I am NOT a Gleek – Glee on Copyright

First off, I am not a “Gleek”; however after watching a recent episode with my family, I got to thinking about what a great illustration about copyright law that the show and the production of the show provides.

The first issue that came to mind was – beside the producers of Glee, who is making money off the music?  Under US copyright law, royalties for music generally fall into three categories: (1) For reproductions (CD, downloading), (2) Grand Performance Rights (commonly known as sync rights), and (3) performance rights (radio play). There are other categories but rest assured sure I doubt that copies of “Glee for ukulele” sheet music is making ton of money.

So let’s use a hypothetical, let’s say I have a band and we record and make popular a new song written solely by our bassist. The bassist is the sole copyright holder. Under our recording agreement, all the band members get a percentage of all sales of their recording of the song. However under copyright law, the bassist / songwriter also received a mechanical royalty (disregarding controlled compositions clauses) and is paid for every time it plays on the radio.

Now let’s suppose we work hard and promote ourselves, and the song gains just enough popularity that the folks at Glee decide that they want their precocious group of oppressed teenage songbirds to break into song (and coincidentally mimic the exact style of the original recording) – Glee will pay the songwriter/bassist a synchronization fee (for putting it into a TV show)[not everyone jumps at the chance, BTW], and mechanical fees for including it on a cast recordings. Additionally, the Performing Rights Organizations (ASCAP, BMI, etc)will collect royalties for the songwriter/bassist for every time the cast recording is played on the radio. The drummer, lead singer, and guitarist get zilch.

So as sales dry-up for the original recording, our songwriting bassist gets paid over and over again while the band’s hard-working drummer is left out in the cold with only the comfort that the Cast of Glee are themselves complaining that they aren’t getting paid enough in royalties for their recording of the very same song.

More “Glee on Copyright” to come.

Gray Market Goods in Legal Gray Area

In what is perhaps a fitting end to the only copyright case before the Supreme Court during this term, the Court sitting without Justice Kagen issued its first split decision of the term – leaving the issue of “gray-market” goods in a gray area.

    ‘Gray-market’ goods, or ‘parallel imports,’ are genuine products possessing a brand name protected by a trademark or copyright. They are typically manufactured abroad, and purchased and imported into the United States by third parties, thereby bypassing the authorized U.S. distribution channels.” Parfums Givenchy, Inc. v. Drug Emporium, Inc., 38 F.3d 477

The case centered on Costco’s sale of imported watches manufactured in other countries.  The watches manufacturer alleged that the unauthorized sale of the watches constituted a violation of their rights to control importation under 17 USC 602(a).   Costco’s defense rested on the “first sale doctrine” The case centered on Costco’s sale of imported watches manufactured in other countries.  The watches manufacturer alleged that the unauthorized sale of the watches constituted a violation of their rights to control importation under 17 USC 602(a).   Costco’s defense rested on the “first sale doctrine” 17 USC 109(a)which holds that while a copyright holder may control the first sale of their copyright protected work, the subsequent sale of the item cannot be controlled.   Omega, however, argued that the first sale doctrine only applies to the goods manufactured in the United States and that since the watches were made outside the country, their subsequent purchase by Costco from a company that did not have authorization to import them to the United States does not provide Costco with a defense of copyright infringement based on the first sale doctrine.

As the Court was split, the lower courts opinion holding that the first sale doctrine does not apply to foreign manufactured goods remains in place and is considered the controlling law for the Ninth Circuit.

Magic Words for Copyright Transfer

Last week the 8th Circuit Court of Appeals (which covers Minnesota) ruled in Thomsen v. Famous Dave’s of Am., a case involving a copyright infringement claim by an independent signage designer that designed and built various signs and interior elements for Famous Dave’s Restaurant around the Twin Cities. Following a prior dispute between the parties, where Thomsen alleged infringement of his copyright (no work for hire agreement or other assignments were entered into), the parties entered into a settlement agreement. As a part of that settlement, the parties agreed that:

    Thomson “. . . is releasing all copyright, proprietary design and sign work to [Famous Dave’s] in all other restaurants that he has worked on with the exception of . . .”

Adopting language from the 9th Circuit, the Bench ruled that

    ” A transfer of ownership requires no “magic words” to satisfy copyright law; even “a one-line pro forma statement will do.” (citing, Radio Television Espanola S.A. v. New World Entm’t, Ltd. , 183 F.3d 922, 927 (9th Cir. 1999)).

While not earth-shattering, this opinion is interesting in that it appears to be the first opinion in Minnesota that explicitly adopts the position that simple wording in a copyright transfer can meet the necessary language needed to assign a copyright under Section 204(a) of the Copyright Act as long as the basic terms are of the transfers are spelled out.

For Creatives, this opinion makes clear the importance of having clear and understandable agreements in place. Reliance on technicalities is not in the best interest of the parties. While some aspects of copyright transfers and assignments require “magic words,” other aspects can be transferred or otherwise affected by ill-fitting language and contradictory clauses. Having a contract reviewed by an attorney can help by providing trained eyes to help make sure that what you think you are signing is what you are actually signing.

Audit & Record Keeping Provisions

Whether you have partners, or are contracting for royalties from another party, one of the most common provisions in any licensing & partnership contracts is one that provides a means and method of keeping financial records of the project or business. The exact language will differ slightly depending on the specifics of your circumstances, but common terms will include what types of books are kept, how and when audits may occur, and a description of what is to happen in the event of a problem with the records.

Records
While there are a variety of record-keeping methods, typical contract provisions regarding record-keeping will simply provide that the books are complete and accurate. In most cases it is understood that the books will be kept in accordance with “generally accepted accounting principles.” Furthermore, in some circumstances, state statutes may regulate how the books are kept.

Audits
Once it is decided what and how records are kept, one of the most important elements of a record-keeping provision is one that allows audits of the records. This is useful in keeping everyone on their toes, and it provides a means by which everyone can feel comfortable that everyone is being treated fairly. However, it is important to remember the difference between an audit and the right to inspect the records. While the right of a party to inspect records is often unequivocal and required by statute, the right to audit can be more easily limited. Audit provisions typically address when an audit may occur, who can ask for one, and who will pay for the audit. Often the number of times a party can request an audit during a specific time period is limited and how much notice is needed before an audit can occur also varies. Audit provisions usually provide that the party requesting the audit bear the cost of the audit.

Resolution
The last element of a record-keeping provision is one that spells out what happens in the event that an audit uncovers a problem. This element should lay-out how corrections will be handled in the event that the audit uncovers either overpayment or underpayment of funds. In addition, the provision can also provide that in the event that there is an underpayment in excess of a certain amount (5-10%), the cost of the audit shifts to the responsible party.

Providing an orderly way to handle potential disputes over money is a great way to resolve disputes before they start.

Music Publishing Administrator

I recently had the opportunity to consider whether a US artist with airplay in Europe would be better served to find a publisher or to simply hire an agency to administer his rights overseas. While it is hard for any self-reliant musician to pay an extra percentage for doing something that they do themselves in the US, not considering such an arrangement might be leaving money on the table.

These agencies can provide independent musicians and small publishers with instant international reach, which includes their bookkeeping expertise, use of sub-publishers in other countries, administrative services to register the copyrights and to affiliate with performing rights groups, and options related to their services in shopping the music for other uses.

What to look for

When considering these groups, I recommend that you ask them about the following:

  • Do they have experience with your type of music? (Yes)
  • Will they register the copyright in the songs on your behalf? (Yes)
  • Will they handle the administration of registering you with U.S. rights societies? (Yes)
  • Will they collect mechanicals from foreign labels? (Yes)
  • Do they have affiliates in other countries where your music is popular? (Yes)
  • How often will they send statements (Quarterly)
  • Shopping (don’t expect it, but it can be added)

Foreign Administrative groups can be of great help in dealing with quirks of local/ non-US laws related to how royalties are calculated and paid. Having them work through the process on your behalf has its advantages and likely outweighs the extra percentage.

Work for Hire

One issue that people often overlook when drafting agreements involving creative works is the copyright concept of “work for hire.” Failing to come to a clear understanding of the parties intention can cause unnecessary conflict that neither party really benefits from.

What is Work for Hire
Simply put, work for hire addresses issues of copyright ownership when the work has been created for the benefit of someone other than the creator. Typically, the owner of a copyrighted work is the person who creates it, however, if a work is deemed to be a Work for Hire then ownership belongs to the hiring party. Work for hire situations occur in two basic ways; 1. works created by employees and 2. works created by independent contractors.

Federal law states that Works Made for Hire is:

    (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. (17 U.S.C. sec 101)

Employee Presumption
Works created by employees in the scope of their employment are presumed to be works for hire and are owned by the employer. The main question in these situations is whether the work was created in “the scope” of the employee’s employment. For example, the janitor of a publishing company is not not responsible for writing manuscripts, however, he might be responsible for maintaining training materials related to his job – the manuscript would be outside the scope of his employment, while the training materials would belong to the company as a Work Made for Hire.

Contractors
However, many works are created in situations other than employee/employer relationships. In the case of professionals like graphic artists, photographers, or web page designers a work may be created under the terms of a contract. In these cases, if the work falls within certain categories of works (it may also be a work for hire. These guidelines require that the work be of a certain type, specifically created for the hiring party, and that the parties must explicitly state in writing that they intend for the work to be a work for hire.

For the creative professional, the distinction of what is and is not a work for hire is important. Clarification of the issues from the start is a great method of avoiding misunderstandings down the road.

Forum Selection in Creative Commons Licenses

Users of Creative Common’s licenses beware!

Chang v. Virgin Mobile USA, LLC
2009 WL 111570 (N.D.Tex. January 16, 2009)

Texas plaintiffs posted a photo to a popular picture sharing website using a Creative Commons licenses. The photo was then down loaded by an Australian company who used the photo inconsistent with the Creative Commons 2.o license and Plaintiff’s wishes. Plaintiff sued Defendant in a Texas court and Defendant moved to dismiss for lack of jurisdiction. While many factors were considered, of particular note is how to court pointed out that the license did not require the license to take place in Texas.

In fact, the Creative Commons license used specifically does not contain either a forum selection clause or a choice of law clause that would outline where cases should be heard and under what state law a dispute will be analyzed. T he Creative Commons FAQ specifically notes that the selection of jurisdiction in the license

These clauses are commonly used in most transactions to provide some guidance to the parties to know where and under whose laws a dispute will be heard – to avoid problems such as the one in the Chang case.

While I understand the passion for Creative Commons licensing, it is this type of outcome that highlights for me why licensing parties should take a step back and make sure they really understand what they are doing when using these licenses. It also raise the question in my mind of whether licensors should consider making some additions to these terms such as adding in something stating the residency of the licensor, that the license is entered into under the laws of licensor and that all disputes will be heard in the licensor’s state/forum.

Baseball Uniforms as Trade Dress: MLB v. Donruss

An interesting case was recently filed involving baseball card manufacturer Don Ross and Major League baseball. Among several counts involving, minor league players, retired players and current players is a claim that that Donruss inappropriately used the trade dress of the former Major League players. Interestingly, the complaint seems to indicate that there isn’t a claim of trademark infringement related to the cards with the former players. While it is not spelled out in the complaint, it appears that the claim is that even though the logos have been removed from the pictures of these players (thereby avoiding the trademark claim) that because the colors and other parts of the uniform are visible, the trade dress has been infringed.

It is standard practice to remove the logos on licensed memorabilia of sports figure, but if this case plays out in favor of MLB, it would appear players will have to be completely stripped of any identifying indicia to avoid the claims by MLB. Trade dress must be distinctive and non-functional ~ while I will admit to not being a major sports fan, but it seems to me that proving these elements is going to be a difficult task for MLB. If in fact MLB is claiming a trade dress in the uniforms and is successful, it raises all sorts of issues for merchandisers, former players, and sporting good manufacturers.

The complaint has been loaded online at http://www.scribd.com/doc/11055023/Complaint-MLB-Don-Russ-Baseball