Copyright Issues

Did You Know: Open Source Software (“OSS”) Is a Major Player in Software Development & Use

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The open source software (“OSS”) revolution affects most software applications. A 2015 survey found that 78% of the companies questioned ran their operations on OSS.[1]/  Its expanded inclusion has resulted in great savings in time and money in the creation of software products.  However, when the creator of the OSS releases it, she often does so under a license expected to promote its open availability and use. In order to avoid risks of violating the creator’s licensed conditions, business owners and developers should know whether any OSS is present and under what terms it may be used.

Working with an intellectual property attorney familiar with the issues associated with open source software, developers and businesses can better manage their security, legal and operational risks by:

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LED ZEPPELIN TO DEFEND “STAIRWAY TO HEAVEN”

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guitarLed Zeppelin, Robert Plant and Jimmy Page remain defendants in a copyright infringement case brought on behalf of the estate of guitarist Randy California.  If the case moves forward, the trial is set for May 10, 2016.   The California estate alleges that important parts of “Stairway to Heaven” were based on music from the song “Taurus” written and performed by California.

Check out NPR’s recent take on the case as it allows you to hear and decide for yourself whether “Stairway to Heaven” plagiarized “Taurus.”  [NPR Story]
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WHO OWNS THE COPYRIGHT IN A FILM?

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Because many creative people participate in the making of an artistic, documentary or commercial film, in order to exploit the film efficiently, it is critical to pinpoint who owns the copyright in the finished work as well as in the raw footage.

Congress recognized that an unwieldy situation could arise with respect to the control of a film’s copyright unless there was a way for all copyright interests to reside with a single owner. This is because if a non-employee of the producer made a creative contribution during a film’s production, such contribution could be viewed as copyright protected. To address the problem, Congress adopted a mechanism in the Copyright Act of 1976 (the “Act”) which treats any such contribution as a work-made-for-hire (“WMFH”) [WMFH Described] if the parties so agree in a signed document. Under such circumstances, all copyright rights in any creative contributions belong to a single owner, most likely the producer.

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Can You Learn Anything from Monster Energy’s Run-In with the Beastie Boys?

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The dispute that led to the legal battle between the Beastie Boys band and Monster Energy Company (“Monster”), involved Monster’s use without permission of songs by the Beastie Boys and verbal references to the band and a member, Adam Yauch, in a promotional video. Monster’s negligible music licensing procedures were strongly criticized by the trial judge. The one-sided victory of the Beastie Boys for copyright infringement and false endorsement has led to Monster being found financially liable for its misjudgment.

In an earlier blog [Justin Bieber et al], I considered the misuse by one musician of the works of another. The Beastie Boy’s case gives guidance to business owners who wish to incorporate the intellectual property of others in their marketing and other creative endeavors with impunity.

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What Do Justin Bieber, Usher Raymond, Robin Thicke, Pharrell Williams and Sam Smith Have in Common?

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Music concertJustin Bieber, Usher Raymond, Robin Thicke, Pharrell Williams and Sam Smith have all recently been challenged by claims of copyright infringement based on allegations that they incorporated other people’s music into their recordings. If celebrities can be found liable for copyright infringement and ordered to pay millions of dollars, what should non-celebrity musicians and producers do to avoid a similar fate?

In the case involving Bieber and Usher [Some Background], musician Devin Copeland alleged that they had used material from his 2008 song titled “Somebody to Love” in their 2010 hit with the same name. The trial judge granted Bieber and Usher’s motion to dismiss the case on the grounds that no reasonable jury could find the two song sufficiently similar to find the duo liable for copyright infringement. However, on appeal in 2015, the Fourth Circuit found the two songs to be “cohesive wholes, without distinguishing between protected and unprotected elements, just as the works’ intended audiences likely would encounter them in the marketplace,” and reached the opposite conclusion. The case has now been sent back to the trial court, which forces Bieber and Usher to settle or face a jury trial.

After being contacted by the family of Marvin Gaye, Robin Thicke and Pharrell Williams sought a declaratory judgment that their 2013 song, “Blurred Lines,” did not infringe the copyright in Gaye’s 1977 hit “Got to Give It Up.” The heirs of Marvin Gaye brought counter-claims of copyright infringement. The matter survived a Williams/Thicke motion to dismiss and was sent to a jury. In 2015, the jury found that there was substantial similarity between the two songs and the Gaye family was awarded $4 million in actual damages and $3.38 million in lost profits. [More Detail] The question as to whether the Gaye Family will also be granted injunctive relief (i.e., preventing Thicke/Williams from reproducing, performing, etc. “Blurred Lines” and impounding existing copies of the song) remains open, as it appears that neither side is prepared to give up the fight.

By contrast, in 2014, a potentially litigious dispute between Sam Smith, a British soul singer, and Tom Petty, an American folk rocker, was avoided. Soon after the release of “Stay With Me,“ by Sam Smith, his publisher was contacted by the publishers of ”Won’t Back Down,” co-written by Tom Petty and Jeff Lynne, who asserted that the choruses in the two songs were similar. By way of defense, Smith said, “It was a complete accident. I am 22 years old…. I’ve never listened to that song.”  [Smith’s Quote]

We will never know whether Mr. Smith’s protestations of “no access” (a key element in proving copyright infringement) to the Petty song would have carried any weight with a jury because the parties entered into a settlement with Smith acknowledging the similarities between the two songs, giving Petty/Lynne writing credit and 12.5 percent of the royalties from “Stay With Me.”

The outcomes from these scenarios offer guidance for song writers, performers and producers:

• Because music is easily accessible over the Internet and other media, expect that if there are similarities between your work and that of another, you will hear about it.

• If you are in doubt about whether your song is derivative of someone else’s, then consider testing it prior to public release against the song in question before an audience composed of likely intended consumers.

• If you know that you will incorporate the work of another in your song, then obtain a license to do so. The fee you pay before your song becomes famous will most likely be far less than the damages you will pay after it becomes famous.

• If it is your idea to create an “homage” to another performer or to recreate a genre, then consider carefully how you go about composing the work. It is one thing to write and perform music in a certain genre or the performance style of a particular singer, and quite another to incorporate actual material from a work or imitate the sound of the recognized performer. In addition to claims of copyright infringement, you could face the charge of violating the celebrity’s right of publicity. Bette Midler successfully sued Ford Motor Company for violating her right of publicity by using without her permission a sound-alike in a TV commercial. [Midler v Ford Details]

• Be aware that if your work is challenged, during the course of a trial, it will be subject to minute examination.

• If your work is challenged, consider the path laid out by Sam Smith, find a way to settle the matter.

ARE YOU READY TO SELL YOUR INTELLECTUAL PROPERTY RICH BUSINESS AT ANY TIME?
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Service oriented businesses that create intellectual property (IP), such as software, data, and applications, need to be nimble so they are ready to take advantage of unexpected opportunities.  One important opportunity to anticipate is the sale of your business.  Large service oriented businesses wishing to expand their underlying capabilities or client base could now be on the hunt for just what you do.   Because such an offer could come at any time, will you be ready to exploit the opportunity advantageously?   

At such a time, you will be faced with a variety of decisions and actions requiring a quick turn-around.   This article poses a series of questions and identifies concrete steps that every business owner should incorporate into her business operations. Then, like the proverbial Boy Scout, you will “be prepared.”

1.    Are You Ready for the Due Diligence Inquiries That the Buyer Will Be Make?

It goes without saying that as a seller, you will be confronted by a close examination of your organizational and operational documents by the potential buyer.  Therefore, at least yearly, you should:

  • Review and update your entity’s documents (enabling and owner related agreements) and keep them current.
  • Maintain your business entity’s legal good standing in all jurisdictions in which you function.
  • Verify licensure and other regulatory requirements.
  • Review management and operational procedures, especially as they relate to your IP products. 
  • Confirm that NDAs, employment and contractor agreements assure your control over your IP.

Unfortunately, business owners frequently fail to conduct this type of annual self-examination.   Perhaps surprisingly, a common oversight is the failure of a business to maintain its good standing in all the jurisdictions where it is organized and doing business.   This lapse, along with the failure to have documents signed or to keep licenses current, can quickly derail what otherwise seems to be a marriage made in heaven.

2.    If Some or All Of Your Business’ Assets Are Tied to the Good Will Associated With an Individual, What Steps Are You Taking Now to Allow for a Smooth Changing of the Guard?

From a seller’s point of view, it may not be what the founder wants to hear, but if others are not being groomed for a change in control, then the business’ value is likely to be diminished in the eyes of a potential suitor.    Especially in a business where the key asset is “its people,” if this asset is not going to be preserved in a change of control, the buyer is going to move on.  The necessary preparatory actions for a potential seller are to have the hard discussions, be willing to anticipate changes, have contractual obligations in place and be comfortable with those changes well before a potential buyer comes to call.

3.    If Your Business Relies Heavily on Intellectual Property Assets, Do You Control What You Need?

Conduct an inventory of all of the intellectual property (IP) assets that your company uses.  Know whether you IP is subject to copyright, trademark, patent, or trade secret laws and regulations not just in the United States, but in all the countries where you conduct business.  

Not surprisingly, business owners understand the need to inventory and value their hard assets if, solely to have such listed and depreciated on tax returns.  Conducting a full inventory of a business’ IP assets can be harder because it is not always clear who actually owns the assets.  But it is of equal importance because those assets do add great value to your business’ bottom line.

The inventory should cover an assessment of what you have and close review of your documents to be sure they comport with your expectations of ownership and control.   Once you have the inventory, periodically re-evaluate it to be sure all permissions are current and available for your continued use and exploitation of the IP.   

 Can you answer the following questions in the affirmative?  If not, then you could be leaving money on the table.

  • Are procedures in place to identify the ownership of the IP that your business uses? 
  • Are you living within the limits of any licenses to which you are a party?
  • In the case of copyrighted works, trademarks, and patented or potentially patentable works, have you registered them? 
  • Are all IP registrations current? 
  • What steps are you taking to police your IP to prevent others from infringing upon it? 
  • Do your contracts with third parties include the IP protections you need?
  • Are you complying with the IP related laws of relevant other countries?

4.    Do You Have a Good Team of Consultants in Place Who Can Watch Your Back?

By employing a good team of advisors, you will have the necessary documents in place and you may be able to delegate some of the preparatory work outlined in this article. The obvious players are your corporate and IP lawyers and CPA.   But your insurance agent and marketing specialist can be equally important advisors who can help you ask the hard questions and position your business in the most favorable light either to acquire or be acquired.

5.    Do You Know What Your Business Is Worth?

Offers to be purchased can come from a variety of unexpected places.  An insider may want to make a play for control or a larger firm may have identified your company as a strategic acquisition.   Similarly, you may conclude that it is important to expand.  Knowing what your business is worth will be helpful in evaluating an offer to buy you or in obtaining financing for an internal expansion.  

Therefore, regularly analyze the value of your assets.  Your CPA’s reports and even feedback from your banker should give you a good idea of the “fair market value” of your business as a whole and its various assets.  

6.    Are the Business’ Assets Transferable?

For valuable assets such as your IP and commercial leases and licenses, it is important to know whether they are transferable or assignable.  A periodic review should answer questions such as:  whether restrictions exist on the transferability of licenses; whether a new owner can use the software or data on which you rely; whether your commercial lease can be assigned in connection with a third-party acquisition.  Going forward, a word of advice:  when negotiating new deals, try to avoid restrictions on your ability to transfer assets.

Answering these questions should go a long way in helping you be ready should “the call” come from a potential buyer.  As with anything worthwhile, you need to take the time and make the investment in advance to have your business ready to respond with agility to whatever opportunities come along, including being bought.

ATTORNEY’S FEES IN COPYRIGHT INFRINGEMENT CASES: A DOUBLE EDGED SWORD
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     One of the benefits of registering your copyright in a work with the US Copyright Office is the opportunity to seek recovery of your attorney’s fees if you subsequently pursue an infringement action and are the “prevailing party.”

      Without registration prior to the alleged infringement having taken place, the weapon of being able to collect attorney’s fees from the defendant will be unavailable to you.  However, before you choose to sue another party for copyright infringement, given the language of the statute, be advised that should you be unsuccessful in your claim, you could find yourself paying the legal fees of your adversary.      

     That is exactly what happened to Mattel, the creator of Barbie dolls, in its eight-year unsuccessful copyright infringement battle with MGA Entertainment, creator of the Bratz dolls.  http://www.bloomberg.com/news/2013-01-24/mga-bratz-win-over-mattel-partly-erased-by-appeals-court.html   The Ninth Circuit upheld the trial court’s award requiring Mattel to pay MGA more than $137 million for its attorney’s fees.  http://caselaw.findlaw.com/us-9th-circuit/1621085.html?DCMP=NWL-pro_ip . Ouch!

     Section 505 of the Copyright Act (“the Act”) gives the trial judge the discretion to “award a reasonable attorney’s fee to the prevailing party. . . .”  In deciding whether to award attorney’s fees, a trial judge determines who prevailed and whether the award will further the purposes of the Act.  Merely because the plaintiff asserts claims that might be considered “objectively reasonable,” such will not thwart a prevailing defendant from successfully arguing for its attorney’s fees.

      Urging meritorious copyright defenses can be one way to advance the purpose of the Act, which is “to stimulate artistic creativity for the general public good.” In the battle of the dolls, the trial court decided that because MGA vigorously defended against Mattel’s claims, competition in the market place was allowed to advance.

      What to take away from Mattel’s expensive lesson? 

      Before pursuing a claim of copyright infringement, perform a careful analysis of what defenses the infringer is likely to assert and whether you can overcome them.  Also, be certain that you have exhausted all other avenues to resolve your dispute – including mediation or other alternative means of dispute resolution.   Remember, once you enter into litigation, it can be difficult to extricate yourself from the consequences of that choice.

 

ARE STATUTORY DAMAGES FOR COPYRIGHT INFRINGEMENT OF SONGS POSSIBLE?
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When advising artists, authors and song writers about ways to protect their interests in their creative works, I encourage them to file for copyright registration.  But even if you follow all of the rules and register your copyright, you may still come up short when it comes time to enforce against infringers.

While the exclusive rights associated with copyright ownership attach as soon as the work is fixed so that others can perceive it, registration with the Copyright Office is necessary in order to enforce those rights in court.  Additionally, registration offers some other benefits to the copyright owner, namely the opportunity to ask for statutory damages and attorney fees.

As a copyright owner, you want to be in a strong bargaining position when confronting an infringer.  Being able to threaten to seek statutory damages and attorney fees can be a big stick.  However, even when you appear to have a clear-cut case of infringement, there will be hurdles that you must surmount if you are to achieve meaningful relief.  A recent case decided by the U.S. Court of Appeals for the Second Circuit illustrates well what problems a copyright holder may face.

The facts are that songwriters, Bryant and Bernfeld (“B&B”), wrote and produced two albums of songs, each containing 10 songs. B&B registered with the Copyright Office not only the two albums but also each of the songs individually.  They entered into an agreement with Media Right Productions (“Media”) authorizing Media to market the albums, but not to make copies of them.  If Media needed more albums, B&B would give them the copies.  Media, in turn, contracted with Orchard Enterprises (“Orchard”), a music wholesaler, to sell the music.

Over the course of time, Orchard started to sell copies of the albums and individual songs in digital format.  The actual sales were very modest generating only a few hundred dollars.  Eventually, B&B learned of this development and sued both Media and Orchard for copying and selling the works without permission.  Clear copyright infringement, right?

The Copyright Act allows a judge to award statutory damages between $750 and $30,000 for all infringements with respect to any one work.  Because B&B had registered their works with the Copyright Office before any infringement took place, they were eligible to seek statutory damages.  Given that the actual damages would have been meager, seeking statutory damages was the way to go. But what constituted a “work” in this case to calculate damages—the two albums or the twenty songs?

The Second Circuit concluded that because the plaintiffs had issued their works as two albums, in other words as a “compilation” work, rather than as individual songs, they could receive statutory damages only for infringement of the two albums.  The Court was not persuaded by B&B’s argument that in the digital age it was easier for infringers to make parts of albums separately available.

Other examples of situations where plaintiffs were limited to one statutory damage award are:  computer generated clip art issued in one package; and photographs of plant seedlings included in a catalog.

As this case study shows, it is hard to anticipate how best to protect artistic works from copyright infringement.  Also, choosing to release each work independently may not be feasible given that the real value of each work exists only in being part of a collection.  Faced with such a dilemma, your enforcement options could be limited, even with the best set of facts.

WHO OWNS COPYRIGHT IN SOURCE CODE FOR START-UP COMPANY?
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Start-up ventures, especially in the area of technology, often begin based on nothing more than good faith assumptions of the founders. Frequently they operate informally without understanding the need to document the relationships among the venture, its principals and its employees. More often than not avoidable disputes ensue, creating needless expense, arguments and sometimes the split-up of the founders or the loss of key employees leading to the dissolution of the venture.

JustMed, Inc. v. Michael Byce, a case decided by the U.S. 9th Circuit Court of Appeals earlier this month, involved a dispute between the founders of the venture about the ownership of the copyright in computer source code. This case is a classic illustration of what not to do; these facts are often present in startup companies (not only the IT field), namely the absence of written agreements and formal employment procedures.

Former brothers-in-law, Joel Just and Michael Byce, patented a device to help those whose larynxes have been removed. Together they formed JustMed for the manufacture and development of the necessary hardware and software. Byce was a shareholder and served on the Board of Directors. He took over the development of the software from a company employee, and basically rewrote the source code. JustMed had no employment agreement with Byce; he created the source code at home; worked his own hours; and his pay was in company stock.

Byce was anxious that he would not receive his fair share should there be a buy-out or merger of the company. So, to protect what he considered his intellectual property, he deleted the source code from the company’s computers.

The expected lawsuit followed. From JustMed’s point of view, it owned the copyright in the software on the theory that Byce was its employee and, therefore, the source code was a “work made for hire.” Byce countered, arguing that he was an independent contractor and, therefore, owned the copyright in the work.

In deciding whether an employer/employee relationship existed, the Court examined several factors to determine to what extent JustMed controlled the manner and means of the creation of the source code. Typically in employee vs. independent contractor disputes, factors such as whether an employment agreement exists; whether taxes are withheld and social security paid; to what extent the employer controls the creation of the work product; and what level of skill is required in the work, are examined to see which side proves stronger.

Here, despite that JustMed operated informally as to Byce’s compensation, namely, by the issuance of stock; did not exert control over the manner and means of the creation of the source code; and was lax in its tax and withholding procedures, the Court nevertheless concluded that Byce was an employee, making the source code a work made for hire, which meant that JustMed owned the copyright in it.

In other circumstances, such informal employment practices could be seen to favor an independent contractor interpretation. Here, because of the start-up nature of the technology enterprise, the Court relied on other factors (such as that a software developer is expected to be inventive and work independently, that the project was central to JustMed’s business and that Byce performed other tasks for JustMed) to buttress its conclusion that he functioned as an employee.

Regardless of whether one considers the outcome fair in this case, had some of the variables changed slightly, it is unclear whether another court would give similar leeway to a technology company faced with a challenge to its copyright ownership in its software. But why take the risk? Had JustMed documented its relationship with Byce and specified who owned the copyright, it could have avoided the expense, disruption and animus that both sides experienced.

Do you have some horror stories to share?