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ENTERTAINMENT LAW OUTLINE WINTER 2008 (Hertz)


I. REPRESENTING TALENT, PART I
BUSINESS OF INTERMEDIARIES - Personal managers: are typically paid 15-20% of the artists gross income o Concerned with career development and will therefore be focused on long term planning, as well as day-to-day activities of their clients o Most common form of representative in music business o Typically get 15-20% of the gross income of the artist (gross income is reduced by very limited deductions (e.g., (1) tour support, (2) booking agency feestypical booking agent gets 1015% so manager subtracts that from gross income to get a lower gross so they dont take a commission off of the money the artist never even sees, and (3) light and sound for shows). There are usually no deductions for travel and hotels that comes out of the artists pocket. o Manager is quarterback of the team. They deal with record company, promotions, manufacturer, artists who design artwork for cover, publishers - Business managers: typically receive 5% of income received by the artists o Usually have CPAS o Generally restrict themselves to financial aspects of clients career: paying clients bills, advising on investments, effectively running tours, and other extremely complicated functions o All money is funneled to the business manager who then writes the checks to everyone else. o Some business managers even handle the artists personal bank accountsmakes sure they are being fiscally responsible. - Agents: typically receive 10% of income from bookings o Job is to find work for their clients o CA Labor Commission wont approve an agents contract that does not require a measurable level of performance: a certain amount of work must be secured on a regular basis, or the artist can terminate the agreement. o Agents cannot charge a registration fee. Trying to avoid taking advantage of people trying to get into entertainment business. - Lawyers: often have commission arrangements of 5% 1

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o Lawyers are distinguishable from the rest because they are governed by codes of professional behavior. o Lawyers work on hourly rate or contingency, or sometimes contingency and reduced hourly o Tell clients: never sign an agreement without having an entertainment lawyer represent you. There are many awful agreements out there. o You really have to be careful of conflict of interests! And make sure the client understands what those conflicts are and signs that he understands. o When you fill out malpractice insurance, answer it honestly! If you get a claim for COI and then insurance looks at your questionnaire and if youve answered dishonestly, they wont cover you. Questions: Does anyone act as an agent for any artist? Yes, if youre out soliciting recording or publishing contracts. Do you handle the finances for clients? Yes, even if youre not giving financial advice and just hold the checkbook. o Dont give advice to potential clients. o Always put a fee agreement in writing! And write there is no guarantee on the services rendered. o You must provide competent representation. You should always go to CLE classes. It shows competence if you need to defend a threat. o There can even be sanctions for giving a bad referral. Its best to give 2 or 3 names so they cant say that you told them to go to someone specific. o The most common action brought against attorneys is for negligence. o Some states require you to be licensed as an agent. MI doesnt. The question is where you do the majority of your business. o Contracts with minors have to go to probate court and get approved by a judge. And typically, if theres substantial income that could result, a conservorship must be set up with parent as guardian and they move to the court to spend it. ATTORNEYS ESTABLISHING AN ATTORNEY-CLIENT RELATIONSHIP - Courts and disciplinary authorities have found that the attorney-client relationship exists as soon as the client reasonably relies on the attorneys advice. - Attorney should formally establish a professional relationship with a client and memorialize it in writing.

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Retention agreement should clearly outline the scope and conditions of the lawyers representation as well as the basis for the fee if the client decides to employ the attorney.

DUTY OF COMPETENCE - Once an attorney agrees to represent a client, MRPC 1.1 requires the lawyer to provide competent representation. Competence requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation. - Continuing legal education programs for entertainment lawyers is a good idea. CONFLICTS
OF

INTEREST

MULTIPLE CLIENT REPRESENTATION RULE 1.7: CONFLICT OF INTEREST: CURRENT CLIENTS (a) Except as provided in paragraph (b), a lawyer shall not represent a client if the representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if: (1) the representation of one client will be directly adverse to another client; or (2) there is a significant risk that the representation of one or more clients will be materially limited by the lawyer's responsibilities to another client, a former client or a third person or by a personal interest of the lawyer. (b) Notwithstanding the existence of a concurrent conflict of interest under paragraph (a), a lawyer may represent a client if: (1) the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client; (2) the representation is not prohibited by law; (3) the representation does not involve the assertion of a claim by one client against another client represented by the lawyer in the same litigation or other proceeding before a tribunal; and (4) each affected client gives informed consent, confirmed in writing. Under MRPC 1.7(a), an attorneys simultaneous representation of a music manager who is a prior client and an artist in negotiating their artistmanagement contract raises serious conflicts of interest issues. Concurrent conflict of interest may exist if there is a significant risk that the attorneys responsibilities to the earlier client, the manager, may materially limit the attorneys representation of the artist and violate 1.7(a). The managers attorney should ask the artist to retain independent counsel to facilitate the negotiation of the contract, to help ensure the 3

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enforcement of an eventual agreement, and to avoid personal liability for violating the conflict of interest rules. o They could also get written informed consent from both clients. Some conflicts are nonconsentable, though. THE COMMENTS TO MRPC 1.7 - COI rules are designed to advance confidentiality and undivided loyalty. - Absent consent, a lawyer may not act as an advocate in one matter against a person the lawyer represents in some other matter, even when the mattes are wholly unrelated. OTHER NOTEWORTHY CONFLICTS
OF

INTEREST ISSUES

MRPC 1.8: CONFLICT OF INTEREST: PROHIBITED TRANSACTIONS: (see full rule on cTools) - A lawyer shall not enter a business transaction with a client unless (1) transaction is fair and reasonable to client, (2) client is advised in writing of the desirability of seeking and is given a reasonable opportunity to seek the advice of independent legal counsel on the transaction and (3) client gives informed consent, in writing and signed by the client, to the essential terms of the transaction and the lawyers role in the transaction, including whether the lawyer is representing the client in that transaction. - MRPC 1.8(f): permits someone other than the client to pay the lawyer for his services if the client gives informed consent and there is no interference with the lawyers independent professional judgment and relationship with the client. - MRPC 1.8(d) precludes a lawyer from making or negotiating an agreement with the client prior to the conclusion of the representation that gives the lawyer literary or media rights to a portrayal or account based in substantial part on information relating to the representation. Note that the rule does not prohibit a lawyer representing a client in a transaction concerning literary property from accepting as his fee an ownership interest in the property. RULE 1.9: CONFLICT OF INTEREST: FORMER CLIENT (a) A lawyer who has formerly represent a client in a matter shall not thereafter represent another person in the same or a substantially related matter in which that persons interests are materially adverse to the interests of the former client unless the former client consents after consultation. (b) Unless the former client consents after consultation, a lawyer shall not knowingly represent a person in the same or a substantially related matter in which a firm with which the lawyer formerly was associated has previously represented a client

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(1) whose interests are materially adverse to that person, AND (2) about whom the lawyer has acquired information protected by Rules 1.6 and 1.9(c) that is material to the matter. (c) A lawyer who has formerly represented a client in a matter or whose present or former firm has formerly represented a client in a matter shall not thereafter: (1) use information relating to the representation to the disadvantage of the former client except as Rule 1.6 or Rule 3.3 would permit or require with respect to a client, or when the information has become generally known; or (2) reveal information relating to the representation except as Rule 1.6 or Rule 3.3 would permit or require with respect to a client. MRPC 1.9: a COI arises with a former client when the lawyers representation of a new client bears a substantial relationship to the matter of the representation that the attorney provided to a former client. Lawyer should withdraw from representation or seek the former clients informed consent regarding the COI. MUSIC LAWYER AS MANAGER OR AGENT - Lawyers can serve as managers or agents while simultaneously practicing law. - Lawyers often tend to act more like managers than agents. - Lawyers are agents and it is axiomatic that an attorneys authority to represent clients creates an agency and fiduciary relationship. SPECIAL CONSIDERATIONS REGARDING LAWYER CONDUCT MERGING THE ROLES OF VARIOUS ENTERTAINMENT REPRESENTATIVES Entertainment attorneys who also act as agents or managers are still subject to their states codes of professional conduct to the extent that any of their activities involve the delivery of legal services. ADVERTISING AND SOLICITATIONS MRPC 7.2 and 7.3 governs lawyer ads and solicitation. They can mail written ads and solicitation directly to prospective clients providing they are truthful and non-deceptive. They can also advertise through recorded or electronic communication, including public media. Lawyers shall not by inperson, live telephone, or real-time electronic contact solicit professional employment from a prospective client when a significant motive for the lawyers contact is pecuniary gain, unless the person contacted is a lawyer or has a family, close personal, or prior professional relationship with the lawyer. They also cannot state or imply that they are specialists in a field, such as entertainment law, unless the lawyer has been certified as a specialist by an organization.

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COMPENSATION FOR ATTORNEY SERVICES AND RETENTION AGREEMENTS - Unlike employment contracts with managers and agents, clients can fire terminate employment contracts with lawyers at any time. - Lawyers hourly range from $200 to $400. - Customary contingent fee ranges from 5% to 10% of the defined compensation earned by the client and rarely exceeds 10%. - The definition of compensation is a negotiated term. - Lawyer contingency agreements, like personal management contracts, may also provide for a declining percentage rate after expiration of the term (a sunset provision). o This provision requires the client to pay the contingency fee for the lawyers past services even after the representation is terminated, usually for a period of 6 to 12 months. - Model Rule 1.5 requires hourly and contingent fees to be reasonable. - Contingent fee agreements must be in writing, signed by the client. SANCTIONS - Two principle methods to hold judges and lawyers accountable for their misconduct: o (1) File lawsuit against attorney for civil liability (negligence, fiduciary breach, breach of contact or fraud, usually) Example: John Grisham sued his attorney for breach of fiduciary duty and malpractice, in part, for not advising him of the conflicts of interest in the attorneys simultaneous representation of both Grisham and his agent. Grisham claimed he retained the lawyer on the advice of his agent and that the attorney failed to tell me that he didnt have to renew his original agreement with the agent. o (2) States disciplinary systems; clients file grievance against an attorney. RULE 1.10: IMPUTED DISQUALIFICATION: GENERAL RULE (a) While lawyers are associated in a firm, none of them shall knowingly represent a client when any one of them practicing alone would be prohibited from doing so by Rule 1.7, 1.8(c), 1.9, or 2.2. (b) When a lawyer becomes associated with a firm, the firm may not knowingly represent a person in the same or a substantially related matter in which that lawyer, or a firm with which the lawyer was associated, is disqualified under Rule 1.9(b), unless: (1) the disqualified lawyer is screened from any participation in the matter and is apportioned no part of the fee therefrom; and (2) written notice is promptly given to the appropriate tribunal to enable it to ascertain compliance with the provisions of this rule.

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(c) When a lawyer has terminated an association with a firm, the firm is not prohibited from thereafter representing a person with interests materially adverse to those of a client represented by the formerly associated lawyer, and not currently represented by the firm, unless: (1) the matter is the same or substantially related to that in which the formerly associated lawyer represented the client; and (2) any lawyer remaining in the firm has information protected by Rules 1.6 and 1.9(c) that is material to the matter. (d) A disqualification prescribed by this Rule may be waived by the affected client under the conditions stated in Rule 1.7. See sample Engagement Letter of Agreement, page 23 Notice: - Contingent fee in writing and is reasonable - Conflicts of interest paragraph 8: tell client that they may come up, what you will do if theres a conflict, who you can represent in the case of a client. AGENTS AND PERSONAL MANAGERS UNION REGULATION OF AGENTS - The overwhelming majority of working performers in these industries are represented by agents, who are heavily regulated by the unions through their franchising systems, i.e., licenses under which agents agree to abide by specific union regulations. o If agent lacks a union franchise, the members of that union cannot engage that agent to represent them. o Major point on which union will insist:: agent cant commission minimum salaries (i.e., scale payments, or amounts received by way of reimbursement for items like travel expenses in connection with work). - Agents will seek a rate of scale plus 10% (i.e., the amount of agent commission allowed under most franchise agreements). - There is no contact between Screen Actors Guild (SAG) and Association of Talent Agents (ATA) (as of the time of writing of textbook). o Note: ATA is a nonprofit trade association of more than 100 talent agents primarily located in LA and NY, representing artist clients in film, stage, TV, radio, commercials, and literary work. - Most major agencies continue to operate under the parameters of the prior agreement BUT smaller agencies have been more aggressive regarding what funds are commissionable. STATE REGULATION OF AGENTS - NY and CA both require agents to be licensed!

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o Serving as an agent without registering and being licensed can carry severe penalties. Remember: licensed and unlicensed agents are affected by the legislation of the jurisdiction. Fundamental question: who is an agent? o Pine: a one-shot effort at securing a recording contract resulted in a decision that the finder was an agent. o Mandel: a non-practicing attorney, acting as a manager under a management contract that provided he was not required to procure employment, was found to be a manager rather than an unlicensed agent.

NEW YORK GENERAL BUSINESS LAWsee page 29 for full terms - 172: license required for employment agencies - 181: duty of employment agencies to give each applicant for employment copy of contract and receipts of payments made by applicant - 185: fees - 187: additional prohibitions o Cant induce employee to terminate his employment in order to obtain other employment through the agency o Cant send someone to employer that agency knows of should knows violates state or federal laws (wages, child labor, etc.) o Cant engage in any other business on premises of employment agency - 189: enforcement of provisions - 190: penalties for violations Pine v. Laine, 321 N.Y.S.2d 303 (NY App 1971) Facts: sued for $35k for work, labor, and services performed in arranging a recording contract between and ABC Records. Issue: Whether was acting as an employment agent or as the personal manager of the when he performed the alleged services for the ? Reasoning: - If not licensed as an employment agency, and unless he comes within the exception of 171(8) as a personal manager where the seeking of employment is only incidental to the business of managing, he may not recover. - had a manager, and only service performed by (even though he was trying to become the manager) was procurement of recording K not exception. Holding: wins. Notes: - CA provides exclusive original jurisdiction over talent agency disputes to the Labor Commission.

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NY has no such statutory procedure and questions must be resolved in court.

Mandel v. Liebman, 100 N.E.2d 149 (NY 1951) Facts: Liebmann signed K with Mandel, a nonpracticing attorney engaged in business of personal management, to be his personal representative and manager for 5 years for 10% of gross receipts. Issue: Was Mandel acting as an attorney such that his client could discharge him at any time? Lower court said yes. Reasoning: - Since was required to render some service to under the K, it cannot be said that it was unconscionable. - The K cant be seen as an attorney retainer agreement because was employed as s personal representative and manager, which could be held by a nonlawyer. - K said that Mandel was not required to procure contracts or work and if Liebman needs additional work an agent shall be employed by Liebman to procure such employmen and services of that agent shall be separately paid for by Liebman. Holding: reversed. Mandel was not acting as an attorney; K made clear that Mandel was not an agent; he was acting as a manager. California Labor Codesee page 38 for full terms - 1700.5: talent agents must procure a license from Labor Commissioner (LC); must be posted in conspicuous place in agency - 1700.21: Grounds for revocation or suspension of license - 1700.23: contracts between agency and artists must be submitted to LC for approval o Except for conditions of 1000.45, contracts shall have an agreement by talent agency to refer any controversy between the artist and agency relating to terms of the K to the LC for adjustment o K will not be approved if unfair, unjust, or oppressive to artist. - 1700.25: Trust Fund Accounts; Disbursement of Funds; Recordkeeping Requirements - 100.37: Contracts with minors - 1700.40: Repayment of Fees - 1700.41: Reimbursement of artist for expenses incurred in going outside city in unsuccessful effort to obtain employment - 1700.44: Dispute Determination by Commissioner; Appeal o Parties shall refer controversies to LC who will hear and determine the dispute, subject to an appeal within 10 days after determination, to the superior court where it shall be heard de novo. - 1700.45: Validity of Contractual Arbitration Provisions o Notwithstanding 1700.44, arbitration clauses are valid if: 9

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(a) Clause is in agency-talent agreement, OR (b) Clause is inserted in contract pursuant to rule, regulation, or contract of a bona fide labor union regulating the relations of its members to a talent agency, AND (c) Contract provides reasonable notice to LC of time and place of hearings, AND (d) Contract provides that LC or authorized representation has right to attend all hearings.

Buchwald v. Superior Court of San Francisco, 62 Cal.Rptr, 364 (Cal. Ct. App. 1967) - The musical group Jefferson Airplane sued their personal manager, Matthew Katz. Their written agreement stated that Katz was neither authorized, now would he obtain employment for the group. Jefferson Airplane claimed that, despite the contractual language, Katz did indeed procure bookings for them. Katz argued that written agreement established that he was not subject to statutory regulation. - Court looked to illegality lying behind the contract to determine whether the contract was prohibited. - General holding: procurement efforts require a license and that the substance of the parties relationship, not its form, is controlling. - Agents, whether they are licensed or not, are bound and regulated by the Artists Managers Act (and the Talent Agency Act), which gives the Labor Commission jurisdiction over them. Raden v. Laurie, 262 P.2d 61 (Cal. 1953) The alleged agent confined his activities to working to develop the poise and skills of a young actress and to taking her around to auditions where she might obtain work, without ever directly seeking to obtain employment for her. Buchwald and Raden establish parameters for determining who was and who was not an agent in CA. Pryor v. Franklin (Labor Commission 1982) [Case shows the draconian punishments which can befall one who falls on the wrong side of the line of being an agent or not.] - Franklin managed Richard Pryor from 1975 until 1980. He held himself to third parties as Pryors agent, negotiated many agreements on Pryors behalf, and promised to procure employment in all fields of entertainment for Pryor. There was evidence that he did not account to Pryor for, or return, some $1,850,000 of Pryors funds. - Special hearing office held that Franklin acted as an unlicensed talent agency and agreement between Pryor and Franklin was void and unenforceable. Franklin was ordered to repay $3,110,918 to Pryor.

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Pryor could be seen as indicating that a true manager cannot participate in the negotiation process, but thats not always the case, see below: Barr v. Rothberg (Labor Commission 1992) Facts: Barr filed petition to determine whether Rothberg was her agent under an Agreement or whether he had violated the Labor Code. Reasoning: - To conclude that Rothberg acted as a talent agent requires a finding from all the evidence presented that Rothberg engaged in the procuring, offering, promising or attempting to procure employment or engagements for Barr. - The William Morris Agency continued to represent Barr through the period at issue. - Negotiation meetings were a joint effort between Rothberg, Hirsch, and WMA, all working on Barrs behalf, not for the purpose of procuring employment, but rather to aid Barr in the achievement of the goals she desired. Holding: Rothberg acted as a personal manager, not a talent agent. Wachs v. Curry (Ct. App. 2d Dist. 1993) - Court prescribed a center of gravity test to be applied to the representatives entire business: if the representatives overall business was not within the ambit of the Act, the representative would not be considered an unlicensed agent even though performing activities covered by the act in a specific instance. But see: Waisbren v. Peppersorn Prod. Inc. (Ct. App. 2d Dist. 1995) However, a different panel of the same court subsequently expounded a bright line theoryANY unlicensed activity was covered by the Act. Park v. Deftones (Ct. App. 2d Dist. 1999) [Highlights the Waisbren bright line rule] Facts: Dave Park had written contract with Deftones in return for a 20% commission on all income earned from the employment he secured. Park also procured 84 performance engagements and a recording contract with Maverick Records without being a licensed agent. [REMEMBER: under CA Talent Agencies Act, these activities require a license as a talent agent.] Reasoning: - The job of personal managers is to primarily advise, counsel, direct, and coordinate the development of the artist career. They advise in both business and personal matters, frequently lend money to young artists and serve as spokespersons for the artists. - Because Park would receive a commission from obtaining the record contract, he was in effect acting as an agent. Holding: affirmed LCs decision to void the management agreements. 11

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Chinn v. Tobin (Labor Commission) CA LC ruled that an attorney who owned a production company was not procuring employment as an agent for an artist/client when he hired the artist to be in one of his productions. The Commissioner held that an attorney having an ownership interest in the employment is functioning as an employer, not as an agent "with third parties" within the meaning of the Act. However, conflict of interest issues were raised but not resolved by the Commissioner. BUSINESS MANAGERS Because the business manger is privy to the most intimate details of the clients economic life, a very high level of fiduciary duty attaches. ABKCO Music, Inc. v. Harrisongs Music, Ltd. (2d Cir. 1983) - Issue one: Bright Tunes Music Corp., copyright holder of Hes So Fine (HSF) brought copyright suit against George Harrison, and related entities, alleging that Harrisons My Sweet Lord infringed. The court found that there had been a copyright infringement based on a theory of subconscious copying. - Issue two: ABKCO was Harrisons former agent and negotiated for the purchase of Bright Tunes stock (including HSK). Allegation: ABKCO improperly used confidential information received from representation of Harrison. - An agent has a duty not to use confidential knowledge acquired in his employment in competition with his principal. This duty exists as well after the employment is terminated as during its continuance. But this rule does not cover use of information based on general business knowledge or gleaned from general business experience, and the former agent is permitted to compete with his former principal in reliance on such general publicly available information. - Evidence here is not at all convincing that the information imparted to Bright Tunes by Klein was publicly available. - An action for breach of fiduciary duty is a prophylactic rule intended to remove all incentive to breachnot simply to compensate for damages in the event of a breach. - Appellants conduct didnt meet the standard required of him as a former fiduciary.

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II. REPRESENTING TALENT, PART II


I. Personal Manager Contract a. Introduction i. Personal managers role is to advise, counsel, and develop the artists career ii. An important role of attorneys is in helping choose the personal manager iii. There is a tension between choosing a manager experienced enough to deal with the complex demands of a signed artist and one with enough time to give personal attention iv. Not uncommon for the personal manager to be someone who has supported and perhaps financed the artists career from the beginning 1. It may therefore be complicated to advise the artist to obtain a more experienced manager v. The client remains the artist, and not the manager b. Terms of example personal manager contract i. Territory 1. Generally the world. It is very rare to find anything limited to less than world-wide coverage ii. Term 1. May be a term of years, or even a number of touring cycles 2. Usually 2-5 years 3. Might provide for a short initial period with an option to extend for a longer period if certain goals are met iii. Services provided 1. Advice and counsel 2. Reasonable efforts to enhance and promote career and reputation a. The artist will also be under an obligation to continue the career, and failure to do so may be a material breach 3. Regardless of the terms, the scope of the relationship can be very different from relationship to relationship iv. Expenses 1. Usually provides for reasonable expenses 2. Usually long-distance travel must be approved 3. And large expenses must be approved v. Compensation 1. Typical management agreement is 15-20% a. Could be on a sliding scale increased percentage as money earned increases b. Elviss manager had 50%

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2. The percentage is generally on gross money actually received (money earned, but not received is generally not commissionable) a. Also includes gifts, bonuses, shares of profits, shares of stock, partnership interests, and total amounts paid for packages b. Will not include recoupable costs c. Income derived from an entity in which the manager has an ownership interest d. Money paid as tour support e. Costs incurred to collect gross income (like attorneys fees and auditors costs) 3. Usually includes a commission on contracts that continue after the termination of the relationship, and even reengagements of the same contracts if within a year vi. Accounting and audits 1. The artist will have a right to audit the books and records 2. The manager will keep adequate books and records vii. Power of attorney 1. Will provide that the manager can enter into various contracts on the artists behalf 2. May provide that artist approval is need for material terms a. May have an unavailability clause to allow the manager to enter into certain contracts when the artist is unavailable b. In general, artist must agree on tour dates viii. Assignment 1. Generally not allowed except to an entity owned or controlled by the manager 2. This is because the contract loses its value if it were to be performed by someone else ix. Arbitration clause 1. May or may not want an arbitration clause 2. If you do things above-board, you wont want it because it will be a compromise x. Life insurance clause 1. Provides that the artist will have a life insurance contract that will be available to cover expenses and possibly compensation in the event of death xi. Loans 1. Managers end up loaning the artist money 2. May want to provide that nothing in the agreement is meant to imply an obligation to loan, but that if there are loans, there will be separate agreement II. Talent Agency Licensing a. Talent Agency Requirements in NY and California b. Table of Talent Agency Requirements in Every State

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III. TALENT CONTRACTS, PART I


I. Introduction A. Two General Types of Deals 1. Securing the Rights to Produce the Entertainment Property 2. Contracts that SECURE THE TALENT (that is what we are concerned with in this chapter) these are often personal services contracts they also usually include the acquisition of rights owned or controlled by the talent class notes: book publishers, music publishers, record companies, producers, film studios, etc. will contract for both rights (in existing works) and services (in future works or employment) B. Regulation and Enforceability of Personal Services Contracts 1. Regulation state law (usually either California or New York) dictates whether a formal contract exists 2. Enforceability depends on a number of factors a. existence of formal contact between the parties b. whether such contract is in writing c. whether services are exclusive or non-exclusive d. terms of agreement e. statutory restrictions f. consideration flowing to the artist g. services to be performed by the artist h. effect and nature of breaches of the agreement II. Contracts with Minors A. Introduction big area of personal services contracts

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California or New York law generally governs. At common law, minors can usually disaffirm a contract. However, California and New York have statutes which greatly restrict minors rights to do so. Basically, those States gives judges the power to affirm or disaffirm such contracts. Also, it is a good idea to get the parent to execute a valid release. In New York and California, a minor cannot disaffirm when a parent has done so. There are also protections in place to protect the minors earnings. Coogan Law: parents or guardians must establish trust accounts for their children. Employers then have to directly deposit 15% of the money into the trust account.

B. California Age of Majority: 18 (California Civil Code Section 25) An agreement cannot be disaffirmed if party seeking minors services complies with court approval provisions (this is usually parental consent). Court approved minor contract can extend to option periods as well. Warner Bros v. Brodel (Cal. 1948). There are also protections in place to protect the minors earnings. Coogan Law (California Family Code Section 6752): parents or guardians must establish trust accounts for their children. Employers then have to directly deposit 15% of the money into the trust account. C. New York Age of Majority: 18. An agreement cannot be disaffirmed if party seeking minors services complies with court approval provisions (this is usually parental consent). New York also has its version of the Coogan Law (above), the New York Child Performer Education and Trust Act, which essentially mirrors the Coogan Law. Case: Scott Eden Management v. Andrew Kavovit (NY 1990, page 88) Facts: Infant actor disaffirmed personal services contract. He sought to avoid responsibility to his manager for commissions due in the future on income from performance contracts already obtained for him by the manager. Rule(s) to Remember: After disaffirmance, the infant is not entitled to be put in a position superior to such a cone as he would have occupied if he had never entered into his voidable agreement. He is not entitled to retain an advantage from a transaction which he repudiates. The privilege of infancy is to be used as a shield and not a as a sword. Infant is thus responsible for the wear and tear on the goods returned by him. III. Contract Duration

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A. Introduction In the old days, 1920s etc., the stars were locked up in contracts with one studio for a long time, maybe like 10 years. Nowadays, they usually do it one project at a time.

B. California 1. Seven Year Statute o Today, California is unique with its limitations on the duration of personal service contracts. Since so many entertainment transactions are subject to California law, the California enactments require thorough analysis. o California statute limits enforcement of personal service contracts at 7 years. Case: De Haviland v. Warner Brothers Pictures (Cal. 1944, page 93) Facts: The sole question is whether the provisions for suspension, and for extension of the term of the agreement, were lawful and effective insofar as they purported to bind plaintiff beyond seven years from the date her services were commenced. If they were lawful, plaintiff still owes 25 weeks of service; otherwise the contract cam to an end earlier. Rule(s) to Remember: The seven years means seven years and cannot be waived. Case: Ketcham v. Hall Syndicate (New York 1963, page 98) Facts: Creator of Dennis the Menace and Syndication company entered into agreement for the syndication by Hall of the cartoon panels. Contract provided that the panels were to be delivered to Halls office in the City of New York at least 6 weeks prior to the scheduled date of release. Analysis: This case is distinguishable from the previous one because in that case the acting was performed by the employee at the discretion of her employer at places designated by her employer. In this case, plaintiffs performance was delivered by him at defendants New York office of six daily cartoon panels per week, There was no supervision and plaintiff worked as he pleased. Thus, he is like an independent contractor. The code is designed only to protect employees, not independent contractors. Furthermore, the contract is not vague. Also, there is mutuality. Thus, plaintiff cannot get out of the contract. It is enforceable. 2. Statutory Termination Rights in California By employer: Section 2924. Employment for specified terms; Grounds for termination by employer o An employment for a specific term may be terminated at any time by the employer in case of any willful breach of duty by the employee in the course of his employment, of in case of his 17

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habitual neglect of his duty or continued incapacity to perform it. Case: Goudal v. Cecil B. De Mille Pictures (Cal. 1931, page 106) Facts: The basic question in this case is whether the termination was wrongful or whether it was justified by acts of the respondent violative of the terms of the contract. The employer advanced two reasons for firing her: (1) she interpreted and performed her parts as she saw fit creatively and (2) she was late on the set a couple of times. Analysis: Both of the reasons advanced by the company were wrongful. (1) She, as an actress, was hired for her creativity, which was even fostered and encouraged by the directors. (2) She was late on the set a handful of times only, and that was because her costume required must time to configure. This is unlike a case of an actress who is habitually and substantially late onto the set. o By Employee: Section 2925. Employment for specified term; grounds for termination by employee. An employment for a specific term may be terminated by the employee at any time in case of any willful or permanent breach of the obligations of his employer to him as an employee. Case: Warner Bros v. Bumgarner (Cal. 1961, page 111) Facts: There was a writers strike. Warner Bros. discontinued James Garners compensation under a contract because of it. They relied on the force majuere clause in the contract. Garner informed Warner that they were in breach of their obligation and told them that the contract was terminated as a result. Analysis: First, the contract did provide that they could refuse to pay him if the series was suspended, interrupted, or postponed. However, the Court finds that the writers strike did no such thing here. So, it follows then, that that contract was breached by the company when they failed to pay him. The question, though, is whether that breach was willful, as required by the statute. Willful does not imply anything blamable, malicious, or wrong, but merely that the thing done or omitted to be done or omitted was done so intentionally. It amounts to nothing more than this: That the person knows what he is doing, intends to do what he is doing, and is a free agent. Thus, there has been a breach of the contract. On crossclaim, Garner wants damages for breach. Here, it must be remembered that Garner was not discharged. The law is that if an employee is discharged his remedy is an action for damages. Where he has not been discharged but merely has been prevented by the employer from working, he need not treat the contract as broken but may sue on the 18

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contract and recover the agreed compensation. But in order to recover the agreed compensation he must be ready, able, and willing to perform. Therefore, while Garner had a right to terminate the contract, he does not have the right to recover damages. The right he had was the option to quit his job and sue for the salary then due, or of continuing in the employ of Warner Bros., and sue for his salary as it accrued. Garner terminated the contract about one week after the commencement of the term, and he is entitled to be paid for that period. C. Contract Formality and the Availability of Injunctive Relief 1. Introduction Parties rush to agree, and, in the process, desire at times outraces common sense. The deal, as it turns out, is strictly verbal, or there are scattered memos but no single, final, formal written agreement. If the production proceeds as envisioned, these questions are moot. There is no problem because the idea becomes a deal that produces a success, and everyone is happy. But at other times, dreams die early, when the great concept does not live up to expectations, management changes, or better opportunities are seen elsewhere. In those circumstances, the deal sours, the parties go to war, and inevitably the questions involving contract formality become pressing inquiries. The following two cases illustrate these problems when one party to a transaction must argue that a contract exists without the benefit of a signed written agreement. a. The New York Experience Case: Metro-Goldwyn-Mayer v. Scheider (New York 1976, page 118) Facts: Metro, a producer made a deal with ABC, whereby Metro would submit a pilot and ABC would decide whether to make it a film or a sitcom series. Metro entered into an oral agreement with an actor to star in the pilot. When ABC decided to proceed, the actor (because he had better roles available) said that he did would not do it and that the agreement was unenforceable under the statute of frauds because it could not be performed within 1 year. Analysis: The agreement was performable within one year. ABC controlled the cutoff date and could have terminated the agreement at any option stage. Nor is it unusual for a third party to govern the possibility of performability of a contract. In any event, as the dates turned out, as chosen by ABC and ordered by plaintiff, performance for this series would have been complete before the first broadcast date, less than a year from the first agreement. And ABC retained an option to stop then or go on from year to year thereafter. Thus, the contract was terminable at any time within a years whenever ABC chose. The statute of frauds is thus not applicable and cannot serve to defeat plaintiffs claim. b. Oral Agreements 19

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Case: Lyrick Studios v. Big Idea Productions (5th Cir. 2005, page 120) Facts: Lyrick was distributing Big Ideas cartoons. Over the years, they sent contracts back and forth. None were ever signed or formally constituted a long term agreement. Lyrick and Big Ideas relationship eventually became strained. When Lyrick was bought out by HIT entertainment, Big Idea informed them they were going with a new distributor. In response lyric sued. Analysis: A grant of an exclusive license is considered a transfer of copyright ownership. Section 204(a) of the Copyright Act, while sometimes called the copyright statute of frauds, is in fact different from a statute of frauds. Rather than serving an evidentiary function and making otherwise valid agreements unenforceable, under 204(a) a transfer of copyright is simply not valid without a writing. The writing does not have contain any particular language, one sentence will do. It must, however, show an agreement to transfer copyright. An afterthe-fact writing will also suffice, at least against challenges to the agreement by third parties. Here the parties dispute whether Big Idea and Lyrick have a writing that meets 204(a)s requirement. The first two faxes, by their very language are negotiations. As for the internal memo, satisfying 204(a) with a purely internal memo that was never intended to be provided to Lyrick would not further the copyright goals of predictability of ownership. Notes: 204 of the copyright act only applies to exclusive license agreements. Therefore, it if is not exclusive, oral agreements are in play. D. California Injunction Statutes 1. Intro Basically two sections of the California statutes cover thisCalifornia Civil Code 3423 and California Code of Civil Procedure 526. They are called the 9,000 plus statute). The statutes basically provide that in order to provide the basis for injunctive relief, a contract must be in writing, provide for services that are unique and extraordinary, and provide for a minimum compensation (which, until 1994, at the rate of not less than $6000 per year). It is important to note that the $9000 plus per year rule is not a mandatory condition placed on all employers, but, ultimately, inclusion of that clause in all entertainment service contracts would have a significant economic effect on the entertainment industry and its constituent personnel. Class Notes: The next couple cases were decided when the $6,000 rule was in effect. So now just pretend its $9,000. The Newton-John case illustrates the hazards of terms based on fixed time periods, and the Brockert case illustrates that the reference in 3423 to the stature of the artist are not mere boilerplate.

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Case: MCA v. Newton-John (Cal. 1979, page 133) Facts: Olivia Newton-John was enjoined from recording for anyone other than MCA while MCAs action was pending or until April 1, 1982, if that date shall occur during the pendency of the action. The court rejected Newton-Johns argument that she could not be enjoined from recording for third parties because MCA did not guarantee that she would net at least 6,000 dollars every twelve months, because that would permit her to spend her way out of the deal (she was advanced several hundred thousand dollars, but she also bore the producing costs). However, the court would not accept the injunctive period prescribed by the trial court. Rule(s) to Remember / Reasoning: Here, the contract had a set duration of 5 years. The trial court had Newton-John enjoined past that point. That was wrong. You cannot take a preliminary injunction past the duration of the contract. Class Notes: Because of this case, recording and music publishing companies changed their contract forms so that each period of the term would run for the longer of a stated time (usually 12 months) or until delivery of a specified number of records or compositions. In this manner, the issue of suspension (and the permissible length thereof) would no longer arise. Although the payments required in order to secure an injunction under the amended 3423 are considerably higher than those formerly required under the earlier version of the statute, the employer must still demonstrate the requisite status. As the following case indicates, unless the talent has been the subject of an auction (i.e. multiple companies have been in the bidding for his/her/their services) or the artist has a proven track record, the company may encounter difficulties with the status branch of the statute. Case: Motown Record v. Brockert (Cal. 1984, page 134) Facts: Tina Marie, when entering into the agreement was unknown in the music business. Her experience consisted of singing with local bands at weddings, parties, and shopping centers and roles in school musicals. She had written some songs but non had been recorded or released commercially. Rule(s) to Remember / Reasoning: For the statute to be enforced, the star has to be unique, of star quality, and basically irreplaceable.

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IV. TALENT CONTRACTS, PART II


I. CREDIT ISSUES CLAIMING CREDIT The legal principles used to resolve disputes over credit issues are derived from two sources: contract and statutory/common law Because of the importance of credit, though, it is one of the subjects often specifically covered by a K, and one you should make sure terms that are favorable to your client exist in a K. Include explicit language indicating how your CL should be given credit for particular things, in order to avoid a situation like Cleary v. News Corp (no clause mentions title page credit for author he is not awarded any; a publisher is not obligated to give credit unless it says so in the K). A. Remedies for Breach of Contracts Credit Provisions 1. Damages - but b/c public acclaim/potential professional reputation benefits (which wd be the economic loss resulting from loss of credit) is difficult to quantify in monetary terms, damage award for loss of publicity is contingent upon their being reasonably certain, specific, and unspeculative (Tamarind Lithography Workshop v. Sanders) Injunction/Specific Performance - P must show: (1) the inadequacy of his legal remedy; (2) an underlying K that is both reasonable and supported by adequate consideration; (3) the existence of a mutuality of remedies; (4) contractual terms which are sufficiently definite to enable the court to know what it is to enforce; and (5) substantial similarity of the requested performance to that promised in the K. (Tamarind Lithography Workshop v. Sanders)

2.

B.

Remedies through Statute/Common Law: In the absence of K provisions, the general rule is that there is no statutory or common law right to claim credit (Vargas v. Esquire, Inc.) However, an exception to this is where credits are not simply omitted but are affirmatively misrepresented, in which case one may turn to the Lanham Act or common law. 1. Lanham Act: - Section 43(a) forbids the use of false designations of origin and false descriptions or representations in the advertising and sale of goods and services - To state a claim related to credit issues under this section, a complaint must allege merchandising practices or conduct in the nature of, or 22

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economically equivalent to, palming off and/or misuse of trademarks and trade names. palming/passing off = selling goods/service of ones own creation under the name or mark of another reverse passing off = removal of a name/trademark on another partys product and replacing it w/ a diff name (both may be either express or implied) see Smith v. Montoro What amounts to such a claim may be interpreted differently depending on industry customs of viewing when it is appropriate to credit o Smith v. Montoro in motion pictures (substitution of another actors name in place of plaintiffs in connection w/ movies advertising and credits constituted reverse passing-off) o Lamothe v. Atlantic Recording Corp. in musical compositions (plaintiffs didnt receive credit for their roles in writing of songs; incomplete credit designations or only partial identifications of those deserving credit qualifies as economic equivalent of passing off) o Follett v. Arbor House Publishing Co in publishing (substantial revisions may not necessarily amount to any more than what is customarily performed by freelance editors, which would not amount to an attribution of authorship) Injunctions under the Lanham Act: to obtain injunctive relief under the act, a plaintiff need only establish a likelihood of confusion or a tendency to mislead (see Follett v. Arbor House Publishing Co)

DISCLAIMING CREDIT One also has a right to disclaim credit to a work that has been improperly attributed to you, for which the Lanham Act can also be used, as well. It is easier to prohibit possessory credit than it is to prohibit based upon credit, though. e.g. King v. Innovation Books 2. MOST FAVORED NATION CLAUSES Although the concept originated in international treaties, entertainment law picked up on it. An MFN clause provides that a particular aspect of a contractual relationship (e.g. amount, definition, etc.) will be computed or defined in at least as favorable a manner as that given for one or more third parties (although exceptions may still be made for stars or big players). They may be used for a variety of purposes, but should be precisely written to be limited in scope. These can be particularly helpful to parties with little bargaining power confronted by lengthy standard terms (and also sometimes to the party granting the MFN clause b/c it eliminates some transaction costs from negotiations).

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V. TELEVISION
Guest Lecturer: Michael Novak I. Overview A. Major TV networks: 1. ABCowned by Disney 2. NBCowned by General Electric 3. CBSowned by Viacom 4. Foxowned by NewsCorp B. Stats/Facts 1. Broadcast network share of audience has declined by more than 1/3 since the 70s because of cable and streaming tv available for computers. 2. Most of the major networks are now affiliated with one or more cable networks, which are often owned by their parent corporations. Each of the major film studios also produces tv shows. C. Broadcast TV 1. Major Network Organization: a. Entertainment programming in LA office; advertisement, news and corporate in NY office. b. Each division (i.e. sports, news, entertainment) is operated as a separate company. c. Each network also owns and operates affiliate stations, which are also operated as separate companies. Under network affiliation agreements with local stations, network provides schedule of programs with national commercials and financial compensation for airtime utilized; the affiliate is allotted a portion of the commercial spots time to sell to local advertisers. d. Networks want to own stations in larger markets with larger audiences so they can command higher prices for selling spots to advertisers. e. Most of the other local affiliate stations not owned by the major networks are owned by Station Groups (i.e. Hearst Corp., Tribune Corp., Viacom). D. Cable and Satellite TV 1. Cable was created to boost reception in areas where broadcast tv signals were blocked or weakened. Subscribers were charged for the service. Could provide multiple network channels and non-network affiliated channels. 2. Used to be that municipalities granted monopoly of control over all their territory to single cable companies. Federal Communications Commission now limits reach of any single cable company to 30% of the market.

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3. Most cable companies are multiply system operators (MSOs) which control several cable systems around the country (i.e. Comcast, Adelphia). Under FCC rules, MSOs are required to carry all the broadcast network, and public and public access channels. MSOs pay each cable network they carry a monthly fee of 5-40 cents per subscriber. They then bundle these (which are usually advertiser supported) together with broadcast channels into basic cable package. Pay cable, like HBO, provides higher cost programming and isnt advertiser supported. Many major studios also own pay cable networks. 4. Courtroom Television Network v. NY (New York, 2005): Court TV challenged NY statute barring cameras in courtrooms, claiming it violated right of access to courtroom proceedings under NY State constitution and Federal Constitution. Court of Appeals rejected this argument, holding that press and media possesses the same right of access to courtrooms as the public, but not more. II. Creating and Acquiring Programming A. Dealmaking in the TV Industry 1. An idea for a program is pitched by a producer to a studio or network or the network or studio may ask an established producer or writer to come up with a series. 2. First step is writing treatment for the series and the treatment for the first episode the pilot. 3. The network or studio or both reviews the treatment and if they approve they order a script of the pilot and maybe 2nd or 3rd episode. 4. Pilot is created, and if the network approves, it will usually order between 7-13 episodes of the series. Based on the performance of the first episodes, the network may then decide to order additional episodesup to 22. The network then usually has 3 annual renewal options of 22 episodes each. 5. After 4th full year (assuming network exercised all its options), producer has right to take the show elsewhere, subject to networks right of first negotiation/right of first refusal, which prevents the producer from moving the show to another network. 6. Networks rights limited to U.S. 7. Network gets right to air each show twice: one original and one rerun. After end of networks exclusive term, producer has right to license existing episode to 3rd parties. B. Compensation for TV Writers 1. Networks refuse to make commitments on the basis of just ideas and pitchesthey require completed treatment. 2. Writers Guild Basic Agreementprescribes minimum payments for treatments, scripts and pilots; higher compensation negotiable by experienced and successful writer. 3. Writer will receive partial payments at various stages of development process, with lump sum payment on delivery. 4. If network rejects pilot script, writer will have a turnaround provision in the contract which will permit him to take series to another network for syndication, usually upon repayment of development expenses. If writer is also creator of series, writer will receive ongoing royalties if series is produced. 5. Development Deal

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a. Studio pays writer, producer or production company a minimum annual payment and provides offices, studio facilities and a development fund. b. Studio gets first look at anything created under the agreement and if it approves, it automatically gets the distribution and syndication rights to new series. c. Funds spend on development are deducted from earnings of creations of writer or producer generated under agreement. d. When series is put on a network, the creator earns fees as an executive producer and collects royalties for all future broadcasts. 6. Deficit Funding a. Most TV shows operate at a deficit. Producers recover cost of production from licensing to networks for initial run. They make profits from syndication of the series. Networks make money from advertising sales. b. TV shows are produced for $1-2 million for 1 hr. series and $500K-1.5 million for hr. series. TV series are licensed for $500K per episode for sitcom and $1-2 million for hour-long drama. Thus, production is usually dominated by major studios. c. Since syndication success isnt guaranteed, production deficit is mitigated by co-production agreements between studios and networks or smaller production companies. Studio wants to decrease its costs and networks and smaller production companies want access to syndication profits. C. Syndication 1. Stems from fact that broadcast networks dont provide programming for the entire day, so affiliates must look elsewhere for programming. 2. Syndication = selling a program individually to affiliates in local markets or to a cable network. Series for syndication usually need to have 88 episodes. 3. Straight cash deal: syndicator licenses shows to each market for as much money as possible. 4. Barter system: Licensee pays no case, but syndicator gets right to specified number of minutes of commercial time, which the syndicator then turns around and sells to advertisers. Most syndication deals are now cash + barter system. The amount the station pays depends on popularity of the show and size of the market. 5. Studios and networks look to make up their production deficits in the syndication market. Syndicators also sell to cable networks. 6. Many conglomerates that own studios and cable networks and affiliates try to keep their shows in the family by licensing their off-network shows to their own cable networks or to their owned and operated broadcast affiliates. D. Ratings 1. Televisions success determined by ratings because advertisers determine where to buy commercial spots based on them. Advertisers buy spots based on number it takes to reach 1000 viewers. 2. Nielsen Television Index is major ratings source used to measure broadcast network audiences. Rating of a program = percentage of total television households whose sets were tuned to that program.

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3. Ratings from sweeps (measurement of viewers in all 211 TV markets) used to set advertising rates for the next few months. The best shows are shown during sweeps. E. International and Ancillary Markets 1. Studios sell already produced shows to foreign networks and format rightsallows them to take same format of show and produce it in countrys own language demonstrating its own culture. 2. Ancillary markets include dvds, soundtracks, merchandise. III. Federal Communications Commission A. Licensing 1. Controls broadcast and cable tv. Broadcast licenses must be renewed every 5 years; cable systems arent licensed but must register with FCC. 2. FCC settles disputes between FCC and private parties through hearings conducted by administrative law judges pursuant to Administrative Procedure Act. Appeals are made to FCC Review Board, then to 5 commissioners, then to US Court of Appeals and Supreme Court. 3. FCC can revoke licenses and impose fines. B. Control of Broadcast/Cable TV 1. FCC involved in network affiliate relations (networks cant force affiliates to take their programming and cant control their advertising inventory); limits number of stations one entity can own (up to 35% of total market); limits broadcast hours of networks (prime-time access rulelimits network programming to 3 of 4 hours to encourage local programming). 2. Local tv stations given choice between granting cable carriers free retransmission of programming on a must-carry basis or negotiating arms length retransmission agreement with cable system. FCC also sets cable rates. IV. Issues in TV Distribution A. Antitrust: Block Bookingit is unlawful for networks to insist that local stations license an entire package of films in a tying agreement. Case: U.S. v. Loews (US Sup. Ct. 1962) Facts: Syndicator conditioned license or sale of one or more feature films to tv stations on stations acceptance of a package or block (under tying agreement) containing one or more unwanted or inferior films. Holding: Tying agreements are illegal and violate Sherman Antitrust Act. B. Antitrust: Geographical Restrictions Case: Ralph C. Wilson Industries v. ABC (ND Cal. 1984) Facts:

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Plaintiff, a small tv station owner, claims that defendants have unreasonably restrained trade in violation of Sherman Antitrust Act by licensing programs on an exclusive basis (vertical contract), making the licenses unreasonably long, and by incorporating rights of first refusal into these licenses. Plaintiff wanted to bid for exclusive program license at lower rate than other stations in the geographic area in which it had been placed by defendant by being placed in a smaller geographic market. Holding: Exclusive licensing practices not unreasonable because plaintiffs ability to compete for quality programming not restrained; exclusivity promotes competition by maximizing tv programs value and avoiding overexposureallowing tv station to plan programming to compete with another stations programming, knowing that the other station wont dilute value of its competitive programming by airing the same program at the same time. C. Piracy: Unlawful Interception and Retransmission of Signals Case: DirecTV v. Robert F. Pepe (3rd Cir. 2005) Facts: DirecTV sued to deter illegal interception of its encrypted satellite broadcasts. Holding: A private right of action exists for violations of 18 U.S.C. 2511(1)(a), which, as a joint civil-criminal provision of the Electronic Communications Privacy Act of 1986 (ECPA), imposes sanctions against anyone who, without authorization, intercepts encrypted satellite television broadcasts. Private actors can bring piracy claims on ECPA grounds. D. Infringement: Unaccredited Copying of Uncopyrighted Works Case: Dastar v. 20th Century Fox (US Sup. Ct. 2003) Question: Does Section 43(a) of the Lanham Act prevents the unaccredited copying of a work? Facts: Dastar purchased tv series from the public domain and modified them before selling as video tape without crediting original producer. Original producer of series sued for copyright infringement since they held exclusive television rights in the book upon which the original series was based, and they claimed Dastars actions constituted reverse passing off in violation of Section 43(a) of the Lanham Actwhich creates a federal remedy against anyone who uses a false designation of origin in connection with any goods or services. Holding: Origin of goods in Lanham Act refers to the producer of tangible goods offered for sale and not to the author of any idea embodied in those goods. Lanham Act does not create perpetual copyright, but rather protects against misleading use of trademarks leading to unfair competition. Dastar produced and was therefore the origin of the videos in question, so there is no Lanham Act violation. V. Broadcast Employment Agreement (class notes based on handouts1 tv agreement; 1 radio agreement) 1. Most of these are just for 1 year.

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2. 3. 4. 5.

Everything is negotiable Radio Broadcast agreement doesnt include bonus schedule Termination of employment = most carefully drafted/negotiated part of agreement Radio Broadcast agreement: missing Cure provisionbefore employer can invoke termination, employer must give employee opportunity to cure breach 6. TV Broadcast agreement: Force Majeure provisiongives employer right to terminate contract under extreme and unanticipated circumstances 7. TV agreement: exclusive negotiation provision 8. TV agreement: match provisionbefore employee seeks employment elsewhere, he must first allow current employer to match second offer. 9. CA doesnt recognize non-competition covenant. So to get injunctive relief, employer relies on confidentiality provision. 10. Broadcast: Pay or play provisioncompany must either allow actor to work or pay him/her a fee upon dismissal.

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VI. SOUND RECORDINGS


I. Development of the Industry a. History i. Victor Talking Machine Co and Columbia dominated the record industry at the turn of the century ii. Growth was slowed by radio in 1920s and television in 1950s 1. But in 1950, US record sales were $189M iii. Exponential growth 1950s to 1978 slowed in 1980s due to competition from video games, video cassettes, and cable b. Rock and Roll i. Many small independent labels due to rock and roll 1. Sun Records, Chess, and Atlantic ii. Columbia Record Club gave an alternate mail-order means of distribution iii. 1962, the Beatles came to America and launched the modernday record business c. Consolidation: 1962-1999 i. Now four major companies 1. Warner (Including Elektra and Atlantic) 2. EMI (Including Capitol and Virgin) 3. Sony/BMG (Sony and Epic) 4. Vivendi (bought Universal, including Polygram, Mercury, Island, A&M Geffen and Interscope) ii. The four companies control 90% of the physical product sales iii. 18.4% of albums were released by the major labels iv. Independents 1. Consolidation has also led to major labels affiliating with independent labels to nurture and develop new artists 2. Examples of successful independents are Priority, Matador, LaFace, Interscope, Maverick, Tommy Boy, Radioactive, Mammoth and American 3. 81.6% of albums are released by independents d. Distributors i. Labels record and promote records, distributors physically ship them ii. Each major label is affiliated with a major distribution company iii. But, distributors are independent companies and may distribute other major record labels iv. In 1980s, independent labels left independent distributors in favor of major distributors e. Music Videos

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i. MTV, VH-1, and DVD concerts and documentaries have established new revenue streams ii. Content of lyrics has created legal issues 1. Potential legislation 2. Criminal courts for obscenity 3. Civil suits for suicide victims f. Digital Technology: Creates challenges and new revenue i. Digital sampling in 1980s ii. Illegal downloads, illegal copying via rippers and burners, and file sharing over peer-to-peer networks iii. Law changes 1. Until 1995, Section 107 of the Copyright Act did not include a performance right in sound recordings 2. Now, there is an exclusive right associated with interactive and subscription services that give the listener the ability to select or predict what would be broadcast 3. And, Digital Millenium Copyright Act of 1998 provided a compulsory license for other digital broadcast services of a non-interactive, non-predictable nature II. Contracts in the Record Industry a. Background stats i. In general 1. Break-even point for record cos investment is high 2. Costs of recording is very high 3. Few albums make it 4. Most artists never make a second album 5. Legal download sales are a small but growing ii. Numbers 1. Out of 11,070 new releases by major labels, average total sale was 18,455 2. 2004-2005: 9.2% decrease in albums sold a. 2004: 681,437,000 albums b. 2005: 618,951,000 albums 3. 2004-2005: 147.3% increase in digital singles legally downloaded a. 2004: 142,594,000 b. 2005: 352,655,000 4. Neglible sales of cassettes, CD singles and vinyl b. Quick Economics i. Job of identifying artists is done by artist and repertoire (A&R) representatives who look at the internet and local contacts ii. Cost of an album is $100,000-$500,000, this is advanced to the artist as a fund, anything left over is an advance to the artist 1. Label has content or approval rights over recording budget and elements a. Selection of studio, producer, and engineers iii. Label will advance the costs of certain promotions, financial support of the tour, video, and other items in the agreement 1. These are to some negotiated extent, recoupable

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III. Artist a.

b.

c.

d.

iv. General rule of thumb is that one point equals 10 cents, so 14%=$1.40 per album sold v. Advances are recoupable, but the artist will not have to pay the shortfall out of pocket the risk of that happening is on the label vi. If an artist is unusually successful, the company will re-negotiate many terms vii. Artist revenues come from 1. Recording 2. Publishing (song writing and licensing to third parties) 3. Touring 4. Merchandise sales Recording Agreement Introduction i. Length 1. Used to be one page in 1920s 2. Now can be above 70 pages 3. Independent labels are shorter 15-40 ii. What an artist will get and the label will give depends on 1. What leverage does the artist have a. Several offers? b. A proven career 2. What does the artist ask for during the negotiation Parties and exclusivity i. Artist may enter individually or through loan out company 1. If through a loan out company, the artist will guarantee personal services in an inducement letter ii. Recordings are almost always exclusive 1. Except with a sideman on another artists recording 2. Also, will have a re-recording restriction: Restricts artist from recording the same song for a different label a. Usually for the longer of two years following the end of the term or five years from the release of the recording iii. If its a band, there will be leaving member clauses, which give the label the opportunity to renew if members leave Term i. Initial period will commence immediately and continue until a specified amount of time following the delivery [usually 6 months] ii. Option periods commencing immediately after the preceding period and continuing until a specified amount of time following delivery [5-6 months] iii. May require that the artist provide notice that the option has not been exercised, and time for the label to exercise it after receiving notice iv. Pay or Play: Artist wants the initial number of albums to be firm, so the label must record and release the albums or pay a liquidated amount Delivery i. Provides technical requirements for delivery

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e.

f. g.

h.

i.

1. What physical and digital form 2. Consents, approvals, licenses and documentation for samples, master, and artwork ii. Starts the time running on the many parts of the contract iii. Is required for payment of balance of initial advance to artist and producer Technically and Commercially Satisfactory i. Master must be technically satisfactory (no hisses, good sound quality, etc) ii. May have to be commercially satisfactory in the reasonable, good faith opinion of the label 1. Only major artists can sometimes get this taken out of the contract Territory: Usually the world or the universe, unless its an independent label of limited regional reach Video i. May mutually agree on the budget and director of a video ii. Production costs are generally advanced by label, but recoupable against video sales or record sales or both 1. Sometimes the label will agree to recoup up to 50% of the video production costs from the sale of records, and 100% from sale of videos, which are rarely sold 2. Typical video royalty is 10% iii. Composition (publishing) license is generally waived for videos Creative i. Creative controls are important to artists ii. For new artists, the studio, producer, material, and times of recording will be set by the label iii. Sometimes they are by mutual agreement Grant of Rights i. Labels normally insist on perpetual, worldwide ownership of recordings created 1. Ownership and total control of the sound recording copyright is the central asset of record companies 2. Artist may be able to restrict the territory 3. Artists of unusual leverage may be able to get a reversion of copyright after an amount of time reasonable enough for the label to make its money back ii. Artists lawyer would want to make sure publishing income is not cross-collateralized 1. Income from compositions should not be applied to recoup advances. Only income from recordings should recoup advances. iii. Artist may have the right to approve all (or some) of the personal elements used for production 1. It may be difficult to find an unused band name 2. Label may have to agree with the artist to select an alternative name iv. Sales by the artist of CDs at live performances are a major source of income for a developing artist

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1. CDs may be provided at manufacturing and handling costs ($3) 2. Or, some labels provide them free in lieu of money tour support v. Status of existing recordings previously distributed 1. New artists may have previously self-released titles 2. The label may want to buy the copyrights to all of them, or restrict their sale during promotion of new albums j. Website i. The label will usually create a new official website for the band ii. The bands old website may be continued with a link to the new one iii. The label will generally control and own an official site for the term of the agreement k. Release and Commerical Availability Commitment i. From the artists perspective, an essential element of the contract is the labels commitment to record and release a record ii. The agreement will almost always provide for the recording a minimum number of masters, it will rarely guarantee release. iii. Sometimes a label will agree to guarantee release within a certain number of months, 1. but may refuse to release during the fourth quarter because of the holiday season iv. Typically the artists sole remedy if the label doesnt release is to terminate the term of the agreement 1. Sometimes the label will agree to sell back the masters l. Recording fund and advances i. Recording funds are the most common way to budget albums ii. For new artists, the amount is intended to provide enough income to pay the artists cost of living and general overhead for the time it takes to record an album iii. The advance is opportunity money, not retirement money iv. The fund for ensuing albums is determined to be an amount usually equal to 67% of the royalties, 1. after retention of reserves (not to exceed 20%), 2. less recording costs attributable to the previous album 3. And subject to minimums and maximums in the example: a. 2nd album 200,000 250,000 b. 3rd album 300,000 400,000 c. 4th album 400,000 500,000 v. Cost of promoting an artist is usually not charged as a recording cost or a recoupable costs 1. Though if independent, third party promoters are engaged, there may be a recoupable advance of 50-100% of such amount m. Per record costs i. Technically the artist is responsible for engaging a producer, who is charged with engaging studios and engineers

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ii. Producer submits an invoice for services of technical parties to the label administrator iii. Those entitled to royalties (producers, top-level mixers) may receive a letter of direction which allows them to get their royalty directly rather than from the artist n. Royalties i. Artists royalty typically begins at a rate of 14% (28% if on wholesale price) 1. Will be all-in, that is, will include producer and mixer royalties ii. Reductions include 1. 10% breakage fee, off the top 2. 25% container or packaging charge 3. Free goods or promotional items 4. Records sold as scrap 5. Records sold below $5 6. Reduction for special sales plans, record clubs, other promotions iii. Foreign rates 1. May be reduced by a percentage, depending on country, because of added expense of distributing to other countries iv. Proration 1. If a single is included on a compilation, the artist only receives the prorated royalty (e.g. 1/16 if one track is theirs on a 16 track compilation) v. Flat-Fee licensing 1. If the label licenses to someone else, the royalty may be 50% vi. Escalation 1. May provide that albums 500,001-1,000,000 will be paid . 5% more, and albums 1,000,0001 and up will be paid 1% more 2. Once an album sells this much, the label has generally broken even, and this represents sharing of those profits with the artist o. Statements, Reserves, and Audit Rights i. Receipts and payments is customarily sixty days after each semi-annual period ii. Label will probably maintain reasonable reserves of royalty payments to recognize that there are records sold that may be returned 1. Contract should specify the maximum amount [20-30%] 2. It must be liquidated eventually usually a year is enough iii. Artist will have the right to pay for an audit of the books iv. Company may pay for that audit if it turns out that they seriously miscalculated p. Controlled Compositions i. There are two different properties in sound recordings 1. Recording itself (sound recording)

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a. Recording royalties are paid for this 2. The song (musical composition) a. Mechanical royalties are paid for this ii. Company will try to limit the amount it pays for mechanical royalties to an amount less than the statutory rate (typically 75%) 1. Company will also try to cap the number of masters it pays mechanical royalties for (10-12) 2. Company is essentially getting a 25% share in the artists mechanical royalty 3. Attorney should try to make sure this applies only to recordings that were written by the artist (controlled recordings) q. Warranties, Representations i. Artist will make warranties about ability to contract, that no materials or use will violate the law or infringe on third party rights ii. Will also include a re-recording restriction 1. Artist should not re-record the songs within a certain period a. Usually 2 years after the end of the term, or five years after the release, whichever is longer r. Logos/Artwork i. Logos and artwork created by the label will be owned by the label unless the artist pays for them ii. The company doesnt want the artist making money off of artwork in merchandising they dont participate in iii. Merchandise deals should also not be cross-collateralized IV. Hypothetical Contract How a Gold Record Can Lose Money Albums on which hypothetical Gold Record will earn royalties 500,000 -6,000 494,000 X10/12 CDs shipped CDs given free to DJs Shipped, 2 free with every 10 To determine number sold CDs given away for free are not included in royalty calculations. Maximum percentage of free albums can be negotiated A gold record is 500,000 Promotional CDs are not included in royalty calculations

=411,666 X90% Breakage fee There still persists a 10% breakage fee though few, if

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any CDs break as did old-timey records =370,500 Gross Royalties $15.98 -$4.00 =11.98 X14% Suggested retail price Packaging deduction of 25% On which royalties are payable Royalty rate for CDs May be more for later CDs, and may be more on the 500,001 and subsequent albums if there is an escalator clause May not be calculated for digital downloads CDs on which royalties are payable

$1.677 =$621,328

Royalty per CD sold Gross CD royalties

Mechanical License fees Total mechanical license fees paid by label to third-party songwriters on all songs $.091 X12 =$1.092 X500,000 License fee per song Songs on this hypothetical gold record Mechanical license fees per CD CDs shipped This is the statutory minimum for composition royalties

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$546,000

Total CD mechanical license fees

Mechanical license fees that the label was responsible for under the hypothetical gold record agreement $.091 X75% The statutory minimum The typical percentage that labels try to reduce their payment of mechanical licenses to Agreements may also cap the maximum number of songs the label will pay mechanical licenses for the artist is responsible for royalties on songs above the cap

X10 songs cap

=$.6825 X500,000 CDs shipped =$341,250 What the label will pay for

Mechanical license fees that the artist is therefore responsible for $546,000 -$341,250 =$204,750 Total mechanical license fees What the label will pay for Mechanical license fees the artist is responsible for

Producers royalties

$15.98 -$4.00

Suggested retail price Packaging deduction of May not be calculated

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25% =11.98 X3% On which royalties are payable Royalty rate for producer Royalty per CD sold Gross Producer royalties Advance already paid by the company

for digital downloads

Comes out of the artists royalties because they are all-in

$.3594 =$133,157 -$30,000

Producer will have already received an advance, which is recoupable

=$103,157

Additional amount payable to producer on account of record sales

Royalties Payable $621,328 -$125,000 Gross royalties Reserves against possible returns Recording Costs Producer advance Artist advance Video production costs This represents 100% recoupable costs for creating a video Typically 20-30%, this number represents 25% of CDs shipped

-$110,000 -$30,000 -$10,000 -$75,000

-$204,750 -$103,157 =(-$36,579)

Excess mechanicals Royalties to producer Still substantially unrecouped

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Deductions totaled $657,907

Now imagine that just a few changes are made to the contract Somehow gets the label to agree not to charge a breakage fee - Reduces the number of free albums from 2 on 10 to 15 on 100 - Only deduct 50% of video expenses, not 100% - Excess mechanicals altered o Label to pay mechanicals on all albums distributed, not just on albums sold o 75% rate limitation only to apply to controlled compositions songs the artist wrote herself o No cap on number of songs, label pays mechanicals on all 12 songs Gross Royalties 500,000 -6,000 494,000 X100/115 =429,566 $15.98 -$4.00 =11.98 X14% $1.677 =$720,382 Suggested retail price Packaging deduction of 25% On which royalties are payable Royalty rate for CDs Royalty per CD sold Gross CD royalties CDs shipped CDs given free to DJs Shipped, 15 free with every 100 To determine number sold

Producers royalties

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429,566 $.3594 =$154,386 -$30,000 =$124,386

CDs sold Royalty per CD sold Gross Producer royalties Advance already paid Additional amount payable to producer on account of sales

Royalties Payable $720,382 -$125,000 -$110,000 -$30,000 -$10,000 -$37,500 0 -$124,386 =$286,496 Gross royalties Reserves against possible returns Recording Costs Producer advance Artist advance Video production costs Excess mechanicals Royalties to producer Royalties payable to artist

So, just from a few changes to a few deal points, the artist can make money where otherwise her expenses may have remained substantially unrecouped.

VII. MUSIC PUBLISHING


Overview of the Industry Publishing rights are the rights in the underlying composition as opposed to specific recordings of the composition.

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New ways to use, listen and purchase music have necessitated business and legal changes in the industry. So many new sources of song publishing income: ring tones, streaming radio, pay-per-listen, digital jukeboxes, etc. Music publishing revenues exceed $6B in 2004. The song as a unit is at the heart of the music publishing industry Music publishers functions include working on creative level with songwriters in composing of new songs, protecting/enforcing copyrights, seeking potential licensees for songs, entering into licensing arrangements for such uses, and collecting and disbursing the resulting income Labels and publishers fight over who has the licenses and who gets the royalties for ring tones, streaming audio, tethered downloads (e.g., Pandora), etc. Harry Fox Agency U.S. organization that represents music publishers for mechanical licensing. Reps over 28,000 publishers. Like a performing rights collecting society of sorts. o A single LP can have songs owned by 10 different parties. Songwriters are an increasingly important part of the industry (e.g., Dr. Dre, Timbaland, Neptuned) In 2006, the five largest music publishing companies controlled nearly 2/3 of market share and revenues: o EMI Music Publishing, Warner, Universal Music Publishing, Sony-ATV Music, and BMG Music Publishing. Main Sources of Publishing Revenue: o Small performing rights - streaming radio, jukeboxes o Mechanical royalties - using songs on records o Royalties from printed editions o Fees from movies, TV, and soundtracks, and royalties from ring tones, subscription services, and other digital forms. Co-publishing agreements provide for co-ownership of specified songs by two or more parties. Songwriters who are artists recording their material and who want a publishing deal with an advance can usually negotiate the retention of a portion of the copyrights in their songs. Types of Publishing Agreements: o Songwriter agreement writer receives certain amount of royalties and transfers 100% of copyright to publisher. o Administration agreement publisher gets no ownership right songwriter retains 100% copyright, publisher undertakes same functions as under copublishing or participation agreement, and publisher received an administration fee (usually 15-20%). Rights expire after a stated period. o Collection agreement publisher acquires no ownership, merely rights for a term of years. Publisher does not undertake any affirmative obligation to exploits songs. Just handles paperwork of registration, licensing and collection. o Foreign sub-publishing agreement Similar to administration agreements and impose additional artistic and economic controls on subpubs. Will not license socalled local cover recordings (recording of song produced and recorded in local territory by artist other than original artist) without approval. 42

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o Catalog purchase agreement owner of composition (or catalog) sells copyrights in a transaction known as a catalog purchase. Can include a percentage of one song or rights in a million compositions. Purchase price based on net publishers share (publishers share of income over a period of years) Deal Basics: o Publishers will always try to acquire copyright for the life of the copyright, but songwriters will often want a right to the reversion at earlier dates. o Territory will often be a sticking point in these deals. o Administration rights are almost always exclusive to the publishers though artists/writers can sometimes prior approval provisions in there. o 75/25 split songwriter gets 50% songwriter share, and then 50% of royalties that he splits with publishers (mechanical royalties, performance income, print music income, etc.) o Foreign deals domestic publishers work through societies abroad who deduct their fees and pass along money to domestic publishers. Two types: Receipts deals U.S. publisher deducts its publisher/administrator/collection percentage and pays over remainder to songwriter (or co-publisher or participant). Source deals - fees of foreign subpublishers absorbed by originating U.S. publisher of out originating publishers percentage of income. o Receipt deals better for songwriters. See sample co-publishing agreement on pages 648 650.

Obligations of Publishers Without any special provisions, publisher does not guarantee any particular level of success and is not really obligated to do anything except customary housekeeping details (registration of copyright, setting up of song files, etc.), and accounting and payment for royalties if compositions are exploited. o However, courts usually read in an implied promise to use reasonable efforts to market and place the products. See Wood v. Lady Duff Gordon and Zilg v. Prentice-Hall cases. Required efforts are reduced when there are advances paid. o Some songwriters put provisions in agreement which revert the copyright to the songwriter if not exploited within a certain amount of years. Publishers may not sell rights in a way that diminishes songwriters contractual expectancy (barring special provisions allowing that). Nolan case. Obligation to exploit is not open-ended. Cases: In re Waterson, Berlin & Snyder Co. (2nd Cir. 1931) o Bankruptcy case back in the day when sheet music and son plugging were the primary exploitation vehicles. o Bankrupt publisher tried to sell rights to compositions free of royalty claims. 43

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o Songwriter sued claiming that they had no right to sell copyrights at all, much less free and clear of royalty provisions. o Court holds that bankrupt publisher can sell the compositions but must do so subject to the license/royalty terms negotiated with songwriter. Harris v. Evans (9th Cir. 1984) o Distinguishes Waterson case and holds that a mere license is not transferable in bankruptcy. Evans v. Famous Music Corp. (N.Y. App. 2003) o Songwriters signed a receipts deal with publishers for composition exploitation throughout world. o Publishers deducted certain foreign taxes from $ they received from foreign subpublishers before cutting songwriters their 50%. o Publishers then got foreign tax credits for 50% paid to songwriters. o Songwriters sue arguing that publisher must share gain of foreign tax credit with them. o Court refuses to read such an obligation into the K; says the K is unambiguous as to what type of royalties songwriters are entitled to, and that foreign tax credits were not envisioned by the parties to the K.

Performing Rights: The performing rights area represents for most songwriters, film and TV composers and music publishers their greatest source of continuing royalty income. o Each year, writers and publishers receive more than $4 billion in royalties from this right of copyright. The performing right is a right of copyright that applies to the payment of license fees by music users when those users perform the copyrighted musical compositions of writers and publishers. o This right recognizes that a writers creation is a property right and its use requires permission as well as compensation. o Examples of performances include: songs heard on the radio or jukebox, underscore in a TV series, music performed live or on tape at a show, amusement park, sporting event, concert venue, or symphonic concert hall. o Music users (those that pay license fees) include major TV networks, local TV and radio stations, cable services, concert halls, web sites, hotels, colleges, nightclubs, restaurants, etc. o The Copyright Act covers the non-dramatic performance of copyrighted musical works (which is basically everything besides dramatic rights) In the US three organizations negotiate license fee agreements with the users of music and distribute those fees back to the writers and publishers whose music and lyrics are being performed. They are: ASCAP, BMI, and SESAC. o Members of this society are songwriters and publishers. The organizations pay 50% to the songwriter, and 50% to the publisher directly, cutting out the record company as a middleman. If there is a co-publishing deal in place, then the split is 75% and 25% respectively.

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Types of License Agreements: Blanket License: The most common type of license agreement. It allows a user to perform any works in the ASCAP or BMI repertory during the term of the license for a specific negotiated fee. These are negotiated agreements in which the license fee paid by the user can be a flat dollar fee, a per subscriber or gross revenue fee, a fee based on net receipts from sponsors, or based on other objective factors such as seating capacity of a venue. Such agreements have a maximum term of five years. Per Program License: An agreement where a station pays a license fee only for each for program using ASCAP or BMI music that is not otherwise licensed directly or at the source. Other forms of license involve the writer and publisher making an agreement directly with a user or directly with a program producer. Such forms of license are permitted under ASCAP and BMI agreements which are non-exclusive and enable a writer to license his or her works directly. o A license directly between writers/publishers and program producers is known as a Sync License. This is when the underlying composition is synchronized with the film or TV production. With this license, money goes directly from the TV/movie/commercial production company to the publisher. The Sync License is not automatic, as is the granting of the license under the Blanket or Per Program license. It has to be agreed to by the Publisher and sometimes the writer. The charge for the license is negotiable. Blanket License Case Buffalo Broadcasting Co. v. ASCAP (2d Cir. 1984) o Hundreds of local TV stations sued ASCAP, claiming its blanket licenses were an unreasonable restraint of trade in violation of Section 1 of the Sherman Antitrust Act. o Trade is restrained, sometimes unreasonably, when rights to use individual copyrights or patents may be obtained only by payment for a pool of such rights, but that opportunity to acquire a pool of rights does not restrain trade if an alternative opportunity to acquire individual rights is realistically available and a plaintiff will not be held to have an alternative available simply because some imaginable possibility exists. o The court finds Per Program licensing, source licensing, and direct licensing to all be viable alternatives to Blanket Licenses. Thus, Blanket Licenses are not an unreasonable restraint of trade. Split Licensing Case: In business such as cable TV, in which programming passes through more than one conduit, ASCAP and BMI have tried repeatedly and unsuccessfully to collect license fees at each stage. U.S. v. ASCAP, In re Fox Broadcasting Co. (SDNY 1995) o Then fledgling Fox Network distributed programming via satellite to 143 local stations. Prior to 1991, ASCAP licensed the programming at the local station level. In 1991, ASCAP demanded that Fox Network obtain a license itself for the transmission of its programs to its network stations. 45

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o It has long been recognized that ASCAP may not split rights in order to collect more than one license fee for any one use of the music in its repertory. o ASCAP may not split licensing. It can only collect license fees from Fox Network at the local station level or at the network level, not both. Sampling: Many recordings embody digital samples of other recordings that require licenses from both the owner of the sound recording that is being utilized and the owner of the musical composition. It is important for these two licenses to be obtained before the release of the use of the song, or the results can be disastrous. Grand Upright Music, Ltd. v. Warner Bros. Records, Inc. (SDNY 1991) o Defendant, Biz Markie, made unlicensed use of a copyrighted composition written and performed by the plaintiffs. o The court approved a preliminary injunction against Biz Markie and referred the matter to the U.S. Attorney for consideration of prosecution under certain criminal statutes. o The court suggests that such unlicensed use can lead to both civil and criminal penalties. Newton v. Diamond (9th Cir. 2003) o Defendants, The Beastie Boys, sampled a 6-second long, 3-note segment of a copyrighted recording for one of their songs. In doing so, they obtained a license to sample the sound recording of the copyrighted composition, but did not obtain the license to the underlying copyrighted composition itself. o We hold today that Beastie Boys use of a brief segment of that compositionis not sufficient to sustain a claim of copyright infringement. We affirm thegrant of summary judgment on the ground that Beastie Boys use of the composition was de minimis and therefore not actionable. o The requirement that obtaining the license to the underlying composition when sampling is subject to a de minimis exception. o Note: the dissent argued that summary judgment was inappropriate in this case because a jury could have found that the Beastie Boys use of the sampled material was not de minimis. Bridgeport Music v. Dimension Films (6th Cir. 2004) o Relevant Facts: Defendant, No Limit Films, sampled a 2-second 3-note segment of a composition in the sound track to one of its films. The plaintiff held the copyright for the sound recording of the composition, and the defendants did not obtain the license to sample this recording. o When sampling a copyrighted song, is there a de minimis exception to the requirement of obtaining the license to the sound recording of the composition? (recall there is such an exception for the license to the underlying composition) o Sound recording copyright holders [have] the exclusive right to duplicate the sound recording in the form of copies that directly or indirectly recapture the actual sounds fixed in the recording.

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o There is no de minimis exception for the requirement of a license to the sound recording when sampling. Any use of a sound recording, no matter how short in length or how much it has been altered, requires a license.

VIII. FILM

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The Changing Scene o Rate of return for studios from theatrical distribution is low (5%); most profits come from home video and TV distribution. o Studios determined to cut costs by: 1) paying talent less $, 2) greater readiness to drop/cancel productions with potential runaway budgets, 3) eliminating perks. o US industry dominated by six major studios that finance, produce and distribute films (Universal, Sony, 20th Century Fox, Warner Bros., Paramount and Disney). o Most big-time production companies also owned by major studios o Difficult for indie film companies to survive over long term without agreement with major studio because not diversified conglomerates and majors enjoy regular revenue stream from exploitation of their substantial movie libraries. Producing Films o 1920s-WWII, studios controlled nearly every aspect of financing, production and distribution; actors worked exclusively for one studio under long-term Ks; studio system came apart after WWII as a result of TV and antirust litigation. o Primary business models today: Negotiation on film-by-film basis: studio still primary source of financing but no longer have power to assign talent to be in specific productions. Other business models include long-term Ks with major studios for talent. Co-financing arrangements: studios contribute production monies in agreed shares, with one acquiring rights for US/Canada, other for rest of world with revenues apportioned according to prearranged formula. Off-balance sheet financing: interests in slates of films syndicated to outside investors (ex: Castle Rocks eight-picture deal with Chase, where bank provided $200M to finance 2/3 of production costs, distributing studio took 15% fee off top, and Chase recouped investment from remainder). Negative costs - all out of pocket costs that go into finishing movie. If add up all actual costs of getting movie into theater and getting people into theater, $100M, most major studio films make money unlike in music business where 1 out of 20 actually make money for major label. Most profits from film coming from TV and home video rights, however, not from being in theater. o Studio Model Prospective producer of film begins by acquiring rights to existing play, book, screenplay or treatment for screenplay. Producer wants broadest possible grant of rights, including right to distribute film in all formats presently known and that may be invented; also wants to acquire all rights in characters embodied in property to do remakes, sequels, spin-offs and exploit all those derivative works in all present and future formats. Usually need rights to screenplay, book, treatment, someone's life story, or even just idea. Typically, production company ends up owning rights (individual with own company, small independent production company, or one tied in w/ major studio). Usually rights obtained through option or purchase agreement, normally production company will go to author or vice versa and say don't know if can get film made, want series of options where

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have exclusive right to make movie if pay "x" dollars, six months, one year period. Stronger the material, shorter period; option anywhere from $0 to something for beginning. If don't sell in initial period, pay to extend. Sometimes option agreement will include writing agreement, i.e. if screenwriter sold option to production company and can write, production company would also want option for you to do rewrite based on comments, second rewrite, maybe polish to go into production. Terms of literary option/purchase agreement: 1) length of initial option period and any extensions, 2) price of option periods and any extensions and whether those payments are applicable against the purchase price, 3) set up bonuses if any, 4) purchase price for rights, and if based on % of budget, floors and ceilings, 5) if additional writing services to be rendered, what writing steps will be commissioned and for what fees, 6) rights granted, reserved and reversion of rights, 7) with respect to rights reserved, holdbacks, rights of first negotiation, and matching rights, 8) credit. Basic Terms and Conditions: OptionScreenplay, p. 746 Term option granted for six months; also simultaneously executed short form option (see below). Can exercise option by paying. No extensions in this agreement. Contingent payments gets $ for exercise of option; if producer makes prequel, sequel or remake based upon this movie, then seller gets separated rights in the work and % of original amount paid; if producer makes TV show under specific conditions, gets separate rights and first-run royalty with reductions to occur under certain conditions (ex: HBO v. free TV), with amounts depending on length of episodes according to schedule; if producer makes spin-off, deemed series in accordance with last schedule, with reductions of 50% for generic spinoff and 75% for planted spinoff (definitions in K); if makes sequel or remake which is movie of the week or mini-series on TV, gets separate rights of $/hour of run time and reduced if not on free TV during prime time. Not entitled to receive addl amounts. Credit entitled to receive separate rights if producer makes movie based upon the work and gets credit as determined by producer and in accordance with WGA Basic Agreement. Reversion right in accordance with WGA Basic Agreement, can arise no later than 5 years after date producer exercises option Misc - gets early copy of film and premiere tickets Future productions, restrictions on sequels if makes sequel or remake within 7 years after initial general commercial theatrical release of film, seller gets first opportunity to negotiate right to provide writing services on first future production subject to procedures. Standard Terms and Conditions: OptionScreenplay, p. 751 Length see above Extension force majuere or if seller breaches reps or warranties, grant period extended automatically for period of time equal to period of time that development and/or production hampered or delayed or 49

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time during which any claim is outstanding or unresolved, but not more than 6 months in either case. Reps and warranties of seller, including right to enter into agreement, that work is fiction and hasnt been published anywhere else before, subject to , etc. Indemnity seller indemnifies producer against any claims and expenses arising from sellers breach of rep or warranty while producer indemnifies seller from any material added and not provided by seller in connection with film. Credit producers sole determination in accordance with conditions above. Producers control producer has right to make any changes in work in preparation and exploitation of any productions based upon work and seller has no right of approval or consultation regarding any such changes or with respect to any element, seller waives any droit morale rights. Right of first negotiation/matching last refusal if seller finds another buyer during option period, seller must negotiate with producer for 60 days in good faith and if cant reach agreement, producer has matching rights. Sellers remedies cant get injunction, limited to damages and cant terminate or rescind agreement or enjoin or restrain distribution of film Assignment producer can assign and remains liable unless assigned to specific parties (merger, major studio). Short-Form Option, p. 757 Grants producer exclusive and irrevocable option to acquire forever all rights in the work. Part of terms above. Turnaround rights: if company doesn't find someone to buy film, writer has right to find studio and get that second one to pay back first for film, get rights back and sell them to second production company. Usually in agreement with writer b/w producer, latter has creative control. If production company goes to studio, latter will have those rights. Often assignments rights when writer sells to production company rights to screen play or book, production company has right to assign K to someone else b/c want to make sure can assign it to big studio, new LLC, etc. If music to be part of film, studio must enter into Master Use License with record company that owns underlying rights to recording and Film Synchronization and Performance License with music publisher who owns underlying rights to musical composition embodied on recording. Ex: song goes with title that you really want to have, going to want rights ahead of time. When getting rights to music, sometimes its work for hire when hiring composer and production company owns music or sometimes using already existing music where have to get 1) master use license for whoever owns master, permission to use song in movie,

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2) synch license, underlying composition or publishing rights and need right from publisher to synch that underlying song with movie. Master Use License, p. 758 For fee, licensor grants licensee non-exclusive and irrevocable rights throughout territory, including: 1) right to re-record, reproduce and perform excerpts from recording in synch or timed relation with film, make copies of film with recording contained in it and exploit such copies, 2) distribute, publicly perform, exploit and otherwise use all versions of film with recording, 3) utilize recordings on excerpts in and out of context used in film in any media, 4) nonexclusive right in each country of territory to include recording on soundtrack album, and if used on album, licensee will pay licensor basic royalty based on retail selling price (%) and if licensee accounted to by record distributor based on wholesale price then different %. Licensor responsible for paying all recorded royalties (other than mechanical royalties) payable to artist, producer, etc. Cant make singles of recording. If any record company receives screen credit with respect to preexisting master recording used in connection with film, licensee obligated its distributor to accord licensor screen credit on negative and positive prints of film in same manner as other record companies. Cant use recording in conjunction or as title and/or screen credits or as theme song w/o licensors prior written consent. Remedies for licensor limited to damages, no injunctions If giving rights to use song in a film, theyll usually want right to utilize recording on excerpts in or out of context in which contained in film in any media. Negotiable, depending on both parties preferences. Can make it prorated to # of tracks in film for money get from soundtrack, i.e. 3 out of 12 tracks, get 25% of those three points for producer when calculating royalties, same concept for film soundtrack, get prorated amount depending how many songs on soundtrack. Music, have to make sure if using other already existing music that you have 2 agreements. Agreement for distribution of soundtrack, agreement with owner of both master recording and owner of publishing rights, although for publishing, it's going to be compulsory license possibly where they have to give it to you. Film Synchronization and Performance License, p. 760 Licensor grants licensee irrevocable rights throughout territory to: 1) record composition in synch or timed relation with film and copies of it, 2) right to utilize composition subject to mechanical licenses in soundtrack albums and other soundtrack recordings, 3) right to distribute, publicly perform, and otherwise use and exploit all versions and copies of film, and 4) right to utilize composition or excerpts out of context in which composition recorded in film in any media to promote or advertise. Licensee wont authorize performance of composition in film in US by means of TV unless broadcaster or exhibitor has valid small 51

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performing rights license for composition from performing rights society or from licensor. If any music publisher receives screen credit with respect to musical composition utilized in film, licensor wants similar one. Licensors remedies limited to damages and no injunctions. o Production/Financing/Distribution Deal (PF&D deal) Once get necessary rights, producer can move ahead to get PF&D deal from studio whereby studio engages producer to oversee development of script, recruitment of director and lead actors and, if studio decides to go forward, to produce the film. Studio agrees to put up funds for development, then finance production and then in its discretion to distribute film. All rights in film and underlying property belong to studio. Important decisions subject to complete discretion and control of studio. Producer usually entitled to 50% of some contractually determined net. Pre-Production: producer wants progress to production schedule in PF&D, forcing studio to choose to proceed further with development or abandon project, usually letting producer repurchase it. Key step here is budget, established when script finished. Most producers overload initial budget because studios always reject first draft. Once budget set, pay or play status whereby studio has to pay off producer whether or not film is actually made. Often started before buy rights but while under option to buy rights. Need to: get financing, director. May not actually sign director or performer to K where bound to pay them but might have option or understanding with them that if film made, they'll work on it or be in it, etc. Create production schedule, includes pre-production, principal photo, post-production, editing, inserting soundtrack, special effects, etc. Create budget, obtain a completion bondonce at point actually going for financing, need this, insurance policy that says we've checked out your budget, your credentials, we know what this business is about, and going to guarantee for a fee you can finish this film within that budget (see below). Get insurance, clearance for products, secure locations. Principal photography: period during which film shot Post-production: once film in the can, producer etc. finish up, studio begins its distribution work. Above the line/below the line personnelabove the line most important, integral parts of film, i.e. writer, performers, at least main actors, director, producer and executive producer, ones typically asking for some type of contingent payment where if film makes money, they want to share in those profits. Below the line is cinematographer, special effects person, wardrobe, makeup artist, integral to making movie but not as much as producer, etc. Distributionagreement for distribution to theaters. Non-theatrical K, including things like pay TV, free TV, syndicated TV, home video, and foreign rights. In each area, if independent filmmaker, going to negotiate each

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separately w/ different companies in different territories around world b/c each important for sales, and sometimes one company better than other and can get advances, important for finishing movie. See also merch rights, commercial tie in rights, product placements. o Writers, Directors and Performers Agreements Main issues: money, credit and creative involvement Writer Agreement Producer is hiring writer to render writing services on a work-for-hire basis, so producer will own all results and proceeds of writers services. Basic terms: 1) writing services to be performed, 2) writing/reading periods, 3) payments for each writing step and guarantees, if any, of certain steps, 4) sole and shared screenplay credit bonuses, if any, 5) first opportunity to write on subsequent productions based on source material, 6) passive royalties, 7) credit. Need to know whether writer is member of Writers Guild of America because theyre prohibited from entering into deals with production entities that arent signatories to its basic agreement. Life Story Rights Agreements Producer must resolve what rights are required to be obtained in bringing factual story to screen. General rule of thumb is to acquire as many rights as you can from all living person to be depicted even if youre individually comfortable with your legal position. These rights often obtained through option purchase agreement, but different considerations. Basic terms: 1) length of initial option period and any extensions, 2) price for option periods and any extensions, and whether these payments are applicable against option price, 3) set up bonuses, if any, 4) purchase price for rights, and if based on % of budget, floors and ceilings, 5) rights granted (scope of release, i.e. specific periods in persons life or specific events that occurred to particular person), 6) control over screenplay and degree of fictionalization permissible, 7) use of copyrighted works created by subject. Screenwriter Agreement Key issues: 1) grant of rights, 2) representations and warranties, 3) indemnities, 4) producers control, 5) remedies, 6) suspensions and terminations, 7) insurance, 8) immigration and naturalization, 9) publicity Sometimes separate from option agreement b/c person who sells rights to book or screenplay isn't necessarily same person who ends up writing screenplay for movie. This agreement talks about writer, "writing and reading periods," very specific, right to pull it, etc. Basic Terms and Conditions: Screenplay Agreement, p. 765 o Services producer engages artist to write screenplay consisting of first draft and at producers election, rewrite and

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polish in accordance with delivery schedule (complete first draft within 3 months; producer has 8 weeks to read it and then can require writer to rewrite which needs to be delivered within 6 weeks and following delivery of that, producer has another 8 weeks to read and then has right to require artist to write polish, which author has 4 weeks to complete). o Compensation - $15k, 50% upon commencement of services, 50% upon delivery of first draft. o Contingent payments - $7.5k for rewrite, 50/50 before/after delivery; $1.5k for polish, 50/50; if producer makes movie and artist gets sole written by or Screenplay by credit, such amounts, including min and max, reduced 50% - % of budgeted cost of film provided all amounts paid no less than and no greater than __ and amount equal to % of producers share of net profits, if any, commencing at point at which producer is first paid its share of net profits. If producer makes sequel, and writer gets credit, gets 50% of amount paid under first part plus net profits at 50% as above and if gets shared credits, reduced by 50%. If producer makes remake, 33%, same formula as for sequel. If makes live action episodic TV series and same standards as above, royalties reduced by 50% and specific fees for length of episodes of 20% royalties for reruns. If movie of the week or mini-series, 50% reduction and $10k for each hour of running time but not more than $80k. If doesnt get credit, not entitled to any compensation. o Credit if producer makes movie based on work, writer gets credit on screen and in paid advertising to extent mutually agreed by parties in good faith. Standard Terms and Conditions: Screenplay Agreement, p. 767 o Together with basic terms above constitute agreement o Writer required to perform to best of his ability and on exclusive basis during all writing periods and on non-exclusive first-priority basis at all other times. o Producer has all rights in artists work, employee-for-hire and commissioned for purposes (or assigned if not). Same with rights in any derivative works. Also rights to his name and likeness. o Reps and warranties artist will write screenplay by himself and not taken from any other material; material clear of problems; artist has right to enter into agreement, etc. o Indemnities artist indemnifies producer for any breach of rep or warranty; producer indemnifies artist for any material he adds. o Credit determined by producer at his sole discretion o Producers control same as in option agreement above. o Artists remedies damages only 54

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o Immigration/naturalization employment contingent on proving artists identity and employment eligibility under immigration laws. o Publicity cant directly or indirectly issue any publicity or disclose any info concerning agreement, movie, etc, without producers prior written consent and has to pose for publicity pictures, etc, in accordance with producers requests. Director Agreement Where director can get a cut, i.e. can present it to production company way he wants it, but its production company or producer who gets to make final cut, can even change casting, etc, again everything is negotiable, if this is huge director who is always successful and who everyone thinks has best creative sense for this film, will get more creative control. Basic Terms and Conditions: Director Agreement, p. 775 o Services commence on exclusive basis 8 weeks before scheduled commencement of principal photography, shall direct movie in compliance with requirements of producer, including budget, schedules, legal requirements, running time (95-110 minutes), and PG-13 rating. Cant authorize or make any changes in final shooting script, schedule or budget without producers written consent. o Compensation - % of budgeted cost on commencement, paid according to schedule. o Credit directed by on screen, in billing block, and for awards. o Directors cut producer has sole right to make any and all cuts, including final cut provided that director can make one cut and one preview of movie subject to certain conditions, including upon completion of directors cutting rights, producer still has right to make final cut. o Misc gets premiere tickets and early copy of film Standard Terms and Conditions: Director Agreement, p. 779 o Grant of rights producer has all of them, same as in writers agreement above. o Reps and warranties see writers agreement. o Indemnities see writers agreement. o Credit see writers agreement. o Producers control see writers agreement o Artists remedies see writers agreement o Immigration/naturalization - see writers agreement o Compliance with guarantor-s instructions director has to act in accordance with any completion guarantee agreement o Publicity - see writers agreement

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o Guild membership artist has to remain in good standing in that organization and if fails to do so, producer can terminate agreement or stop paying. Paid Advertising Exhibit o Producers obligation to accord credit, if any, in paid advertising limited to advertising issued by or under direct control of producer and doesnt exclude certain advertising such as group, list or institutional ads; teaser or special ads; outdoor ads; promo materials for exhibitions and much more, see p. 786. Performer Agreement Loan-out agreementartist for tax reasons wants to have own company or LLC owned by artist or director or performer or actor that then loans the services of that actor to production company; also liability protection. Basic Terms and Conditions: Performer Agreement, p. 787 o Services acting services in role, exclusive starting 2 weeks prior to commencement of principal photography o Compensation - $__, paid according to schedule o Contingent payments unspecified amount if certain events (such as having to work more than consecutive free weeks) occur. o Credit if artist appears recognizably in role during initial general theatrical release, gets cast credit: 1) on screen, on all positive prints, on separate card in position among cast members, in main titles and in size no smaller than that of larger 50% of screen title or credit accorded any other cast member, in ads subject to paid advertising exhibit, and in billing block. If any other cast member accorded credit above screen title, artists credit also accorded that. o Transportation and expenses o Nudity rider if nudity required, lender shall cause artist to execute nudity rider in form and substance satisfactory to producer in connection with her performance of nude scenes in picture o Consultation rights w/ respect to hairdresser, etc, personal to artist and cannot be delegated. o Can keep one costume from wardrobe. o Needs to be signed by authorized representative. Standard Terms and Conditions: Performer Agreement, p. 791 o Grant of rights see directors agreement o Reps and warranties - see directors agreement o Indemnities - see directors agreement o Credit - see directors agreement o Producers control - see directors agreement 56

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o Lenders remedies - see directors agreement o Immigration/naturalization - see directors agreement o Publicity - see directors agreement o Guild membership - see directors agreement o Paid advertising exhibit - see directors agreement o Gross Receipts/Net Profits Points contingent revenue participations in addition to fixed fee, typically applied to net profits but sometimes (for select few) to gross receipts. Definition of what is gross and what is net not determined in accordance with GAAP but depends on language in studios form. Generally, participant receives a fixed fee and contingent compensation that comes into play only after recoupment of artists upfront fee and some form of breakeven. Basic getting to net formula: Gross (or gross proceeds) = studios receipts from theaters, TV licensees, and portions of income from various ancillary sources (home video, 20% of wholesale receipts; soundtrack record sales, 5% of 90% of suggested retail list price; music publishing income, 25% of publishers share of income recd by studios publishing affiliate; merchandising, 50% of receipts) Deductions: o Distribution fees, typically 30% of film rentals in US and Canada, 35% in UK, 40% rest of world; 35% of other US TV fees, 40% foreign TV o Distribution costs, i.e. costs of duplicating and handling prints and other distribution materials, including advertising and promotion and overhead charge of 10% of expenditures for inhouse personnel o Production costs, actual costs of development, pre-production, principal photography and post-production, plus interest on each and overhead charge o Deferrals, when actor reduces fee by deferring part of it for later to extent funds available after above deductions. If anything remains, participations kick in with studio and producer splitting net 50/50 and with producers share absorbing all other net participations, subject to a minimum floor which may be soft or hard o Ex: if director, two leads and writer each entitled to 10% of net, producer would only wind up with 10%. o As a result, studios will agree to either absorb third party participations to extent they would reduce producers share below a specific % (usually 20, hard floor) or more typically will agree to absorb of third party participations to extent theyd reduce producers share below threshold (above, producer would get 15%)

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Rationale: fundamental economic underpinning, studio must recoup not only its investment in successful film but also sufficient addl revenues therefrom to cover its unrecouped investment on its unsuccessful pictures, its ongoing development program, distribution organization and to finance its future motion pictures. These needs result from fact that 1) most films fail to recover their production costs and distribution expenses during initial cycle of exploitation in theaters, video and TV (although over time most finish in black), 2) success of motion picture cannot be predicted, 3) studio has no K right to ask net profit participations to share risks attendant to film. Contracts of Adhesion/Unconsionability: The Buchwald Case and After o Buchwald v. Paramount (Cal. Sup. Ct. L.A. Cty. 1990) Definition of net builds in for studio not only to recoup all out of pocket expenses but to make profit on film before they start dividing up so-called profit b/c of risks taken, fact they could lose money and might on other films. Producer hired director and actors, and if given them % splits, usually comes out of his 50%, but some deals can negotiate with studio to share other profit participation amounts in some %. Court looking at Deal Memo, turnaround agreement, additional terms and considerations and Paramounts standard net profit participation agreement to determine whether 1) K between P (producer) and D (studio) K of adhesion, 2) K, or any provision, is unconscionable, 3) relationship b/w P and D was that of co-venturers, 4) D owed fiduciary duty to P, and 5) conduct on part of D breached implied covenant of good faith and fair dealing. Contract of adhesion signifies standard K which imposed and drafted by party of superior bargaining strength, relegates to subscribing party only opportunity to adhere to K or reject it. Balance between social advantage in light of modern conditions and danger of oppression. Court finds that Ps compensation package negotiated by his agent and Ds representative but that boilerplate language in deal memo not negotiated, and neither were rest of documents above, instead prepared on take it or leave it basis. D negotiates net profit formula only w/ relatively small number of persons who possess necessary clout. Entire K drafted by D and turnaround and net profit participation provisions standard, form ones, even standard for the entire industry K of adhesion. Unconscionability K of adhesion fully enforceable according to its terms unless other factors present (including if its unconscionable). Ps not using doctrine as sword but rather raised it in response to Ds reliance on K as written. Absence of surprise doesnt render doctrine inapplicable. Doctrine has procedural (inequality of bargaining power which results in no real negotiation and absence of meaningful choice) and substantive (turns also on absence of justification for one-sided result) considerations by which enforceability of clause tied to procedural aspects of unconscionability such that greater unfair surprise or inequality of bargaining power, less unreasonable risk allocation tolerated. Doctrine permits court to strike down entire K or any provision and nothing about this case precludes court from 58

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addressing whether certain component parts of net profit determination unconscionable. Court finds P sustained burden of proving following were overly harsh and one-sided: 1) 15% overhead on Eddie Murphys operational allowance; addl 15% charge made for overhead on top of this item, resulting in charging overhead on overhead, no justification, 2) 10% advertising overhead not in proportion to actual costs; flat overhead charge has no relation to actual costs and adds significantly to amount D must recoup before net profits realized, no justification, 3) 15% overhead not in proportion to actual costs; flat charge, not correspondent to actual costs incurred, abandoned fundamental economic underpinning argument during hearing, 4) charging interest on negative cost balance without credit for distribution fees; slows down recoupment of negative costs and inflates amount of interest charged is one sided whereby D accounts for income on cash basis while simultaneously accounting for cost on accrual basis, 5) charging interest on overhead; interest becomes addl source of unjustified profit because neither distribution fees nor overhead charges taken into account in determining whether costs have been recouped yet charges interest on them, 6) charging interest on profit participation payments; charges payments made to gross participants to negative costs, not paid until film derived receipts, so hasnt advanced the money in any real sense but charges interest, 7) charging an interest rate not in proportion to actual cost of funds, 20-30% even when havent laid out any funds. Question then becomes what decision is necessary to produce an equitable result? Court refuses to strike all challenged provisions of net profit formula it found unconscionable and permit D only to recover costs plus reasonable rate of return because would give windfall to P, instead says doesnt have sufficient facts to determine what P should be paid. Turnaround provision purpose is to permit producer to take his project to another studio if first is no longer interested in pursuing it while at same time permitting first to recoup its development costs if project undertaken by second. D gave notice it was abandoning project inspired by Ps treatment, permitted its option to expire, and D says that since P failed to set up project at another studio within 12 month window, turnaround provision extinguished its obligations. Court already concluded film made based upon his treatment, so D was required to employ P as producer and that breached its K to so and this clause cannot extinguish its duty to compensate him. Also in light of purpose of clause, D has more than recouped its costs for film. Co-venturer and fiduciary duty few if any features that usually characterize joint venture present here; P didnt have right at all times to inspect and copy purported venturer's books and records and D had pervasive control and while agreement to share profits, D retained virtually unlimited power to determine whether P ever recd profit. Also no fiduciary relationship except with Ds duty to render accounting. Covenant of good faith and fair dealing unnecessary to determine because court will fashion equitable result that will produce damages at least equal to damages that could be awarded for breach of convenant.

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Note: Ps argued clause where only 20% of video receipts counted towards gross unconscionable, but judge said that was something they bargained for. Ended up getting $900k, low given huge profitability of movie. o Batfilm v. Warner Bros. (Cal. Super. Ct. L.A. Cty. 1994) [class only] Ps obtained rights from comic book company and sold rights to WB, argued entitled to net profits. Judge said didn't prove K defeated their reasonable expectations, knew what expectations were, denied Ps any relief. o Estate of Jim Garrison v. Warner Bros. (Complaint) [optional reading] Complaint alleging net profit practices of studios illegal. Nine categories universally included in charges allocated to net profit calculations: 1) distribution fees, 2) distribution costs, 3) advertising, 4) prints, 5) production costs, 6) over-budge penalty, 7) taxes, 8) political lobbying expenses, and 9) interest. While video revenue often surpasses 50% of total income, these Ks only let participants count 20% of that income to profit participations. Standard form Ks on take it or leave it basis. Costs deducted grossly inflated and bear no relation to reality, instead helps reduce cost studios must pay for films. Causes of action include price fixing, boycott/concerted refusal to deal, breach of K, breach of implied covenant of good faith and fair dealing, unjust enrichment, imposition of constructive trust and for an accounting, for declaratory relief, violation of business and professions code, and injunctive relief. Producing Films: The Independent Model o Financing Sources: 1) advances from presales in foreign territories, 2) advances from foreign sales agents, 3) private equity through private offering, 4) private equity from independent financier, 5) bank loans secured by advances payable on domestic and/or foreign distribution deals, 6) co-production funds, 7) tax credits and other soft money. Domestic Negative Pickup coupled with Foreign Pre-Sales Negative pickup agreement with domestic distribution; if film delivered with set list of requirements, domestic distributor will purchase film for set price. Differs from typical domestic distribution agreement and a foreign distribution agreement in that distributor heavily involved in production of film, despite its decision not to cash flow production. Basic terms: 1) advance paid on delivery, and any contingent compensation paid to producer once advance recouped, 2) rights granted, 3) who, if any, are essential elements to production (directors, cast members), 4) creative approval rights of distributor, 5) business approval of distributor, 6) procedures that must be followed during production, 7) distributors access to production, 8) delivery date, 9) delivery materials. Sales agency agreement with foreign sales agent; commits agent to sell film and lists sales agents project sales of film upon completion.

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Agent responsible for delivering distribution agreements to trigger banks agreement to loan production funds but also to sell enough remaining territories to cover gap. Basic terms: 1) term, 2) territory, 3) rights granted, 4) ask/take prices, 5) producers approval rights, 6) sales commission, 7) sales agents expenses and cap on them, 8) allocation of gross receipts, 9) delivery schedule. Pre-existing agreements with multiple foreign distributors guaranteeing payment of certain advances upon delivery of film, with portion of advance paid upon signature of agreement. Usually more basic than negative pickup agreement b/c latter covers 30% or more of budget, this is fraction of that. Basic terms: 1) term, 2) territory, 3) minimum guarantee, 4) authorized languages, 5) rights granted and reserved (rights granted to foreign distributors often limited or split among companiesrights for sale include theatrical, non-theatrical, home video, pay TV, free TV, and pay-per viewrights usually reserved include merch, soundtrack album, music publishing, interactive rights, print publication rights, and ship and airline rights), 6) overspill, 7) producers approvals (video and TV windows, marketing and ad budgets, marketing materials), 8) distribution fees taken by distributor and/or royalties paid (theatrical and non-theatrical, TV, home video), 9) delivery schedule. Loan agreement; bank loans producers budget of film, secured by producers rights under agreements above and producers rights in and to film. Basic terms: 1) amount, 2) maturity date, 3) gap, 4) interest reserve, 5) specifics of film production, 6) bank approval rights, 7) bank takeover rights, 8) banks security interest in picture. Completion agreement with completion company; completion company gives guaranty to bank that film will be delivered within budget to each distributor. Also if over budget, completion guarantors responsibility to front addl costs. Sets forth terms and conditions upon which completion guarantor will provide completion guarantee to bank. Basic terms: completion guarantors 1) fee, 2) expenditure of sums in connection w/ picture and method of recoupment of such sums, 3) approval rights and control of production, 4) takeover rights, 5) security interest in picture. Two interparty agreements; one among domestic distributor, producer, bank and completion guarantor and other among foreign sales agent, producer, bank and completion guarantor. Set forth: 1) limited circumstances in which negative pickup distributor can reject delivery of picture, 2) uniform delivery system and method for disputing delivery, 3) prioritization of parties security interests in film, at varying stages of production. Bank will loan producer production funds to make movie based on 1) fact that large portion of budget will be repaid upon films completion and 2) banks trust in sales agent to sell remaining territories in

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accordance with its projections by time film finished so loan can be repaid in timely manner. Difference between advances secured by executed distribution agreements and total amount of loan = gap Summary: get bank first to guarantee loan, then can usually get domestic distributor to do negative pickup agreement. Five principal components: get domestic distributor who says if deliver film with these requirements, pay you $x for it. One requirement is have sales agent agreement w/ foreign sales agent who commits to sell film for you, have pre-existing agreements w/ multiple foreign distributors (agent gets you those distributors), loan agreement w/ bank where bank now sees you have foreign distribution and distributor and willing to loan you money for budget of film which is secured not only by film but by deal w/ distributor and deal w/ foreign sales agent, and completion agreement w/ completion company (completion bond where completion company says guarantee movie will come in for this particular budget), and then usually agreements b/w distributor, producer and bank along with completion guarantor and also agreement b/w foreign sales agent, producer, bank and completion guarantor. Get everyone on board ahead of time. Private Equity a private offering Typically used for films with smaller budgets ( < $5M). Producer forms LLC, prepares offering memorandum (sets forth info about producers and synopsis of film, include risk factors) and sells units of LLC to investors, using investments in company to fund production. Must comply with federal and state securities laws. (including, but not limited to, Reg D, blue sky laws). Key terms: 1) # and cost of units, 2) allocation of net profits (first, to payment of actual, out of pocket, costs of production, business expenses related directly to picture and/or distribution expenses in excess of approved budget; second, 100% to financiers of picture on pro-rata, pari passu basis, until distributions to financiers equal, on culm basis, 100% of aggregate cash investments in picture made by such financiers; third, 100% to financiers of picture on pro-rata, pari passu basis until distributions to financiers equal, on culm basis (including amounts in second) 120% of aggregate cash investments in picture made by such financiers; fourth, to payment of any contingent amounts paid, earned or payable to any person or entity based upon gross receipts if ever payable; fifth, after all above payments, remaining gross receipts deemed net profits and allocated on pro-rata, pari passu, 50% to financiers and 50% to production company. Summary: form LLC or LLP, offer to investors pieces of film, this is how people w/o track record go about doing it because can't get distributor or bank to commit first or second time, so find "angels", i.e. people who want to be in film business, usually for budgets under $5M, have to comply w/ state and federal securities laws because 62

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selling security and complicated to put together offering memorandum to make those sales to people, so fees for doing that are expensive. Split profits after breakeven point. o Insurance Studios generally have blanket insurance policies that cover all of their films and activities. Indie filmmakers must obtain this on their own for each project and often cant get funds w/o it. Very costly aspect of production. Types: most deal with theft, damage, injury to cast members, workers compensation, or weather insurance. Others apply only in certain situations, such as foreign insurance, aircraft/water insurance. Errors and omission insurance (E&O) protects film producers from claims such as violation of rights of publicity and privacy, quasi-K claims from submitters of ideas, copyright infringements, and violations of 43a of Lanham Act. Doesnt provide reimbursement for lost profits or production costs and doesnt cover crimes or intentional torts. The International Market o US film industry dominates intl market. Foreign countries source of financing for US movies, even major studios use it to spread risk. o But increasing number of films by European producers produced with assistance of system of quotas and subsidies. Most European countries given subsidies and quotas to encourage investment in locally produced films. To help them compete with US blockbusters, EU and member states have established local-content quotas for primetime TV and range of subsidies available to EU-based producers who utilize requisite proportion of local talent and technical support. Varies by country. o Intl co-financing is way to spread risk inherent in industry while allowing US producers access to European system of subsidies and allows more creative, artistic films to be made that major studios pass on.

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IX. ENTERTAINMENT RIGHTS: RIGHTS OF PUBLICITY, PROPERTY AND IDEAS, PART I

READING NOTES: CB (casebook) 185-231; 243-247; 255-260; 270-279

Personal Rights: Privacy o Prosser's 4 Categories protection against intrusion into one's private affairs avoidance of disclosure of one's embarrassing private facts protection against publicity placing one in false light in the public eye remedies for appropriation, usually for commercial advantage, of one's name or likeness o right of privacy is a personal right only persons who are injured may assert a claim the right is not assignable and usually does not survive the injured party's death o elements of right to privacy claim - the use of one's name or image in an identifiable manner w/o consent situations in which the invasion benefits the wrongdoer o an unauthorized depiction of an individual need not be complete facsimile to warrant a privacy invasion o Roberson v. Rochester Folding Box (CB 187) HOLDING: the unauthorized use of an individual's picture on flyers promoting the sale of flour boxes did not violate that individual's right of privacy REASONING: the right to privacy does not exist in law and is not enforceable in equity * this was a NY case in 1902 o Pavesich v. New England Life Insurance Co. (CB 188) FACTS: An easily recognizable likeness of was published in an advertisement for . HOLDING: there is a legal right to privacy REASONING: the right of privacy has its foundation in the instincts of nature as to each individual member of society there are matters private and there are matters public so far as the individual is concerned * this was a GA case in 1904 NOTES: 64

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it's permissible for a reporter to tape material for a report where the taping took place in a location where the had no reasonable expectation of privacy Sanders v. American Broadcasting Company (CB 190) FACTS: Investigative reporter obtained employment as a telephone answerer at a psychic hotline. Reporter used a hidden video camera to tape her conversations w/ other employees inside of the firm's offices. ISSUE: whether claim could be dismissed b/c events or conversations that were intruded upon were not completely private HOLDING: no dismissal just on that court didn't rule on issue of liability REASONING: test = whether a reasonable expectation of privacy is violated if so whether the invasion is highly offensive to a reasonable person, considering among other factors, the motive of the alleged intruder CA 1708.8 imposes liability for physical invasion of privacy in a manner that is offensive to a reasonable person for the purpose of capturing any type of visual image, sound recording, or other physical impression of the engaging in a personal or familial activity direct at paparazzi Statutory Protection NY Civil Rights Law 50 Right of Privacy: it's a misdemeanor when a person, firm, or corporation uses for advertising or trade purposes the name, portrait or picture of any living person w/o written consent 51 Action for Injunction and for Damages gives victim of 50 right to recover damages jury has discretion to award exemplary damages doesn't apply to author/composer/artist who uses his name/portrait/picture in connection with his own works Spahn v. Julian Messner (CB 292) FACTS: won the most baseball games for any left-handed pitcher in MLB history. published a fictionalized biography of which portrayed him as a war hero. sued. HOLDING: violated 51 REASONING: courts have engrafted exceptions and restrictions onto the statute to avoid any conflict w/ the free dissemination of

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thoughts, ideas, newsworthy events, and matters of public interest it is erroneous to confuse privacy w/ personality or to assume that privacy, though lost for a certain time or in a certain context goes forever unprotected is a public personality and insofar as his professional career is involved, he is substantially w/o a right to privacy the factual reporting of newsworthy persons and events is in the public interest and is protected the fictitious is not Tony Stephano v. News Group Publications (CB 193) FACTS: is a professional model who claims that used his photo in an advertisement w/o his consent. claims he only consented for use in a fashion article. ISSUE: do statutes preclude the recognition of a common law right of publicity in cases where has exploited, w/o consent, the name/picture/portrait of a person who consciously sought to establish a publicity value for his personality HOLDING: common law right of publicity did not exist b/c right of publicity is encompassed under NY 50-51 REASONING: common law claim the statute is not limited to situations where 's conduct has caused distress to a person who wishes to lead a private life free of all commercial publicity right of publicity is encompassed under the Civil Rights Law as an aspect of the right to privacy statutory claim statute doesn't define trade or advertising purposes but courts have consistently held that these terms should not be construed to apply to publications concerning newsworthy events or matters of public interest this exception should be liberally applied newsworthiness exception applies to news stories and articles of consumer interest including developments in the fashion world the event or matter of public interest which seeks to convey is not the model's performance, but the availability of the clothing item displayed the fact that may have included the article in his column solely or primarily to increase the circulation of its magazine and therefore it's profits

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does not mean that has used 's picture for trade purposes within the meaning of the statute a picture illustrating an article on a matter of public interest is not considered used for purposes of trade or advertising within the prohibition of the statutes UNLESS it has no real relationship to the article the article is an advertisement in disguise NOTES (CB 198): statute applies to real names, not pseudonyms written consent is absolute requirement (Brinkley v. Casablancas) consent is final once it is granted in an appropriate manner (Shields v. Gross) the absence of sufficient connection between the editorial content and the offending portrait/picture may give rise to a cause of action under 51 (Ali v. Playgirl) even in a situation in which editorial content is present and the use is not explicitly for advertising purposes Defensive Aspects the same public official/public figure considerations that figure strongly in the area of defamation also apply in the area of privacy Rosemont Enterprise v. Random House (CB 200) FACTS: Howard Hughes wanted to forestall the publication of an unauthorized biography. Hughes formed a corporation and sold it the exclusive rights to his life story and bought a series of articles written about him. Hughes then sued for copyright infringement. HOLDING: NY statute does not give a public figure the right to suppress truthful accounts of his life REASONING: the law affords little privacy protection to public figures right of publicity recognizes pecuniary value which attached to public figures and the right of those figures to benefit from it the publication of a biography is clearly outside the commercial use contemplated by the right of publicity right of privacy must yield to public interest right of publicity must yield in some conflicts of free dissemination of thoughts, ideas, newsworthy events, and matters of public interest Lerman v. Flynt Distributing Co. (CB 201) FACTS: was misidentified in an article in 's magazine as an actress who appeared in an orgy scene in a movie. was actually the writer of the book and screenplay that film was based on.

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brought 3 claims - (1) libel (2) violation of NY 50-51 (3) invasion of common law right to publicity. was found guilty and damages were awarded for 1st publication of article. sought recovery for later publications of magazine that included the infringing article. HOLDING: can't be liable for state law claims b/c of 1st amendment unless can prove that acted w/ requisite fault which they can't no violation of right to publicity REASONING: State law Claims NY privacy statute only provides cause of action for commercial appropriation when the advertisement is merely incidental to a privilege use there is no violation of 51 solicitations that were designed to simply convey the nature and content of past issues cannot satisfy advertising prong where is a public personage or actual participant in a newsworthy event, the use of his name or likeness is not for purposes or trade within the meaning of 51 the privilege does not extend to commercialization of his personality through a form of treatment distinct from the dissemination of news or information even if there was no use in conjunction w/ a report on a matter of public interest, may still obtain sanctions under 51 if he meets one of two tests may attempt to demonstrate that 's name or likeness has no real relationship to the discussion, and thus is an advertisement in disguise court finds that doesn't prove this may claim that forfeited the privilege for reporting matters on which the public has the right to be informed by proving that 's use was infected w/ material and substantial fiction or falsity court finds that satisfies this but 1st amendment means can't be held liable

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unless can prove fault (which court says he can't) common law right to publicity claim insistence that she is a private person does not square w/ her claim that her right to publicity was appropriated there is no evidence that deliberately exploited fame and fortune false light claim distinguished from right to publicity falsity is key to 51 claim, but 1st amendment prevents imposition of liability unless there is actual malice shown false light claim also has falsity as it's key also subject to constitutional protections constitutional issues is a limited purpose public figure she purposefully surrendered part of what would otherwise have been her protectable privacy rights by voluntarily devoting herself to the public's interest in sexual mores publication does not need to meet an independent standard of newsworthiness stand under umbrella of 1st amendment even vulgar publications gets protection loses 1st amendment protection only under a standard analogous to those which cause libelous speech to lose such protection had actually been the starlet pictured then would have this protection factual error does not alter the subject matter of the offending publication loses 1st amendment protection if he acted w/ the requisite intent in distributing materials defaming or invading the privacy of a private figure issue = whether had serous doubts about accuracy of the identification of may only be held liable upon clear and convincing evidence that a high level employee knew or reckless disregarded the fact that a false matter had been published

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there is no evidence that knew or recklessly disregarded factual error there's an absence of any facts demonstrating that had a subjective awareness of probable falsity

Damages $7 million award shock conscience of court they are grossly excessive and obviously a product of 's appeal to the passion and prejudice of the jury verdict of this size places a deep chill on a media 's 1st amendment rights NOTES (CB 209): the newsworthiness defense is extremely broad a fictionalized account of a newsworthy event does not necessarily make it ineligible for 1st amendment protection when individuals voluntarily enter the public arena they must expect to endure the consequences of such participation Personal Rights: Publicity o some jurisdictions still subsume the right of publicity under the right of privacy in others the right of publicity is wholly separate, independent, and regarded as a property right o right of publicity: right of each individual to control and profit from the commercial value of his or her own identity it protects the unauthorized commercial exploitation of a celebrity's name (actual or legal), likeness, as well as other aspects of identity such as photograph, portrait, caricature, and biographical facts and records of performance rationale = protection of celebrity's proprietary interest in the development of a marketable interest serves societal interests by guarding against unjust enrichment also promotes creative by offering financial incentive to those choosing to cultivate a unique persona o an important issue in the area is whether rights of publicity survive death of the celebrity concerned and if so, whether those rights are inheritable and devisable o At Common Law courts have struggled w/ distinctions between the two rights court first expressly recognize a right of publicity in Haelan Laboratories v. Topps Chewing Gum (CB 211) Zacchini v. Scripps-Howard (CB 212) FACTS: is an entertainer who performs a human cannonball act. performs at a state fair where a TV reporter tapes his performance and broadcasts it w/o his permission.

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ISSUE: whether reporter has privilege to report matters that would otherwise be protected by an individual's right of publicity (unless the actual intent of reporter was to appropriate the benefit of publicity or to injure) HOLDING: State can make this privilege, but the 1st and 14th amendments don't require this privilege REASONING: precedent relied upon by state supreme court shouldn't be applied b/c it dealt w/ right to privacy, not right to publicity differences between these torts are important b/c state interest in each is different in false light privacy case the interest is protecting an individual's reputation in publicity its protecting an individual's proprietary interest they have different degrees of intrusion on dissemination of information to the public false light privacy case requires minimizing publication publicity case focuses on who does the publishing the broadcast of a film of 's entire act poses a substantial threat to the economic value of that performance no social purpose is served by having the get for free some aspect of that would have market value protection provides an economic incentive for to make the investment required to produce a performance of interest to the public there is no doubt that entertainment as well as news enjoys 1st Amendment protection but it is important to note that neither the public nor respondent will be deprived of the benefit of petitioner's performance as long as his commercial stake in his act is appropriately recognized DISSENT: doesn't like how majority draws line around media broadcasting entire act w/o his consent acts were not comparable to unauthorized commercial broadcast of sporting events, theatrical performances, and the like where the broadcaster kept the profits instead of beginning w/ quantitative analysis of the performer's behavior (which would be "is this or isn't this his entire act") court should direct initial attention to acts of news media

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when a film is used for routine portion of regular news 1st amendment protects from right of publicity or appropriation law suit unless plaintiff makes a strong showing that the news broadcast was a cover for private or commercial exploitation Martin Luther King Jr. Center v. American Heritage Productions (CB 216) FACTS: is the administrator of Dr. King's estate. made a bust of Dr. King and wants to sell it. advertised that a portion of sales would go to Dr. King but never created a trust for it. ISSUE: is right of publicity distinct from right of privacy in GA? does right to publicity survive the death of its owners? is the right inheritable or devisable? must owner of right of publicity have commercially exploited the right before it can survive death? HOLDING: right of publicity is separate from right of privacy right of publicity survives death owner does not have to commercially exploit right before death REASONING: separation from right of privacy history of recognition of right of publicity kept it separate from right of privacy 1st GA case to recognize right of publicity = Cabaniss v. Hipsley recognized it as distinct tort from overarching invasion of right to privacy survival after death necessary for full commercial exploitation of right commentators urge the right should be inheritable, but courts have been split if the right of publicity dies w/ the celebrity, the economic value of the right of publicity during life would be diminished why? b/c the celebrity's untimely death would seriously impair, if not destroy the value of the right of continued commercial use also, those who would profit from fame of celebrity have failed to establish their claim that they should be the beneficiaries of a celebrity's death trend as been to recognize survivability

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commercial exploitation prior to death exploitation: commercial use by the celebrity other than the activity which made him/her famous e.g. an inter vivos transfer of the right to the use of one's name or likeness idea that right needed to be exploited during life to render the right inheritable arose out of dicta in Hicks v. Casablanca but was overturned in Groucho Marx Productions v. Day & Night "that we should single out for protection after death those entertainers and athletes who exploit their personae during life, and deny protection after death to those who enjoy public acclamation but did not exploit themselves during life, puts a premium on exploitation" - Groucho having found that there are valid reasons for recognizing the right of publicity during life, we find no reason to protect after death only those who took commercial advantage of their fame a person who avoids exploitation during life is entitled to have his image protected against exploitation after death just as much if not more than a person who exploited his image during life Dr. King could have exploited his name and likeness during his lifetime, just b/c he didn't doesn't mean that others have the right to use his name and likeness in a way he chose not to do

Note (CB 228) MLK Concurrence (Justice Charles) thought it was unnecessary for the majority to expand the right of privacy enumerated in Pavesich complaint stated a claim under which existing doctrine of unjust enrichment could grant relief no need to create a new right financial gain should not control whether there's a right of publicity violation Statutory Recognition CA 3344.1.3344: Use of Name or Photograph w/o Consent for Advertising person is liable for damages for knowingly using another's name, voice, likeness, etc. for purposes of advertising or selling without such person's prior consent damages = $750 or actual damages injured party only has to present proof of gross revenue attributable to such use

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person who violated this section is required to prove his/her deductible expenses prevailing party is also entitled attorney's fees and costs where a photograph/likeness is only incidental, and not essential, to the purpose of the publication there shall arise a rebuttable presumption affecting the burden of producing evidence that the failure to obtain the consent of the employee was not a knowing use of the employee news/public affairs/etc. shall not constitute a use of which consent is required no violation of this section merely because the material containing the use of a name/voice/etc/ was commercially sponsored or contains paid advertisement nothing in this section shall apply to owners or employees of any medium used for advertising "likeness" need not be literal under 3344 (Newcomeb v. Adolf Coors ) it's a triable issue of material fact Additional Recognition of the Right at Common Law Midler v. Ford Motor Company (CB 243) FACTS: asked to participate in a commercial. said no. hired a sound alike. ISSUE: whether can sustain claim HOLDING: has a claim REASONING: the purpose of the media's use of a person's identity is central if the purpose is informative or cultural the use is immune if the purpose merely exploits the individual portrayed no immunity Under copyright law, mere imitation of a recorded performance would not constitute a copyright infringement even where on performer deliberately sets out to simulate another's performance as exactly as possible if were claiming secondary meaning or seeking to prevent from using that song, she would fail but claim is about voice and a voice isn't even copyrightable can't get a remedy under unfair competition b/c the type of use wouldn't infringe her market can't get relief under 3344 b/c didn't actually use her voice CA also recognizes an injury from an appropriation of the attributes of one's identity value of 's voice = what market would have paid for to have sung the commercial in person

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Waits v. Frito-Lay (CB 246) upheld viability of Midler elements of voice misappropriation whether had deliberately imitated the artist voice rather than simply his style whether the artist's voice was sufficiently distinctive and widely known to give him a protectable right in use voice misappropriation is not preempted by federal law Note (CB 247) Stephano held that there was no common law right of publicity in NY Post-Mortem Availability (CB 254) NY has no common law right of publicity the limited right of publicity under 50, 51 does not survive death a number of other state statutes contain provisions providing for postmortem rights including CA where no statute exists results may vary At Common Law several states recognize the descendability of the right of publicity at common law but have not established limits for its duration GA is silent on the issue NJ recognizes descendability OH says it's not descendable Under Statute in CA Guglielmi and Lugosi made it clear that if a common law right of publicity legislature passed 990 amendments to 990 include statement that a use that would otherwise be exempt shall not be exempt if the claimant can prove that the use is so closely connected to the sale of a product, article of merchandize, good or service as to constitute an advertising, marketing or merchandising extension of post-mortem applicability of the provision to 70 years provision that applies the to acts occurring in CA regardless of the domicile of the deceased personality of the time of death California Civil Code Astaire Celebrity Image Protection Act (CB 256) Conflict Problems there is no uniform rule concerning the descendability of property rights creates an issue in many cases where the heirs of a decedent domiciled in one state have sought to enforce publicity rights under the laws of another state

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the outcome will generally depend upon whether the right of publicity is descendible under the law of the state in which the decedent was domiciled at the time of death Southeast Bank v. Lawrence suggests this Prima v. Darden Restaurants had domicile make a difference o Defensive Aspects First Amendment limits the right of publicity courts will not permit exploitation beyond what is reasonable necessary to convey the newsworthiness of an event Trademarks (CB 270) o 43(a) of Lanham Act (CB 269) makes liable any person who affixes a false designation of origin or any false description or representation to any good or service in commerce 43(a) provides protection against false representation likely to cause public confusion about origin and sponsorship o Trademarks trademark: a sign, device, or mark by which the goods produced or dealt in by a particular individual or business are distinguished from those produced or dealt in by others includes any word, name, symbol, or device adopted and used to identify goods and distinguish them from others purpose of trademark designate goods as the product of a particular source assures the public that they are procuring the genuine goods they seek must point distinctly to the origin or ownership of the goods to which it is affixed trademarks may be fanciful (coined words which have been invented for the sole purpose of functioning as a trademark) arbitrary (words or symbols in common usage in the language but arbitrarily applied to goods) suggestive (words which suggest but do not primarily describe the goods or their characteristics) descriptive (marks that describe the qualities, ingredients, or characteristics of a product) trademark infringement is determined by the likelihood of confusion among the purchasing public factors to consider the similarity of the marks in sound, appearance, and meaning the similarity of the channels of trade and good o Tradenames tradenames: used to indicate a part or all of a business

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includes individual names, surnames, and abbreviations of firm names use by one engaged in a business as a means of identifying products, business, or services and of establishing goodwill tradename relates mainly to a business and its goodwill a trademark relates mainly to goods sold tradenames aren't entitled to registration, the protection afforded to tradenames is the same as protection afforded to trademarks Service Marks service mark: a mark used in the sale or advertising of services to identify the services of one person and distinguish those services from the services of others includes titles, character names, and other distinctive features intended to identify and afford protection to things of an intangible nature it is possible for a given symbol to be used in a way that it functions as both a trademark for goods and service mark for services, and can be the object of separate registrations Use of 43(a) by Celebrities and Entities Allen v. National Video (CB 271) FACTS: is suing over an advertisement used featuring an actor that claims is masquerading as . admits that that the actor looks like but denies that the advertisement appropriates likeness or that it poses a likelihood for confusion. admits that the actor was selected & posed the way he was to capitalize on his resemblance to . claims this was to convey idea that the actor was the ultimate woody Allen fan. ISSUE: whether there was a likelihood of confusion over whether endorsed or was otherwise involved in the advertisement HOLDING: there was a likelihood of confusion injunction is issued REASONING: 43(a) prohibits false descriptions of products or their orgins it has been held to apply to situations that would not qualify formally as trademark infringement, but that involve unfair competitive practices resulting in actual or potential deception must establish 3 elements involvement of goods or services effect on interstate commerce false designation of origin or false description of the goods or services application of 43(a) is limited to those situations where the potential deception threatens economic interests that are analogous to those protected by trademark law

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examples of economic interests court should be concerned about interest of having public free from harmful deceptions interest of trademark value in the value of his distinctive mark court must consider 6 factors when determining whether there's a likelihood for confusion the strength of marks and name the similarity of and 's marks the proximity of and 's products evidence of actual confusion as to source or sponsorship sophistication of 's audience good or bad faith distinctions between Lanham Act and privacy claims that makes Lanham more appropriate resolution for this case the likelihood of confusion standard applied under Lanham is broader than the strict "portrait or picture" standard under privacy statute likelihood of confusion standard is easier to satisfy on the facts of this case likelihood of confusion standard may be applied by court privacy statute poses question of identifiability to jury while confusing similarity is technically a question of fact, it has sometimes been regarded as one for the court to decide through its own analysis, comparison, and judgment injunctions scope of injunctions against misleading commercial speech should be limited to that necessary to avoid consumer confusion disclaimers are favored over outright bans must be enjoined from appearing in advertising that creates the likelihood that a reasonable person might believe that he was really plaintiff or that plaintiff had approved his appearance

Lecture Notes Ive only included those notes that supplement the reading notes (i.e.
information given in lecturer that was different or new from readings)

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privacy is personal not assignable doesn't continue past death o right to publicity relates to someone who's has commercial value to their image o privacy claim involves the use of someone's name or image identifiable w/o consent to the benefit of some wrong doer o fictional work can give rise to privacy claim ex) Kid Rock was sued by an ex-girlfriend whom he wrote a song about Lerman o sued for use of photos by in a magazine that claims was , only it really wasn't o court said that although the use of her name was false, there was no violation of right to publicity b/c claims to be a private person o Hertz thinks that if the court wanted her to get the money they would have he thinks that this is what's motivating the court and that you can see it working in all of these cases right of publicity o basically a protection of celebrity's image for use in commercial purposes o there's a difference between states as to whether the rights are inheritable or devisable o 43 of Lanham act talks about unfair competition gives a nationwide remedy as opposed to the varying state remedies for right of publicity o Haelan first official expression of right to publicity (also recognizes a separate right to privacy) Allen o Hertz emphasizes pg. 275 -- where court talks about how use of look-alike could case confusion to consumers 6 factors to look at strength of likeness and name similarity of and mark proximity of and 's products evidence of actual confusion sophistication of audience good or bad faith o If this were to be on the exam he would expect you to know and apply these factors
o

Contract Clauses
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None for the Section

Exam Tips
Common law right to privacy & publicity are potential exam topics Key cases (meaning they were listed by him as being potential for the exam) o Midler o Waits o Allen

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X. ENTERTAINMENT RIGHTS: RIGHTS OF PUBLICITY, PROPERTY AND IDEAS, PART II


Chapter 3 Entertainment Rights: Rights of Publicity, Property, and Ideas (pp. 291 385) 3.4.3 DEFENSIVE MATTERS (subsection to Personal Rights: The Lanham Act and Other Fed. Leg) Pump, Inc. v. Collins Management, 746 F. Supp. 1159 (D. Mass. 1990) (court outlined factors to determine if there was confusion from similar trademark) Holding: Court granted Def. Aerosmiths motion to dismiss in a service mark infringement case. Facts: Pl. Pump, Inc. (Promoting Unlimited Mind Power) was a no name musical group which promoted physical self-improvement as an alternative to drugs. The bandmates were former body builders and they had been recognized for their work in the band by anti-drug activists. Pumps registered mark consisted of the word Pump resting on a barbell. The band released 2 singles, got some local radio time and had its videos aired on local cable station in Massachusetts. Def. Aerosmith released their Pump album in 1989 to considerable publicity. Their tour was called the Pump tour and the words Pump were featured prominently on the album cover (they were placed on the back of a pick-up truck) along with the Aerosmith logo. Also one of Aerosmiths members told a reporter that the album was named Pump because Now that were off drugs were all pumped up. There is no evidence that Aerosmith was aware of the ban Bumps existence. Issues: 1) Pump trying to prevent Aerosmith from trading off its business goodwill Ct thinks it is ridiculous to argue that Aerosmith adopted the name Pump in hope that purchasers would mistake its album for one of the band Pump. Aerosmith does not need to rely on Pumps limited recognition to sell Aerosmith albums. 2) Reverse confusion, Aerosmiths notoriety, its actions in released and promoting the album Pump have effectively robbed Pump, Inc. of the ability to use its service mark and have rendered the Pls mark devoid of independent value. Legal standard in 1st Cir: *8 factors to determine if there was confusion* between the two service marks that negatively affected Pump (1) the similarity of the service marks Because the standard in summary judgment requires the court to review the evidence in a light most favorable to the non-moving party (Pump) the court refrains from saying the two marks are dissimilar. What the court says though is the only similarity

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is that the spelling is phonetically identical, the two marks are otherwise used in different contexts and with different visual displays. Favors Aerosmith (2) the similarity of the goods Both parties use the term Pump to promote a wide array of goods (albums, t-shirts, videos) and services (concerts) associated with musical entertainment Favors Pump (3) the relationship between the parties channels of trade (4) advertising (5) the classes of prospective purchasers The differences between the parties are a matter of degree, not of kind. While Aerosmith already has wide spread audience appeal and success, Pump seeks just that. Pump wants to increase its profits through the same channels Aerosmith already uses through music store sales, radio and video royalties, live concerts. Both bands advertise through posters, t-shirts, jewelry and media exposure. Both groups play rock music that appeals to young people. Favors Pump (6) evidence of actual confusion Pumps 4 affidavits as proof of actual confusion fail on several grounds o 1. each of the four affiants admit he was aware that the Pump album was an Aerosmith album o 2. Mere inquiries as to any affiliation between Aerosmith and Pump is insufficient evidence of actual confusion o 3. each of the four affiants is a friend or acquaintance of Pump o 4. No evidence that an unaffiliated person was confused by the appearance of Aerosmith Album that Pump was working with Aerosmith to promote an antidrugs message, or that the Aerosmith album was Pumps album, or that anyone bought the Aerosmith album thinking it came from Pump. Favors Aerosmith (7) the defendants intent in adopting its mark Only evidence that Aerosmith even knew about Pump, forget about intentionally using their service mark in bad faith, is that members of Aerosmith live within a 7-mile radius of where Pump, Inc. has its headquarters Favors Aerosmith (8) the strength of the plaintiffs mark o 1. the length of time it has been used and the plaintiffs renown in its field only been in use since early 1987; o 2. the strength of the mark in the field - and bands failure to get a record contract indicates that neither it nor the ark is well-known in the music industry; o 3. the plaintiffs actions in promoting its mark efforts to promote the band ended sometime in 1988 and were only rekindled in recent months Favors Aerosmith Courts Reasoning: Court was swayed in favor of Defendant because of the dissimilar manner in which the term Pump was used, the weak evidence of actual confusion, the weakness of the mark of Pump, Inc., and Aerosmiths lack of bad faith.

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Sullivan v. CBS Corporation, 385 F.3d 772 (7th Cir. 2004) (Fn 1, p. 296) (Another case of an inflated sense of proprietariness) Facts: Owner of the trademark in the band name Survivor brought suit alleging trademark infringement, federal and common law trademark dilution, unfair competition and deceptive trade practices against CBS and others to prevent them from using the mark Survivor from their TV show on CDs and merchandise. Legal Standard: similar to 1st Circuit, the factors regarding confusion are (1) the similarity of the marks; (2) the similarity of the products; (3) the area and manner of concurrent use; (4) the degree of care likely to be used by consumers; (5) the strength of the plaintiffs mark; (6) whether any actual confusion exists; and (7) the defendants intent to palm off its good as those of the plaintiff. Procedural History: District Court found for Defendant because only 1 factor weighed in favor of Plaintiff, which was the area and manner of concurrent use. Holding: Court held for Defendant. For Plaintiff to succeed he must offer some evidence on the likelihood of confusion or actual confusion, examples of such evidence include: Specifics on how well known the name Survivor is today as the identifier of a rock band How much money is spent on promoting or advertising of the band, how much the band has earned in profits. Surveys demonstrating confusion o Sullivan did not conduct a survey, but he presented the results of searches conducted on two automated search engines. He presented evidence that when one types in Survivor it retrieved web sites related to the band and the television show. But this did not present evidence of confusion a consumer looking at the different web-sites would not come to the conclusion that CBS and the band were from the same source. Pirone v. Macmillan, Inc., 894 F.2d 579 (2d Cir. 1990) (Fn 2 p. 297) (Scope of coverage of a trademark will not be unreasonably extended) Facts: Defendant MacMillan published a baseball calendar consisting of pictures of baseball starts accompanied by weekly calendars. The calendar featured two pictures of Babe Ruth and a picture of a baseball autographed by Babe Ruth. Babe Ruths daughters had registered Babe Ruth as a trademark for paper articles, namely playing cards, writing paper, and envelopes. Babe Ruth League, Inc., was licensed to use the trademark for its amateur baseball league and Curtis Management Group Inc., was authorized to license the mark to third parties on a royalty basis. Holding: Second Circuit affirmed the trial courts grant of summary judgment with respect to the Ruth daughters federal and common law trademark infringement and unfair competition claims, and the lower courts dismissal of their claims for infringement of the common law right of privacy. Courts Reasoning Trademark use is defined as one indicating source or origin and thus the owner of the mark acquires only the right to prevent his goods from being confused with those of others and to prevent his own trade from being diverted to competitors through their use

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of misleading marks. The court rejected the daughters claim that their registration of two specific pictures extended their rights to every photograph ever taken of him a photograph of a human being is not inherently distinctive in the trademark sense of tending to indicate origin. Macmillan was only using the name and image of Babe Ruth to identify a great baseball player, not to indicate source or origin, which was not a trademark use and thus there was no infringement. Unfair competition - 43(a) of the Lanham Act is violated by the use of any symbol as a false designation of origin or as an representation, whether or not a registered trademark is involved, the pictures used by Def. are symbols under the Act, but their use does not violate the Act. The pictures do not indicate origin no consumer would think that Ruth sponsored the calendar. The source of the calendar is clearly indicated by the numerous references to Macmillan. No possibility of confusion, no infringement. Common law right to privacy only apply to living persons

3.5 ACQUISITION OF RIGHTS: IDEAS AND OTHER PROPERTY 3.5.1 IDEAS Legal history law is ambivalent about ideas. It provides some protection to those who submit ideas to others (against the unauthorized use of those ideas) and some protection for those who receive idea submissions (against unwarranted claims by those who submitted them). Society wants to reward men for their ingenuity and labor, but at the same time the world should not be deprived of improvements or progress of the arts. The amendment of copyright law in 1891 created a right to dramatize copyright-protected literary works. Until that time the law provided no protection whatsoever against unauthorized dramatiziations of copyright-protected literary works. But Congress made it clear it was only protecting expression, not ideas. Copyright law does NOT protect ideas. See, e.g., Copyright Act 102(b) (In no case does copyright protection for an original work of authorship extend to any idea.). When relying on copyright law, it is necessary for a plaintiff to show that copyrightprotected expression was used by the defendant. 3.5.1.1 COPYRIGHT LAW: IDEAS VS. EXPRESSION Nichols v. Universal Pictures Corp. 45 F.2d 119 (2d Cir. 1930) (copyright protected expression had not been used) Facts: Plaintiff is author of a play, Abies Irish Rose which was properly copyrighted. The defendant produced publicly a motion picture play, The Cohens and the Kellys, which the plaintiff alleges was taken from it. Holding: Assume that Pls play is altogether original, but her copyright did not cover everything that might be drawn from her play; its content went to some extent into the public domain Reasoning: one can be liable for stealing a plot (sequence of incident) this case both stories involve a quarrel between a Jewish and Irish father, the marriage of their children, the birth of grandchildren and reconciliation

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o Differences the play is about religious zealot (a Jewish father wants his son to only marry a Jewish woman) while the movie is about the hostility of a Jewish father towards his Irish neighbors, which stems from the Jewish familys wealthy inheritance. one can also be liable for copying characters, if the copyrighted story has very developed unique characters o these are stock characters of decades old o Jewish fathers are different in the play the father is obsessed with his religion, but is affectionate, warm and patriarchal; in the movie he is tricky, ostentatious and vulgar and obsessed with wealth o Irish fathers are even more different in the play the Irish father is hardly a character, only a symbol for religious fanaticism and patriarchal pride; in the movie he plays the role of lowbrow comedy A comedy based upon conflicts between Irish and Jews, into which the marriage of their children enters, is no more susceptible of copyright than the outline of Romeo and Juliet.

Zambito v. Paramount Pictures, 788 F.2d 2 (2nd Cir. 1985) Facts: Pl. n archaeologist-screenwriter asserts that Def.s movie, Raiders of the Lost Ark infringes on copyright protected material contained in his screenplay Balck Rainbow. Holding: Not substantially similar Courts Reasoning: Test described as whether an average law observer would recognize the alleged copy as having been appropriated from the copyrighted work. But copyright protects only an authors expression of an idea. It affords no protection to scenes a faire i.e., characters, settings or events which necessarily follow from a certain theme or plot situation. The court finds mood and feel to be different, as is the setting and characters. Universal City Studios, Inc. v. Film Ventures Intl, Inc. 543 F. Supp. 1134 (C.D. Cal. 1982) Facts: Whether Def.s movie, Great White, is substantially similar to Pl.s Jaws. Holding: Finds for Pl. Def. have captured the total concept and feel. 3.5.1.2 IDEA SUBMISSIONS Idea submission cases involve 2 types of legal issues: (1) circumstances that must exist in order for a contract or confidential relationship to exist between the idea-submitter and the person to whom it is submitted, (2) characteristics an idea must have in order for it to be protected (assuming a contract or confidential relationship is found) 3.5.1.2.1 IMPLIED CONTRACT Desny v. Wilder, 299 P.2d 257 (Cal. 1956) Holding: Pl. submitted and offered to sell to Def. a synopsis containing public domain material and an abstract idea of making a photoplay dramatizing public facts. Court allowed the claim to go to a jury, but imposed strict standards to infer an implied-contract-in-fact. (pl. not claiming recovery under law of plagiarism or infringement, the ideas were not unique, they were based on public info.) The mere submission of an idea by a writer could not create the obligation to pay.

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Program Material Release Form Post Desny motion picture and television production companies sought to protect themselves from idea submission claims by: declining unsolicited scripts or treatments from unknown individuals in limiting access to the receipt of submissions from established industry professionals like agent, managers and entertainment attorneys require the signing of a broad program material submission release or film script release in conjunction with any submission Example of a Program Material Release Form p. 325 Paras. 4 & 5 absent distinctly novel or original content, only a clear case of copyright infringement would prevail if the submitted material was substantially copied by the production company. Mann v. Columbia Pictures, Inc., 128 Cal. 3d 628 (1982) (Fn 2 p. 327) Ms. Mann submitted her idea, a brief description of six characters in a beauty salon setting, together with a short narration of a number of scenes, which she registered with the Writers Guild of America to someone who she thought worked at Columbia Pictures. She never stated it, but she expected to be paid if her work was used. There was no record of a rejection letter of her work, nor was her material found in Columbias records. Four years after her submission Columbia released Shampoo, which she thought was similar so she sued for breach of an implied-in-fact contract. Procedural History: Trial judge set aside jury verdict for Pl. Mann and granted JNOV to the Def. Columbia. Ct. of Appeal Affirmed. Holding: Affirmed lower courts, found for Def. Courts Reasoning: (1) Court characterized her work as no more than a collection of ideas which was never developed in the form of a script or a storyabstract ideas are not literary property. Only if they are protectible property (form or manner of expression) can she recover in quasi-contract. Lower court determined that there is no substantial similarity between Shampoo and Pls work in form and manner of expression. There was evidence of independent prior creation by Columbia and no evidence that Pls work had even reached Columbia. (2) To succeed on an implied-in-fact contract Pl. must demonstrate that she clearly conditioned her offer upon an obligation to pay for it, or its ideas if used by Columbia AND Columbia, knowing the contract condition before knowing the ideas, voluntarily accepted Pls disclosure and found them valuable and used them. Since Def. did not use Pl.s ideas in the shooting script the fact that the movie may strongly resemble Pls work does not afford her a cause of action. Robinson v. Viacom Intl, 1995 WL 417076, 1995 (S.D.N.Y) Takeaway: the abstract (and clichd) nature of Pl.s idea was decisive factor in finding against the Pl. Pls claimed misappropriation of plot, characters, total concept and feel (mood), setting, format and pace. The majority rule is that novelty be a condition to an implied contract. Court held that the juxtaposition of the two families constitutes an idea, NOT an expression. Pl may not be granted a monopoly in this idea, even if the Pls formulation is novel. Pls plot ideas were not sufficiently developed, especially in light of their derivative and clichd nature. There was no character development. The setting (middle class suburb), format (comedy with prologue), pace (up tempo) were too abstract.

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Nadel v. Play-by-Play Toys, 200 F.3d 368 (2nd Cir. 2000) Takeaway: In an idea-submission case, general novelty is required. In a misappropriation/breach of contract case, novelty as to the defendant is sufficient. Particular novelty novelty as to the defendant General novelty totally novel 3.5.1.2.2 CONFIDENTIAL RELATIONSHIPS Majority rule in idea-submission cases is the NY rule idea must be novel to be protected Minority rule is the Cal rule non-novel ideas may be protected by contract too, if a confidential relationship exists between the parties. Blaustein v. Burton, 9 Cal. App. 3d 161 (1970) Facts: Appellant producer had the idea of making a movie out of Shakespeares play Taming of the Shrew. He disclosed this idea to key players with the view towards a joint venture in which he would be made producer in the movie. Things fell through with his involvement and the movie was made by Columbia. Holding: Producer idea may be protected by contract because he was someone from the industry and you would expect that he would only disclose the idea if he were promised payment for its use. Courts Reasoning: The idea discloser has a right to recover damages from an idea recipient under an express or implied contract to pay for the idea in the event the recipient uses it after disclosure is discussed. If a producer obligates himself to pay for the disclosure of an idea, whether it is for protectible or unprotectible material, he should be compelled to hold to his promise. This is so even though the material to be purchased is abstract and unprotected. The subject matter of the idea need not be novel or concrete. Statute of Frauds Issues: If trier of fact concludes there was an implied contract an implied promise of payment, conditioned upon subsequent use, in return for appellants act of disclosing his idea. This would be a unilateral contract, does not fall within the SoF dealing with contracts not to be performed within one year. In unilateral contracts, where a contract has been fully performed by one party and nothing remains to be done, except the payment of money by the other party, the SoF is inapplicable. Here the producer disclosed his idea and the respondent used it they did not compensate him with an engagement as producer, so they must pay him. Faris v. Enberg, 97 Cal. 3d 309 (Cal. 1979) Facts: A novice, a developer of an idea for a TV quiz show submitted his idea to an up and coming sportscaster. The Pl. idea-submitter described the show and gave the Def. a copy of the format, saying the show was his creation and literary property. He never expressly authorized Def. to discuss it with anyone. Sportscaster ended up making a show with a similar format. Holding: Court found no implied contract the mere submission of an idea by a writer could not create the obligation to pay if used. Similarly the mere submission of one idea to another does not create a confidential relationship. Evidence that there was a confidential relationship can be inferred from these factors: proof that the material submitted was protected by reason of sufficient novelty and elaboration, proof of a particular relationship such as partners, joint adventurers, principal and agent, or buyer and seller

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Court fears the creation of monopolies of ideas and poses a barrier to the free communication of ideas Murray v. Natl Broadcasting Comp., Inc., 8 F.2d 988 (2nd Cir. 1988) Facts: Pl.-appellant, claims breach of implied contract because four years prior to the premier of the Cosby Show he proposed to NBC a new idea for a half-hour sitcom starring Bill Cosby as a loving black father in a show about a middle-class black family. Procedural History: Trial court granted SJ for Def. because lack of novelty precludes Pl. from maintaining a cause of action. Holding: court affirms, no legally protectible interest if your idea is not novel Courts Reasoning: merely a combination of two ideas which had been circulating in the industry for a number of years (a) the family situation comedy and (b) casting of black actors in nonstereotypical roles. Mere fact that idea had not been put into production until now does not mean the idea itself is novel. 3.5.2 NEGOTIATED AGREEMENTS 3.5.2.1 THE SCOPE OF ACQUIRED RIGHTS: BY CONTRACT Landon v. Twentieth Century-Fox Film Corp., 384 F. Supp. 450 (S.D.N.Y. 1974) Facts: 1944 Margaret Landon entered into an agreement with Fox to sell motion pictures rights to her book Anna and the King of Siam. In 1972 Fox produced a mini-series which aired on CBS TV network. Issue: Whether the 1944 agreement authorized Fox to produce and exhibit the series through CS. Pl. claiming series infringed her copyright in the literary property and the 1944 constituted a tying arrangement in violation of Sec. 1 of Sherman Act. On the grounds that Fox acquired the original copyright on the condition that it acquired the copyright renewal right. The assignment of renewal right is unenforceable for lack of consideration. And several tort claims: defamation, invasion of her right of privacy, misappropriation of literary property and wrongful attribution to Landon of credit for the series, which she claims mutilated her book. Holding: Infringement of copyright - when the parties sought to reserve to Landon certain rights, they did so carefully and specifically. Clause (f) cedes exclusive right to broadcast on TV any of the motion picture versions. Fox was granted the right to make an unlimited number of motion picture versions of the property without limitation as to length or place of first exhibition. To Exhibit means to display or show by any method. Rule: if the words are broad enough to cover the new use, it seems fair that the burden of framing and negotiating an exception should fall on the grantor. Sherman Act Pls claim is deficient the exercise of actual coercion by the defendant (as opposed to mere presence of market power) is necessary element of claim Damage to her privacy and reputation and literary property itself Fox only said based on the work of the author, they did not falsely attribute the authorship of the series to her. Goodis v. United Artists Television, Inc., 425 F.2d 397 (2nd Cir. 1970)

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Facts: Warner Bros acquired exclusive motion picture rights to the novel Dark Passage under a contract which contained addl specially negotiated clauses to cover radio and tv broadcast rights. Warner brother assigned its contract rights to UA which produced a tv film series based on the book. Similar to Landon. Holding: Appellate Court reversed trial courts decision to grant summary judgment for defendants. Whether the right to make additions insaid writings and in the characters and plot of the novel should go to a jury. The contract does not explicitly mention the right to make subsequent stores employing the same character, i.e., sequels. It would be rash to hold on SJ that the sale of right sin one of an authors works ends, without specific mention that it ends, the authors exclusive ownership of the valuable characters he created in that one work, when he may desire to create sequels. Rey v. Lafferty, 990 F.2d 1379 (1st Cir. 1993) Facts: Margaret Rey owns the copyright to the Curious George childrens books. In 1979 a Revised License was excecuted to grant Milktrain Productions and Lafferty investment firm the right to produce and distribute animated Curious George films for television viewing. Production of 104 TV episodes was completed in 1982. Beginning in 1938 TV episodes were licensed to Sony, which transferred the images from the television film negatives to videotape. Holding: Revised License grant of rights to the 104 film episodes for television viewing did not encompass the right to distribute the films in cassette form. Uphold lower courts decision of breach of contract in favor of Pl. Rey. Courts Reasoning: Court accepts finding of fact that relevant video technology was not in existence at the time the rights were granted under the agreement in 1979. In cases where parties lacked specific intent, court tries to discern general intent form the language of the license, the surrounding circumstances and trade usage. But there are policy reasons too. Preferred method of dealing with new uses licensee may properly pursue uses which are reasonably within the medium described in the license courts assume that the possibility of nonspecific new uses was foreseeable so if you write your contract broadly the burden of framing and negotiating an exception on the grantor of the licensed rights Alternative method only such uses that fall within the unambiguous core meaning of the term rights not expressly granted are reserved supposed to prevent licensees from reaping the windfall of new uses especially relevant when the licensee has more bargaining power This case: o 1. no general grant of rights in technologies yet to be developed, the license is limited to a particular grant of rights based on the general tenor o 2. television viewing and videocassette viewing are not coextensive terms you dont have to watch a videocassette on the TV o 3. the license was drafted by Lafferty, which is a professional investment firm, ambiguities in the drafting instrument are construed against the party drafting, in this case Lafferty, which was more sophisticated 3.5.2.2. THE SCOPE OF ACQUIRED RIGHTS: LEGALLY IMPOSED LIMITATIONS There are certain provisions of copyright law which prevent copyright owners from conveying everything that others might be willing to acquire 89

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Compulsory Mechanical License provision of Copyright Act of 1976 o Prevents songwriters and music publishers from granting exclusive licenses to recording artists or record companies, at any price o If agreement between a music publisher and record company purports to grant to the record company exclusive recording or mechanical rights to a song that clause would be unenforceable o Recording Industry Assn of America v. Copyright Royalty Tribunal, 662 F.2d 1 (D.C. Cir. 1981) Statutory scheme, set by Congress, places a ceiling on the price copyright owners can charge for use of their songs under negotiate contracts Includes digital phonorecord delivery too, not just physical records There cannot be a monopoly on the production of records the creator of the musical work must grant a license upon request to any person who proposes to make and distribute phonorecords of the work at the royalty rate set by law Termination of Transfers provision of Copyright Act of 1976 o Permit authors (or lawful heirs) to terminate assignments and licenses after a period of time, even if they had expressly agreed by contract not to do so o You have five years to terminate starting from 35 years after the execution of e grant o Must serve advance notice in writing o Terminated grants revert to the authors except derivative work may continue to be utilized under the terms of the grant after its termination o Further grant is valid only if it is made after the effective date of termination Renewal provisions of Copyright Act of 1909 o Invalidate agreements which purport to transfer rights to be exercised during the copyright renewal term o Miller Music Corp. v. Charles N. Daniels, Inc. 362 U.S. 373 (1960) Facts: Petitioner, a music publisher, sued respondent, another music publisher for infringement of petitioners rights in the renewal copyright of a song. Ben Black (deceased) coauthored a song with Charles Daniels. Prior to the expiration of the 28-year term, Black assigned to petitioner his renewal rights in this song. Before the expiration of the original copyright Black died. One of his brothers, as executor of the estate, renewed the copyright for a further term of 28 years. The probate court decreed distribution of the renewal copyright to the residuary legatees. Procedural History: Trial Ct granted SJ for Respondent, Ct. of Appeals affirmed. Issue: Whether by statute the renewal rights accrue to the executor in spite of a prior assignment by his testator. Holding: When the author dies before the renewal period arrives, his executor is entitled to the renewal rights, even though the author previously assigned his renewal rights to another party. Congress intended to treat renewal rights as expectancies until the renewal period arrives. When the renewal period arrives the renewal rights pass to one of the four classes listed in the statute (author,

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widow/ers, children, executors, and next of kin). Assignees of renewal rights take the risk that rights acquired may never vest in their assignors (if they die). Petitioner was a purchaser of a contingent interest. o Stewart v. Abend, 495 U.S. 207 (1990) Facts: Author of a story, It Had to Be Murder assigned the rights to Petitioner to make the movie Rear Window. He also agreed to renew the copyrights in the stories at the appropriate time and assign the same movie rights for the renewal term. Author died before the renewal period commenced. His executor of the estate renewed the copyright and assigned to respondent. The movie was then broadcast on TV and re-released in a variety of media. Respondent sued. Issue: Whether the owner of the derivative work (petitioner) infringed the rights of the successor owner of the pre-existing work (respondent) by continued distribution and publication of the derivative work during the renewal term of the pre-existing work. Holding: Yes hold for respondent, owner of pre-existing work. Courts reasoning: Author holds a bundle of exclusive rights among them the right to copy and the right to incorporate the work into derivative works. This author died before the renewal period, so the Petitioner holds nothing, not even the derivative right.

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XI. THE INTERNET AND THE DIGITAL WORLD, PART I


A. Personal Jurisdiction With the increased use of the Internet, courts must determine whether businesses and individuals are subject to personal jurisdiction wherever their website may be accessed. i. a courts decision to exercise personal jurisdiction over a D depends on how interactive Ds website is ii. courts are more likely to find personal jurisdiction if D has made a sufficient number of non-Internet contacts w/the forum state Bensusan Restaurant Corp. v. King Facts: P, a NY corporation, alleges that D, the owner of a small Missouri nightclub, is infringing on Ps rights in its trademark The Blue Note. Issue: Whether the existence of a website, w/out anything more, is sufficient to vest the court w/personal jurisdiction over D pursuant to NYs long-arm statute and the DP Clause of U.S. Constitution? Analysis: Given that courts have held that an offering for sale of even one copy of an infringing product in NYeven if no sale resultsis sufficient to vest a court w/personal jurisdiction over the alleged infringer, we must determine whether the creation of a website in Missouri with a telephone number to order the allegedly infringing product constitutes an offer to sell the product in NY. The mere fact that a person can gain information on the allegedly infringing product is NOT the equivalent of a person advertising, promoting, or selling the product in NY. Holding: There is simply no allegation or proof that any infringing goods were shipped into NY or that any other infringing activity was directed at NY or caused by King to occur here. (p. 904) i. King did nothing to purposefully avail himself of the benefits of NY Court cited another caseCompuServe Inc. v. Pattersonto illustrate a decision that reached a different result, but one based on vastly different facts. i. unlike the facts in Bensusan, the Internet user specifically targeted the product to the forum state Zippo Manufacturing Co. v. Zippo Dot Com, Inc. (Internet domain dispute) Facts: P, a PA corporation with principal place of business in PA, files trademark claims against D, a CA corporation with principal place of business in CA. P manufactures Zippo tobacco

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lighters, and D operates a website/online news service with domain names zippo.com, zippo.net and zipponews.com. D has 3,000 subscribers in PA, and has entered into agreements with 7 Internet access providers in PA to permit their subscribers to access the site. Issue: Whether Ds conducting of electronic commerce w/PA residents constitutes the purposeful availment of doing business PA sufficient to vest the court w/personal jurisdiction? Analysis: D repeatedly and consciously chose to process PA residents applications, and to assign them passwords. Although only 2% of Ds subscribers are PA residents, even a single contact with the forum state can be sufficientthe test has always focused on the nature and quality of the contacts w/the forum and not the quantity of those contacts. (p. 912) Holding: The Court may appropriately exercise personal jurisdiction over D. B. Defamation Bynog v. SL Green Realty Corp. 1st Amendment precludes the issuance of a preliminary injunction against the posting of allegedly defamatory statements by a former employee on her website and blog. The court noted 2nd Circuit precedent that, absent any extraordinary circumstances, no injunction should be issued in a defamation case. (p. 914) Franklin Prescriptions Inc. v. The NY Times Co. Internet pharmacy that prevailed on a defamation claim but was awarded no monetary damages is NOT entitled to a new trial on the grounds of error in the instructions to the jury. The jury found in favor of the pharmacy on the merits of its claim that it was defamed by the juxtaposition of a screen shot of the pharmacys website w/a side bar suggesting that certain Internet pharmacies should be avoided by consumers. Barret v. Negrete The fact that Ds in a malicious prosecution action made efforts to widely publish allegedly false allegations about P on the Internet supports a finding that Ds acted w/malice in filing defamation claims against him. Churchill v. State of NJ The period of limitation for a defamation claim based on items posted on a website begins to run when the items are first posted on the website, and does not begin to run again each time the website is updatedsingle publication rule. 1. Immunity Under 230 Of The Communications Decency Act i. Section 230(c)(1) of the Communications Decency Act of 1996: no provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider. ii. Section 230(c)(1) immunity has been invoked to bar defamation claims against Internet Service Providers (ISPs) and private individuals, and has been extended to non-speech communication as well.

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Doe v. Bates Express exception from immunity in Section 230 applies only to criminal prosecutions under federal criminal statutes, not to their civil remedies sections. Austin v. CrystalTech Web Hosting Citing the leading case of Zeran v. AOL, the court rejected Ps argument that Section 230 immunizes only publishers of defamatory content, leaving the ISP open to liability as a distributor of the statements that it knew or had reason to know were defamatory. Barnes v. Yahoo!, Inc. A service provider is entitled to immunity under Section 230(e) for breach of a promise to remove defamatory online profiles posted by a third party impersonating P. Associated Bank-Corp. v. Earthlink, Inc. An ISP cannot be held liable for erroneously identifying a legitimate bank website as a fraudulent site where the ISP relied upon a list of phishing sites provided in anti-phishing software licensed from a third party. 2. Questions About The Scope of Section 230 i. some cases have ruled that immunity does not extend to distributor liability, i.e., the dissemination of a defamatory statement made by another party, w/knowledge or the reason to know that it is false. Barrett v. Rosenthal CA Supreme Court has agreed to review this controversial decision, where the appeals court held that Section 230 does not restrict distributor liability under the common law, and Ps defamation claim was not barred by the statute. Grace v. eBay, Inc. An online site is not entitled to immunity under Section 230 for a users alleged defamation of another user in a feedback posting, if the sites publisher knew or had reason to know of the alleged defamation and refused to remove the posting. C. Net Censorship 1. Child Pornography Ashcroft v. Free Speech Coalition U.S. Supreme Court held that the Child Pornography Prevention Act of 1996 (CPPA), which extended the federal prohibition against child pornography to sexually explicit images that appear to depict minors but are produced w/out using any real children, is an unconstitutional abridgement of free speech. 2. Indecent Material i. The Child Online Protection Act (COPA) prohibits commercial websites from making available to minors material that is harmful to minors. ii. In June 2004, the U.S. Supreme Court affirmed a preliminary injunction against the enforcement of the Act.

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iii. In March 2006, the District Court in Gonzales v. Google, Inc. ruled that b/c of the potential for the loss of user trust in the privacy of their search requests, the U.S. Government was not entitled to obtain any user search requests from Google. Reno v. ACLU In July 1997, the U.S. Supreme Court rules that the challenged provisions of the Communications Decency Act (CDA) that regulate transmissions and display of indecent and patently offensive materials are unconstitutional. The Court afforded the highest level of 1st Amendment protection to Internet speech. D. Control of Access: Framing and Linking i. Framing allows visitors of website A to link to website B while particular info (usually ads provided by A) remains as a frame around B. ii. Framing can cause confusion as to the source of the information and can allow the framing website to generate ad revenues solely from the efforts of a third party. eBay, Inc. v. Bidders Edge, Inc. P moved for a preliminary injunction to enjoin D from accessing eBays computer systems by use of any automated querying program w/out eBays written authorization. Court enjoined D pending trial of this matter from using any automated query program, robot, or web crawler w/out written authorization from P. E. Liability Of Internet Service Providers Zeran v. AOL, Inc. Facts: P brings claim against D for its allegedly unreasonable delay in removing defamatory messages posted by an unidentified third party on an AOL bulletin board. P argues that Section 230 immunity does not apply to liability for interactive computer service providers (like AOL) who possess defamatory material posted through their services, and that the 230 immunity eliminates only publisher liabilityhere, AOL was a distributor. Analysis: If computer service providers were subject to distributor liability, they would face potential liability each time they receive notice of a potentially defamatory statementfrom any party, concerning any message. To impose liability here would have serious potential to chill free speech. Holding: Because the probable effects of distributor liability on the vigor of Internet speech and on service provider self-regulation are directly contrary to 230s statutory purposes, we will not assume that Congress intended to recognize liability here. F. Copyright Infringement i. Digital Millennium Copyright Act (bound U.S. to the 1996 World Intellectual Property Organization (WIPO) treaties and expanded the scope of the performance right in sound recordings) a. establishes potential safe harbor for an ISP when copyright infringement is committed by a third party through the use of the ISPs facilities

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b. sets up a notice and takedown procedure under which copyright proprietors can notify an ISP of the presence of infringing material and demand its removal Recording Industry Association of America, Inc. (RIAA) v. Verizon Internet Services, Inc. Facts: The RIAA used the subpoena provision of the Digital Millennium Copyright Act to identify internet users the RIAA believed were infringing the copyrights of its members. The RIAA served two subpoenas upon Verizon Internet Services in order to discover the names of two Verizon subscribers who appeared to be trading large numbers of .mp3 files of copyrighted music via peer-to-peer (P2P) file sharing programs. Verizon refused to comply w/the subpoenas. Issue: Whether the Digital Millennium Copyright Act applies to an ISP acting only as a conduit for data transferred between two internet users, such as persons sharing P2P files? Holding: A subpoena may be issued only to an ISP engaged in storing on its servers material that is infringing or the subject of infringing activity. In re Charter Communications, Inc. Facts: Charter sought to squash a subpoena requiring it to provide subscriber information linked to certain IP addresses known to have transmitted infringing files. The ISP argued that the DMCA did not apply to it, as it was only a conduit, as opposed to an ISP that stored infringing material. Holding: Following the reasoning in the Verizon case, the 8th Circuit held that the subpoena was not properly issued b/c Charter acted solely as a conduit.

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XII. THE INTERNET AND THE DIGITAL WORLD, PART II


11.5.2 The Impact of Internet Specific Technologies:
Overview: o There has been explosive growth in the sale of letigimate digital media. However, more than 6.25 million individuals visit illegal file sharing sites each month. MP3s were the first legal battleground RIAA v. Diamond Multimedia Systems, Inc. (9th Cir. 1999): Reached a similar outcome to the Betamax cases which held that VCRs were not per se instruments of copyright infringement. Said the Rio device was consistent with the AHRAs main purposethe facilitation of personal use. Point to legislative history which protects the right to make private recordings of copyrighted works

UMG Recordings, Inc. v. MP3.Com, Inc. (SDNY 2000) o Facts: MP3.com launched a service called My.MP3.com which allowed subscribers to store customize and listen to the recording on their CDs from any place. Defendant purchased tens of thousands of CDs and then the user could load his CD, and then have access to the MP3s from any location. o Defendant argues Fair Use

Issue: Is the MP3.com service allowed under the Fair Use exception of the Copyright Act? Holding: Defendant has infringed on plaintiffs copyrights. Grant defendants motion for partial summary judgment. Defendant is replaying for the subscribers coverted versions of the recordings it copied, without authorization, from Ps copyrighted CDs.

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Reasoning: Court addresses each of the four factors of Fair Use and REJECTS Defendants argument: 1) Purpose of character of the use if for a commercial or nonprofit educational use: Court says the work is not transformative. It is merely repackaging the old work, as opposed to adding any additional value. 2) The nature of the copyrighted work: The work being copied is at the core of the type of material we seek to protect. 3) The amount and substantiality of the portion used: Defendant is copying the WHOLE of the work. 4) The effect of the use upon the potential market for or value of the copyrighted work: Just because the plaintiffs have not yet pursued this market, doesnt mean that the defendant can usurp this market.

A&M Records, Inc. v. Napster, Inc. (9th Cir. 2001) o Facts: Napster operates a system which permits the transmission and retention of sound recordings using digital technology. System permits peer to peer sharing. Holding: Enjoin Napster. Find them guilty of contributory copyright infringement. Reasoning: Court summarily rejects Napsters Fair Use defense TWO PART TEST: Liability for Contributory Copyright Infringement: Court finds that Napster would be liable because it 1) knowingly encourages and 2) assists the infringement of Ps copyrights. Knowledge: Court finds that knew or had reason to know of direct infringement. Although it is possible that Napster could have had a system where they did not know, in this case it is very clear that they had direct knowledge as to the infringement at issue. Material Contribution: Without Napsters system users could not find and download the music they want with the ease of which defendant boasts.

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Liability for Vicarious Copyright Infringement: Vicarious liability is an outgrowth of respondeat superior. Find that they are vicariously liable. Napster has a direct financial benefit in the infringement Napster has the right to control access to the system. Turning a blind eye to detectable acts of infringement for the sake of profit gives rise to liability.

Napster Defenses: Actions are protected by Audio Home Recording Act of 1992: Court finds that act does not cover downloading of MP3s onto hard drives. S Digital Millenium Copyright Act limits liability: There are serious doubts as to whether defendant will be able to get shelter here. Say that the balance of factors however tips in plaintiffs favor. Court rejects Napsters affirmative defenses as well

In Re: Aimster Copyright Litigation (7th Cir. 2003) o o o o Facts: Aimster provides software than enables peer to peer file sharing. Issue: Is Aimster guilty as a contributory infringer? Holding: Yes. Reasoning: Firms that facilitate their ifingrement, even if they are not themselves infringers because they are not making opies of the music that is shared, may be liable to the copyright owners as contributory infringers. Sony Decision: Just because a product can have an infringing use doesnt mean that a party is a contributory infringer. Court applies a cost-benefit analysis and finds that Aimster should be enjoined. Use a three part balancing test: 1) Percentage of non-infringing to infringing use, 2) whether the defendant invited infringement (e.g. in its

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documentation and tutorials), and 3) whether defendant took steps to eliminate infringing uses. Says that its failure to take efforts to root out infringement is further evidence that it was a contributory infringer

MGM v. Grokstrer (US 2005) o Facts: Defendants operate a peer to peer file sharing service. 90% of the material is copyrighted work. The system (unlike Napster) is decentralized. They do not control the supernodes. Parties crossmoved for SJ. COA: Finds for Grokster. A party is liable as a contributory infringer when it had knowledge of direct infringement and materially contributed to the infringement. Said that under Sony had to have knowoeldge of of specific instances of infringement and had failed to act. COA therefore finds that based on the Grokster architecture they did not know, therefore they were not liable. Also note that there is no vicarious liability because they had no ability to supervise, and no duty to police.

o Holding: One who distributes a device with the object of promoting its use to infringe copyright, as shown by a clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties. Reasoning: Defendant was not passive, but rather took active steps to encourage and facilitate downloading. Tension between encouraging technological innovation and protecting artists. Yet in this case the infringement is too strong. One infringes contributory by intentionally inducing or encouraging direct infringement. Real question is how do we reconcile Sony which permits commercial products so long as they have capability for noninfringing uses? Say that reliance on Sony at all is not required.

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Court says that they can look at the intent of Grokster in determining whether they are liable. Use theory of inducement. One who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties. o o Need intent And actual infringement

Therefore, the message from the majority seems to be that under the inducement theory you must show by the defendants own actions and statements that his unlawful purpose disqualifies him from claiming the protection under Sony. That is, clear evidence of intentional inducement trumps, even in situations where the technology may have substantial noninfringing uses. http://www.philiplarson.com/blog/?p=5

o Concurrence: Ginsberg Ginsburg effectively argued for the Seventh Circuits approach to determining the knowledge component that would require the courts to employ a balancing test and would give them more discretion to protect copyright holders. http://www.philiplarson.com/blog/?p=5

Ginsburg argued for a balancing test more in line with Posners recommended balancing test in the Seventh Circuits Aimster decision. Ginsburg stated that determining whether there were substantial non-infringing uses could only be done by comparing the number or percentage of infringing use to the non-infringing uses.

Concurrence: Breyer: Breyer basically attacked Ginsburgs opinion as not doing enough to protect technological innovation. He argued for something closer to the Ninth Circuits narrower test.

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http://www.philiplarson.com/blog/?p=5

Therefore, Breyer thought the Ninth Circuit got it right when it granted summary judgment on the issue of whether Groksters product was capable of substantial noninfringing uses. Breyer argued that Grokster passes the Sony test because it is capable of substantial non-infringing uses. http://www.philiplarson.com/blog/?p=5

XIII. LITERARY PUBLISHING


Introduction Evolving market- may be going digital via Google, Amazon Large portion of the raw material for other media is derived from print sources The Business of Literary Publishing Publishers began as family businesses, eventually most were swallowed up by a few conglomerates Potentially negative consequences for authors: Publishers are generally publicly held and must answer to risk-averse shareholders Less one-on-one interaction between editors and authors Only TV commands more total revenue than print publishing Leading publishers in annual sales:

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Random House- $2.1 billion worldwide Penguin Group- $1.3 billion HarperCollins- $1.1 billion Simon & Schuster- $690 million AOL/Time Warner- $415 million Many of the major conglomerates (Bertlesmann, Pearson PLC, Time Warner) operate in many areas of the ent industry- makes for easier cross- pollination Books on tape, movies based on books, books based on movies, etc There are six large publishers, 300-400 medium sized, 86,000 small/self publishers Book sellers have become conglomerates as well: Barnes & Noble, Borders-Waldenbooks (owned by Kmart) and Crown Books account for approx 50% of US retail book sales Online hard-copy distribution is majorly eating into traditional bookstores Online publishing is a hot issue, but largely an unknown Has been successful so far- Steven King novella released exclusively online was hugely successful He then began sell pay-as-you-go subscription chapters of another book The Scope of Literary Publishing Contracts

First contract b/t publisher and author is crucial in determining who has control over the process of adapting an original work into any other permutations But several other contracts are often necessary before the work reaches ultimate saturation in other markets Paperback Licensing: Hardcover publisher usually obtains paperback exploitation rights in the original contract Often means sublicensing paperback rights to another company The most established writers sometimes arrange for a different company to do the paperback at the outset Foreign Licensing: Often disposed of separately than US/Canada rights Lower royalty rates Translation and honorable adaptation issues- rare for author to secure approval over translations EU requires only one license now Merchandise Licensing: Merchandise licensing agreement must define precisely for what purposes the license is granted in terms of what products can be produced, what degree of quality control exists, how long license runs, territorial areas, types of marketing Motion Picture/Television Licensing: While this is often covered in the original contract, many films have been based upon novels acquired prior to their publication Very much in authors best interest to secure these rights separately from publisher 103

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Usually producers purchase an option on a manuscript, with a few renewal periods and further payment if the option is exercised, plus a percentage of proceeds Money greatly depends on the stature of the author/book and whether it is written originally for the screen Option contract and license must specify degree of creative control retained by publisher and author, time limits, sequel/spin-off rights, royalty/fee arrangements Other Media Licensing In our text, this covers mostly audiobooks and other new media- want to align a specific strategy to maximize buzz Author- Literary Agent Authors who write for the mass market almost always require a literary agent Generally, agent promises good faith duty to market the author plus fiduciary duty Often a young authors big opportunity may lie in getting a good agent See text for model Literary Agency contract Publisher-Author Agreement in Detail

Obviously these vary greatly with different kinds of books (law school texts dont require motion picture rights, for example) Rights Granted and Assigned: Publisher will want exclusive, worldwide perpetual rights Author will want to individually negotiate each specific right, and not assume any of them naturally go to publisher Higher quality paperbacks, book clubs, reprint, mass market reprints, anthologies, textbooks, abridgements and condensations, periodicals, theater/motion picture/TV, merchandising, foreign language, online distribution, etc Delivery of Satisfactory Manuscript This section assigns ultimate creative control over the work, as well as delivery date, rights and duties of publisher to edit Lots of litigation regarding what is satisfactory in form and content Authors guild prefers its own satisfactory manuscript clause- excerpted p. 567 Random House v. Gold

RH and Gold entered into an agreement for publication of four literary works with an option to cancel the fourth $150k advance due in ten installments Gold delivers two satisfactory manuscripts, which are published to little acclaim/profit RH, aware that another installment is due soon (Gold has received 60k so far), rejects 3rd manuscript and terminates contract RH seeks to recover from Gold the amount of all advances paid to Gold in excess of his royalties- approximately $50k Gold denies that he should repay the advances and maintains that he is owed the $90k balance of the advance, or at least the remaining $15k for the two pre-existing books

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Gold argues that RH acted in bad faith by terminating the contract because of profitability, because the manuscript was in fact publishable Ct refuses to say that profitability cannot be a factor in assessing whether a manuscript is in content and form satisfactory to the publisher Ct holds that there were four separate contracts, one for each book It would do violence to the contract, common sense, and industry practice to hold that Gold forfeited all advances because RH chose not to publish the 3rd book Thus: Gold received $60k for four books, so he owes $30k to RH RH is still liable for $45k- the portion of advances outstanding for the two published books So in the end, RH pays Gold $15k (45-30 = 15) Doubleday & Company v. Curtis

Doubleday rejects a Curtis manuscript as unsatisfactory Each party sues for breach of contract Doubleday seeks recovery of advance Curtis counterclaims for anticipated earnings Curtis was to receive $100k advance charged against future royalties One half paid upon signing of contract, balance due on acceptance of complete satisfactory manuscript Contract states that failure to comply with the satisfaction clause granted Doubleday the right to terminate and require Curtis to return any advances Doubleday signs lucrative advance agreement for paperback version with NAL contingent on Doubleday publishing Curtis book by a certain date Novel is too poor for publication, so Doubleday cancels both contracts Court holds that a publisher may terminate a standard publishing contract at its discretion so long as it is done in good faith, and so long as the unsatisfactory nature of the manuscript is not due to the publishers bad faith Curtis refused good faith assistance from Doubleday in editing, as well as their offer of providing a novel doctor Non- Compete Clause

Fairly standard clause that requires author not to publish a future book that is based on the book under contract These provisions can be quite sweeping and detrimental to author Authors Guild suggests that theses clauses may be unenforceable and may violate antitrust laws AG suggests that in the event the clause cannot be cut, it should be tightened, with a short time period Authors of textbooks should be particularly concerned

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Publication Clauses Exclusive right to publish for Publisher Timetable for publication for hardcover and paperback editions Author will seek/publisher will resist specific recitation of duties on the part of Publisher to advertise and market the book Publisher has implied duty to market, but never anything more explicit than the first push If the book isnt published in a specified period of time, author will reclaim the rights to it, often in return for their advance being repaid Copyright Most publishers agree to allow copyright to remain with author Contract should be precise both as to copyright ownership and the rights to license that flow from ownership Royalties and Other Payments See top of page 604 for detailed royalty tendencies Determined almost entirely by publisher- also largely dependant on caliber of author Warranties and Indemnities Attempt to shift burden to the author if suit is brought by a third party claiming copyright violations, libel, invasions of privacy, etc Authors should attempt to narrow the coverage Future Revisions Author will want as much input as possible, while publisher will fear that this gives author veto power Once again, should be carefully negotiated Publisher should re-retain rights if author is unable or unwilling to assist Option for Next Book Must be crafted carefully so as to not simply constitute an agreement to agree Authors Guild despises next-book option clauses for publishers- high potential for unfair provisions At most, a publishers should be entitled to a right of first negotiation or a right of first refusal Sets an objective market value on the authors present worth while maintaining loyalty to publisher

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Model Literary Publishing Agreement Book provides a model contract that contains mostly provisions already summarized abovepages 607- 621 See also model contract w/ commentary provided by Professor Hertz

The Impact of Custom and Usage Many cases arise from authors simply signing whats placed before them and not thinking about the future Geisel v. Poynter Products Dr. Seuss entered publishing agreement w/ Liberty Magazine Years later, he sues to prevent the creation of action figures based on the cartoons printed in Liberty Since contract was inconclusive, court looks to custom and usage Court is un-persuaded by Dr. Seusss star witness, a notable book publisher Hold that the custom in 1932 was for magazines to hold copyrights to all that was published within Stein and Day, Inc v. Morgan Morgan agrees to write two books for Stein & Day, successfully writes one Contract has a typical complete and satisfactory clause Morgan submits a purportedly complete copy of the second book, which is unsatisfactory to S&D No other publishing company would accept the manuscript either S&D sues to recoup advance $ allotted for the 2nd book No portion of the advance was allocated to either book in particular Author raises uncontradicted testimony that industry custom is to allow author to keep the advance However, ct holds that custom cannot overcome express language of contract Contract specifically stated that if the manuscript was unsatisfactory, publisher was entitled to recoup advance Tasini v. New York Times Freelance writers sue NYT for putting their articles on electronic databases available to the public Ps were not employed by the Times, and did not write works-for-hire They held the copyrights in their articles 107

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Crux of dispute is whether databases may be considered a revision of the individual periodical issues from which the articles were taken Publishers would benefit from this definition Ct holds that they are not revisions Ct holds that publishers of collective works are not permitted to include individually copyrighted articles w/out receiving a license or other express transfer of rights from the author The Next Book Option Pinnacle Books v. Harlequin Enterprises

Pinnacle accuses Harlequin of interfering with Ps contractual relationship with author Pendleton They claim they induced him to break his contract with Pendleton in order to publish his profitable series with Harlequin Pendleton had been in mid-negotiation with Pinnacle when he decided to move to Harlequin The original contract assigned the option to Pinnacle, and stated that both parties would give their best effort to renew Harlequins argument that this is nothing more than an agreement to agree is shot down- ct believes this to be a good faith negotiation clause However, ct also holds that the best effort clause is unenforceable because it is too vague The term must be defined specifically- ct is unwilling to insert their definitions into a pre-existing contract

XIV. CONTRACT PERFORMANCE AND EXPLOITATION OBLIGATIONS


-General Rule-degree of subjectivity with which delivery standards are infused increases in more or less direct proportion to the relative level of investment. The greater the investment (relative to industry norms), the more subjective the company will be in its delivery standards.

Delivery Clauses in Different Areas of Entertainment


Book Publishing -Manuscript must be satisfactory in form and content in publishers eyes -Advance is repayable if it is unsatisfactory Music Publishing -standard is 15 100% newly-written compositions (or equivalent in partly-written compositions) each Contract year -notice of completion of delivery with song titles, co-writers, etc. -Delivery commitment can be based on a number of songs OR a number of songs embodied on a specified number of albums

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Recorded Music -label has right to reject an album presented for delivery if it is offensive to reasonable standards of public taste or in violation of rights of others AND if it is technically unsatisfactory Film

1) Physical Delivery-these are the technical requirements-length, film quality, etc. 2) Legal Delivery-Chain of title, errors and omissions insurance, MPAA rating, cast/crew
agreements, etc. OBLIGATIONS OF COMPANY -not usually a fiduciary duty to talent, but can be legally deemed so with particularly disloyal and egregious behavior Rodgers v. Roulette Records -standard recording contract at issue -Plaintiff asserts that he has been paid insufficient royalties, label failed to report foreign sales, underrepresented domestic sales, ascribed too low a royalty rate, etc. 1) Claim of False Royalty Statements -Court-plaintiff claims that he DID NOT discover the alleged fraud until 1984 (27 years after contract signed) -Plaintiff contradicts himself-says that he did not have any expectation that monies would be forthcoming as he was not aware of ANY EXPLOITATION by Roulette or its licensees of my songs -BUT THEN SAYS that his songs sold millions of copies at the time of their release and have continued to sell through the present time -Court-It is inconceivable that plaintiff or his agents did not notice that his songs were being released on records between 1960 and 1984 -Reliance on statements suspected of being false CANNOT be the due diligence required of plaintiffHE MUST INQUIRE FURTHER! 2) Claims of Fraud -Defendant must produce something more than defendants FAILURE TO PERFORM -all he alleges is that defendant promised to pay royalties and provide accountings while secretly never intending to do so-INSUFFICIENT AS A MATTER OF LAW 3) Breach of Contract-not Fraud -alleged fraud here is simply an alleged breach of contract -Fraud is wrong avenue to go down here 4) Right to Accounting -Action in equity -Plaintiff must prove the existence of a fiduciary relationship with defendant -Here, only a contractual relationship existed -Receipt of monies to be passed onto plaintiff as royalties did not create fiduciary relationship because defendants did not receive any property specifically earmarked as plaintiffs property 5) Negotiation of Unconscionably Low Royalty Rates

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1) No fiduciary relationship 2) Plaintiff doesnt identify any royalty or license fee that was in this category 3) Didnt establish defendants duty to negotiate royalty/license fees with 3rd parties Mellencamp v. Riva Music Ltd. -Mellencamp entered into four different music publishing contracts with music publishing companies that are all controlled by one guy (the Riva companies) -in 1985 he amends all of them -In exchange for assignment of copyrights, Mellencamp received a percentage of royalties earned from exploitation of his music Mellencamps claims -Riva companies became fiduciaries by virtue of publishing agreements 1) breached fiduciary duty by failing to actively promote his songs and use best efforts to obtain all $$$ due from 3rd parties 2) Breached fiduciary duty by underreporting royalties and not rendering timely accounting statements Riva Musics response 1) There is no fiduciary duty owed by music publisher to author under publishing agreement 2) Royalty claim does not specify what part of agreement was breached and who the parties are Court-it is possible for a fiduciary relationship to exist between an author and a publisher -Typically, however, a publishers obligation to promote an authors work is one founded in contract rather than on trust principles -However, if a contract establishes that fair dealing was required between the parties, the defendant is perhaps at legal liberty to breach and pay damages, but if the conduct goes further and is intended to inflict injury is not immune from tort liability. -A publisher who breaches his implied contract obligation to exploit an author's work with no motive other than to injure the author, is liable for prima facie tort -Trust elements in a publisher-author relationship come into play when the publisher tolerates infringing conduct. Absent this factor, express or implied obligations assumed by a publisher in an exclusive licensing contract are not, as a matter of law, fiduciary duties. Wolf v. Superior Court -Wolf sold Disney rights to Roger Rabbit characters -Disney developed/produced motion picture -He sues Disney for 1) Failing to prove relevant records for audit 2) Underreporting revenues 3) Failure to disclose nature of 3rd party agreements regarding characters and compensation received Wolf-this is not a contractual breach, but a breach of fiduciary duty because Disney had exclusive control over the books, records, and information concerning the exploitation and revenues. -Fiduciary duty is founded upon the trust or confidence reposed by one person in the integrity and fidelity of another, and likewise precludes the idea of profit or advantage resulting from the dealings of the parties and the person in whom the confidence is reposed

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Court: Wolfs claim fails under 4 grounds:

1) Contingent entitlement to future compensation does not, in and of itself, create a fiduciary
relationship. This was simply a contractual right.

2) Profit sharing aspect of agreement also does not, in and of itself, create a fiduciary relationship.
This case involved a contract that provided for nonmutual profit that is absent in fiduciary relationships. 3) Contractual right to accounting does not create a fiduciary relationship. See Waverly v. RKO. A mere contract or debt does not constitute a trust or create a fiduciary relationship. Court says RKO was not a fiduciary with respect to the performance of the terms of this contract (except as to accounting for rentals received) and that arguments predicated on the assumption that it was are directed to a false issue. -Wolf-Waverly stands for principle that a fiduciary relationship can exist in regards to one part of a contract, while the contract in its entirety can be non-fiduciary in nature? Court-THIS IS WRONG-either a relationship is fiduciary or it isnt -This is a contract with an implied covenant of good faith and fair dealing in which Wolf is entitled to an accounting 4) There must be a fiduciary relationship b/c otherwise Wolf could never prove any breach since Disney has all of the information. Court-Where evidence necessary to establish a fact essential to a claim lies peculiarly within the knowledge and competence of one of the parties, that party has the burden of going forward with the evidence on the issue although it is not the party asserting the claim Court-THIS DOES NOT CHANGE THE CONTRACTUAL NATURE OF PARTIES RELATIONSHIP -DISSENT 1) Evidence could establish here that Disney & Wolf were in a joint venture (at very least a contingent one) DESPITE language in contract to the contrary-in other words, conduct could have overridden express terms of contract 2) Disney does not necessarily escape a fiduciary duty to provide a full and accurate accounting. Disney was essentially Wolfs accountant. This would be literally adopting the language/idea from Waverly v. RKO that PART of a contractual obligation is fiduciary. OBLIGATION TO EXPLOIT Wood v. Lucy, Lady Duff Gordon (222 N.Y. 88, 118 N.E. 214 (1917), p. 409 -Defendant is fashion designer -Plaintiff was hired to help exploit her designs. Agreement provided that 1) He was exclusive agent to place her name on designs of others 2) Exclusive right to place her own designs on sale 3) D was to receive of all profits from any contracts he would make 4) He will provide D with monthly accounting for profits 5) Will obtain all necessary trademarks/copyrights/patents -Plaintiff alleges she breached contract

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-Defendant-There was never a valid contract-plaintiff did not bind himself to actually do anything Court-This is erroneous -Promise to perform can be implied from nature of the contract -He was to be her exclusive agent-UNLESS he put forth effort, neither he or Duff-Gordon would receive anything out of contract -This CANNOT have been intention of the parties Zilg v. Prentice-Hall (717 F.2d 671), p. 411 -Plaintiff proposed idea to write biographical portrait of DuPont family -submitted a comprehensive, highly critical, elaborate history of family and their role in American culture/history/capitalism -DuPont family gets wind of book, make their objections known, but do not issue any overt threats of litigation or other retaliation -PH accepted manuscript (with reservation that litigation, while being victorious, would be costly against DuPonts) -New President came in AFTER execution of contract but BEFORE submission of manuscript, he begins to have serious doubts as to whether book should be published -Book of the Month Club has serious reservations as to whether they want to publish such a controversial work -Big back and forth disaster, end result being that PH reduces first printing by 5k copies and reduced advertising budget Zilg has two legal claims: 1) Tortious interference with commercial relations by DuPont 2) Prentice Halls breach of contract directly with him

1. Tortious interference by DuPont-DuPont had a constitutional right to bring its concerns to


PHs attention, and did not do it with threats of litigation or economic coercion. It was, however, a cause in fact of BOMCs decision to drop the book 2. Prentice Halls breach of contract-Lower court found that PH had no valid business reason for reducing budget and copies. -Second Circuit-there was no contractual promise to put forth best efforts and promote fully the manuscript. -However, just because this was not specifically addressed is not the end of inquiry -Promise to publish must be given some content and that it implies a good faith effort to promote book -This includes FIRST PRINTING, ADEQUATE ADVERTISING BUDGET which will give a book a chance to succeed in market given subject matter and likely audience -If there is no implied good faith effort, authors would be guaranteed nothing except for their advance -Conversely, the PUBLISHER also must get discretion as to how best to do this -Should not be second guessed by judges/juries AFTER fulfilling initial obligation to make reasonable efforts -Zilg could prove breach of contract in following two ways here:

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1) He could demonstrate that initial printing and promotional efforts were so inadequate as not to give book a reasonable chance to catch on with public. -In this case, no evidence that insufficient initial efforts occurred 2) He might show that even greater printing and promotional efforts were not undertaken for reasons other than a good faith business judgment. -No evidence of this here either-making a scale back due to input from Book of the Month club is a valid business judgment Third Story Music, Inc. v. Waits -Tom Waits case -TSM is his music publisher -Licensed distribution rights in Waits recordings to Elektra/Asylum records -Contract language is as follows: Worldwide right to manufacture, sell, distribute, and advertise OR at its discretion, to refrain from doing so. -Subsequently, a 3rd party wanted a license to release previously unreleased songs; Elektra would not do it without Waits consent -TSM sues for damages, claiming Elektra had no right to insist on artist approval and that implied covenant of good faith and fair dealing had been breached Question-if a contract expressly gives one party absolute discretion on whether or not to perform, should the implied covenant of good faith and fear dealing apply to limit this discretion? -In order to find implied covenant, following conditions must apply: 1) Implication must arise from language used or it must be indispensable to effectuate intention of the parties 2) It must appear from the language used that it was so clearly within contemplation of parties that it was deemed unnecessary to express it 3) Implied covenants can only be justified on the grounds of legal necessity 4) Promise can be implied only where it can be rightfully assumed that it would have been made if attention had been called to it 5) No implied covenant can exist if contract is explicitly covered by the contract -In other words, courts will not imply a covenant directly at odds with express grant in contract UNLESS the provision would result in an unenforceable, illusory agreement contrary to parties intention -In this contract, TSM had bargained for guaranteed payments whether or not Elektra made sufficient efforts to exploit the music -In other words, the contract is not illusory and the discretion given to Elektra was supported by adequate consideration-CONTRACT IS VALID Parker v. Twentieth Century Fox Film Corporation -Shirley McClaine had contract with 20th Century to star in film, Bloomer Girl, which was a musical to be filmed in LA -Fox cancels production on that, wants her to instead star in Big Country, Big Man, a Western to be filmed in Australia -Contract contained clause guaranteeing minimum payment of $750k

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-McClaine rejects offer for new film and sues for $750k promised in original contract -Court-general rule is that recovery by wrongfully discharged employee is amount of salary for agreed upon service period LESS amount employer proves employee has earned OR could reasonably have earned from other employment -this is the mitigation doctrine in contract law CAVEAT-employee does not have to seek DIFFERENT OR INFERIOR employment - Big Country, Big Man is employment both different and inferior from Bloomer Girl -HOLDING: McClaine was entitled to agreed upon contractually guaranteed compensation of $750k -Dissent-I think the majority is mistaken; they equate two different genres of film to being two different kinds of employment -This is an issue that should be determined by a factfinder and is thus inappropriate for summary judgment DIRECTORS RIGHT TO FINAL CUT OF FILM Cimino Arbitration -Cimino was to make The Sicilian -Director had right of final cut so long as film was between 105-125 mins long -first cut delivered is 155 mins-Director agrees to re-cut it -next version delivered is 125 mins, cut out ever violent scene -but is of horrible quality b/c it changed character of film from a dramatic struggle to a character study AND made film incomprehensible -Cimino essentially did no more work on film after these objections were made known to him -Arbitrator-Cimino did not treat short version submitted as a realistic attempt at a final cut, failed to make a good faith consultation, and therefore could not prevent producer from re-editing film Beatty Arbitration -Paramount wants to make cuts in Reds for ABC television broadcast -Beatty won Best Director for this -Contract between Beatty and Paramount gave him right to final cut -Contract between ABC and Paramount gave ABC right to cut for standards and practices of network -Arbitrator-since Paramount gave Beatty such wide power to determine final cut of original version, there is no reason to think that it was also extended for network TV viewing-ABC cannot acquire more from Paramount than Paramount acquired from Beatty -Beatty wins arbitration! Gilliam v. ABC TEST QUESTION! -Monty Python had contract with BBC to broadcast their shows -BBC licensed right to distribute show in US to Time Life Films -Time Life then licenses ABC to broadcast two 90-minute specials, each consisting of 30 minute programs -ABC then proceed to edit 27 minutes (almost 1/3 of original content) out for broadcast -Monty Python, upset at editing, tried to negotiate with ABC for editing for second special

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-No agreement reached; Monty Python brings suit for preliminary injunction against broadcast -District Court denied motion, appeal to 2d circuit Court (Judge Lumbard, 2nd Circuit) -ABC argues 3 grounds why they were entitled to edit the special: 1) Unauthorized editing of underlying work constitutes infringement of copyright in that work similar to any other use of a work that exceeded the license granted by the proprietor of the copyright -Edited version ABC broadcast was a derivative work -BBC-MP Agreement-does not contain any grant permitting insertion of commercials or editing for decency standards -BBC-Time Life Agreement-expressly granted right to insert commercials and edit for decency standards -Black letter law that a grantor may not convey greater rights than it owns 2) Scriptwriters agreement DOES NOT restrict MPs right to participate in revisions prior to recording, but also extends to post-recording -Court says contract expressly retains for group all rights not granted in contract, omission of any terms about alterations post-recording MUST BE READ as being reserved to MP. 3) ABC had no implied license to insert commercials and edit obscene/offensive material -ABC says MP should have expected US network would do this -Court says no MP episode ever edited before AND that MP and its representatives representatives repeatedly sought assurances that it wouldnt happen -NO WAY TO IMPLY A LICENSE FROM THESE CIRCUMSTANCES -ABCs only options were to ABCs cuts to program likely constituted actionable mutilation of MPs work -This cause of action has roots in droit moral-Continental European legal concept recognizing right of artist to have work attributed to him/her in form he/she created it -Droit Morale is not recognized in American Copyright law-purpose in US law are to protect economic rights of artist, not their personal rights -Thus, America law relies on unfair competition/breach of contract ideas to remedy such situations -Thus, there is a claim under Section 43 of the Lanham Act-it is sufficient to violate the Act that a representation of a product, while technically true, creates a false impression of the products origin

4)

RESULT: Injunction Granted on breach of contract and Lanham Act Grounds Concurrence (Judge Gerfein) -US Copyright Law does not recognize droit morale -Nor does it exist under the Lanham Act-purpose of this statute is to deal with misdescription of origin-this did not happen here, as everyone knew this was Monty Python

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-What occurred here was a breach of contract and breach of common law copyright, NOT a Lanham Act violation -Its best to not use a doctrine when it is not necessary to do so and which would distort its purpose in US Law CENSORSHIP AND REGULATION OF CONTENT & ATTENDANCE Skywalker Records v. Navarro 739 F. Supp. 578 (p. 437) -Plaintiff is record company-2 Live Crew is one of their artists -Sheriff of Broward County, FL shut down their concert over obscenity concerns Appellate Court 6) Is As Nasty As They Wanna Be legally obscene? 7) Did Sheriffs action pose an unconstitutional restraint upon their first amendment rights and give rise to a 19 USC 1983 claim? Obscenity -Obscenity is determined under the three-pronged test devised under Miller v. California 1) Does the work, taken as a whole, appeal to the prurient interest? -This album does appeal to the prurient interest-excessive references to all types of sex, genitalia, sadomasochism, etc. -it does not appeal to normal, healthy sexual desires -but rather to abnormal, unhealthy ones.how do you make a legal judgment here? 2) Measured by contemporary community standards, does the work depict or describe in a patently offensive way sexual conduct specifically defined by applicable state law? -The album also satisfies this test -Depicts sexual conduct in graphic detail -Lyrics contain dirty words and depictions of female abuse and violence -Additionally, music is a more intrusive medium, there is a captive audience that c cannot escape its reach as easy as in other mediums 3) Does the work, as a whole, lack serious literary, artistic, political, or scientific value? -this standard can be assessed OBJECTIVELY without reference to community standards -In other words, does this work have any social value? -The album also satisfies this test-no literary, artistic, political, scientific merit -Album has no political value-fact that artists are African Americans who draw on their experience does not transform it into a political work-they simply invoke themes common to human condition -No scientific value is contended -For literary and artistic value, Court notes that it cannot reasonably be argued reasonably that violence, perversion, abuse of women, graphic depictions of all forms of sexual conduct, and microscopic descriptions of human genitalia are comedic art -As Nasty as They Want to Be is simply rhythm + explicit lyrics=NO SOCIAL VALUE HOLDING: Album is legally obscene under Florida law NOTE: On appeal, 11th Circuit reversed, saying District Court Judge impermissibly proceeded on basis of his own subjective judgment in determining obscenity

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Cinevision v. City of Burbank (p.446) 745 F.2d 560 -Plaintiff is a concert promoter -Contract specified that City had right to disapprove concert if it had potential of creating a public nuisance or which would violate any State law or City ordinance -City of Burbank denied permission for 6 of 8 proposed concerts, citing dislike of hard rock and potential for certain audience types that they didnt want (gay, anti-nuclear power, etc) -Plaintiffs sue city under a 42 USC 1983 (acting under color of state law/authority to deprive individual of Constitutional rights) -Jury awarded $20k damages against City and Richman jointly, and $50k against Appellate Court 1) ALL music, political and non-political, falls under ambit of First Amendment -Music is a form of expression that is protected by the First Amendment -Burbank tried to argue that Cinevision isnt trying to express anything, rather make a profit, therefore cant be protected by First Amendment -Court says it does not matter if a party seeks to make a profit through expression of protected speech -Also irrelevant if music has ideological content or not-still protected speech -Any willful or purposeful effort by a municipality to suppress protected expression is a per se violation of First Amendment 2) City of Burbank denied access to Starlight Bowl in an unjustifiable manner -Absent a compelling governmental interest that is narrowly tailored to prevent arbitrary decision making, Burbank cannot open the forum to some and close it to others solely in order to suppress the content of protected expression -There are relevant considerations a city can take into account: 1) High noise level 2) Excessive traffic 3) Crowd overflow Additionally, how is the forum administered in general? 1) Is the relevant forum the only place for certain type of expression? If so, then restricting it might be constitutional b/c it wouldnt be shown otherwise 2) Is the authority approving/denying permits removed from political process? -These are factors a court will weigh in deciding whether a citys actions in a case like this are violating First Amendment 3) City of Burbank considered arbitrary and unlawful factors in disapproving concerts -Burbank didnt want gay audiences to come to concerts, simply because thats not what we want -Also didnt want black audiences -Felt that some artists said off the wall things such as speaking against using nuclear power -There was no CONTENT NEUTRAL test with standards used to make a determination, but rather completely unfettered discretionremember Yick Wo v.

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Hopkins from Con Law!!! HOLDING: Officials have qualified immunity when acting in executive capacity, protected from section 1983 claims when acting in good faith within the scope of their authority -Here, Councilman Richman acted in bad faith, so damages are upheld against him Byers v. Edmondson (p.452) 712 So.2d 681 -Two guys allegedly watched Natural Born Killers and were inspired to go on a crime spree, killing a liquor store attendant -Plaintiff is suing under tort-Warner Bros. knew or should have known that this film would have an inciting effect on teenage viewers -Defendant moves for dismissal on the pleadings, stating that it fails to state a claim upon which relief can be granted-they did not owe anyone a duty to prevent someone from recreating actions in a fictional film -Furthermore, imposing such a duty would violate First Amendment of US Constitution -Trial Court dismissed complaint for failing to state a valid cause of action Appellate Court 1) Sufficiency of the Complaint -Generally, a party is not liable for the independent criminal acts of third parties UNLESS there is a special relationship imposed by law, of which there is none here -But at pleading stage, we must accept allegations as true: Warner Bros., in its misfeasance produced a film with violent imagery that was intended to cause viewers to imitate it-plaintiffs could possibly prove this at trial (though unlikely) -Generally, courts have not found liability for filmmakers/producers/studios for injuries allegedly resulting from imitation of on-screen activity -BUT this result came after filing of motion for summary judgment or trial on the merits, NOT at the pleading stage normally -EXCEPTION-if pleadings do not contain any allegation of intentional conduct by film producers, dismissal on pleadings is appropriate 2) First Amendment Argument -First Amendment free speech rights are highly protected and can only be abridged in the following circumstances: 1) Obscene speech 2) Libel, slander, misrepresentation, perjury, false advertising, solicitation, etc. 3) Speech that is integral part of conduct in violation of valid criminal statute 4) Speech which is directed to inciting/producing IMMINENT lawless activity -Plaintiff argues that Natural Born Killers, as released, falls within exception #4 -In order for speech to be characterized as inciting imminent lawless action, it must be directed or intended toward the goal of producing imminent lawless conduct AND was likely to produce such imminent conduct -both conditions must be satisfied-cannot be merely a possibility

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-The standard here is very high-plaintiff must offer evidence that defendant producer/publisher possessed actual intent to assist criminal activity See Paladin Enterprises v. Rice-Defendant published book about how to be a contract killer and stated at trial that he hoped people would actually use it for this -Mere foreseeability or knowledge that publication/film MIGHT be used for criminal purpose is insufficient for tort liability RESULT-case remanded for further proceedings to establish whether or not Warner committed an intentional tort and whether or not they can claim First Amendment defense ON APPEAL AFTER INITIAL REMAND: -Trial Court grants SJ for Warner Bros/Oliver Stone on grounds that Natural Born Killers is indeed protected speech under the First Amendment of the US Constitution Appellate Court: -Free speech is restricted only in the following circumstances 1) Obscene speech 2) Defamatory invasions 3) Fighting words/words part of commission of criminal offense 4) Incitement to imminent lawless action -Plaintiff alleges that NBK falls under 1 & 4 Incitement Claim -In order to constitute incitement, speech must be 1) Directed or intended toward goal of producing imminent lawless conduct 2) Likely to actually produce such conduct -The mere possibility of that speech will incite such activity is insufficient -Directed at some indefinite time in future also will not satisfy test -Natural Born Killers does not purport to order or command anyone to perform any concrete action immediately or at any specific future time -While the film is very violent and CAN BE viewed as glorification of violence, glorification of violence DOES NOT rise it to the level of incitement -Rather, this is a copycat case in which a permissible inference is lacking in speech that the speaker intended to assist and facilitate the criminal conduct depicted -Furthermore, plaintiffs allege that Oliver Stone intended to incite violence; however, their intent DOES NOT MATTER, since we have determined as a matter of law that NBK is not inciteful speech Obscenity Claim -In order for speech to constitute obscenity, it must 1) Appeals to prurient interests of average person 2) According to contemporary community standards, depict sexual conduct specifically defined by a state law

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3) Work, taken as a whole, lack serious literary, artistic, political, or scientific value -Plaintiffs do not allege that NBK is any of these things; rather, they argue that obscenity doctrine should be EXTENDED to cover type of violence therein depicted -Court declines to extend doctrine FINAL RULING -Its unfortunate that individuals will seek to recreate fictional characters committing illegal acts, but thats more a statement to those people being pathetic, not to the speech that they copy -Societal/judicial recognition that benefits of free flow of ideas outweigh costs society incurs by allowing expression of reprehensible ones -Since NBK is not incitement and thus protected speech as a matter of law, action is dismissed in entirety

XV. REMEDIES
5.1: Self Help A. Introduction:
1. The distributor of a creative work is generally only required to make a reasonable effort to exploit the creators work, and courts do not like to place themselves in the position of marketing and distribution specialists. 2. Hertz says that you dont usually expect self-help will work. 3. There are usually procedures in the contract, and the advice you should give a client who wants to take matters into their own hands is to follow the procedures in the contract. Never counsel a client to ignore the contract- they could get sued and you might get sued for malpractice!

B. Dodd, Mead & Co. v. Lilienthal, 514 F. Supp. 105 (S.D.N.Y. 1981):
1. Facts: Defendant was an author, Plaintiff was a publisher who entered into a contract with D. D didnt think P printed enough copies or distributed the books to enough bookstores, so D printed copies on his

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own. P sued for a permanent injunction to prevent him from doing this. 2. D claimed that he had the contractual right to buy books from the publisher at a discount and resell them, and publisher breached this agreement by not printing more books- thus he could print his own. 3. However, the court did not find a breach of the contract; alleged failure to meet public demand does not permit D to publish his own copies in contravention of the contract between the parties. 4. The contract stated that if the publication was out of print for six months and D asked P to print more, and P did not in an additional 6 months, the contract would end and the rights to the work would revert to D. D didnt follow this provision- so he is out of luck.

5.2: Rescission/Reversion A. Introduction


1. Rescission: undoing of the agreement either because there are legitimate grounds to do so or because of a change in circumstances such that P could make a more advantageous deal elsewhere. 2. Rescission carries with it a reversion of rights transferred, and this remedy is rarely granted, unless there was NO consideration.

B. Nolan v. Williamson Music, Inc., 300 F. Supp. 1311 (S.D.N.Y. 1969), affd, 499 F.2d 1394 (1974).
1. Nolan, Plaintiff, wrote Tumbling Tumbleweeds, which he sold to Sam Fox Publishing in exchange for royalties. Fox conveyed it to Williamson, Defendant. 2. Fox continued to pay Nolan, but only paid him 33 1/3% of what Williamson paid Fox (between 50% and 66 2/3% of Williamsons receipts), not what Williamson collected; Fox also did not pay 74% of royalties due over a six year period. 3. Nolan sued to recover his copyright, claiming fraud. 4. He claimed he rescinded the contract through a notice in 1963. 5. Court also found no fraud: 1) Allegation that Fox concealed from P its relationship with Williamson. Evidence does not support fraud- contract was assignable, and did not conceal it. 2) Failure to render clear/detailed accountings: P is actually upset about breaches of contract, not fraud here.

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6. Rescission can be permitted only when the complaining party has suffered breaches of so material and substantial a nature that they affect the very essence of the contract and serve to defeat the object of the parties. 7. Cases only will grant rescission when there is an equivalent of a total failure in the performance of the contract, such as ceasing all royalty payments or breaching nearly every part of the contract. Here, Ds breaches are a failure to comply fully with the contractual provisions for payment of royalties- and this can be dealt with just with monetary damages. 8. P was entitled to royalties due to him under the contract via damages.

C. Nolan v. Sam Fox Publishing Co., 499 F.2d 1394 (2d Cir. 1974)

1. An appeal of the case above. Agrees that Williamson and Fox did not conceal their dealings, due to the advertisement and Williamsons registration as assignee in the copyright office. 2. Finds that rescission has been allowed without a showing of fraud in cases where publisher made NO royalty payments, but here, the publisher did make royalty payments, so no rescission.

D. Peterson v. Highland Music, Inc., 140 F.3d 1313 (9th Cir. 1998)
1. Kingsmen, musical group, wanted a rescission of contract by which they assigned rights to Louie Louie. Sold the masters for 9% of profits or licensing, but never got any money at all. 2. 1993, sued for royalties, basing action on only events in the past four years (within the statute of limitations (SOL)). District court ruled in Ps favor and granted rescission, restoring masters to Kingsmen and found that rescission was effective the date the complaint was filed. 3. D appealed, saying that the four year SOL barred rescission action. D admitted that breaches occurred, including in the four years preceding the case, but still thought that P should have to have brought the action within four years from when it first could have been granted rescission. 4. Court rejects this argument. In California, courts find that EACH BREACH starts SOL clock anew- each payment is separable from the other, so each starts a new SOL. 5. SOL does not bar the action, so long as it is based on events within the SOL. Affirms finding that rescission is effective as of the date of filing of complaint, and thus Kingsmen are entitled to all income brought in by Ds from the recordings after the complaint was filed.

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A. Introduction

1. A negative injunction: will prevent a party from working elsewhere. a. A court will not issue a negative injunction if it feels that it will be unduly harsh or burdensome- factors are: i. The length of time the injunction is to run. ii. The extent of geographical area in which the defendant is to be prohibited from seeking alternative work. iii. The types of work prohibited by the requested injunction. iv. The likelihood that the injunction will produce positive results. b. You cant make someone work for you- that is like slavery. c. You can make someone not work for someone else. This ends up with 2 results: i. The performer has a change of heart. ii. Better bargaining position to get a cut of the performers contract with the new label (that is, you let them work for the new label but you get more money out of it). 2. Warner Bros. v. Nelson: Bette Davis case. a. Court agreed to an injunction for either 3 years or remainder of contract term, whichever was shorter. b. Court also said cannot both have an injunction and suspend the performer without pay. 3. Courts have recently been increasingly reluctant to grant injunctions against entertainment figures. 4. Uniqueness of performers talents is a central issue in obtaining a negative injunction. a. Element of proving irreparable harm, and bears on issue of inadequacy of legal damages as well. b. A showing of great difficulty and inconvenience in finding a substitute performer of similar talents is generally sufficient, but a clause in a contract stating the performer is unique, alone will not suffice. 5. Hertzs negotiating tip with regard to representing an artist:

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a. Often courts will only enforce injunctions if the company says an artist is unique in the contract, and that the company has a right to go to court and get injunctive relief. b. Make sure that it says that the company has the right to SEEK injunctive relief- not an automatic injunction upon a breach. 6. Courts want to make sure there is a likelihood of success on the merits before issuing a preliminary injunction.

B. Machen v. Johansson, 174 F. Supp. 522 (S.D.N.Y. 1959)

1. Plaintiff boxer sues to stop defendant boxer from fighting Patterson before fighting P in a rematch agreed to by D, along with an agreement not to engage in any U.S. fights prior to the rematch or to fight Patterson anywhere prior to the rematch. Court determined that Machen was not entitled to injunction. 2. The usual form of redress in cases of breach of contract is money damagesan injunction is unusual. Particularly true if seeking to restrain defendant from practicing trade. 3. Found that negative covenant could not run for an indefinite length of time, and thus, the negative covenant was not intended to run beyond February 14, 1959. As this time period had passed, court first found that the negative covenant was no longer in effect. 4. Court further found that even if the negative covenant was still in effect, the injunctive relief requested was not reasonable on its terms, and that granting the injunction would inflict serious injury on the defendant, while not providing the plaintiff with the protection he sought. a. Covenant was too broad geographically, and was imposed for an indefinite period of time. This was an unreasonable restraint. b. Granting the injunction would severely harm the defendant, by disallowing him to fight during the prime of his career, and it would not benefit plaintiff very much. The injunction would be an intolerable and unreasonable burden.

C. American Broadcasting Cos. v. Wolf, 52 n.y.2d 398 (1981)


1. Issue: whether ABC was entitled to equitable relief against Wolf, who was a sportscaster. 2. Contract had a good faith negotiation clause, which the court found to be breached, because Wolf engaged in essentially sham negotiations with ABC while under a new contract with CBS that forbade him from working with ABC in the future.

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3. There is general judicial disfavor of anticompetitive covenants contained in employment contracts, particularly once the employment agreement has expired. 4. Once contract is over, injunction only available to prevent injury from unfair competition or similar tortuous behavior or to enforce an express and valid anticompetitive covenant. 5. No existing employment agreement between ABC and Wolf, and there is no express anticompetitive covenant that Wolf is violating or claim of special injury from tortuous conduct such as trade secret disclosure. 6. Dissent thinks that there should be a 90 day injunction, which was the time that was supposed to be the transitional period during which ABC and Wolf were supposed to negotiate in good faith.

D. Notes:

1. Zink Communications v. Elliot: Court distinguished Wolf, granting injunction against allowing Defendant to host competing game shows, because the contract for employment had NOT expired. 2. KGB Inc. v. Giannoulas: Vacated injunction which didnt allow a man to wear a chicken suit. Contract was over and no irreparable harm was shown. =

3. MCA Records v. Newton-John: Court said that can grant injunction against employee performance during contract term, due to a breach, but not after the term is over. 4. Courts tend to be hostile toward non-competition clauses for former employees. In one case, a court held that it should not require a performer to move to another area in order to obtain employment- Nigra v. Young Broadcasting of Albany, Inc. In another, however, a court held that the uniqueness of personality meant it would enforce a one year, 100-mile radius non-competition clause- Midwest Television, Inc. v. Oloffson. 5. If an injunction cannot be obtained against the performer to prevent the performer from working for a third party, in California at least, cannot obtain injunction against the third party itself either. 6. Injunction will endure for duration of the term of the contract, including unexercised option periods.

7. In recording agreements, there is usually a clause against re-recording material; these negative covenants usually run for 5 years from date of release of artists recording or 2 years from date of expiration of agreementwhichever is later.

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5.4: Damages A. Introduction

1. Money damages are the traditional remedy for breaches of entertainment industry contracts. a. Must have a reasonable foundation upon which an award can be calculated, based on track record or custom in industry. b. Freund (NY): found that when a plaintiff could not prove what his royalty payments would have been, all that were due him were nominal damages. c. Barrera and Burgos (NY): found that an amount that reflected the fact that Ds use was of Ps work was unauthorized cannot be part of the fair market value of a license authorizing such use. In addition, as P cannot put forward what part of profits are attributable to Ps work, P cannot just claim all of Ds profits, and is not entitled to any profits. 2. Pay or play clauses a. Liquidated damages clause such as a pay or play clause can be helpful for artists who do not want to have to prove damages in court. b. Pay or play clause: the failure to utilize services of performer gives rise to an entitlement to a specified sum of money. c. Can also protect company against consequential damages. 3. Punitive damages a. Can be available in contractual disputes if particularly problematic. b. Nebulous promises such as promises of creative input or good faith approvals can lead to contentious suits.

B. PolyGram Records, Inc. v. Legacy Entertainment Group, 2006 Tenn. App.


1. This case is about the right to exploit performances of Hank Williams recorded and broadcast by WSM Radio in the 1950s. 2. There are three parties that claim rights in them. a. Polygram has rights in his recordings during that time period for the PURPOSE of creating phonorecords. The purpose here was to perform on the radio, not create a record. b. Legacy has the actual, tangible recordings in their possession- but ownership of these does not come with the right to exploit. There are

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copyrights in their enhancements to the recordings, but that is all that is covered by these- not the underlying recordings themselves. c. Williamss heirs claim his right to publicity gives them rights to exploitation. 3. Court holds for his heirs. a. They have the right to publicity of Williams. b. Book notes that this was a really old contract, and now industry standard language is all-encompassing and would have covered these recordings.

5.5: Bankruptcy 5.5.1: The Availability of Bankruptcy Protection A. In re Watkins, 210 B.R. 394 (N.D. Ga. 1997)

1. This was a determination of whether the members of TLC had filed for bankruptcy in bad faith, in order to get out of their contracts, or whether they had legitimate reasons for doing so. 2. A trustee in bankruptcy can get rid of personal service contracts. 3. Court held that even if that was one reason they were filing, they were substantially behind on car payments, house payments, etc. that it was not a bad faith filing. Refused to dismiss the case.

B. George Clinton
1. Hertz story. Armen Boladian owned George Clintons copyrights because Clinton had owed him a lot of money, so he got the copyrights in exchange for the debt. 2. Then Clintons former manager got a judgment against him. Clinton filed for bankruptcy. Then the former management tried to get the copyrights into the bankruptcy estate. 3. Judge denied motion, finding that Boladian had received the copyrights for valuable consideration.

5.5.3: Protective Registration A. In re Peregrine (C.D. Cal.)


1. Until Peregrine, routinely filed security interests in copyrights by filing UCC-1s in the home jurisdiction. 2. Security interest: if you are owed money by a debtor and you take a secured interest in the property that you are loaning the money for, then you have certain rights before others do in the property. If you go to bankruptcy- they either pay the debt or you get the property.

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3. Now you have to file a security interest in a copyright in the Copyright Office. This puts the whole country on notice, also a preemption argument.

5.6: Arbitration A. Introduction

1. Most agreements include arbitration clauses in their agreements. 2. As an artist, you may prefer to arbitrate because: a. It is less expensive, usually. b. The arbitrators are more likely to understand the issues and compromise than a court is. c. If the company is going to be right, and the artist ends up suing, then they may lose it all. If the company is right, and artist goes to arbitration, may cut the baby in half and get something out of the deal. 3. From company: don't want arbitration because if they are right want what they think they are entitled to, and often want to use financial power against the artist and because it is so costly to litigate, if a record company sues an artist it is tough for the artist to come up with a retainer to fight the record company, so more likely to work out a settlement immediately. Reason record company might want an arbitration clause is because sometimes it is a quicker process, etc. 4. Arbitration is strongly favored as a matter of public policy. 5. An arbitration proceeding concludes with the entry of an award, and resort must then be made to the appropriate judicial forum for the confirmation, vacatur, or modification of the award. 6. Often used for collective bargaining agreements. 7. Meaningful court review is prevented, because the arbitrator does not have to state reasoning behind his decision, and thus the error must be obvious.

B. Robert Lewis Rosen Associates v. William Webb (S.D.N.Y. 2005).


1. Original arbitration award said a specific amount of damages for a particular breach, and said that additional payments were owed to Plaintiff as other contracts were paid to defendant. 2. The court approved the award, specifying the specific amount but did not mention the additional payments. 3. Defendant said the additional payments were not collectible because they were not mentioned in the judges original order.

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4. Court said that because arbitration awards are confirmed in their entirety or specifically changed or vacated, in this case there can be no arguments about ambiguity or the effects of the final judgment.

C. Preston v. Ferrar (Supreme Court decision from class)


1. When parties agree to arbitrate all questions arising under a contract, state laws lodging primary jurisdiction in another forum, whether judicial or administrative, are superseded by the FAA. 2. The question was who decided whether Ferrar was acting as an agent or as a manager- the court or the arbitrator. Supreme Court says arbitrator if parties agreed to arbitrate.

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