Legal Muse

Moving Legal Muse Blog

2010-09-22T01:38:00.002-05:00

Please note that Legal Muse has moved to www.legal-muse.com.

Ringtone Copyright Royalty Rates

2010-07-19T10:00:00.001-05:00

"Answer the phone, answer the phone" - that's what my cell phone screams in the voice of my daughter whenever someone tries to reach me. I recorded it a while back and it amuses me and everyone around me every time it plays. What happens, however, when you record someone else's creative work as your ring tone?

Under US copyright law, users of compositions must pay copyright owners when recording a composition. When the recording party and the copyright owner do not negotiate a license, Section 115 of the Copyright Act provides that the Copyright Royalty Board can establish a predefined rate which allows the recording party to record the composition without the explicit permission of the owner of the composition's copyright. In traditional recording settings, this is often refereed to as a mechanical.

In the recent decision DC Circuit decision Recording Indus. Assn. of Am. v. Library of Cong., No. 09-1075 ruled that the Copyright Royalty Board's decision that royalties paid for use of compositions as ring-tones should be be paid as 24 cents per recording (penny-rate) rather than as percentage of the wholesale rate (the RIAA argued the rate should be 15% of the whole rate charged). The court affirmed the reasoning of the Copyright board who found that “that a single penny-rate structure is best applied to ringtones as well as physical phonorecords and digital permanent downloads” because of “the efficiency of administration gained from a single structure when spread over the much larger number of musical works reproduced.”

The basic reasoning - which I agree with - was that a flat penny rate is the fairest and simplest method of compensating individual songwriters. This is usually true for most creatives. Keeping licensing of copyright and trademarks as simple as possible reduces disputes over the method of calculations.

Twitter Bribe to Benefit Springboard

2010-06-13T15:19:00.007-05:00

The gist: To benefit Minnesota Creatives, I will bribe the entire world to follow me on Twitter for $1 each.

I’ll also be drawing for 2 tickets to Springboard for the Arts' Bounce Bash to benefit the Artists' Access Healthcare program.

Here’s how this is going to work:

If I have 500 total followers by noon on June 25th, I will donate $250 to Springboard for the Arts. Follow me here: http://twitter.com/kunkle_law

For every follower (new or old) that sends out a tweet promoting Springboard and the Bounce Bash using the hashtag #bouncebash, I will enter them in a drawing for the tickets.

Not sure of what to say? Here’s the simple version for Twitter:

Kunkle_Law – Donating $1 to @Springboard #bouncebash per Twitter follower: http://muse.kunklelaw.com/

For more information on Springboard and the Bounce Bash go to: http://www.springboardforthearts.org/AboutUs/BounceBash.asp

If you are interested in doing more, please consider donating a few dollars directly to Springboard or coming down on the 25th to the Bounce Bash.

I hope you choose to participate and make a difference.

Ken

AIGA Solopreneurs breakfast event

2010-06-10T08:30:00.002-05:00

From AIGA Minnesota Website. Sign-up available at the AIGA website. Event is Thursday, June 24, 2010.

Discover your entrepreneurial spirit and business desire. If freelancing or self-employment is in your future, this event will provide ideas, possibilities and insight. Join us for this special event, where a trio of speakers awaits your questions. Hear from Doug Powell, Principal, Schwartz Powell; Dan Woychick, Principal, Woychick Design; and Kenneth Kunkle, Kunkle Law PLC.

Kenneth Kunkle is a local attorney whose practice is focused on working with creative professionals. Blogging at muse.kunklelaw.com, Ken provides a wide field of knowledge in the areas of business, copyright and trademarks. His long history working in, and with, a variety of creative fields provides a unique understanding of creativity and the law. Ken will be discussing issues related to business structures, work for hire and independent contractor status. www.kunklelaw.com

Doug Powell − a designer, business strategist, entrepreneur, and curator of the blog Merge − will offer next steps to help you build your great new business ideas. Or maybe allow Doug’s inspiration to bust you out of a narrow way of working. He suggests the next generation of designers will have to find other ways of working, providing value and generating revenue. Learn tips to start and launch your design-driven business. www.schwartzpowell.com and mergedesignblog.com

Dan Woychick is a designer and creative strategist with over 20 years dedicated to helping non-profit organizations communicate more successfully. He has helped clients with brand identity and positioning, market research, and the design and production of print and electronic communications. Dan is experienced in building a network of collaborators, hiring employees, working from home and renting office space. He will share his thoughts on marketing yourself to find clients and focus your work. For more info, go to www.woychickdesign.com or read his blog, think + do: an exploration of non-profit marketing and design

Time: Doors open at 8:30 A.M.; Presentation from 9:00–10:30 A.M.

Magic Words for Copyright Transfer

2010-06-07T15:52:00.008-05:00

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

183 F.3d 922

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.

Trademarks and Pepper Potts - Is Iron Man a good or a service?

2010-05-17T14:58:00.013-05:00

Warning: this may be one of my more nonsensical posts.

After seeing Iron Man 2 this week, I felt compelled to speak out about the misinformation propagated by Pepper Potts. During a scene in which Tony comes into Pepper's office, we overhear Pepper talking to an unidentified party about the suit. In the conversation (which I am editing to avoid spoiling it for anyone who went to see Robin Hood this weekend instead), Ms. Potts repeatedly references the intellectual property right in the suit being based on trademark law. My beef? It is clear from the story line, that the issue is one of patent law, not trademark.

Trademarks generally serve two purposes: 1) to provide consumers with an assurance as to the source of goods or services; and 2) to protect the value that a business receives from creating and marketing a product. Patents, on the other hand, are intended to protect inventors by giving them the sole ability to utilize or license their creations. While the suit could serve as a trademark for Tony Stark's services as a super hero, it should be clear to anyone that has seen the movie that the discussion in question was more properly framed as an issue of patent law.

Am I being nit-picky? Well . . . Yes. But as a copyright and trademark attorney, Pepper's lack of understanding ruined the entire film for me - or at least it distracted me for 5-10 seconds.

Does theTwitter ToS dedicate everything you post to public domain?? - NO!

2010-05-05T00:28:00.013-05:00

I use to say that it was a myth that if it was on the Internet it was free to use. While still a myth, photojournalist Daniel Morela may have reason to question whether this in fact still true.

Morla was recently sued by Agence France Presse (AFP) for “antagonistic assertion of rights” for accusing AFP of violating his copyright in several photos taken following the January earthquake - Morela has counter sued for copyright infringement. AFP has asked for summary judgment that it did not infringe on Morela's copyrights (complaint). AFP's claims are interesting because, in part, they note that since Morela used Twitter to distribute the photos (which he did not - he used Twitpic), the Twitter Terms of Service (ToS) granting Twitter the right to distribute the photos should be extended to AFP as well. Besides the fact that AFP appears to have little understanding of the facts of their own case, this reading of the Twitter ToS is a little odd.

The Twitter ToS provide that:

You retain your rights to any Content you submit, post or display on or through the Services. By submitting, posting or displaying Content on or through the Services, you grant us a worldwide, non-exclusive, royalty-free license (with the right to sublicense) to use, copy, reproduce, process, adapt, modify, publish, transmit, display and distribute such Content in any and all media or distribution methods (now known or later developed).

You agree that this license includes the right for Twitter to make such Content available to other companies, organizations or individuals who partner with Twitter for the syndication, broadcast, distribution or publication of such Content on other media and services, subject to our terms and conditions for such Content use.
While it is possible that AFP is making the argument that the second clause which allows Twitter to make the content available to partners and that they in fact are partners, it is clear from anyone's reasonable reading that this scenario is not what is intended by this agreement.

The much sparser Twitpic ToS has a similar clause, but its sparser writing style makes the intent of these types of clauses much more clear. The Twitpics Terms of Services specifically notes:

While I believe that AFP's arguments are weak (though other claims raised by AFP may have more merit), they do help to illustrate that Creatives that use various forms of social media or SaaS solutions related to the creation or distribution of their work should be aware of, and understand, the ToS for those sites. Otherwise, you risk obscure boilerplate agreements giving away your work for free - or at least claims to that effect by multinational corporations.

CoCo Day Camp: “Common Myths and Misconceptions About Copyrights and Trademarks”

2010-04-29T16:08:00.005-05:00

On Thursday, May 6th, I'll be providing a seminar for creative professionals on how creative professionals are affected by copyright (e.g., public domain, fair use, joint works and work for hire) and trademark law at CoCo in downtown St. Paul. the program is set to run from 10am to 12pm.

Cost:
Session + 1/2 day of coworking: $30
Session only: $15

About CoCo:
CoCo is a coworking and collaborative space in Lowertown St. Paul (and coming soon to Minneapolis), where independent workers and small businesses can gather to share ideas, team up on projects and get some work done. We’re an alternative to working from home or the local coffee shop.

Who can Sue when a Freelancer is Discriminated Against?

2010-04-29T14:51:00.005-05:00

Freelancers take note: Under Minnesota Law if you have formed an LLC or other business entity and you experience discrimination at the hands of one of your clients, as an individual you cannot make a claim under Minnesota's Human Rights Act (Minn. Stat. § 363A.17 (2008)), which authorizes parties to a business contract to sue for business discrimination in the performance of that contract.

The Minnesota Supreme Court reasoned in Krueger v. Zeman Construction Co. that the focus of the statue was the relationship of the parties, not on the individual subject to the discrimination. As a result, the court argued that an individual employee, even one that is a single member owner of an LLC, is not the intended beneficiary of the statute and therefore they cannot file a lawsuit in their individual capacity.

While I generally believe freelancers should consider business entities like LLC over that of sole proprietorship, this case provides a stark example of how there are some disadvantages to forming a separate legal entity and an evaluation of the advantages and disadvantages should always be considered.

The 2010 Midwest Art, Entertainment & Sports Law Institute

2010-04-26T16:03:00.002-05:00

I will be presenting along with many other area attorneys at next weeks Midwest Art, Entertainment & Sports Law Institute. Come out and hear about some the latest opportunities and challenges facing the attorneys for the art, entertainment and sports communities. http://www.minncle.org/Materials/Seminars/67410.pdf

Highlights Include:

Former ASCAP executive and current president of a music publishing company, attorney Ron Sobel will “teach, discuss, rant and rave” about intellectual property pitfalls, new media trends, current revenue models and licensing protocols
Music publishing contracts and other issues in the digital age
The FTC’s take on endorsements and Internet advertising
The hottest legal and ethical concerns in college sports
A review of core intellectual property concepts, as well as contract, licensing entity basics with a nod to the creative client
The Ramifications of Supreme Court Review of American Needle
Your Client Said WHAT?? Lauren Bloom, J.D., L.L.M., author of The Art of the Apology, will give us valuable insights into helping our clients out of potential PR and legal nightmares

When is a farm boy just like any other farm boy?

2010-03-29T10:36:00.014-05:00

When is a farm boy just like any other farm boy? That's the question at the heart of a recent Federal Circuit decision (Odom's Tennessee Pride Sausage, Inc. v. FF Acquisition, LLC, No. 09-1473) involving a decision by the USPTO to grant a trademark registration to FF Acquisitions (a SuperValu company) over the objection of Odom (a retail food conglomerate).

Despite the fact that the registration in question was merely adding the body onto an already registered mark making up the torso of a farm boy (mark on the right), Odom was concerned that the mark was now likely to confuse consumers and opposed the registration, citing its own registrations. Even though Odom argued that there were other factors to be considered under the DuPont test for likelihood of confusion, the USPTO and the Circuit court summarily dispatched the complaint by noting that the registered marks differed in the size and shape of the hands, styles of hats, shoes on the feet, and apiece of straw hanging from his mouth.

In its appeal to the Federal Circuit, Odom argued that the USPTO was wrong in basing its decision that there was no likelihood of confusion based a single DuPont factor and not considering other factors. The legal question was whether consideration of the single DuPont factor involving similarity of the marks was enough for the court to conclude that there was no likelihood of confusion and to allow registration - it was. The Circuit court went further and noted that even if the USPTO had considered all the other factors, the dissimilarity of the marks was , by itself, a strong enough reason to deny Odom's claims and to allow registration of FF Acquisitions' mark.

This opinion is a reminder that trademarks are limited and do not create ownership in an entire concept. The focus when adopting a mark is its overall distinctiveness. A mark cannot be deconstructed into individual pieces for the purpose of eliminating distinctive qualities, because that is not what a consumer does. It is the overall impression that makes the difference.

AIGA MN - Cocktails with Creatives

2009-12-30T20:01:00.003-06:00

Come on out and mingle with a variety of creatives (and one lawyer) from the Twin Cities.

I will be sponsoring the AIGA MN's Cocktails with Creatives in January. It will take place at the Peacock Lounge, the bar part of Erte Restaurant, in Northeast Minneapolis on January 7th from 6 to 8 p.m. Happy Hour goes until 7 p.m. and parking is free anywhere on the streets. Relax, munch, chat and enjoy!

FTC Endorsement Guidelines - Typicality Claims

2009-12-02T00:07:00.007-06:00

Effective December 1, 2009, the Federal Trade Commission (FTC) has adopted new advisory guidelines concerning use of testimonials in advertising. These modifications and clarifications concerning FTC enforcement have raised concerns in many industries that rely heavily on testimonials as a large component of their marketing efforts.

What are these guidelines about?
The FTC is charged with enforcement of federal laws prohibiting deceptive trade practices – i.e. false advertising. To accomplish this mission, the FTC adopts rules and issues policy guidelines regarding the laws.

Complete Bulletin available on KunkleLaw.com

Audio from a recent interview with CoachingToys.com

Public Performance and Ringtones

2009-10-28T16:01:00.004-05:00

As if to demonstrate why the general public continues to question the validity of all copyright claims in music, ASCAP recently provided us with one of the stupidest and greediest copyright cases in the recent past. (opinion at www.eff.org). After being sued in relationship to the reasonableness of its blanket licenses (related to its antitrust exemption), ASCAP argued that when someone's cell phone rings with a musical ringtone, the ring is a public performance of the composition and therefore the phone companies owe licensing fees for each call. The Electronic Freedom Foundation, who filed an amicus brief in the case, noted that: “Under this reasoning from ASCAP, it would be a copyright violation for you to play your car radio with the window down!" While I am not sure it is quite this bad, the arguments advanced by ASCAP do require a great deal of legal gymanstics in order to work.

While the law of copyright is intended to be largely technology neutral, with any newer technologies, the courts are often called upon to interpret how copyright applies in new circumstances. - ringtones are no exception. For example, a few years back the recording industry obtained clarification from the Copyright Office over whether a mechanical royalty was necessary for creating the digital files that make up ringtones - the outcome was a decision that ringtones were in fact subject to a statutory/mechanical license payable by the makers of the ringtones. The arguments made by ASCAP for performance licenses, however, are much less persuasive than those made for mechanicals. ASCAP made several legal arguments to support its position, some more technical than others, but all them largely coming down to a discussion of whether the activation of the ringtone by an incoming call constitutes a public performance that is not exempt for claims of copyright infringement. ASCAP basis its arguments on two separate theories: 1) that the downloading of the ringtone is the same as a public performance, and 2) that sending the signal activating the ringtone is part of a performance authorized by cell phone companies.

Downloading Ringtones is Not a Performance
ASCAP argues that under the “Transmission” clause of Section 101, which provides that the transmission of a protected work that is made available to the public is an act of infringement. ASCAP first argues that the Verizon allows its customers to download songs, and that these downloads are public transmissions. Wisely, the court points out that the download is being made to one party and is not to the public at large. ASCAP, however, goes an additional step and argues that the download is also the first step in a two step process whereby the performance is shifted to such times as when a phone company customer receives a telephone call which others may overhear. In an odd bit of irony, this argument strikes me as ASCAP attempting to use a time-shift argument FOR infringement.

Playing of compositions: Direct and Secondary Liability
ASCAP also argues that even if the transmission by the cell companies is not infringement, the playing of the music by the owner of the phone is, and that the phone company is either directly or indirectly liable for the infringement due to its participation in the process of the music being played. Perhaps the strangest argument made by ASCAP is the one that the court notes is their primary argument - ASCAP argued that the playing of any ringtone was in effect a direct performance by Verizon on the basis that Verizon sends a signal that triggers the playing of the music and therefore they are the instigators and the source of the performance in some Rube Goldberg like manner. ASCAP’s second argument is based on secondary liability, which requires a finding that there has been a direct or primary infringement by one party (the cell phone owner), and is aided in some way by the second (Verizon).

While the court addressed many sub-issues related to their claims and every theoretical possibility, the majority of its analysis were based on a finding that playing of ringtones are generally just intended for use by person who's phone it is on, and is therefore not a public performance as defined by Section 101. The court backed this argument up by noting that even if the playing of the ringtone was loud enough to be heard by a general audience and constitute a public performance; Section 110(4) exempts the public performance from liability if there is no commercial intent in making it public.

Conclusion
ASCAP cited many cases to support its position in this case – the majority of which were cases involving mechanical rights to reproduce a copyrighted work rather than ones dealing in issues of performance, which the court points out are not in dispute and in fact have already been paid. While in many cases the payment of performance royalties in addition to mechanical is entirely proper and appropriate, the attempt of ASCAP to apply a secondary license in this context is clearly overreaching, and it is this type of overreach that causes the general public to begin to question all copyright protections, which in turn only serves to hurt the very people that ASCAP is suppose to be working for – the artists.

Public Performance

2009-10-27T13:47:00.003-05:00

What is a performance license?

One of the exclusive rights of composers of songs is to control the right to publicly perform the song publicly. Of course with the way that the music industry has developed, it is not practical in most cases to go to the composer each time a radio station or concert hall wants to play a song for their customers. Coming to the rescue (Debatable, but that's another post) are the folks at ASCAP, BMI, and SEASAC (and a few others). These organizations, commonly referred to as Performing Rights Organizations (“PROs”), have entered into agreements with thousands of composers and music publishers for the right to represent them and to license their music to radio stations and venues. While technically everyone involved (DJ, sponsor, and venue) can be held to jointly infringe a copyright, in practice the venue and promoter is most often the one that is expected to have obtained a license for music performed.

What is public?

The trick comes in when deciding what a “public” performance is. Section 101 of the U.S. Copyright Act notes that:

To perform or display a work “publicly” means to perform or display it at a place open to the public or at any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered. . .
As a result, most weddings, bat mitzvahs and the like would typically fall into this category of non-public performance and would not require approval by the composer and no PRO license would be necessary. With this said, a party involving 500 people who include many friends of friends or one in which some form of admission is charged will likely not fall into the category of “normal” and the use of admission will demonstrate “open to the public.”

Bottom line

Performers or venues that play to audiences other than “normal” families and their acquaintances should consider obtaining a blanket license form the PROs – an ounce of prevention is worth a pound of cure.

Bratz Revisted

2009-09-21T11:56:00.004-05:00

In the continuing case of the Bratz doll, the Ninth Circuit recently ruled in the case of Art Attacks Ink, LLC v. MGA Ent'mt. Inc. While the case dealt with several issues, of interest to me is the portion of the ruling dealing with whether Art Attacks had proved adequate access to their character that they sold at fairs and on their website.

In the opinion, the court went out of its way to note technical weaknesses of the website as evidence of the small likelihood that there has been any access to the designs. In particular, the court noted that it "took a full two minutes" for the website to fully load; and that the website did not use meta tags that contained the words "Spoiled Brats." The court then drew the conclusion that:

A website with such limitations could not have widely disseminated the copyrighted Spoiled Brats material.
It is not clear from the opinion how this analysis of load times and meta-tag relevancy was conducted. While I would agree that it is relevant if the load times mentioned were from 2009; it appears that the time referenced is from the late 1990's, when the site first went live. Consumer's patience with load times has un-questionable changed over that time period and a two minute wait may have been perfectly reasonable in 1996. Additionally, it is not clear why the court thinks that information must be contained in meta-tags in order to be relevant to search engines (a fact many SEO folks I'm sure would like to question.)

While I have doubts that Art Attacks could prevail in its underlying case, the court using this questionable understanding of the how meta-tags and search engines works, and their current day expectations of speed, really create a flawed ruling. It would be unfortunate if trial courts recognized this opinion as a demonstration that a website must contain specific terms in its meta-tags to be relevant in showing possible access in copyright litigation.

UPDATE: Court issues injunction related to enforcement of decision.

Bringing Conciliation Court Cases

2009-03-31T10:00:00.000-05:00

Conciliation court was created to allow citizens to bring legal actions for smaller claims that would normally be difficult to bring due to the expense and knowledge needed to bring a suit in district court. Generally, these courts allow individuals to bring claims of up to $7,500 ($4,000 in cases involving commercial consumer credit transaction), or order the return of property. However, these claims may not include claims for title to real estate, libel or slander, class actions or medical malpractice.

Additionally, since these are state courts, they can not hear matters of federal law such as disputes over copyright ownership. They can, however, hear cases involving breach of contract that involves copyrighted material. This means that the conciliation court can not hear a case involving ownership of a copyright, but it can hear a case involving whether a party has paid what they owe for the creation of copyrighted material.

An important thing to remember before you file a conciliation court matter is whether you will be able to collect anything in the event that you win your case. If a person has no money, collecting the judgment may be next to impossible. However, keep in mind that judgments are good for a period of ten years.

In the event you do decide to sue and you win the court will not automatically collect the money from the defendant. In order to collect your money you will be required to get a writ of execution from the court. A writ will not be issued until after the time for the defendant to appeal has passed and until certain documents are provided to the court.

Once the writ has been issued, plaintiffs need to locate property to be seized and inform the sheriff’s office where the property can be found so that they can carry out the writ. Defendants can be forced to disclose assets when a plaintiff files an order for disclosure. This process will take approximately thirty days. In the event that a defendant has been sued by other people, the sheriff will first execute writs on behalf of the prior plaintiffs.

Additional information on the conciliation court process can be obtained from your local county court office and at http://www.mncourts.gov/.

Audit & Record Keeping Provisions

2009-03-24T10:00:00.000-05:00

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.

Tax Deductions for Creatives

2009-03-18T15:28:00.006-05:00

As Tax day approaches its important to take into account targeted deductions that benefit Creatives. One such deduction is the Domestic Production Activities Deduction (AKA Section 199 deduction) which was meant to encourage U.S. job creation. The deduction was created in 2004 as a part of the American Jobs Creation Act of 2004 and is one of those nice benefits that is targeted at small businesses operating as sole proprietors, partnerships, LLC, or S Corps.

So What?
For many creative based businesses, this deduction may provide a significant deduction on gross income, based on the amount of W-2 wages spent in the production of their work. The deduction specifically singles out wages paid out in the sound recording, software (including websites), and film (excluding porn) industries, as well as producers of personal tangible items (clothing, books, etc.) for an additional tax credit against profits.

What to do?
Simple - if you are engaged in one of these categories, had a profit, and paid W-2 wages, make sure that your tax preparer is aware that you may have this additional 6% deduction available to you, or if you prepare your own taxes, be sure to look though the instructions for Form 8903 .

IRS Circular 230 Notice:
United States Treasury Regulations require me to disclose the following: Any tax advice included in this document is not intended or written to be used, and it cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code.

Response Regarding MN Arts Cuts

2009-03-17T10:00:00.000-05:00

Recently I sent letters to my state representatives regarding the proposed disproportionate cuts to funding for the MN Arts Board. I was pleased to receive a response from my state senators which reads in part:

Thank you Senator - your thoughtful response will be remembered during the next election.

Music Publishing Administrator

2009-03-12T00:24:00.003-05:00

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.

Who Owns What? - Tuesday March 10, 2009

2009-03-04T13:42:00.003-06:00

On Tuesday, March 10 at 1 PM, the Twin Cities chapters of the National Writers Union and the Professional Editors Network will hold a free workshop about permissions and copyright and other intellectual property issues concerning writers and editors.

Location: St. Louis Park Library, 3240 Library Lane, St. Louis Park. Two attorneys—Debra Kass Orenstein and Kenneth Kunkle-- will explain copyright and permissions.

Please join us for this FREE event! For more details about the Twin Cities National Writers Union, visit http://www.nwu-tc.org For more details about the Professional Editors Network, visit http://www.pensite.org

Arts Funding in Minnesota

2009-02-23T20:20:00.003-06:00

Dear Legislator,

I am writing to you concerning Governor Pawlenty's budget plan cutting arts related spending and elimination of the Arts Board by 2011. These proposed cuts are simply a bad idea, and are contrary to the express wishes of Minnesota voters.

Last fall, Minnesotans sent a clear message that they value the arts and felt that dedicated funding was an important statement of who we are. Governor Pawlenty’s cuts, however, seem to try and take back the very increase that voters demanded. Passage of the amendment was a clear message sent by voters that they want MORE investment in the arts and culture, not less.

A 2006 study showed that Minnesota non-profit art organizations had $840 million in economic impact on the state. The same study showed that for every one dollar of investment by the state art boards in artist, there is an $11 return on that investment. Furthermore, these non-profits are often the incubators for for-profits arts enterprises which represent millions more dollars in economic impact for our state. “The arts” in Minnesota are small business. Artists and arts organizations buy equipment and supplies; hire employees; rent studios; and contract for services. Budget cuts that affect this industry have a direct and immediate impact on more than just the artist, but also to the countless business and employees that they support. Funding through these agencies has an economic multiplier effect that should not be overlooked or dismissed.

According to a 2001 report by the National Governor’s Association Center for Best Practices, “If states intend to build their economies on the jobs of the future and improve rural communities…they must cultivate a creative workforce and attract arts-based businesses.” Yet, the proposed budget cuts will cut funding to organizations that cultivate this part of the economy by over 33%.

Yes, it can be argued that, the arts now have dedicated funding through the state sales tax, however this funding is still in the pipeline and is years off in being fully realized. Cutting funding now fails to take seriously the importance voters have placed on the arts, and will harm many small businesses in these productive industries at a time when they are in a great position to help invigorate the economy.

Cutting funding for the arts in Minnesota is not in the best interest of Minnesotans. The arts community uses the money it receives, it does not simply use the grants and funding to pay down credit cards or by television sets and DVD’s – they use the money to run their business and support other businesses and individuals. The money they receive is recirculated throughout Minnesota’s economy many times over and in the process it enriches our lives in the ways that Minnesotans have said they want. Please see to it that this important part of our local small business economy is not harmed by short sighted thinking about what artists bring to our economy – oppose these reductions.

Work for Hire

2009-01-31T00:19:00.003-06:00

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

2009-01-30T11:00:00.000-06:00

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

http://wiki.creativecommons.org/CC0_FAQ

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.