and the members of the Group, using and commercially exploitation musical compositions composed by any Partner individually or jointly with any other person and recorded by the Group for the purpose of exploiting Recordings (the "Group Compositions"), and all other present and future activities of the Partners as members of the Group in the entertainment field during the term of this Agreement. Except as otherwise expressly provided herein, the Partnership shall have the exclusive right to the services of each Partner as a member of the Group in the entertainment field. The principal place of business of the Partnership shall be at such place as the Partners may determine pursuant to the provisions of this Agreement.

2. THE NAME.

The Partnership shall do business as "_____" (the "Group Name") and any and all trademarks and related intellectual property rights therein and thereto shall be the sole and exclusive property of the Group.

3. DURATION OF PARTNERSHIP.

The term for which this Partnership is to exist shall commence as of the effective date hereof and shall continue until dissolved in any manner provided herein.

4. REPRESENTATIONS, WARRANTIES AND AGREEMENTS.

Each of the Partners warrants and represents to each of the other Partners that he is free to enter into this Agreement, and that he is under no disability, restriction or prohibition which will interfere in any way with his full compliance with all of his obligations under this Agreement. Each Partner warrants and represents that he has not done nor will he do any act or thing that will or might impair the full enjoyment by the Partnership of any of the rights granted to it under this Agreement or the commencement or continuation of the Partnership business in the manner herein contemplated. Each Partner further warrants and represents that he will not sell, assign, transfer or hypothecate any right, title or interest in or to any asset of the Partnership without the prior written consent of all other Partners. Each Partner covenants and agrees that he will perform the services provided to be performed by him hereunder diligently, fully and to the best of his ability during the Term of this Agreement, in a competent and professional manner, and will refrain from participating in activities which with reasonable foreseeability could limit or prohibit him from so performing. Each of the Partners acknowledges that preservation and enhancement of the value of the Partnership may be hindered by the failure of an individual Partner to apply himself diligently to the business of the Partnership or by actions in a manner injurious to the rights of the other Partners.

5. CONTRIBUTION.

As a contribution to the Partnership, each Partner is contributing his exclusive services as a recording artist with respect to Recordings embodying musical performances of the Group, his exclusive services as a musical performer in all media and on the live stage with respect to his activities as a member of the Group, his Merchandising Rights with respect to his activities as a member of the Group, his exclusive services as a songwriter and publisher with respect to the Group Compositions, and generally his exclusive services as a member of the Group within the entertainment field. No Partner shall be required to make any capital contributions except upon the unanimous agreement of the Partners.

6. PROFITS AND LOSSES.

(a) Subject to Paragraph 6(b) below, and unless agreed otherwise in writing by all of the Partners, the Partners shall share equally in all of the profits, losses, rights and obligations of the Partnership. Should any Partner at any time bear or satisfy a disproportionate share of the financial obligations of the Partnership, he shall be entitled to reimbursement therefore from the other Partners proportionately out of sums otherwise distributable to them as Partners. "Net profits" (as hereinafter defined) shall be distributed in cash to the Partners from time to time, but only as expressly authorized by a vote of a majority of the then-existing Partners. "Net profits" as used herein shall mean all commissions, royalties (including Recording royalties but excluding the so-called "songwriter's share" and "publisher's share" of music publishing royalties), bonuses, payments (other than repayment of loans), fees (including synchronization fees), dividends, stock bonuses, interests or monies of any kind or nature which shall be paid to the Partnership or to any Partner as a result of the Partnership activities after deducting the sum total of all reasonable salaries, rent, promotional costs, travel costs, office expenditures, telephone costs, accounting and legal fees, entertainment costs, and any and all legitimate Partnership expenses incurred by the Partnership while conducting Partnership business. No Partner shall receive any salary, bonus or goods or other assets of the Partnership in excess of that received by any other Partner, except as set forth herein or otherwise upon the unanimous vote of all of the Partners.
(b) Notwithstanding anything to the contrary contained herein, and unless agreed otherwise in writing by all of the Partners, net profits arising from the copyrighting, publishing and exploiting of a particular Group Composition ("Publishing Profits," which includes, without limitation, the so-called "songwriter's share" and publisher's share" of music publishing royalties) shall be shared solely among the Partners who are the authors of such Group Compositions.

7. MANAGEMENT.

(a) Each Partner shall have the right to participate equally in the control, management and direction of the business of the Partnership. In exercising this control, management and direction, each Partner shall have the same vote as each other Partner. No Partner shall have the right to make any expenditure in excess of $100 or incur any major obligation (including, without limitation, borrow or lend money, make, deliver, accept or endorse any commercial paper, compromise or release debts owing to the Partnership, sell, lease, license, assign or hypothecate any Partnership property or enter into any contract for any purpose) on behalf of the Partnership, except as expressly authorized by a vote of three-fifths (3/5) of the then-existing Partners. No Partner shall hold or accept from any third party any gratuity or other consideration in consideration of his exercising or declining to exercise his rights hereunder in any manner. The Partners may, by 3/5 vote, delegate all or any of their management functions to one or more professional managers upon such terms and conditions as the Partners so voting shall designate.
(b) Notwithstanding anything to the contrary contained herein, but subject to any future agreement, if any, between the Partnership and a third-party co-publisher or administrator, the Partner(s) who is/are credited as the writer(s) of a particular Composition shall have the exclusive right to sell or grant rights (by means of license or otherwise) in respect to such Composition in his/their sole reasonable discretion; provided that any Partner disassociated from the Partnership pursuant to Paragraph 11 hereof shall thereafter retain the right to sell or grant rights in respect to any Composition for which he is credited as a writer, subject to Paragraphs 7(b)(i) and (ii) hereof and the continuing rights of the other Partners in any net profits derived therefrom as provided in Paragraph 6 hereof. A disassociated Partner shall keep the Partnership informed as to his address and telephone number for the purpose of transacting business in respect to the Compositions. If a Composition is co-written by a remaining Partner and a disassociated Partner and the remaining Partner seeks to pursue a commercial opportunity in respect to such Composition, he shall send the disassociated Partner written notice thereof by certified mail, return receipt requested. If the disassociated Partner does not respond within fourteen (14) days after the date of such notice, then the remaining partner shall have the authority to grant rights in such composition to a third party, subject to the disassociated Partner's right to share in any net profits in respect thereto as provided herein.
(c) Notwithstanding the foregoing, the Partner or Partners who are the authors of any Group Composition hereby grant the Group a mechanical license for use of the Compositions in any Group Recording at the full statutory mechanical rate.

8. BOOKS OF ACCOUNTS AND RECORDS.

The Partnership books and records, together with all other documents and papers pertaining to the business of the Partnership, shall be maintained at its principal place of business or at such other place as shall be designated by the Partners, and shall be available for inspection at all reasonable times by any Partner or any designated representative of any Partner. The maintenance of such books and records shall be in accordance with generally accepted accounting practices and principles, consistently applied, and at the cost of the Partners, pro rata. The fiscal year of the Partnership shall end on December 31. The Partnership shall render yearly accountings to each Partner on the first day of February in every year during the term of the Partnership. At the sole cost and expense of the Partners, the Partners may retain any duly licensed firm of accountants and/or attorneys in connection with the business of the Partnership, including the rendition of said accountings.

9. DISSOLUTION.

(a) This Agreement shall terminate, and the Partnership shall be dissolved, upon the first to occur of the following events:
(i) The written agreement of all of the Partners to dissolve the Partnership; or
(ii) By operation of law, except as otherwise provided herein. The addition of a new Partner (as provided in Paragraph 10 hereof) or the disassociation of a Partner (as provided in Paragraph 11 hereof) shall not terminate this Agreement, and it shall remain in full force and effect among the remaining Partners.
(b) Upon termination of the Partnership, the Partnership's receivables shall be collected and its assets liquidated forthwith (except as provided in subparagraphs (d) and (e) below). The proceeds from the liquidation of the Partnership assets and collection of the Partnership receivables shall be applied in the following order:
(i) First, to the expense of liquidation and debts of the Partnership other than debts owing to any of the Partners;
(ii) Next, to the debts owing to any of the Partners, including debts arising from loans made to or for such Partners, except that if the amount of such proceeds is insufficient to pay such debts in full, payment shall be made on a pro rata basis;
(iii) Next, in payment to each Partner of any financial capital investment made by him in the Partnership belonging to him, except that if the amount of such proceeds is insufficient to pay such financial capital investment in full, payment shall be made on a pro rata basis;
(iv) Next, in payment to each Partner on a pro rata basis of any of such proceeds remaining.
(c) The Partners shall execute all such instruments for facilitating the collection of the Partnership receivables and liquidation of the Partnership assets, and for the mutual indemnity or release of the Partners as may be appropriate under all then-present circumstances.
(d) Any property, including, but not limited to, the Group Name, all rights and interests in contracts, agreements, options, choses in actions and Merchandising Rights, owned or controlled by the Partnership at the time of dissolution from which income is being derived, shall not be sold, but shall be retained and distributed in the manner hereinafter set forth. After the payments provided for in Paragraph 9(b)(i), (ii) and (iii) have been made in full, any such property owned by the Partnership and the continuing earnings received as a result of the exploitation thereof shall be valuated by an accountant selected by the Partners who is experienced in the music industry. Said property shall then be distributed, as nearly as possible, among the Partners in a manner consistent with the terms set forth in Paragraph 6 hereof.

10. ADDITION OF A PARTNER.
A new partner may be admitted to the Partnership but only with the written consent of all of the Partners. Each new Partner shall be admitted only if he shall have executed an agreement with the Partnership under the terms of which such Partner agrees to be bound by all of the provisions hereof, as amended, as if a signatory hereto. Notwithstanding anything to the contrary contained herein, such new Partner shall have no right, title or interest in any of the assets or property of the Partnership existing at the time of his admission to the Partnership ("existing property") or in any of the proceeds derived from such existing property or from the sale, exchange, or liquidation thereof. Such new Partner shall have no interest whatsoever in the Group Name apart from the limited right to be known as a member of the Group, and upon the termination of the Partnership his interest in any assets, property, net profits and losses of the Partnership shall attach only to such assets, property, net profits and losses acquired by the Partnership after his admission to the Partnership. Such new Partner's capital contribution, if any, and share of the Partnership's net profits and losses shall be set forth in the written consent of all of the Partners approving the admission of the new Partner.

11. DISASSOCIATION.
(a) A Partner may become disassociated from the Partnership by reason of his death, his disability, his resignation or by the written vote of all of the other Partners. For purposes of this Agreement, a Partner shall be deemed disabled if he is unable to perform services as required hereunder for any reason for a period in excess of one hundred eighty (180) consecutive days, or two hundred seventy (270) days out of the year. If a Partner resigns, he shall give thirty (30) days prior written notice of such resignation to each of the other Partners. A Partner (or, in the event of disassociation by death, his executor or personal representative) who is disassociated shall be entitled to receive an amount equal to his proportionate share of the net worth of the Partnership as of the date of his disassociation, exclusive of any value attributable to the Group Name, but he shall not be entitled to any of the earnings of the Partnership received thereafter or any interest in the Group Name, nor shall he be subject to any of the liabilities of the Partnership incurred thereafter; provided, however, that such Partner shall be entitled to receive his applicable proportionate share (as set forth in Paragraph 6 hereof) of any royalties (other than any share of Publishing Profits provided for in Paragraph 6(b)(ii)(A) in respect to Group Compositions which are not written, in whole or in part, by the disassociated Partner(s)) earned from the exploitation of (a) any Recording recorded hereunder and embodying his performances, and (b) the Group Compositions which have been recorded by the Group prior to the date of his disassociation, as and when such profits are actually received by the Partnership, less his pro rata or other agreed share of any expenses and/or liabilities relating thereto.
(b) The net worth of the Partnership shall be determined as of the date of the disassociation by an accountant selected by the remaining Partner(s) other than the Partnership's regular accountant, and other than the personal accountant of any Partner, which accountant shall be familiar with the music industry. The accountant shall make said determination in accordance with generally accepted accounting practices and principles, taking into consideration, among other factors, the fair market value of the assets of the Partnership other than the Group Name, its liabilities (including the disassociated Partner's entitlement to future royalties as provided in subparagraph (a) hereinabove), its past profits and losses. In the event of voluntary resignation, the determination of said accountant shall be final. However, if the disassociated Partner or his legal representative should disagree with the accountant's determination in the event of disassociation for any other reason, the disassociated Partner or such representative may within thirty (30) days after receipt of the accountant's determination submit the issue of the fair market value of the Partnership to arbitration in New York, under the applicable rules of the American Arbitration Association by one (1) arbitrator selected by such organization from its panel of arbitrators in accordance with its usual procedures. Unless the remaining Partner(s) elect to pay the disassociated Partner's share of the value of the Partnership sooner, said share shall be payable (without any interest accruing thereon) in twelve (12) approximately equal monthly installments commencing one month following the date of the final determination of said net worth; provided however, that if said share is in excess of $10,000 but less than $25,000, the remaining Partner(s) may elect to pay same in twenty-four (24) approximately equal monthly installments, and provided further, that if said share is in excess of $25,000, the remaining Partner(s) may elect to pay same in thirty-six (36) approximately equal monthly installments.

12. NOTICES.
All accountings and notices to be given hereunder, and notices of any action by the Partnership which has the effect of altering any Partner's share of profits or losses shall be given in writing, by personal delivery or by mail or by telegram at the respective addresses of the Partners set forth above, or at such other addresses as may be designated in writing by registered mail by any Partner. Notice given by mail or by telegram shall be deemed given on the date of mailing thereof or on the date of delivery of such telegram to a telegraph office, charged prepaid or to be billed.

13. PARTNERSHIP BANK ACCOUNTS.
One or more Partnership bank accounts may be opened and maintained by the Partners with such bank or banks as the Partners may determine and any checks or withdrawals from or against any bank account or accounts shall be upon the signature of any of any person as the Partners may unanimously select; provided, however, that such checks or withdrawals shall be subject to the approval process set forth in Paragraph 7 hereinabove.

14. ASSIGNMENT OF PARTNERS' INTEREST.
No Partner, or executor or administrator of a deceased Partner, shall sell, assign or transfer all or any portion of his financial or other interest in the Partnership or right to receive a share of Partnership assets, profits or other distribution without the prior written consent of all of the other Partners and any such purported sale, assignment or transfer in contravention of the foregoing shall be null and void. The Partners acknowledge that a part of the capital contribution of each Partner is the unique personal services required to be rendered for the exclusive account of the Partnership by each Partner, for which no presently adequate substitute exists; and that the other Partners are the sole and exclusive judges of the adequacy of any future substitution.

15. GENERAL PROVISIONS.
(a) Liability. The liability of the Partnership or the Partners arising out of any activities of the Partnership shall to the extent possible be covered by appropriate policies of insurance. In the event that any liability shall not adequately be covered by insurance, the amount of liability not so insured against shall first be satisfied out of the assets of the Partnership.
(b) Indemnity. Each Partner hereby indemnifies the other Partner(s) and holds such other Partner(s) harmless against and from all claims, demands, actions and rights of action which shall or may arise by virtue of anything done or admitted to be done by him (through or by agents, employees or other representatives) outside the scope of or in breach of the terms of this Agreement. Each Partner shall promptly notify the other Partner(s) if such Partner knows of the existence of a claim, demand, action or right of action.
(c) Successors and Assigns. Subject to the restrictions on assignments set forth in this Agreement, the provisions of this Agreement shall be binding upon and inure to the benefit of the heirs, executors, administrators, successors and assigns of the Partners.
(d) Severability. If any term, provision, covenant or condition of this Agreement is held to be illegal or invalid for any reason whatsoever, such illegality or invalidity shall not affect the validity of the remainder of this Agreement.

16. CONSTRUCTION.
This Agreement shall be governed by and construed in accordance with the laws of the State of New York. In the event of any action, arbitration, suit or proceeding arising from or under this Agreement, the prevailing party shall be entitled to recover reasonable attorneys' fees and costs of said action, suit, arbitration or proceeding. This is the entire understanding of the parties relating to the subject matter hereof and supersedes all prior and collateral agreements, understandings, and negotiations of the parties. Each party acknowledges that no representations, inducements, promises, understandings or agreements, oral or written, with reference to the subject matter hereof have been made other than as expressly set forth herein. Each Partner acknowledges that he has consulted with legal counsel of his choice with respect to the contents of this Agreement prior to execution hereof, and has been advised by such counsel with respect to the meaning and consequences hereof. This Agreement cannot be changed, rescinded or terminated except by a writing signed by each of the Partners. The titles of the paragraphs of this Agreement are for convenience only, and shall not in any way affect the interpretation of any paragraphs of this Agreement or of the Agreement itself.

NOTWITHSTANDING THE REPRESENTATION OF THE PARTNERSHIP BY WALLACE COLLINS AS LEGAL COUNSEL, EACH OF THE PARTNERS HAS BEEN ADVISED OF THEIR RIGHT TO RETAIN INDEPENDENT LEGAL COUNSEL IN CONNECTION WITH THE NEGOTIATION AND EXECUTION OF THIS LEGAL DOCUMENT AND EACH PARTNER HAS EITHER RETAINED AND BEEN REPRESENTED BY SUCH LEGAL COUNSEL OR HAS KNOWINGLY AND VOLUNTARILY WAIVED RIGHT TO SUCH LEGAL COUNSEL.

IN WITNESS WHEREOF, the parties hereto have executed and sealed this agreement on the date first above written. "PARTNERS"

________________________

May 23, 2016

Heirs Go Crazy: Prince's Estate and Copyright's Termination of Transfer

By Britton Payne
https://paynebritton.wordpress.com/about/

The fight over Prince's estate will dig deep into copyright law for a very long time.

When Prince passed away on April 21, 2016, he left no will, and now his heirs appear ready for a long fight over his estate. Apparently, their first meeting about the estate ended in shouting. Heirs can battle over any substantial estate, and there are particular complications when it involves an artist. Some of what Prince's heirs are fighting over is the ownership of his works -- his published and unpublished music compositions and recordings. Copyright law will have a significant impact on who has what rights, and for how long. Three particular areas affecting their rights are: the termination of transfer (17 U.S.C. § 203), the term of copyright for published and unpublished works (17 U.S.C. § 302), and the contracts already in place. The drafting of a will for an artist, or the administration of a late artist's estate, should include a consult from an attorney for copyright due diligence.

After 35 Years, Artists and their Estates Get Another Bite at the Apple

There is an inherent feeling of unfairness for artists when they sign away the rights to their works, which against all odds go on to become popular and make a fortune for the rightsholders -- but not the artists. To address this, the Copyright Act built in a "termination of transfer" provision that gives an author an opportunity to claw back the work after 35 years, essentially giving the artist "another bite at the apple." (17 U.S.C. § 203.) There are court cases about termination of transfer for "Santa Claus is Coming to Town," Winnie the Pooh, Archie Comics, Ray Charles, the Village People and a few others, but there aren't very many published opinions offering guidance about interpreting the law. The battles over the Prince estate may explore these issues for decades.

Most of Prince's Works are Owned by the Estate and Licensed to Warner Bros.

Prince's first album For You was released in 1978, but still earns money for its publisher Warner Bros. Records to this day. Had Prince wanted to, in 2013 he could have rescinded the rights to distribute his 1978 album from Warner Bros. In 2014, he could have terminated the transfer of his 1978 or 1979 albums, and reclaimed control over them. Had he wanted, he could have kept terminating transfers as his most popular albums hit their 35 year marks: Controversy (2016), 1999 (2017), Purple Rain (2019), Around the World in a Day (2020), Parade (2021), Sign o' the Times (2022), Lovesexy (2023), Batman (2024), Graffiti Bridge (2025), Diamonds and Pearls (2026) and so on. Instead, in 2014 Prince and Warner Bros. Records redid their deal, which apparently resulted in Prince's reclaiming ownership in his back catalogue, and Warner Bros. retaining certain rights to distribute his music. This effectively resets the clock on the termination right, which can't be exercised against Warner Bros. for the works covered by this agreement until 2049. Warner Bros. and other record labels appear to be quite flexible in redoing deals with their artists with still-popular back catalogues that are approaching their 35-year termination of transfer dates. Musicians are finding that the evolution of digital recording and distribution give them much more of an ability to exploit their works without the help of a record label, which gives them more leverage to get even more favorable deals if they renegotiate. The termination of transfer right and technological advances are giving artists just the second bite at the apple envisioned by the termination of transfer clause's authors -- as long as the artists and their heirs have the legal counsel to help them take advantage of it. Warner Bros. chose to do what it could to lock up Prince's most lucrative works in the face of a termination of transfer.

Prince's Estate can Already Claw Back Some of His Other Works, and More Every Year

However, there may be other licenses and transfers of rights in Prince's works that were not affected by the Warner Bros. agreement. The oldest of these licenses and transfers are eligible for termination, and more will be in the coming years. The mechanics of the termination are a bit complicated, but are based on the passage of 35 years since the initial transfer of copyright. For the purposes of illustration, imagine that shortly after Prince released "Purple Rain" in 1984, he licensed the song to Hallmark for exclusive use in musical greeting cards. Even if the contract said that Hallmark had the right to make "Purple Rain" greeting cards for the entire duration of copyright, Section 203 allows Prince to terminate that license after 35 years. The termination can take place as early as 2019, or within five years after that in 2024. It's a five-year window to terminate -- after that, Prince would lose his chance. To terminate a transfer related to "Purple Rain" as early as possible in 2019, Prince would need to notify Hallmark between 2009 and 2017, since the law calls for written notice no more than 10 and no less than two years before the termination would take effect. During that time between the notice and the termination, the original parties can renegotiate their deal, in this case Prince and Hallmark. If they couldn't come to an agreement, the termination takes effect, and the greeting card rights to "Purple Rain" would revert to Prince. Only after the termination took effect could Prince make a new deal with another party for "Purple Rain" greeting cards. There are many other contours to the law, and there is very little caselaw on how it works, so it is ripe for controversy and error without the guidance of an attorney who understands the process. As Prince has passed away, there is the further question of who (if anyone) can terminate a transfer in the first place.

Who can Pull the Trigger? Not Prince's Siblings

There may end up being an interesting split between who owns the copyright to Prince's work, and who has the right to terminate a transfer. Under Minnesota state law, Prince's estate, including his copyrights, will descend to his sister Tyka Nelson and their five living half-siblings. (More than 700 people have claimed to be Prince's half-sibling, but none have yet been recognized by the court.) Yet under the termination of transfer law, siblings of the author do not have the right to terminate. Section 203 says that widows/widowers, children and grandchildren are the family members who have termination rights. Prince left no living widow, children, or grandchildren, so none of that applies to his works. According to the termination law, siblings are not next in line -- "In the event that the author's widow or widower, children, and grandchildren are not living, the author's executor, administrator, personal representative, or trustee shall own the author's entire termination interest." So who will "inherit" Prince's right to terminate the transfers in his works? Who will actually get the second bite at the apple?

The Fight to be the Administrator

As of this writing, the termination of transfer right is owned by the court-appointed "special administrator" the Bremer Trust, which provided financial services to Prince for many years. "Administrator" is one of the entities recognized by the termination of transfer law. The Bremer Trust was appointed special administrator by request of Prince's sister Tyka Nelson. The Bremer Trust could exercise Prince's termination rights for older works now, and may even find it necessary to do so given the strict deadlines of the termination right. However, the special administrator should be replaced within six months by a more permanent representative. Tyka or any of the other siblings could seek to be named Prince's administrator, and the court could also name the Bremer Trust or another neutral party. An administrator is typically thought of as being a functional role, carrying out the best interests of the estate, distributing property by function of law and not operating for its own benefit. However, the termination of transfer creates a strange situation where the administrator him or herself becomes the owner of the terminated right (or work, if it was transferred in its entirety). It is not clear whether the administrator is required to redistribute any terminated rights to Prince's heirs, all of whom would be well-advised to raise these issues before the permanent administrator is appointed by the court. There may be a contractual agreement among the administrator and the heirs or a court order concerning the exercise of the termination of transfer right, but the actual termination must be made by the court-appointed administrator, the only party recognized by the Copyright Act. Unless addressed by the court, this means that the heirs who own Prince's works by the mechanics of estate law could lose their rights to their own administrator slowly over time through termination of transfer. There will certainly be a struggle among the parties over the selection of a favorable administrator, who may not be bound by any restriction with regards to termination of transfer. There could be a contractual agreement between the heirs and the administrator, but the statute may make such an agreement unenforceable. The court's order in establishing the administrator -- and its interpretation of the statute -- could be worth a fortune.

Most of Prince's Works are Protected through 2086

The fight will likely go on for a long time, but will come to an end on a date certain for most of Prince's works. It is very unusual for works to be commercially valuable through their entire terms of copyright. There are millions of works in the Copyright Office registry that have been all but forgotten. However, Prince is the kind of iconic, transformational artist whose works could very well still be earning money for generations. Under current law, the term of copyright protection is the life of the author plus 70 years, which in Prince's case is 2086. This applies to both Prince's published and unpublished works.

Who is Alexander Nevermind?

Prince also wrote under several pseudonyms, including Jamie Starr, Joey Coco, Alexander Nevermind and Christopher, and occasionally used those names for the copyright registration. Copyright for pseudonymous works lasts for 95 years from publication, or 120 years from creation, whichever expires first. (17 U.S.C. 302(c).) Some of these were registered with the Copyright Office to Prince, even though they were publicly credited to one of his pseudonyms. However, if a simple supplement is filed with the Copyright Office, the term of copyright and the termination of transfer rights remain the same, as if Prince had been credited as the author in the first place. (17 U.S.C. 302(c), § 408(a), (d).) This has already been done for many of these pseudonymous works, such as "Manic Monday." The heirs could choose to leave the registration pseudonymous, but that would likely result in a shorter term of copyright. Prince used pseudonyms primarily in the early part of his career, and works published pseudonymously before 1991 and left unclaimed would expire earlier than the 2086 expiration of works credited to Prince.

Some of Prince's Jointly Authored Works Will be Protected Even Longer

In the case of a joint work prepared by two or more authors who did not work for hire, the copyright endures for a term consisting of the life of the last surviving author and 70 years after such last surviving author's death. (17 USC 302(b).) Prince occasionally wrote with co-authors who have also passed, so the copyright in those songs will last (under current law) until 2086. Many of Prince's co-authors are still alive, such as Madonna for "Love Song," so the copyright expiration cannot yet be determined, but will last beyond 2086.

The Works Made for Hire Battleground

Prince's heirs may challenge any assertion that any of Prince's works were "works made for hire." When a company hires an artist to create a certain kind work and follows certain statutory requirements, the company is considered the author of the work as a work for hire. For a work for hire, term of copyright is 95 years from publication or 120 years from creation, whichever expires first. Songs like Prince's embody two copyrights: the copyright in the composition, and the copyright in the recording. Record contracts typically provide that the recording is a work for hire created by the record label as author, not the artist. As such, the termination of transfer is unavailable for works made for hire. However, that status has been regularly challenged in courts, and it may turn out that despite the language of a particular record contract, Prince's recordings were authored by Prince and transferred to the record label, rather than considered authored by the record label as works for hire. Although this determination affects the term of copyright, it is more impactful on the termination of transfer right, and likely to be a source of litigation as the termination rights in Prince's works mature over the next seventy years.

Joint Authorship Will Complicate Everything

Most Prince songs are credited in the copyright registration solely to Prince, like "Purple Rain" and "1999." Other songs have multiple authors. The Prince and the New Power Generation song "7" has three authors -- Prince and the late blues musicians Lowell Fulsom (d. 1999) and Jimmy McCracklin (d. 2012). Joint authorship affects both the term of copyright and the termination of transfer.

The termination of transfer is granted to any majority block of owners of the right to terminate. If Prince wrote a song with one other living co-author, then termination can only be affected by the co-author plus Prince's administrator. Where Prince is co-author with more than one person, the transfer could be terminated without Prince's administrator's participation. However, even if Prince's heirs and administrator object to such a termination, they are entitled to an equal share of any further exploitation of such works.

It gets more complicated where Prince's collaborators are also deceased. Prince co-authored some songs with his jazz musician father, the late John L. Nelson, such as "Computer Blue" from the Purple Rain album. In such a case, the termination of transfer will depend on both Prince's administrator and his father's heirs. John L. Nelson has several living children (Prince's siblings) and grandchildren who could claim an equal part of the right to terminate transfer. Whichever of them (or their descendants) is alive at the time of the maturation of the right to terminate a transfer of one of those co-authored songs will need to cobble together a majority group of Nelson's children and grandchildren that owns the right to terminate, and also Prince's administrator. This complexity is multiplied where there are multiple deceased authors, as with the song "7." It is possible that heirs who were shut out of a will would nonetheless own or share the late author's right of termination. These rights can be organized by an attorney in the present, even if they can't be exercised until some future date.

Post Mortem Rights of Publicity

Although not a part of copyright law, the right to exercise certain copyright rights will intersect with Prince's rights of publicity. Certain states have laws or court decisions that allow people to protect the use of their personas in commerce. As of this writing, Minnesota protects rights of publicity through court rulings (Lake v. Wal-Mart Stores, Inc., 582 N.W.2d 231 (Minn. 1998); Ventura v. Titan Sports, Inc., 65 F.3d 725 (8th Cir. 1995)), but does not have a right of publicity statute, and is silent on whether those rights exist after the celebrity has passed. However, Minnesota's Senate and House of Representatives recently introduced a new bill that would establish a broad right of publicity that would cover Prince -- the Personal Rights in Names Can Endure (PRINCE) Act. The PRINCE Act would grant extended publicity control to the artist's estate and limit commercial use of his name and likeness by others. It would last for the celebrity's life plus at least 50 years, thereafter for as long as it is still in use, and would apply retroactively to celebrities who died within 50 years before the law's passage. In Prince's case, the right would descend to his siblings, and be further sellable or descendible by them, until at least 2066. Any exercise of copyright in Prince's work would likely be accompanied by a consideration of his post mortem rights of publicity.

Change in Copyright Law will Likely Benefit Prince's Heirs

As we're talking about such a long time, copyright law itself may change. It has gone through major revisions in the United States that have affected the term of copyright. Each copyright regime has stayed in place for decades since the first Copyright Act of 1790. Major changes came in 1831 (which was essentially preserved in the Confederacy under 1861 and 1863 Confederate acts, and honored after the war) and again in 1909. The current regime is the Copyright Act of 1976, which federalized copyright law, removed formalities, and came into effect on January 1, 1978 -- coincidentally at the dawn of Prince's career. Each of these revisions expanded the rights of authors and more forcefully protected intellectual property. This gradual increase in copyright protection is not surprising, as the United States evolved from a country that largely imported the creative works it consumed, into the world's largest exporter of intellectual property. One recent change in copyright law added the administrator as a possible claimant for termination of transfer -- previously, it had only been children or grandchildren. We can expect another change in the law between now and the expiration of copyright in Prince's works in 2086. We can further expect that such a change will increase protection of his works, either in length of term or some unforeseen manner.

Prince as a Model for Future Application of Copyright Law

Due to the administrator's ownership of the right to terminate, there must be an administrator in power at least through 2086, when Prince's works finally enter the public domain. The administrator will have responsibilities beyond 2086, to exercise the termination rights for works Prince co-authored with collaborators who have not yet passed as of 2016. During his lifetime, Prince was a tireless advocate of his rights as an artist, using copyright law to control and protect his artistic footprint, even when it seemed like it would cost him more than it would gain. For different reasons, it appears that more contentious exploration of copyright law will continue to be part of his legacy. Needless to say, it will be a long time before Prince's estate is fully settled. Any successful artist would be wise to consult with an attorney about the effect of copyright law on their estate, and not leave behind the uncertainty faced by the Prince heirs.

June 15, 2016

BEWARE: Recent Decision in CBS Lawsuit Over Pre-1972 Sound Recording Could Wreak Havoc In The Copyright World

By Wallace Collins

Wallace Collins is an entertainment lawyer and intellectual property attorney with more than 30 years of entertainment business experience. He was a songwriter and recording artist for Epic Records before receiving his law degree from Fordham Law School. T: (212) 661-3656; www.wallacecollins.com

The recording artist and songwriter communities should take note of a recent decision in ABS Entertainment, Inc. v. CBS Corporation, et al., a case concerning pre-1972 copyrights - and raise an outcry! The judge in this case held that remastered versions of old songs are entitled to a new copyright, and owners of the originals are not allowed to stop the public performance of them.

Over the past few years, the public performance of songs authored before sound recordings fell under Federal copyright law has become a contentious legal issue. This ABS v. CBS ruling could help immunize terrestrial radio operators and others from lawsuits and disturb many preconceived notions about copyright law. The case arose from a dispute between ABS, owner of recordings by Al Green and others, and CBS Radio, which was dragged into court in this case after other plaintiffs had been successful litigating the theory that pre-1972 songs are protected under State law and could not be broadcast without permission. The ABS lawsuit cut against decades of precedent that songs on the radio served promotional purposes and should not generate compensation for owners. As times have changed, with sales becoming less meaningful to artists, owners have pushed lawsuits and lobbying efforts to shake up the system.

As its defense to the ABS lawsuit, CBS argued that it was not broadcasting the original analog recordings, but rather remastered versions that came out after 1972. Under this specious argument, the specifically performed works would not be protected by State law and CBS would not have to pay anything. ABS argued that what sound engineers accomplish by tweaking timbre, balance and loudness is "mechanical", and not sufficiently original to be entitled to copyright protection. ABS further argued that to accept otherwise would mean that owners of sound recordings would enjoy perpetual copyright over works.

Incredibly, the judge accepted the position of CBS. On the issue of originality, the judge gave credence to the CBS expert, an acoustic engineer and research scientist specializing in forensic investigation of audio evidence, and held that the plaintiffs' pre-1972 sound recordings "have undergone sufficient changes during the remastering process to qualify for federal copyright protection," adding that ABS did not offer sufficient evidence to even make this a contestable point for a jury to decide. As a specific example, the judge referred to the remastered version of Ace Cannon's 1961 recording "Tuff," which the expert found had additional reverberation, was played in a different musical key and at a faster tempo. The judge accepted the proposition that these were not merely "mechanical changes or processes ... such as a change in format, de-clicking and noise reduction," nor were the changes "trivial," making note of the fact that experienced sound engineers were brought in for a reason. "Instead, the changes reflect 'multiple kinds of creative authorship, such as adjustments of equalization, sound editing and channel assignment...'" ABS also tried to argue that sound recordings authored before 1972 cannot serve as a "pre-existing work" for a later derivative work, but the judge found that argument to be unpersuasive. For now therefore, based on this decision, the remastered versions are independently copyrightable.

The holding in this case determined that for some of the recordings in dispute, such as Green's "Let's Stay Together" and Jackie Wilson's "I'm Coming on Back to You": there is no disagreement that the version publicly performed is different from the pre-1972 versions; that for other songs there is no genuine dispute that CBS is performing the post-1972 versions; and that for the remaining songs ABS failed to offer up sufficient evidence that CBS is performing pre-1972 versions. It all adds up to huge victory for CBS, as well as road map for how radio can publicly perform older sound recordings without liability... and it is a horrific, although hopefully temporary, decision for the recording artist community.

Hopefully, this decision will be overturned on appeal so as not to wreak havoc on issues of copyright term, termination rights and its singular determination that sound engineers do copyrightable work when they remaster sound recordings.

September 14, 2016

Flo & Eddie, Inc. v. Sirius XM Radio, Inc., et al. Partial Summary Judgememt

Judge Gutierrez's decision granting Sirius XM partial summary judgment dismissing the request for punitive damages and the unfair competition claim in the Turtles' pre-1972 recording suit in California is available here:

TurtlesCaliforniapartialsummaryjudgment.pdf

September 27, 2016

Post Kirtsaeng, Withdrawal of Attorneys' Fees

After Kirtsaeng, a federal judge in Los Angeles withdrew an earlier award of $720,000 in attorneys' fees to Madonna for winning summary judgment in a music case. vmgv.madonna.pdf

October 26, 2016

Unprecedented Removal of Register of Copyrights Causes Consternation in Copyright Community

Authors Guild Statement
Courtesy of Mary Rasenberger

OCTOBER 24, 2016

Maria Pallante, the Register of Copyrights and Director of the United States Copyright Office, submitted her resignation today, after being abruptly removed and transferred from office last Friday by Dr. Carla Hayden, the new Librarian of Congress, who was sworn in just weeks ago. According to a statement issued by the Library of Congress, Hayden transferred Pallante to a newly created non-managerial position within the Library, Senior Advisor for Digital Strategy. Karyn Temple Claggett, an Associate Register, was appointed Acting Register of Copyrights, effective immediately.

We are disappointed to see Pallante go. She was a devoted leader of the Copyright Office, launching several major initiatives--including a full review of the Copyright Act to bring it into the 21st Century, and the modernization of the Copyright Office to better serve the evolving needs of digital-era Copyright Office constituents--initiatives that took great vision and courage. She also oversaw a full review of and set of recommendations for bringing the Office's technology into the 21st Century; she shored up copyright registration practices and created a comprehensive online guide to registration and recordation--the 2014 Compendium of U.S. Copyright Office Practices, Third Edition--which was the first wholesale revision of the Compendium in 30 years.

In another major initiative (which the Authors Guild has adopted as part of our 2016 Legislative Priorities), Pallante led the Office in a comprehensive study and then a recommendation to create a small claims tribunal, which would allow authors and other creators to bring small infringement claims inexpensively, without having to hire a lawyer. Congressmen Hakeem Jeffries (D-NY) and Tom Marino (R-PA) have already introduced legislation to implement the recommendations, and Congresswoman Judy Chu (D-CA) has indicated that she might as well.

During her tenure, Pallante displayed an uncommon willingness to comprehend and to balance the positions of all copyright stakeholders. Especially important to the Guild was Pallante's conviction that ultimately the creative industries cannot thrive without respect for individual creators. Under Pallante, the Copyright Office operated under and embodied the principle that copyright exists to benefit the public by incentivizing new works of authorship, and that the rights of individual creators need be respected to ensure that robust creative ecosystems can flourish through new digital platforms.

Upon taking office in 2011, Pallante outlined an incredibly ambitious set of Priorities and Special Projects which she proceeded to fully execute--and even exceed--something especially noteworthy given her relatively small staff. Among her many achievements, the Office in just five short years conducted comprehensive studies and issued policy reports on:

The Making Available Right in the United States (February 2016); Orphan Works and Mass Digitization (June 2015); Copyright and the Music Marketplace (February 2015); Resale Royalties (December 2013); Copyright Small Claims (September 2013); Copyright Protection for Pre-1972 Sound Recordings (December 2011); Legal Issues in Mass Digitization (October 2011); and Marketplace Alternatives to Replace Statutory Licenses (August 2011).

Leading always by example, Pallante tackled many difficult issues, and employed a standard of excellence and a work ethic that infused her diversely-minded staff--hired from all copyright sectors--with the energy and devotion to accomplish monumental amounts of exceedingly high quality work. Each study, report and other document issued during her tenure was extremely well researched and written, the law and facts meticulously analyzed. And in every study and rulemaking process, the Office thoroughly reviewed and addressed the hundreds (sometimes thousands) of stakeholder comments submitted for consideration.

It is a difficult time of transition in copyright law, with so much of the law being questioned and recast in response to the digital revolution. It is the rare person who can summon the abilities and strengths Pallante did to tackle these issues head-on. We applaud Pallante for her outstanding service as Register these last five years.

The timing of Pallante's removal is less than ideal, especially in light of her leadership on issues of copyright reform and the significant pending projects. Specifically, at the time of Pallante's removal, the Office was actively working towards reports on:

Moral Rights; Revising the Copyright Exceptions for Libraries and Archives; Mandatory Deposit of Online-Only Books; Copyright Office IT Modernization; Section 512 of the DMCA; and Section 1201 of the DMCA (Circumvention of Technological Protection Measures), among other issues.

It has been the Authors Guild's long held belief that the head of the Copyright Office, not the Librarian, should be responsible for issuing copyright policy. The Copyright Act currently states that the Register of Copyright is subject to the direction and supervision of the Librarian of Congress and that regulations established by the Copyright Office are subject to the Librarian's approval. This is required by the fact that the Copyright Office is a division of the Library of Congress (for historical reasons--the Library wanted the copyright deposits), and the Register is not a presidential appointee. This is why it has been a long-standing priority of the Authors Guild for Congress to modernize the Copyright Office to give it greater political, budget and IT independence from the Library.

Fortunately, Congress has heard our ideas and has been looking at changing the institutional structure of the Copyright Office. Legislation has been introduced in the House that would modernize the Copyright Office and give it greater independence from the Library. The Authors Guild endorsed this bill and continues to support this concept.

Meanwhile, we are pleased that Temple Claggett, Associate Register of Copyrights and Director of Policy and International Affairs for the United States Copyright Office, has agreed to serve as Acting Register while the search for a permanent replacement is underway. Temple Claggett is an astute and experienced copyright lawyer and manager and an excellent choice to lead the Copyright Office through this period of transition. In her prior role, Temple Claggett oversaw the office's domestic and international policy analyses, legislative support, and trade negotiations, among other matters. We look forward to working with Temple Claggett during the transition.

We understand that a search committee to fill the Register's position is being formed. The Authors Guild will request that creators be represented on that committee. We hope that the new Register will continue the Copyright Office's long tradition of championing and serving the interests of individual creators, men and women who work in an increasingly precarious economy, and whose work, though often taken for granted, remains the lifeblood of our culture.

November 29, 2016

Where's the Fair Use? YouTube's Copyright Protection Systems and the Reaction of Content Creators

By Robert Marotta

With 2016 coming to a close, it is important to take a look back at a movement that was lost to the noise of the presidential election. Over the past year, online content creators who use others' copyrighted works on YouTube came together in solidarity under the banner of "Where's the Fair Use?" Their aim was to bring attention to what they believe was YouTube's unfair system of preventing copyright infringement. While their content probably would have constituted fair use at trial under U.S. copyright law, videos and whole channels were being taken down. The chilling effect on commentary, criticism, and creativity as a whole placed a stranglehold on this burgeoning form of media.

As a 2014 episode of "South Park" noted: "Today commentary is the content." YouTube is abuzz with reviewers sharing their opinions on films, video games, and music. This content ranges from clips of copyrighted material over humorous voiceovers to full blown parody sketches. As the younger generations move away from television as their main source of content, YouTube increasingly captures more viewership. Its increasing influence on culture cannot be overstated. The rise of this medium brings with it the rise of a new type of creator. Without the big budget and exposure of shows like "Saturday Night Live", these creators critique, comment, and poke fun at copyrighted works in an engaging way. In the process, they can create new fans, and new ways of enjoying often forgotten films and games. If YouTube's current system regarding copyright enforcement continues, then these creators and their fan bases are in trouble.

Under 17 U.S.C. § 107, the use of another's copyrighted work for criticism, comment, news reporting, teaching, scholarship, or research, is not an infringement of copyright as a defense in an infringement action, and protected under fair use. This is a central pillar to our copyright system. Most relevant to the discussion here is criticism and comment. Integral to the content of channels such as Cinema Sins, TEAMFOURSTAR, Channel Awesome's The Nostalgia Critic, and the Angry Joe Show, are the combination of scenes from various films and games intercut with commentary/parody to highlight a point. In a typical "Nostalgia Critic" episode, the absurdity of well-loved movies from the viewer's childhood are shown through comedic voiceovers. This creates a very clear reference for viewers who may not have seen the particular film in years, and allows them to appreciate the humor. The use of clips is especially important with respect to video game reviews, as found on the Angry Joe Show and many others. Any technical problems or fluid dynamic gameplay can only be truly shown to the viewer firsthand. It allows viewers to make informed purchases on increasingly expensive games. Without the ability to use short clips of the content, these reviewers' videos are completely neutered. The creators highlighted here are only a fraction of those affected. As some of the vanguards of the industry, they may have the resources to fend off a copyright attack on YouTube. Smaller up-and-coming channels are not as fortunate.

YouTube's flawed copyright system stems from the Safe Harbor Provision under Title II of The Digital Millennium Copyright Act (DMCA). While protection of Internet Service Providers (ISPs) like YouTube, under the DMCA, is integral to protecting those that make content available, it is their implementation of this system that creates problems. Under YouTube's system, there are two categories of copyright infringement penalties: 1) a claim and 2) a strike. The more severe is a strike, whereby the copyright holder must make a complete and valid legal request asking YouTube to take the video down. Furthermore, upon three strikes, a content creator will have its account terminated. This includes all videos being removed, along with ratings and comments that have accumulated since the videos were posted. Finally, the creator is prevented from creating a new account.

Many users manage multiple channels. A strike on one channel may affect non-infringing channels. When a strike is issued, a similar partner strike is placed on a user's account. These partner strikes are considered pending for the first 30 days. If the content creator has not resolved the issue after this period, it becomes "active". Accumulating 10 or more active partner strikes severely limit the online creators' accounts. With 10 partner strikes, a content creator loses the ability to add new channels or move channels between content owners. Even if a content creator removes channels, this will not resolve the copyright strike. At 15 or more partner active strikes, the content creator's freedom of expression is curtailed. A content creator loses the ability to access YouTube promotional features. This includes the ability to create custom thumbnails, modify channel art, add annotations (i.e. videos), and other features. With 20 or more active partner strikes, the user is prevented from uploading new videos or live streams, and YouTube further retains the right to terminate.

A silver lining does exist for content creators. After 90 days (120 days after a copyright strike was issued), a partner strike expires and is removed from the total. However the sheer volume of strikes many of the big creators receive in short periods of time limit the availability of this remedy. Multiple creators face new claims or strikes every other day.

A further remedy on which most content creators rest is the submission of a counter notification. They must submit that the takedown occurred due to a mistake or misidentification of the material. This seemingly fair system heavily favors the copyright owners. Many of the online content creators note the claims come not from the copyright holders themselves, but by automated rights management firms. It appears that these groups operate without placing an actual human in front of the content, whereby the nature of fair use could be readily apparent. Furthermore, no penalties for false strikes are included in the system, thereby favoring rights holders. Content creators feel as if they are under the thumb of often far wealthier organizations, and bear the costs for over-policing.

The next, and more common mechanism of how copyright infringement is handled on YouTube is a copyright Content ID claim. The claims process is dependent on YouTube's Content ID program, whereby the rightsholders provide the YouTube with full copies of their works. YouTube then compiles these reference files into a database, from which all videos are compared. The system is able to determine partial matches, video matches, and audio matches. It can even detect matches when the video has been uploaded with poor sound or video quality. When a match is detected, YouTube automatically takes action based on what the copyright holder wants: the video can be left alone, taken down, or left up with the rightsholder somehow monetizing it. The effect on monetization has especially drawn the ire of YouTube content creators, as even when a claim is resolved, they would not get the lost profits made off the video while the claim was in progress. In response to the protests of content creators, YouTube seems to have amended its policy on monetization. Currently, YouTube's content ID process includes the placing of monetized profits in a separate account to be paid to the appropriate party upon resolution. In response to the recent outcry from content creators, YouTube amended its systems, showing a willingness to support smaller creators. However, but problems still persists.

The claim system is rampant for abuse, and many content creators have seen their freedoms greatly reduced. When a claim is disputed, the claimant copyright holder has 30 days to respond. If no response is given, then the video is reinstated. If the copyright holder does respond, it can remove or reinstate the claim. If the latter, the user must file an appeal to which the copyright holder has another 30 days to respond. Online content creators recount horror stories of dealing with automated response from YouTube and rights management firms. For smaller creators, this lengthy, possibly costly process harms their ability to create additional content, which may impact their livelihoods. Furthermore, free speech is implicated, as many creators have seen videos that are critical or negative of certain films and games suffer claims and strikes. This indicates that some copyright holders may be attempting to silence criticism, and not merely protect their copyrights. The automated system has even led to the takedown of videos containing only commentary about films and games, with no actual footage or sound from those copyrights. Currently, YouTube has no penalties for erroneous claims or strikes, and thus the system incentivizes a "claim first" approach.

After widespread outcry from content creators, YouTube reexamined its system. Courts have also begun to warm to the YouTube user complaints. In Lenz v. Universal Music Corp, 801 F.3d 1126 (9th Cir. 2015), the U.S. Court of Appeals for the Ninth Circuit held that copyright holders must consider fair use when filing a takedown notice. In that case, Stephanie Lenz posted a 29-second clip of her young children dancing to the Prince classic, "Let's Go Crazy." YouTube sent her a takedown notice, complying with its duties under the DMCA. In response, Lenz posted a counter notification, claiming that the video should be re-posted on grounds of fair use. Later that year, Lenz sued for misrepresentation under the DMCA 17 § U.S.C. (f). Her claim further sought a declaration that the use of the song in the video was non-infringing. She rested her case on DMCA 17 U.S.C. § 512(c)(3)(A)(v), whereby the copyright holder must consider whether use of the material was allowed by the copyright owner or the law. Integral to the case holding is the Court's view that because 17 U.S.C. § 107 created a type of non-infringing use, fair use is "authorized by law" and a copyright holder must consider the existence of fair use before sending a takedown notification under § 512(c) (Lenz, at 1132-1133).

While Lenz represents a step in the right direction, many content creators will certainly still face hurdles. Despite the holding, in the year following this case, online content creators have seen the number of claims and strikes on their channels exponentially increase. The consequence of such a high volume of complaints is that they all cannot be defended. Furthermore, the case does little to address the automated takedown notices, and whether or not this would be some indicator of bad faith for the purposes of a misrepresentation claim. The takedown initiated by Universal had an actual human evaluate allegedly infringing content, a far cry from the automated rights management firms of today. It does seem to hint that a willful blindness standard can be used to determine whether the copyright holder knowingly materially misrepresented that it held a "good faith belief" the offending activity was not a fair use under 17 U.S.C. § 512(f). However as Lenz encountered, sustaining a misrepresentation claim on grounds of willful blindness is difficult to prove, due to the adoption of a subjective test for good faith, and whether the copyright holder was subjectively aware that the allegedly infringing content contains fair use.

To ensure that this burgeoning medium is allowed to succeed, content creators should stay vigilant, as YouTube and other online platforms are at risk. The hope is that creators of new content who rely on copyrights can continue to create, within the confines of the law. As YouTube grows, so too does the importance of these new creators. The rise of this new form of media has led to problems applying copyright laws that never contemplated the difficulties of the digital age. The risk of not adequately protecting these new content creators places a heavy burden on them, and chills otherwise entertaining and insightful content, as well as free speech. The questions left open by Lenz and issues raised by YouTube content creators means that this subject matter is primed for further review by the courts.

December 24, 2016

John Wiley & Sons v Kirtsaeng

By Barry Werbin

On December 21st, Judge Cote (SDNY) denied Kirtsaeng's motion for attorneys' fees following the Supreme Court's reversal of the Second Circuit's prior decision, which had affirmed the District Court's initial rejection of Kirtsaeng's motion. Following a Second Circuit mandate issued on August 26, 2016, vacating the District Court's decision in light of the Supremes' reversal, Judge Cote held that Wiley was reasonable to submit its claims and that the claims were not frivolous. Judge Cote also noted that Wiley had acted in good faith.

The Supreme Court had remanded to ensure that while substantial weight could be given to the reasonableness of Wiley's litigation position, that alone should not be dispositive, and all other relevant factors had to be considered, as articulated in the SCOTUS Fogerty and 16 Casa Duse decisions.

A copy of the decision is attached at John Wiley & Sons v. Kirtsaeng.pdf. It will be interesting to see if Kirtsaeng appeals once again.

And here is new copyright case about the Grinch:

http://www.nytimes.com/2016/12/29/books/matthew-lombardo-sues-dr-seuss-enterprises-whos-holiday-grinch.html?ref=todayspaper​​

March 13, 2017

Docudramas, Created Without Permission of the Subjects, May Face New Challenges in New York

By Marc Jacobson

An appellate court in New York held recently that a plaintiff, representing himself, who asserts that the defendant knowingly produced a materially and substantially fictitious biography about the plaintiff, without the plaintiff's consent, states a claim for violation of New York's right of privacy statute, and that the defendant must answer the complaint. This case, on its face, may suggest a reversal of trends in the entertainment industry, which of late has permitted docudramas to proceed without the subject's consent.

From his prison cell in Dannemora, plaintiff Christopher Porco first successfully obtained an injunction against Lifetime TV Networks' planned broadcast of a motion picture based upon Porco's conviction for murder of his father and attempted murder of his mother. That injunction was later reversed as a prior restraint -- a violation of the First Amendment -- and the case was remanded to the trial court. On remand, Porco's complaint was dismissed. This decision arises from Mr. Porco's appeal of that dismissal for failure to state a cause of action.

New York's Civil Rights Law §50 states that when a firm or corporation "uses for advertising purposes, or for the purposes of trade, the name, portrait or picture of any living person without having first obtained the written consent of such a person" the entity commits a misdemeanor. Section 51 creates a private right of action for such violation, but under relevant case law, the statute does not apply to "newsworthy events or matters of public interest." Does the film about Porco's life story fit a newsworthy event or matter of public interest?

The court noted, however, that in Porco's case, the limitations on the statute's applicability must be viewed in accordance with binding precedent. Where, as in this case, the program is a "substantially fictitious biography", the newsworthy exception will not help the production company or distribution company. Quoting from Messenger v Gruner + Jahr Print. & Publ., 94 NY2d at 446, the court said that the work "may be so infected with fiction, dramatization or embellishment that it cannot be said to fulfill the purpose of the newsworthiness exception."

In support of his position, Porco submitted a letter sent to him by the producer, who noted that she was involved in the production of a documentary intended to accompany the film that the producer "hope[d] . . . [would] provide the platform for [the mother's] family to state their position in a non-fictional program after the [film] airs." Relying on the existence of that letter (which is apparently not part of the complaint) and construing the complaint most favorably to the plaintiff, the appellate court found that Porco stated a cause of action, and the defendant must file an answer.

In my opinion, the court bent over backwards to provide recourse to a plaintiff representing himself and allowed this claim to proceed, at this preliminary stage. When all is said and done, there remains the possibility that the defendants will not be found to have violated Porco's rights. At this juncture, the court merely held that the defendants must answer the complaint, and that as required, it construed the complaint in the light most favorable to plaintiff, and in so doing found that a cause of action was stated.

Porco v Lifetime Entertainment Servs., LLC 2017 NY Slip Op 01421 Decided on February 23, 2017 Appellate Division, Third Department Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. The opinion is uncorrected and subject to revision before publication in the Official Reports. http://law.justia.com/cases/new-york/appellate-division-third-department/2017/522707.html

March 18, 2017

Flo & Eddie, Inc. v. Pandora Media, Inc.,

On March 15th, the Ninth Circuit issued an order certifying the pre 1972 sound recording public performance right question to the California Supreme Court in Flo & Eddie, Inc. v. Pandora Media, Inc. (9th Cir. No. 15-55287)

The Certification Order: Flo & Eddie Certification Order.pdf

March 30, 2017

Horizon Comics Productions, Inc. v. Marvel Entertainment, LLC et al

By Mike Steger

In this case, brought by Horizon Comics, Horizon claims that the armored suits used in Marvel's "Iron Man" and "Avengers" movies infringe on Horizon's copyrights in armor displayed in its "Radix" comic book series. On Marvel's motion to dismiss the complaint, the court ruled that (1) issues of fact exist as to similarities between the armor used in a promotional poster for "Iron Man 3" and promotional art for the "Radix" series, and (2) the mechanized body armor in the films was not substantially similar to that in the "Radix" series.

IronManDecision3.27.17.pdf

"Warm Kitty"

In Ellen Newlin Chase and Margaret Chase Perry v. Warner Bros. Entertainment, Inc., et al, Judge Buchwald of the Southern District dismissed the copyright action brought by daughters of a poet for failure to state a claim against "The Big Bang Theory" for the song "Warm Kitty".

MTDorder.pdf

Cert denied in Capital Records v. Vimeo

By Barry Werbin

On Monday, March 17th, the Supreme Court denied cert in Capital Records v. Vimeo, thereby leaving intact the Second Circuit's 2016 decision (826 F.3d 78 (2d Cir. 2016)) finding that the DMCA does apply to pre-1972 sound recordings to protect compliant providers from copyright claims under state laws.

August 29, 2017

Ninth Circuit Upholds Preliminary Injunction Against VidAngel's DVD "Filtering" Service

By Barry Werbin

In a decision issued in Disney Enterprises, Inc., et al. v. VidAngel, Inc. on August 24, 2017 [Disney v. VidAngel.pdf], the Ninth Circuit affirmed the grant of a preliminary injunction to stop VidAngel's ripping of DVDs, decrypting and copying them to its servers, and then filtering out objectionable content at the request of end users who could then stream the filtered content from VidAngel's cloud servers for $20. After viewing a stream, however, the end user would "return" it to VidAngel for a $19 credit. VidAngel then discards the filtered segments after the customer views them. The discs contained film and TV content owned by Disney and the other studio plaintiffs.

The Court held that the Family Movie Act of 2005 ("FMA"), 17 U.S.C. § 110(11), only exempted from copyright infringement filtered versions of content that is created from authorized versions, and the copies ripped to VidAngel's servers at that point became unauthorized and infringing, even though VidAngel originally purchased legitimate DVDs. VidAngel was also found in likely violation of the DMCA for circumventing the plaintiff's anti-circumvention technology. Finally, a fair use defense was rejected.

This was the first Ninth Circuit case to interpret the FMA. The Court emphasized that FMA authorized "'making imperceptible'--filtering--by or at the direction of a member of a private household of limited portions of audio or video content of a motion picture, during performances or transmissions to private households, 'from an authorized copy of the motion picture.'"

If VidAngel could meet this "authorized copy" requirement by simply starting with a lawfully purchased disc, it would open up a "giant loophole" in the statute and eviscerate its purpose. Indeed, observed the Court, Congress intended that FMA not impact "established doctrines of copyright law."

With respect to fair use, the Court found that: "Although removing objectionable content may permit a viewer to enjoy a film, this does not necessarily 'add[] something new' or change the 'expression, meaning, or message' of the film" so as to make it transformative. The District Court's ruling that market harm was presumed was also affirmed in light of VidAngel's commercial, non-transformative use.

September 11, 2017

"We Shall Overcome" in the Public Domain

By Barry Werbin

In a significant decision issued on Friday (We Shall Overcome opinion.pdf), Judge Denise Cote granted summary judgment in favor of the class action plaintiff organizations against the owners of the publishing rights to Pete Seeger's iconic civil rights song "We Shall Overcome," finding that the original 1948 copyrighted version of the sheet music (with lyrics), which was owned by Seeger's company, People's Songs, Inc. ("PSI") and had fallen into the public domain in 1976, was not sufficiently different from the core portions of later versions recorded in 1960 and 1963, in which derivative copyrights were claimed by the defendant music publishers. Judge Cote agreed with the plaintiffs "that the lyrics and melody in the first verse and its identical fifth verse ("Verse 1/5") of the Song are not sufficiently original to qualify for copyright registration as a derivative work." The opinion goes through a detailed, lengthy history of the song's genesis.

The song likely originated from an old spiritual that Zilphia Horton learned from striking tobacco workers in South Carolina in the early 1940s. Seeger learned a version of the song from Horton. In 1960, defendant Ludlow Music, Inc. registered a copyright in the sheet music for a claimed derivative version of the song, listing Horton as a co-author with two others (but not Seeger). In 1963, Ludlow obtained a second registration that identified Seeger, along with Horton and the others, as the authors of "New words and music adaption."

The court found only minor differences between the 1948 public domain PSI sheet music version and the later versions registered in 1960 and 1963. Specifically, the words "I will overcome" were changed to "I shall overcome" and the phrase "down in my heart" was changed to "deep in my heart." Two small music changes were also noted, described by Judge Cote as follows:

In both versions of the Song the differences occur during the melodic descent from note "A" to "E" during the singing of the word "overcome." Specifically, the descent from "A" to "E" begins one beat later in the Copyrighted Song, and an eighth note "F" is added between notes "G" and "E" in the second measure. This also changes the rhythm of the second measure. The second difference appears in the seventh measure. In both versions, the melodic descent is from note "D" to "G" during the singing of the word "someday," which is sung over measures six to eight. The Copyrighted Song adds a flourish or trill during this descent, while the word "day" is being sung. The trill consists of three eighth notes "A - B - A."

The court initially rejected any presumption of validity of the 1960 and 1963 copyright registrations because of erroneous information submitted to the Copyright Office about the derivative nature and authorship of those works.

On the core issue of similarity with the 1948 PSI public domain version and the enforceability of the 1960 and 1963 versions as independent derivative works, Judge Cote held "that the melody and lyrics of Verse 1/5 of the Song are not sufficiently original to qualify as a derivative work entitled to a copyright. As a matter of law, the alterations from the PSI Version are too trivial. A person listening to Verse 1/5 of the Song would be hearing the same old song reflected in the published PSI Version with only minor, trivial changes of the kind that any skilled musician would feel free to make. As §101 of the Copyright Act teaches, a judgment about modification to an original work must be based on a consideration of the derivative work 'as a whole.'"

September 13, 2017

Update on the "Monkey Selfie" Litigation

By Barry Werbin

A settlement was reached and the parties filed a joint motion to dismiss the pending a Ninth Circuit appeal. Part of the settlement requires Slater, the photographer, to donate 25% of any future proceeds from the monkey selfie pictures to organizations that protect macaque monkey habitats in Indonesia.

However, the really interesting provision is a joint request that the Ninth Circuit vacate the District Court's ruling, which dismissed the claim based on lack of standing because animals cannot copyright works they create. The rationale, as expressed in the motion, is that Naruto-- the selfie photogenic macaque at center stage--was not a party to the case (which PETA brought on Naruto's behalf) and therefore, as PETA urges, "it would be just and proper to not bind Plaintiff Naruto by the judgment...." and that "Naruto should not be 'forced to acquiesce' to the district court's judgment that he lacks standing under the Copyright Act where the appeal will be mooted by an agreement by PETA and PETA's Next Friend Case status is contested and undecided." Therefore, the Ninth Circuit will need to buy in to monkeys having legal standing to sue to protect some enforceable interest.

Of course PETA doesn't want the negative precedent to remain of record. Yet "forced to acquiesce" takes it a bit far (in my opinion).

Here is a copy of the parties' joint motion to dismiss the appeal and vacate the judgement: Naruto-Settlement.pdf

October 29, 2017

Keitel v E*TRADE Fin. Corp., 2017 NY Slip Op 06624, (September 26, 2017 App. Div. 1st Dept.)

By Marc Jacobson

The Oscar and Golden Globe nominee, and Co-President of The Actor's Studio, Harvey Keitel, sought to enforce an offer made to him to appear in what seems to be a commercial for E*Trade. Although Keitel's agent required that whatever offer was submitted to them for Keitel's services had to be "firm and binding," the defendant's offer, which had additional conditions attached to it, was held to be not "firm and binding" so therefore no agreement was reached and judgement for the defendant/respondent was affirmed.

The agent requested that any offer made for his services be "firm and binding." The defendant acknowledged this request to the agent. Internal communications on the defendant's side showed that he intended to make a "firm offer." The defendant's cover email stated the offer was "firm and binding," but also that the offer was contingent on the parties agreeing to compensation as well as the script. The term sheet attached to that email stated that it "sets forth the general intent of the parties to discuss in good faith the terms and conditions" of the deal, and that "neither party shall be bound until the parties execute a more formal written agreement."

The Appellate Division affirmed Justice Ramos' decision in the lower court that no agreement was formed, because the term sheet by its very terms suggested that it was not binding without execution of a formal written agreement. The court determined that Keitel's reliance on the email, while effectively ignoring the term sheet itself, was not reasonable. As no binding agreement existed, the court affirmed the decision below.

The court refused to consider evidence with respect to the defendant's offer to pay a common "kill fee" after the dispute arose, because such a payment was in the nature of a settlement offer, and was not admissible.

For me, the process is analogous to the "battle of the forms" embodied in Article 2 of the Uniform Commercial Code, governing the sale of goods. UCC Section 2-207 states:

(1) A definite and seasonable expression of acceptance ... sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.
(2) The additional terms are to be construed as proposals for addition to the contract.  Between merchants such terms become part of the contract unless:
(a) the offer expressly limits acceptance to the terms of the offer;
(b) they materially alter it;  or
(c) notification of objection to them has already been given or is given within a reasonable time after notice of them is received.
(3) Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract.  In such case the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this Act.

Practitioners should recognize that emails accompanied by term sheets may create confusion with regard to the parties' intention. However, it is good to know that at least in the First Department, the words of a term sheet are more important (dare I say trump?) an email.

November 20, 2017

Conducting Salary Discussions in New York City after November 1, 2017

By Marc Jacobson, Esq.

Don't ask for an applicant's salary history, whether for you or your client, when interviewing that applicant for employment in New York City.


You were asked to represent a film production to take place in NYC. As part of that engagement, you were asked to negotiate agreements for the director, cast members, and for the department heads, including makeup, sound, transportation, costumes, and others.

Calls start coming in and you're ready to get to work. An actor's agent confirms that her client wants to play the female lead. In turn, you say the role requires eight consecutive weeks of shooting preceded by one week of rehearsal. You want to minimize costs for the production, and ask: "What's her quote?", meaning, what was her fee per week on her last film?

Or, you're working on any other NYC production--a TV show, play, or music video-- and you need to negotiate the agreement for the Costume or Set Designer. You ask each agent for a quote.

Under a new law, now in effect in NYC, each such question can subject the production to a fine of $125,000.

Section 8-107 of the NYC Administrative Code was recently amended to add a new subdivision 25. That subdivision prohibits employers from inquiring about or relying on a prospective employee's salary history prior to setting a new salary. When enacting the law, the council said: "When employers rely on salary histories to determine compensation, they perpetuate the gender wage gap. Adopting measures like this bill can reduce the likelihood that women will be prejudiced by prior salary levels and help break the cycle of gender pay inequity."

It is now unlawful for an "employer, employment agency, or employee or agent thereof:
1. To inquire about the salary history of an applicant for employment; or
2. To rely on the salary history of an applicant in determining the salary, benefits or other compensation for such applicant during the hiring process, including the negotiation of a contract."

There is a definition of "inquire" in the code as well:
" 'to inquire' means to communicate any question or statement to an applicant, an applicant's current or prior employer, or a current or former employee or agent of the applicant's current or prior employer, in writing or otherwise, for the purpose of obtaining an applicant's salary history, or to conduct a search of publicly available records or reports for the purpose of obtaining an applicant's salary history, but does not include informing the applicant in writing or otherwise about the position's proposed or anticipated salary or salary range."

The term "salary history" is also defined: "For purposes of this subdivision, 'salary history' includes the applicant's current or prior wage, benefits or other compensation. 'Salary history' does not include any objective measure of the applicant's productivity such as revenue, sales, or other production reports."

The employer, or its representatives, "may, without inquiring about salary history, engage in discussion with the applicant about their expectations with respect to salary benefits and other compensation..."

Going further, and making these interviews/negotiations even more awkward, "where an applicant voluntarily and without prompting discloses salary history to the [employer or its representatives] the employer [or its representatives] may consider salary history in determining salary benefits and other compensation for such applicant, and may verify such applicant's salary history."

If you're in the midst of such a discussion, you cannot "prompt" the applicant to tell you his or her salary history. Further, if you learn it from another source, you also cannot "rely" on it in determining the salary of the applicant.

However, if the applicant voluntarily reveals that information to you without prompting, you can rely on the information, and make whatever decision you want.

Without a tape recording of every conversation between the employer or the employer's representatives, and the applicant or the applicant's representatives, it seems like whatever happens in these calls will be difficult to prove.

Under §8-126 of the NYC Administrative Code, if the Human Rights Commission, which has the authority to enforce the new subdivision, finds that a person "has engaged in an unlawful discriminatory practice, it may, to vindicate the public interest, impose a civil penalty" of not more than $125,000. This penalty is in addition to the complainant's right to bring a private action under the code. Criminal misdemeanor penalties are available for "any person who shall willfully resist, prevent, impede or interfere with the commission or any of its members or representatives in the performance of any duty" under the code.

Whether acting for yourself or your clients, it is now a violation of the NYC Administrative Code to inquire about salary history, or to rely on salary history, to determine the salary of any employee.

Link to the NYC Charter: https://www1.nyc.gov/site/cchr/law/chapter-1.page#8-107.1

The code, as enacted, with summary of the law: http://legistar.council.nyc.gov/LegislationDetail.aspx?ID=2813507&GUID=938399E5-6608-42F5-9C83-9D2665D9496F

Marc Jacobson, Esq. is the Founding Chairman of the NYS Bar Association Section on Entertainment Arts & Sports Law. He speaks regularly at bar association and other events about issues related to his practice. He is licensed to practice law in New York, California, and Florida. He can be reached at marc@marcjacobson.com or +1-212-245-8955. www.marcjacobson.com

January 4, 2018

California Decision Undercutting Copyright in Video Games

By Barry Werbin